This page has been archived and commenting is disabled.

How The Glorious Socialist Revolution Generated A 681% Return For Goldman Sachs

Tyler Durden's picture


Back in 2011, BlackRock's Larry Fink revealed one of the great unspoken truths of capital markets, namely that "markets like totalitarian governments." They also like authoritarian socialism, sprinkled in with a healthy dose of nationalization, because as Bloomberg reports, one of the biggest beneficiaries of over ten years of the "glorious socialist revolution" in Venezuela, coupled with over 1000 nationalizations by the bed-ridden and roughly 15 times deceased Hugo Chavez (if one believes all the rumors), is none other than Goldman Sachs, which generated some 681% in returns due to "aligning its interests" with those of the unshakable Venezuelan ruler.

From Bloomberg:

Since taking office in 1999, Hugo Chavez has spread his socialist revolution in Venezuela by seizing more than 1,000 companies. For bondholders that stuck by him, he’s also delivered returns that are double the emerging- market average.


The 681 percent advance, equal to 14.7 percent annually, has enriched investors from OppenheimerFunds Inc. to Goldman Sachs Asset Management LP that counted on Chavez’s willingness to siphon the country’s oil wealth to pay its creditors in the face of start-stop growth and falling reserves. While his policies drove away enough investors to keep Venezuela’s borrowing costs over 12 percent on average during his tenure, or 4 percentage points higher than those of developing nations, he’s never missed a bond payment.


Venezuelan bonds accounted for about 6.7 percent of the holdings of Goldman Sachs’s $2.9 billion Growth & Emerging Markets Debt Fund, the third-biggest investment, according to data compiled by Bloomberg. The fund returned 12.8 percent over the past three years, outperforming 90 percent of its peers.


“This is a really great high-income and high-total-return investment for your portfolio,” said Sara Zervos, an emerging- market debt manager at New York-based OppenheimerFunds, which oversees $176 billion in assets and has invested in Venezuelan notes for more than a decade. “Chavez hasn’t done a lot of good for his country, but he has the objective to service the bonds. Our interests are aligned.”

Indeed they are. Just as they are aligned in the US, albeit inversely - because for every bond the US government issues, the Fed monetizes anywhere between 50% and 75% (and sometimes over 100% on a gross basis), with the result being excess reserves created flowing through into the coffers of firms like Goldman Sachs, which can then add domestic to already solid socialist returns abroad, by ramping stocks with the indirect proceeds of the Fed monetization.

But everything comes to an end, and while the Fed will not end its market intervention before it has no other choice (i.e., when the rate it pays on overnight reserves is greater than interest income on its "assets under management"), Goldman's Venezuelan faucet is about to run dry:

Now, as the 58-year-old leader battles cancer, the nation’s outsized returns may be nearing an end. While Venezuela’s benchmark bonds have climbed to a five-year high since Chavez said on Dec. 8 that he needed more surgery, they’re unlikely to replicate the gains they’ve posted in the past decade once the rally drives yields down closer in line with regional peers, according to Russell Dallen, the head trader at Caracas Capital Markets.

What happens after the inevitable passage is unclear, but will likely not be good news:

“While the story has been deteriorating, Venezuela will continue to pay their debt,” Sam Finkelstein, an emerging- market bond manager at Goldman Sachs Asset Management in New York, said in a telephone interview on Jan. 25. “The situation will have to be much tighter, more fragile for a default to be likely.”

A worst case scenario for Venezuela will have broad implications elsewhere, such as the oil market:

Chavez paid off the debt because non-payment would lead creditors to seize Venezuelan oil shipments, which supply half of the government’s revenue, according to Simon Nocera, a former economist at the International Monetary Fund. Bond investors can also freeze Venezuelan assets overseas, including refineries and gas stations of Citgo Petroleum Corp., a subsidiary of PDVSA, he said.


“Chavez makes noise, but he will never come out and say: ‘We are going to restructure our bonds,’” Nocera, now chief investment officer at Lumen Advisors LLC, said in a telephone interview from San Francisco on Jan. 23. “He knows if he does, he won’t sell the only product that allows him to survive. There’s no reason to be scared.”

True -there is never any reason to be scared, until the panic sets in. Just ask the Fed.

As for Goldman, don't feel bad about them: with the entire world turning socialist, the bank may simply focus on France next, or maybe even the US. Worst case, their aggressive ramping of operations in Africa will soon bear fruit, once the whole world grasps that the last race for commodity colonies, to be held between the US and China, together with the occasional drone, extended semiautomatic clip and mortar, will need lots and lots of debt - debt Goldman will be happy to fund for a price.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 01/30/2013 - 12:35 | 3199124 Shizzmoney
Shizzmoney's picture

BlackRock's Larry Fink revealed one of the great unspoken truths of capital markets, namely that "markets like totalitarian governments."

