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Adam Smith Would Neither Recognize Nor Approve Of Our Financial, Monetary, Economic Or Legal Systems
The father of modern economics – Adam Smith – is used as a poster child to support the status quo that we have today. Smith is invoked as the patron saint of free market economics.
In fact, Smith would neither recognize or approve of our current financial, monetary, economic or legal systems.
I noted last year:
Americans have traditionally believed that the “invisible hand of the market” means that capitalism will benefit us all without requiring any oversight. However, as the New York Times notes, the real Adam Smith did not believe in a magically benevolent market which operates for the benefit of all without any checks and balances:
Smith railed against monopolies and the political influence that accompanies economic power …
Smith worried about the encroachment of government on economic activity, but his concerns were directed at least as much toward parish councils, church wardens, big corporations, guilds and religious institutions as to the national government; these institutions were part and parcel of 18th-century government…
Smith was sometimes tolerant of government intervention, ”especially when the object is to reduce poverty.” Smith passionately argued, ”When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.” He saw a tacit conspiracy on the part of employers ”always and everywhere” to keep wages as low as possible.
Paul Krugman pointed out:
Adam Smith … may have been the father of free-market economics, but he argued that bank regulation was as necessary as fire codes on urban buildings, and called for a ban on high-risk, high-interest lending, the 18th-century version of subprime.
And Damon Vrabel wrote:
It seems ridiculous to point this out, but sovereign debt implies sovereignty. Right? Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions? How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders?
A true sovereign is in debt to nobody and is not traded in the public markets. For example, how would George Soros attack, say, the British royal family? [Vrabel is presumably referring to Soros' currency speculation against the British pound and other currencies.] It’s not possible. They are sovereign. Their stock isn’t traded on the NYSE. He can’t orchestrate a naked short sell strategy to destroy their credit and force them to restructure their assets. But he can do that to most of the other 6.7 billion people of the world by designing attack strategies against the companies they work for and the governments they depend on.
The fact is that most countries are not sovereign (the few that are are being attacked by [the big Western intelligence services] or the military). Instead they are administrative districts or customers of the global banking establishment whose power has grown steadily over time based on the math of the bond market, currently ruled by the US dollar, and the expansionary nature of fractional lending. Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty by forcing debt-based … currencies on countries.
We long ago lost the free market envisioned by Adam Smith in the “Wealth of Nations” [the book widely considered to be the foundation of modern economic theory]. Such a world would require sovereign currencies…. Only then could there be a “wealth of nations.” But now we have nothing but the “debt of nations.” The exponential math of debt by definition meant that countries would only lose their wealth over time and become increasingly indebted to the global central banking network.
Smith also knew that trust was a basic ingredient of a sound economy. As I noted in March:
In 1998, Paul Zak (Professor of Economics and Department Chair, as well as the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University, Professor of Neurology at Loma Linda University Medical Center, and a senior researcher at UCLA) and Stephen Knack (a Lead Economist in the World Bank’s Research Department and Public Sector Governance Department) wrote a paper called Trust and Growth, arguing:
Adam Smith … observed notable differences across nations in the ‘probity’ and ‘punctuality’ of their populations. For example, the Dutch ‘are the most faithful to their word.’John Stuart Mill wrote: ‘There are countries in Europe . . . where the most serious impediment to conducting business concerns on a large scale, is the rarity of persons who are supposed fit to be trusted with the receipt and expenditure of large sums of money’ (Mill, 1848, p. 132).
Enormous differences across countries in the propensity to trust others survive
today.
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Trust is higher in ‘fair’ societies.
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High trust societies produce more output than low trust societies. A fortiori, a sufficient amount of trust may be crucial to successful development. Douglass North (1990, p. 54) writes,
The inability of societies to develop effective, lowcost enforcement of contracts is the most important source of both historical stagnation and contemporary underdevelopment in the Third World.
***
If trust is too low in a society, savings will be insufficient to sustain
positive output growth. Such a poverty trap is more likely when institutions -
both formal and informal – which punish cheaters are weak.