And Larry Fink loves totalitarian Secretaries of the Treasury.

Wed, 01/30/2013 - 12:50 | 3199172 JR
JR's picture

This doesn’t have anything to do with markets, capitalism, nationalization or anything else. It has to do with larceny. It’s stealing.

For the robber who empties out the cash drawer at a 7-Eleven store he had more than a 1000 percent up-to-the-cash-register-limit increase in profit. With Goldman operations there isn’t any resemblance to investments or law; you don’t make that kind of money unless you take it. That value, that money, comes from somebody. And it wasn’t somebody who agreed to it. They and their government partners in crime took it.

It’s time people stop implying there’s something legitimate about Goldman Sachs.

Wed, 01/30/2013 - 13:02 | 3199213 disabledvet
disabledvet's picture

Phuck your oil Chavez. I do like his bus driver "replacement just in case though." methinks he has a similar mindset.

Wed, 01/30/2013 - 13:15 | 3199251 trav777
trav777's picture

know who else likes totalitarian socialist governments?  3rd worlders.  That's why they always have them there.

See, what they're not teaching you in "science" is that people are who CREATE environments and cultures and societies.  What you see is a reflection of them.

The US has a one-way demographic trend in place.

Wed, 01/30/2013 - 13:24 | 3199279 NotApplicable
NotApplicable's picture

Funny how yet another "revolutionary leader" remains absolutely obedient to the bankster class, providing them will a massive cut of the loot in order to fund his visions of paradise.

I get so tired of reruns.

Wed, 01/30/2013 - 13:45 | 3199358 economics9698
economics9698's picture

Venezuela is a nation of gangs and Chavez is the biggest gang on the block.  The NYC bankers (I am going to puke with this politically correct shit in a second here) discovered this little trick the last couple of centuries when they got the Central and South American countries to give up their silver for worthless paper or else.   If they do not give their wealth to the NYC bankers insurgents get funded and adios, bring in the new dictator.

Fucking bankers are evil, pure fucking evil.

Wed, 01/30/2013 - 13:25 | 3199281 Poetic injustice
Poetic injustice's picture

Hate to say but you are right there.

Wed, 01/30/2013 - 13:26 | 3199283 JR
JR's picture

The USA is importing socialism.

Wed, 01/30/2013 - 13:26 | 3199286 fourchan
fourchan's picture

the revolutions are created by the profiteers.

just like the fed reserve creates boom and bust cycles to enslave the population to debt and capture productive assets.


the system is working perfectly.

Wed, 01/30/2013 - 13:36 | 3199311 Unprepared
Unprepared's picture

That's a bunch of BS Trav. People are the product of their environments/cultures which are also made by the people. People CAN* change, break-free their cultures if they so want. They can also corrupt it if they let it be. The thing is that most people never learned they have that ability and capacity to change their conditions and predicaments. But that lesson can only be learned the hard way, there is no WAY to "transfer" cultural values (i.e. you cannot "FREE" a country from outside even with the best intentions).

This has nothing to do with race, color or geography.

Wed, 01/30/2013 - 13:42 | 3199346 sdmjake
sdmjake's picture

Didn't Randolph and Mortimer Duke already prove all this over a $1 ??

Wed, 01/30/2013 - 13:51 | 3199370 economics9698
economics9698's picture


Unprepared, there are differences, the we are the same argument died out a few decades ago.

The best defense against stupid people being stupid is to have a biological father in the home correcting the stupid.

Here check for yourself.


Wed, 01/30/2013 - 12:38 | 3199132 tahoebumsmith
tahoebumsmith's picture

And soon the new global currency will have a squid on the first tungsten coin minted...

Wed, 01/30/2013 - 12:40 | 3199133 Cognitive Dissonance
Cognitive Dissonance's picture

Don't fight the Fed is/was in reality always don't fight the (increasingly) authoritarian government and its puppets.

<Though the puppets are actually controlling the Fed. But you knew that.....right?>

Wed, 01/30/2013 - 13:12 | 3199241 Spastica Rex
Spastica Rex's picture

Who's using who? what should we do? well, you can't be a pimp and a prostitute too.

Icky Thump

Wed, 01/30/2013 - 12:41 | 3199134 jjsilver
jjsilver's picture

Jacob Schiff, the head of Kuhn, Loeb and Co., and long-time associate of the Rothschilds heavily bankrolled the [Communist] revolution.

The Jews Who Murdered Tsar Nicholas II


And don't forget the REAL holocaust where 80 million christians were murdered

Wed, 01/30/2013 - 13:21 | 3199272 trav777
trav777's picture

why would they do that?  Were they related to the main agitators for global communism?  Was Karl Mordechai related too?  Is marxism basically another clan religion?

Wed, 01/30/2013 - 12:38 | 3199137 PUD
PUD's picture

Well then! Just align yourself with our glorious leader! So easy even a cave man dan do it!

Wed, 01/30/2013 - 12:38 | 3199138 Uncle Zuzu
Uncle Zuzu's picture

No surprise there.  It's the wheel of globalization.  Wall Street wanted free trade with China, which boosted the Chinese economy, which propelled commodity prices, which consolidated the power of petro tyrants like Chavez, which benefited Wall Street.  Any questions?

Wed, 01/30/2013 - 13:00 | 3199202 JR
JR's picture

Yes, we can trust these well-meaning men who are secretly operating behind the scenes. The Soroses, the Blankfeins, the Rubins, the Rothschilds, the Summers -- the “hope” of the world.

Those who resist them -- the “tragedy.”

“Tragedy and Hope,” Dr.Quigley’s title, that exposes the world-wide conspiracy of a world-wide power grab by a mammoth power network.

Wed, 01/30/2013 - 12:40 | 3199142 A Lunatic
A Lunatic's picture

I like Totalitarian Governments too; makes it easier to see who my enemies are...........

Wed, 01/30/2013 - 13:21 | 3199264 NotApplicable
NotApplicable's picture

Go ahead and waste your time focusing on puppets. It will get you nowhere. Your true enemies are invisible.

Wed, 01/30/2013 - 14:10 | 3199419 forwardho
forwardho's picture

Your true enemies are invisible.



Wed, 01/30/2013 - 12:41 | 3199143 Kaiser Sousa
Kaiser Sousa's picture

look at the fucking Dow...



Wed, 01/30/2013 - 12:42 | 3199148 CrashisOptimistic
CrashisOptimistic's picture

Jesus Christ, MINUS 0.1% and nobody cares!?!?!?!?!?!?!

WTF is going on?

Wed, 01/30/2013 - 12:45 | 3199159 Dr. Engali
Dr. Engali's picture

A negative number locks in the fact Ben will continue to print.

Wed, 01/30/2013 - 12:59 | 3199199 CrashisOptimistic
CrashisOptimistic's picture

But that's absurd.

Who expected an end to QE any time in the next 12 months?  Nobody.

Wed, 01/30/2013 - 13:02 | 3199210 Dr. Engali
Dr. Engali's picture

Allow me to clarify it means he will print more

Wed, 01/30/2013 - 13:15 | 3199252 CrashisOptimistic
CrashisOptimistic's picture

Hard to make a case for that.  If there was a presumption that Ben would buy more Treasuries, it would have driven rates lower.

Wed, 01/30/2013 - 13:40 | 3199327 Dr. Engali
Dr. Engali's picture

Don't limit your imagination to just treasuries. Japan didn't and neither will the Fed.

Wed, 01/30/2013 - 13:11 | 3199237 Atomizer
Atomizer's picture

Look for a subsidiary GS shell company. Follow the money. 

Wed, 01/30/2013 - 13:32 | 3199304 ebworthen
ebworthen's picture

Who needs GDP when you have EBT and FED infinite QE?

Wed, 01/30/2013 - 12:43 | 3199149 Dr. Engali
Dr. Engali's picture

"As for Goldman, don't feel bad about them: with the entire world turning socialist, the bank may simply focus on France next"


with the entire world turning fascist


 There fixed that for you.

Wed, 01/30/2013 - 13:00 | 3199188 Ghordius
Ghordius's picture

you mean they don't like socialist France because of it's socialist austerity calls? ;-)

as someone that grew up in a couple of countries that were truly, honest-to-heart fascist I find it always a bit strange how this word is used in the US and the UK

a fascist government (the way we continental europeans understand the word) would approach the banking crisis in a muscular, watch-me-how-I-protect-your-interests way:

A) round up the usual suspects, in this case the CEOs of the MegaBanks B) yell at them in public (the same way Putin does it with some Russian oligarchs) C) waterboard Corzine - aka pour encourager les autres D) tell them the nation expects better, soon, and they have to deliver solutions in a month and of course E) bask in the glory of the fawning press that says: the gov saved the day, long live the gov

rince and repeat if necessary, with of course escalations

again, that's our understanding of "fascist", but hey, it's not as we have had any experience with that stuff, didn't we? ;-)