Because strong enforcement of laws against fraud is a basic prerequisite for trust, I believe Smith would be disgusted by the lack of prosecution of Wall Street fraudsters today.
And Smith warned against the pitfalls of fiat currencies unpegged to anything real:
The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.
It is certain that Smith would rail against our current financial, monetary, economic and legal systems as violating the most important foundations of sound economics.
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Throughout history, Adam Smith observed, we find the workings of "the vile maxim of the masters of mankind": "All for ourselves, and nothing for other People." He had few illusions about the consequences. The invisible hand, he wrote, destroys the possibility of a decent human existence "unless government takes pains to prevent" this outcome, as must be assured in "every improved and civilized society." It destroys community, the environment, and human values generally—and even the masters themselves, which is why the business classes have regularly called for state intervention to protect them from market forces.
My advice: read Adam Smith. You'll never feel the need to wonder what he would have thought about anything ever again.
I am being told that a moronic invasion of sub specimens of outer space will now land in cape carnaveral. The logic of this outer space decision is that we humans, as incarnated by our most advanced segment, the good people of the US of A, are making such an example of themselves that the word is now out in the biosphere that we don't deserve better than the dregs of the Universe as invaders. They will send us their class CCC specimens to take over our land of the free, home of the brave...sad times, when those schmucks from outer space do not respect us anymore...
That's old and well-known, but they landed in DC, not Canaveral.
By George, I believe you missed one of Smith's most important points--I say after having skimmed through your article: Smith was resolutely against private interests having undue influence over the civil government. I can't cite the exact place he said that because I am presently in a cow-pasture collecting dried cow-pies for my stove, but of course I wouldn't be without my laptop to read your wonderful articles.
by george you are right, he believed that the invisible hand of the market had to be somewhat tempered by the regulation of good ole government. He was a moralist in the finest terms.
Of course he wouldn't - he was a free men free markets guy, not a welfare state wealth transfer Keynsian fucktard like most modern economists.
the season of krisis the cycle of two lions giving birth to a jackass.
I don't know about Adam Smith, but Ricardo, who loved comparative advantage, would have loved Oligarchy play. Can't be more comparative advantage than that; no competitors, no contradictors in Congress, the gates of the FED wide open, its printing press at your service. What a life as WS shill. Ricardo would have been invited to every party amongst the happy few, who would be singing ....thank you very, very much... and fukk you, people so sheeple...
Dr. Housing Bubble speaketh: "Lords of the shadow inventory – over 3 million homes locked away in shadow inventory near peak levels. Prices must fall to prevent massive drawn out drag to economy. California sold 38,000 homes in June but added 43,000 foreclosure filings." "The only reason banks appear on the surface to be better off is the suspension of mark-to-market and other financial gimmicks. Although banks are working through troubled inventory they are trying to do it in a controlled fashion that essentially only helps their own bottom line. Yet the housing market is still faltering and shadow inventory is still near peak levels. We have interesting new data showing that the shadow inventory problem has not improved and is likely to cause problems for many years to come." http://www.doctorhousingbubble.com/lords-shadow-inventory-real-estate-in...
Smithsonian economics is based upon slave labor. Fuck Adam Smith. He would love this shitshow.
Putting words in people's mouth. And dead people at that.
The tenets of Smithian economy are respected and implemented. Nothing more required to be known.
If that's sarcasm it is very dry.
If its not sarcasm then you might consider working at the Fed.
Wasn't it Adam Smith that warned of collusion among big business interests? Something about how big businesses need to be constantly monitored because of their natural tendandcy to conspire to monopolize markets.
Perhaps I've confused Adam Smith with someone else (it has been a very long time since I studied "The History of Economic Thought") but somehow I have carried the impression that he was a strong supporter of what we now call anti-trust law.
"a group of men spotted the couple riding together in a car, yanked them into the road and began to interrogate the boy and girl. Why were they together? What right had they? An angry crowd of 300 surged around them, calling them adulterers and demanding that they be stoned to death or hanged. When security forces swooped in and rescued the couple, the mob’s anger exploded. They overwhelmed the local police, set fire to cars and stormed a police station"
Would that we protected American traditions as fiercely.....