Wed, 01/30/2013 - 13:07 | 3199223 Dr. Engali
Dr. Engali's picture

As an economic system, fascism is socialism with a capitalist veneer. The word derives from fasces, the Roman symbol of collectivism and power: a tied bundle of rods with a protruding ax. In its day (the 1920s and 1930s), fascism was seen as the happy medium between boom-and-bust-prone liberal capitalism, with its alleged class conflict, wasteful competition, and profit-oriented egoism, and revolutionary Marxism, with its violent and socially divisive persecution of the bourgeoisie. Fascism substituted the particularity of nationalism and racialism—“blood and soil”—for the internationalism of both classical liberalism and Marxism.

Wed, 01/30/2013 - 13:38 | 3199242 Ghordius
Ghordius's picture

again: that's the typical US/UK way of looking at it - which of course is the one that counts

Wed, 01/30/2013 - 16:38 | 3200105 NidStyles
NidStyles's picture

Except it was and Italian and Austrian that defined it that way.

Wed, 01/30/2013 - 18:08 | 3200428 Ghordius
Ghordius's picture

Which took their nation's conservativism - among other components - for granted

Wed, 01/30/2013 - 13:53 | 3199360 Bastiat
Bastiat's picture

Always wondered what that thing was on the Mercury Dime !! Thanks, Doc.

Wed, 01/30/2013 - 15:22 | 3199731 Shell Game
Shell Game's picture

Thanks to you both, good stuff..

Wed, 01/30/2013 - 13:13 | 3199243 Pure Evil
Pure Evil's picture

That's old world fascism. Our fascists are truly benevolent. Instead of yelling at our banksters we continue to bail them out with 85 billion a month POMO operations. You can't ask for more benevolence than that. But, maybe the benevolence will be more forthcoming since we had lousy growth last quarter.

Wed, 01/30/2013 - 13:37 | 3199324 Ghordius
Ghordius's picture

+1 LOL - you mean "nurturing motherly" instead of "sternly fatherly", eh?

Wed, 01/30/2013 - 17:39 | 3200347 Harbanger
Harbanger's picture

"A) round up the usual suspects, in this case the CEOs of the MegaBanks B) yell at them in public (the same way Putin does it with some Russian oligarchs) C) waterboard Corzine - aka pour encourager les autres D) tell them the nation expects better, soon, and they have to deliver solutions in a month and of course E) bask in the glory of the fawning press that says: the gov saved the day, long live the gov

Interesting, I could definitely see Obama doing this in the US and getting credit for saving us.  Once you control the propaganda press, anything is possible.

Wed, 01/30/2013 - 18:15 | 3200453 Ghordius
Ghordius's picture

Do you? Really? Not me. That's my whole point, many of the components of fascism can't be applied to countries that have a different set of cultural lies & truths

Example: the politicians we elect would never be elected in the US or UK

Wed, 01/30/2013 - 18:44 | 3200545 Harbanger
Harbanger's picture

What they all have in common is they will never take reponsibility for creating the problem.  I can see him throwing some of his banker and CEO "friends" under the bus when the dollar collapses, nationalizing the banks and everything else he can, the press giving him support and credit for saving us from the greedy 1%.  Not only is it possible, I think that's the plan.

Wed, 01/30/2013 - 18:30 | 3200510 smacker
smacker's picture

Nope. Fascism is corporatism with added jackboots. Meaning that the fascist political elites that are breeding like cockroaches are in bed with big this case the banksters. In Hitler's case it was the big industrialists. In all incarnations of fascism, the ordinary citizen is subjugated to the state and eliminated if he dissents.

Wed, 01/30/2013 - 12:45 | 3199153 GNWT
GNWT's picture


The London Whale really knocked us out He left the Street behind And Jamie Dimon Is selling silver Cause Blythe Is - always - on - his - mind Take me to your gold vaults Way down south Corzine... he stole my daddy's farm
The London Whale really knocked us out He left the Street behind And Jamie Dimon Is selling silver Cause Blythe Is - always - on - his - mind Take me to your gold vaults Way down south Corzine... he stole my daddy's farm


Wed, 01/30/2013 - 12:45 | 3199154 CPL
CPL's picture

They may have made 681% profit but it's in a currency that's lost 99.99% of it's value. 

Like saying silk pocket lint is worth more than cotton pocket lint.  When I see the profit in oz, then it'll mean something.  Otherwise clownshoes and hockey sticks for all the GS alumni.