No, you have it right, Smith was really anti business collusion given what they had to deal with in their times by guilds colluding to rip off consumers.
One Econ Prof I had said Smith would have likely burst if he saw trade associations, trade show/conferences like we have every day at convention centers....he didn't want competitors getting together at all.
From my experience in construction, businesses will make deals, collude on price, and/ or corrupt govt officials or corrupt private businesses purchasers etc..pretty much in cycles or corruption, vigorous enforcement, corruption. There always some state AGs or DOJ locking up some contractors or some construction vendors for bribing, price fixing etc... Basically, in my mind not expecting and assuming corruption and thus policing to stop it is like not expecting bacteria to find and rot the meat you left out of the refrigerator, corruption is ubiquitous, not guarding against it with democratic controls,regulations, policing because don't think it's going to happen is horribly naive.
Somthing about the alpha male always gathering a group of loyalists and dominating everybody else. This will happen always, unless society constructs and maintains a defense against it. The lie might be that there is actually ever a defense against the alpha male syndrome.
Interesting that you bring this up. What you say is true. All heads turn when the alpha male speaks. I read an article by I guy who took testosterone shots just to how this hormone would effect him. It turned out that it deepened his voice, bulked out his muscles, gave him more self-confidence, and made him more aggressive toward others. It also gave him more body hair, and wasn't good for his heart (if I recall, his blood pressure increased). To my mind, that's what the Bush administration was all about. People voted for Bush as an alpha male. However, we Americans always mistake being confident with being right. After a while, even ordinary people who worship testorsterone, began to have misgivings about Bush, Cheney, and Rumsfeld.
Testosterone--the real gold. Even women will grant that.
notice it when I was in college and folks were interviewing for jobs, seen it ever since...in my class of engineers, we all knew who we would want to work with, who we would hire if we had a business, who would be a good manager or business owner, good engineer themselves. The were smart, competent, reasonable decent in working with team...the realy good ones were all those things and optimistic and innovative and charismatic but lead by persuading, making people wanting to follow, not by agression, not by bullying....but the interviewers, the companies hiring always fell for the confident aggresive arse, not the competent team players or even the jovial geniuses.. turns out the confident arse is selfish prick who does not take in enough information and is lousy working with, leading team..if you need an innovateive change to implemented by a bullhead into stiff resistance, selfish prick confident arse might come in handy, but for most day to day team work and problem solving, the group is always smarter than the individual and groups with women in them do best at problem solving because women tend to include everyone better...selfish aggresive arse inspires confidence that he will "lead" that he is a "meateater" but he will run over ans waste people that have important contributions to make...his group will be only as intelligent as he is, and no matter how smart he is, the group where are involved will be smarter than his group. This social awareness, inclusion, is not restricted to women, men can be high on the scale also, but on average, woman do it better. But in corporate America, and an inclusive woman manager that problem solves by letting all be heard is not seen as a "leader" the selfish prick agressive decider is....http://www.sciencedaily.com/releases/2010/09/100930143339.htm
Democractically regulated markets with good checks and balances and rule of law, deliver most common good, provide consumers value by keeping costs down, minimize costs of uselss things like sneaky charges and fees that yield nothing of value, minimize super-profits that actually retard innovation, but make sure their is enough profit to keep competion healthy. Healthy margins that provide value the cosnsomer wants, say like Apple are great, many other competitors can keep them honest like MSFT, Google...but huge profits MSFT tradionally a got for 20 years by being an entrenched standard did not bring value.