Wed, 01/30/2013 - 13:31 | 3199298 forwardho
forwardho's picture

CPL, why... it seems... you have become french. No?

Wed, 01/30/2013 - 14:47 | 3199560 CPL
CPL's picture

Bien sur!  The french are part of Canada so I created a symbol of truth, justice...well, no not really.  I was fooling around in GIMP testing an effects plugin, just haven't changed it back yet.


Moustache got messed up, looks more like a dirty sanchez.

Wed, 01/30/2013 - 12:45 | 3199155 Ghordius
Ghordius's picture

I never liked this quip "markets like totalitarian governments", I find it conflates two things, i.e. that


- "Big Business" likes political environments where they get good returns for their bucks (be them through lobbying or outright bribes) and that

- markets like stable, foreseeable government policies


So you can have a wonderfully vibrant democratic setup, but if it's moody and prone to sudden policy changes, markets won't like it. Meanwhile Big Biz will deplore the "unfriendliness towards business" if they can't just get in and do whatever they want (even at any price)

Wed, 01/30/2013 - 13:34 | 3199276 Mercury
Mercury's picture

In this context I don't think the opposite of totalitarianism is democracy but the rule of law.

I can see how "the market" might appear to like totalitarian government (at least in the short term) as long as you recognize the survivorship bias: that the market is in fact a constantly updated list of companies who have survived or benefited from the government's latest whims, favors and punishments.

The ideal long-term environment for the market and the broader economy is (or at least empirically has been in the past) one where things like private property, enforceable contracts, reasonably fair courts, due process and certain civil rights can’t be abrogated by either popular whimsy or executive fiat.

Wed, 01/30/2013 - 18:16 | 3200443 falak pema
falak pema's picture

democracy is the election of leaders either parliamentary or republican congressmen to represent the individual vote. It can be based on proportional system or majority rule. Its legislates to make laws and has the executive and justice branches to implement and control that rule; ideally on a separation of powers basis.

Markets are there to complement government in the domain where the public sector delegates responsibility to private initiative under agreed market economy, supply and demand determined, set of rules. Government stays the ultimate arbitrator of the market economic function. It is NOT independent of the elected democratic system. 

To put the market economy above the government sector or in opposition to it contravenes the democratic process where the individual has power, albeit by elected reps. All other systems negate that individual power and replace it by non elected oligarchy power based on who controls money and therefore the unregulated or corpo regulated so called free market.

That is social regression plain and simple. As the individual cannot exercise his will by representatives WHO DEFINE THE RULE OF LAW IN HIS NAME. It is vital that the individual maintains control over the electoral process; as its the nation's true lifeblood. 

"We the people" meme dies if that control fails...we are now heading there.

Wed, 01/30/2013 - 12:44 | 3199156 GNWT
Wed, 01/30/2013 - 12:46 | 3199160 IamtheREALmario
IamtheREALmario's picture

Seemingly dictators are always fearful and insecure and will do anything and pay anything to protect themselves and their power. Bankers, being able to smell an opportunity to take advantage of fear and insecurity (and people in general) find ways to profit from these situations.

Is it immoral and unethical? sure ... but you have to look at the psychopaths who make up the company and the industry.

Wed, 01/30/2013 - 12:51 | 3199176 reader2010
reader2010's picture

There is nothing new under the sun. History shows us the American industrial and banking interests bankrolled the rise of Lenin, Hitler and Mao for the relentless pursuit of profit. 

Wed, 01/30/2013 - 13:28 | 3199290 forwardho
forwardho's picture

So it would seem that Karma really is a bitch.

If one plants seeds in a radioactive garden they should not be suprised by the genetic abnormallities.

Wed, 01/30/2013 - 12:55 | 3199177 Eally Ucked
Eally Ucked's picture

"Capitalism (according to Marxist theory) can no longer sustain the living standards of the population due to its need to compensate for falling rates of profit by driving down wages, cutting social benefits and pursuing military aggression. The socialist system would succeed capitalism as humanity's mode of production through workers' revolution. According to Marxism, especially arising from Crisis theory,Socialism is a historical necessity (but not an inevitability)."

Where are we now?

Wed, 01/30/2013 - 13:13 | 3199238 disabledvet
disabledvet's picture

The Fed definitely destroyed "their banks." it is no accident that the biggest bailout was for Belgian based Dexia..."all things American" are SO unproductive. And yet it is Simple Justice that those who've made the killing have been the one's betting on recovery in the USA. I'm out of the averages...but not individual names. Long Darwin in a big way though...

Wed, 01/30/2013 - 13:18 | 3199257 JR
JR's picture

Socialism is Marxism and it has never worked, EXCEPT where capitalism has either bailed it out or supported it, such as with the Soviets, where US wheat had to feed the starving citizens, or with Mao's Red China where international corporatist bankers had to grab America’s manufacturing and patent base and transfer it to China, as did the allies after WW II when they dismantled and reassembled Germany’s manufacturing plants in Soviet Russia.

These attacks on capitalism are essentially attacks on failed Fabian Socialism which has replaced the American free enterprise system.

And, finally, capitalism involves the private ownership of the means of production; it does not mean stealing the means of production that describes a banker-controlled economy. That's where we are now.

Wed, 01/30/2013 - 13:41 | 3199342 Eally Ucked
Eally Ucked's picture

"Marx's view of capitalism was two-sided.[8][105] On one hand, Marx, in the 19th century's deepest critique of the dehumanising aspects of this system, noted that defining features of capitalism include alienation, exploitation, and recurring, cyclical depressions leading to mass unemployment; on the other hand capitalism is also characterised by "revolutionizing, industrializing and universalizing qualities of development, growth and progressivity" (by which Marx meant industrialisation, urbanisation, technological progress, increasedproductivity and growthrationality and scientific revolution), that are responsible for progress.[8][105][132] Marx considered the capitalist class to be one of the most revolutionary in history, because it constantly improved the means of production, more so than any other class in history, and was responsible for the overthrow of feudalism and its transition to capitalism.[135][155] Capitalism can stimulate considerable growth because the capitalist can, and has an incentive to, reinvest profits in new technologies and capital equipment."

Wed, 01/30/2013 - 14:14 | 3199449 JR
JR's picture

It’s pretty hard to clean up Marx these days since his ideas have failed throughout the world and his enemy, capitalism, has achieved spectacular success to the point where capitalism based on free markets literally feeds the world.

These memories of Marx colored in Wikipedia, as many things are, are dangerous. The only capitalism Marx feared was not capitalism at all as the capitalism you fear is not capitalism at all.

The entrepreneur is the capitalist; the dictator is not. Only in a world where progress has been achieved through capitalism is there room for discussing the myth of successful Marxism. Bernanke is not a capitalist; Bernanke is a central planner, the same as Stalin.

The rights of man--individual freedom and the opportunity to own property and develop the means of production, i.e., capitalism--exploded into the most successful society the world had ever seen. It is the greed lust of the founders of globalism, based on Fabian Socialism, that is destroying this miracle of individual freedom.

Wed, 01/30/2013 - 15:00 | 3199627 Eally Ucked
Eally Ucked's picture

I'm not marxist but it looks to me that he became symbol associated with Lenim, Stalin, Mao and other communist assholes with their theories of terror as a tool to keep masses at bay. He was mostly philosopher and many of his thoughts are ringging true in todays world.

"Fictitious capital is a concept used by Karl Marx in his critique of political economy. It is introduced in chapter 29 of the third volume of Capital.[1] Fictitious capital contrasts with what Marx calls "real capital" which is capital actually invested in physical means of production and workers, and "money capital" (actual funds being held). The market value of fictitious capital assets (such as stocks and securities) varies according to the expected return or yield of those assets in the future, which is at best only indirectly related to the growth of real production. Effectively, fictitious capital represents "accumulated claims, legal titles, to future production"[2] and more specifically claims to the income generated by that production.

  • Fictitious capital could be defined as a capitalisation on property ownership. Such ownership is real and legally enforced, as are the profits made from it, but the capital involved is fictitious; it is "money that is thrown into circulation as capital without any material basis in commodities or productive activity".[3]
  • Fictitious capital could also be defined as "tradeable paper claims to wealth", although tangible assets may themselves under certain conditions also be vastly inflated in price.[4]
  • In terms of mainstream financial economics, fictitious capital is the net present value of future cash flows."


Wed, 01/30/2013 - 16:44 | 3200147 NidStyles
NidStyles's picture

Marx was just rehashing the false arguments of the Physiocrats there. Rothbard went over this in his essays on pre-Smithian Economics. Look there to find why that assessment is simply a poor description of reality.

Wed, 01/30/2013 - 18:02 | 3200410 falak pema
falak pema's picture

essays....thats your reality.

Wed, 01/30/2013 - 18:32 | 3200512 Eally Ucked
Eally Ucked's picture

I don't want to go to big discussion here, it's not proper forum, so I will use other people words:

"The Austrians specialize in demoralizing intellectuals attracted to the workers’ movement, attempting to steer them toward reactionary bourgeois economics and politics instead.