As an example, I often cite the Cali insurance reform passed by popular vote via a Propositon ballot. I lived in Cali when it passed and the insurers said they would leave the state if it did pass...they spent tons trying to defeat it. No wonder, it forced them to open their books and limited their profits by government decree! And yet all the insures, many years later, are still happily, and profitably, doing business in Cali even while Californians have saved huge money on their premiums, especially many arbitrarily discriminated against in other states. Turns Cali's regs save the businesses fro themselves and provide a stable, steady income...and decent honest businesses offering value, those guys liked not having to compete aginst desiderata that were selling faux insurance, and they could not be pressured into taking risks to keep up with competition...
Sure the businesses would like to jack up their rates more, provide less coverage and make higher margins, but under Cali law, they are doing well and there are more than enough businesses to keep things quite lively and competive.
http://www.consumerwatchdog.org/resources/15years_Prop103.pdf
This is a classic win win win situation brought to Cali via a democratic govt actions the markets themselves, alone, would have never delivered. Consumers get value and lowered prices automatically, without having to be PhD experts in reading what is covered, fine print; businesses get steady, stable reliable income, market gets plenty of competition, and unfair and discriminatory practices are thwarted.
This arcticle claims medical insurance would benefit from similar reform, no doubt it would, but I think it has other issues, mainly fee for service disincentives even in govt regulated Medicare....but a whole nother issue..
Of course.. but with Elizabeth Warren not even made head of the Consumer Protection Agency (still dormant after 2,5 years) I'm not keeping my hopes up for the US of A.
trust, what's that?
The regime has not and will not go after the banksters because the defense would prove regime complicity. The banksters are only one leg of the ponzi, if that one leg goes down the entire stool crashes with it.
Digital money stops the war on drugs
What a dreamer you are. Politicians will still need those anonymous pre-paid credit cards to fund their campaigns, so they will also be available for drug dealing.
Exactly!
Legalisation and proper government oversight and information towards the citizens stops both the illegal trade, and the "war on drugs".
However the huge pool of black money is very profitable for major american institutions. Including the CIA and the Banks, as well as it eliminates competition for those that are manufacturers of artificial medicine (as opposed to natural and unpatented) and those companies that still are milking the petrochemical monopoly. (Hemp will destroy that monopoly.) Moreover, since most scientific research shows addiction is not specifically because of a substance, but is rather as heightened susceptibillity to it (like a disease), and always must be regarded in the context of "set, setting and substance", criminalising it has no ground, whatsoever. That the state took on this role was a big step on the road to take away civil and human rights. I.o.w. the State should stay out of it. Right now, in the USA, just like in the militairy in the "war on terror", a huge part of this "war on drugs" is now carried out by private institutions. This means we have masters now that control us, without any moral ground. And this enslavement only in a few short decades. How far we've fallen as a species!
Digital money will not stop it, since it only evoces more corruption; it creates even more opportunities for bankers that launder money and other criminals in control of such as system to grab more power (from the rest of us). Talk too much? Credit switched off. Don't play along nicely or don't work too hard? Credit switched off. Instant debt serftitude. (of course this electonic money will be a credit card, not the debit card the privileged class will use. An even greater class divide is in the works.)
Electronic money, right now, just as total internet copyright control (parallel issue) as now put into law would mean a nightmare for anyone except TPTB. And that's why they're pushing so hard to get this done. "Some folks" say this whole crisis is a setup to come to that result. Logically... that would make sense. If you're a banker, and you've tasted middle class blood, why stop now?
The "war on drugs" coupled to electronic money and new technology equals Orwellian nightmare.
http://www.smartplanet.com/blog/rethinking-healthcare/fingerprints-revea...
Wake up already: Just like the "war on terror" the "war on drugs" is a destructive export product of the US of A. Time to end it, before it consumes, first you, and then (if we keep in your slipstream) us europeans.
Reptil,
Anyone who has and uses a DEBIT card should immediately close the account,and go back to paper checks.
Credit card only for convienence, payed off 100% end of month.
All else, cash, or checks(Hard copies).
The more Debit Cards are used, the faster the banks RR us onto the system.
Most banks have less than $75k on hand hard cash for a weeks business.