Since they concentrate on refuting Marx, they are frequently somewhat more familiar with Marxist ideas than are most professional bourgeois economists. As intellectuals they love to play with ideas, and have in fact absorbed certain ideas from Marx, which they use for their own purposes. Undoubtedly, Austrian economic theory was influenced by the Austro-Marxist School and the Austro-Marxists were, in turn, influenced by the ideas of the Austrian School. I will examine some of these mutual influences below."

Wed, 01/30/2013 - 13:22 | 3199275 forwardho
forwardho's picture

Not sure what level, but the elevator in Dante's infero comes to mind.

Does it seem kind of hot in here guys?

Wed, 01/30/2013 - 13:30 | 3199294 ebworthen
ebworthen's picture

Sociokleptoligarchyism is where we are.

The worst of both Socialism and Capitalism.

Wed, 01/30/2013 - 13:37 | 3199178 Mercury
Mercury's picture

Now I know why Lloyd Blankfein is growing a beard...

I guess it’s nice to know that the sovereign whose bonds you're holding is perfectly willing to seize private property to make up any projected debt servicing shortfalls. They should invent a AAAA rating just for that and assign it where appropriate - as long as there is still sufficient private capital to seize.

Wed, 01/30/2013 - 12:52 | 3199183 frenchie
frenchie's picture

Rothschild & Marx = both sides of same (kosher) coin...

Wed, 01/30/2013 - 13:08 | 3199228 earleflorida
earleflorida's picture

"The Ashkenazi Syndrome'

Wed, 01/30/2013 - 14:01 | 3199416 JR
JR's picture

Many years ago, Dr. Revilo P. Oliver, then Professor of the Classics at the University of Illinois, provided a penetrating observation of a basic aspect of International Communism in an address to the Association of American Physicians and Surgeons.

In his address, “The Secret of Hideous Communism’s Strength,” he pointed out a fact of Communism that is often overlooked. He said, “The simplest and most fundamental fact about the International Communist Conspiracy is one of the hardest to grasp. Communists are not human, in the selective and optimistic sense in which we habitually use that word.

“They neither think nor feel as we do. They do not see the world that we see…inwardly they are as alien from us as the ghouls of Arabian legend or the Martian monsters imagined by our most extravagant writers of ‘science fiction.’

“Communists are not human because they have been subjected to a prolonged and intensive discipline devised to purge them of all the instincts and capacities that we like to regard as characteristic of man – self-respect, independent judgment, conscience, pity, and every form of decency and morality. And the discipline is above all designed to make certain that anyone in whom the human qualities are not totally extinct is eliminated from the Conspiracy.”

At the time he spoke, Dr. Oliver talked about the “appalling success throughout the world” that the Communists were having, and said then, more than fifty years ago, that in their active preparations to take over the entire nation that “on the most optimistic estimate,” they were “more than half of the way to that goal.”

Think Obama.

Wed, 01/30/2013 - 15:25 | 3199758 Shell Game
Shell Game's picture

+1  Good posts today, JR, thanks.

Wed, 01/30/2013 - 16:06 | 3199938 falak pema
falak pema's picture

JR :  you don't ask yourself the 64000$  question about capitalism as its practiced, not as its theorised; something that escapes your watchful eye when it comes to talking about Marxism-Communism; you always show up the shortcomings of the marxist model relative to REALITY vs THEORY; all the while you stay in the intellectual ghetto of describing capitalism in terms of ideals; never in terms of actual reality...that is undefendable as pragmatic logic based on fact.

There is a divide the size of the Grand Canyon in your relative comparison of two antagonistic models; not that I support one or the other; as I consider both extremes as unacceptable,  liking them as Charybdis and Scylla of old...just saying, to define my little, insignificant subjective position on subjects of universal dimension.


Today the West lives in the eiree legacy of RR/MG gone NWO form.

Consider this reality as starting point; we are there, NOT in CB totalitarian sovietism, which is just a cover to save the neo con Oligarchy. China does not yet rule the world...Just like the NWO invented the Taliban to fight the soviets, it will do the same by inventing the "terrorist threat" to fight the Talibans, its last invention, like a recurrent nightmare, punch n judy smoke n mirrors show. Thats how you captivate the sheeple! ... In fact to increase Oligarchy control over the RM of untapped continents. The new silk and spice routes. 

Yes the capitalist model outstrips the communist model in its hurtling momentum to achieve the only model that western civilisation truly respects in reality : Caesar's destination of PAx Americana. 

The rest is smoke n mirrors. 