War on drugs feeds private prison population, which feeds profits...Rick Scott in FL is both trying to get mandatory drug testing that would hugely Profit lab he has stake in and he is also trying privatizing prisons, that way, every person put jail is not just a tax burden to everyone, but also a profit item to a few special connected industries...so instead of whole pupation weighing costs and benefits of incarceration objectively with everyines motives clearly around common good, instead you have a group of connected insiders that have huge, secret motives and incentive to get more people locked so they profit. Incarcerating illegal immigrants is also profit making as private prison people are tight with AZ governor. if you are for cracking down on illegal immigration, jailing people indefinitely is not a necessary solution...much easier and cheaper to make it virtually impossible to get a job, beyond person to person cash under table, without being legal, thus cutting off main incentive for illegal immigration. instead we have jails filled with people, waiting for something, to be deported, something.
Prisons and surveillance I would think would be growth industries in the coming years, especially if the economy tanks even more. Dmitri Orlov suggested that more and more people will be forced to commit illegal acts, such as stealing food, in order to survive and feed their families, which will expose them to the danger of American justice for the underclass--a consumation devoutly to be feared. I thought prisons were already in the private sector, but you make an excellent point that putting the profit incentive in place can only increase the prison population. We need have no fear of a prison population gap!
There is no more believable PROPAGANDA to employ, as even the dumbest of the sheeple are starting to realize that something is very wrong, and getting worse each day.
And the COUP DE GRACE is the ultimate “Checkmate” situation, when, in REAL TIME, the U.S. government has painted itself into the ultimate corner, forcing a “Hobson’s Choice”, or “Sophie’s Choice” for movie connoisseurs. This situation was created by decades of arrogant, selfish, insanely stupid behavior by a handful of global “elites” (also facetious) headquartered in Washington, New York, and London, and will go down in history as among the greatest of all human follies.
Keep ONLY enough “cash” to pay your bills. The rest of your “cash” should be held in the form of PHYSICAL gold and silver, an account at goldmoney.com, or in the closed-end bullion funds CEF, GTU, SVRZF (or SBT.T in Canada), PHYS, or PSLV). And those closed-end funds MUST be kept in BROKERAGE accounts of brokerages NOT CONNECTED IN ANY WAY to BANKS.
DO NOT EVER OWN GLD OR SLV! These are frauds which will one day be recognized as WORTHLESS.
Readers, there are obviously many more things one can do to PROTECT THEMSELVES from the oncoming surge in inflation. It is up to YOU to decide how much you want to do, but for gosh sakes, PLEASE DO SOMETHING, and do it NOW!
www.LeMetropoleCafe.com
David,
Agree w/you 100%, except;
Having cashed out much of my tax "sheltered" holdings, paid the tax, and converted to hard assets, I can say that the peace of mind exceeds the cost. The returns are impossible to predict, but I believe they will be massively positive as the implosion takes hold. But by then, paper returns will mean nothing...what will be important is what is in reach within my four walls.
Spot on with one exception: "FDA approved grain storage buckets (although Home Depot “Homer” buckets should suffice)". Homer buckets, et al typically utilize toxic mold release compounds that do not "wash off" when these buckets are cleaned in preparation to store food. The better bet is to go to your local supermarket to their bakery department and inquire about their 5 gallon "pickle" buckets. These are FDA food-grade plastics that do not use the mold release compounds that the homer buckets use. Most of the time, the supermarkets are glad to get rid of these buckets at little to no cost.
Dude I agree with you but I think the PTB will just confiscate and make gold and silver illegal along with any barter. The new monetary system will be all digital cash, what ever cash that may be. They can't control cash, gold, silver or barter. Your advice is spot on if they don't take steps to take complete control which they easily could with all digital money. Digital money stops the war on drugs and any competing monetary systems like gold and silver. Pluse you always have a paper trail which is great for tax collections.
They'll never confiscate.
But I do think they'll tax selling and buying of PM's a lot more.
Thus the black market will boil to the surface, barter and bullion driven. Cash will be weight restricting. View recent fiat currency collapses.
I do agree with the above mentioned digital "Blade Runner" govt attempt to control.