Wed, 01/30/2013 - 16:52 | 3200187 NidStyles
NidStyles's picture

The problem is that you are attributing the acts of Fascists with Capitalists. He pointed out that distinction out above.

It's ok, we know you are a closet Socialist already, so there are no real expectations that you would be honest about this discussion. The Economic system that is being used by the Central Planners pre-dates Reagan and Thatcher. It in fact goes all the way back to Wilson and Hoover.


I guess that would require you to actually study history to understand that, something that you seem to have a glaring allergy to.

Wed, 01/30/2013 - 17:25 | 3200296 falak pema
falak pema's picture

and for you to differentiate fact from theory; history is about the facts are NOT written by communists but by US led capital oligarchs gone head up their asses and ready to sell their souls to the first devil who comes their way; be he Putin, Saud or Chinese overlord.

Hahaha ..the current central planned system predates Reagan and Thatcher..yes...It goes back to Rockafella and Morgan and FOrd. 

Now if you can find any capitalist up your red and rosy MORE US capitalism than that; not statist like good ole Lincoln and FDR, I'll eat my proverbial hat.

You'd bend US reality and pretend Lenin ruled USA since 1917; hahaha...keep playing your tune of revisionist logic. The great Gatsby was a commie and Hemingway a Comintern agent! 

Wed, 01/30/2013 - 12:54 | 3199187 docj
docj's picture

Bestest recession EVAH!!

Wed, 01/30/2013 - 13:02 | 3199208 spankfish
spankfish's picture

Looks like GS is doing a reverse Robin Hood, stealing from the poor to give to the rich.

Wed, 01/30/2013 - 13:07 | 3199222 youngman
youngman's picture

Goldman would invest in the company that made the ovens that cremated the Jews in WWII...just to make a buck....its in their

Wed, 01/30/2013 - 13:28 | 3199289 Inthemix96
Inthemix96's picture

Thats probably exactly what they did mate.


Wed, 01/30/2013 - 13:08 | 3199227 Atomizer
Atomizer's picture

This is what Goldman Sachs calls 'Gods work'.

Wed, 01/30/2013 - 13:12 | 3199239 LongSoupLine
LongSoupLine's picture

Goldman can fuck off. It would be a great day when their fucking building in that fucking stinking shithole in NY comes burning to the ground like a fucking Brazilian fucking nightclub.

Fuck you Lloyd, you fucking Fed ass sucking shit eater.

Wed, 01/30/2013 - 13:20 | 3199261 Atomizer
Atomizer's picture

Oh come on comrade, the SEC will only fine GS $500 million. The rest is pocket lint profits. \sarc

Wed, 01/30/2013 - 13:14 | 3199248 alfbell
alfbell's picture

GS, like central banks, is one of the visible arms of the invisible power elite.

Wed, 01/30/2013 - 13:20 | 3199265 alfbell
alfbell's picture


If you located and assassinated just a mere 2 dozen people on this planet (the correct two dozen)... that would be the end of most all of this oppression and insanity for mankind.

Wed, 01/30/2013 - 13:26 | 3199285 falak pema
falak pema's picture

Thats what Hercules said when he fought the hundred headed hydra...But each time he cut one head another grew in its place.

To find a solution he had to use destroy the system...Now think in those terms and you realise what this Oligarchy is and why the dirty two dozen are just figureheads...


Wed, 01/30/2013 - 13:25 | 3199282 Gamma735
Gamma735's picture

Goldman Sachs is Satan's Bank.   Just wait until the excutives get their after life bonuses. 

Wed, 01/30/2013 - 13:27 | 3199288 ebworthen
ebworthen's picture

Kind of like the U.S.S.A. Kleptoligarchy aligning it's interests with China to oppress their citizens and maintain economic and physical indentured servitude to the State (banks/military/corporations).

Wed, 01/30/2013 - 13:59 | 3199397 Miss Expectations
Miss Expectations's picture


Wed, 01/30/2013 - 14:10 | 3199441 zrussell
zrussell's picture

I vote the gubmnt siezes Chevron and BP- to pay for social security!

Wed, 01/30/2013 - 14:37 | 3199522 Downtoolong
Downtoolong's picture

Goldman Sachs, promoting and supporting elitism, centralized control, and the uber rich around the world…. uh, for the people, you know, God’s work.

Wed, 01/30/2013 - 14:51 | 3199587 Venerability
Venerability's picture

Talk about an out-of-date story!

If you wanted to bash Venezuela, you should have done it several years ago.

The oil sector, at least, has been opening up VERY rapidly to foreign investment over the past 24 months now.

This will occur in ALL sectors now that Venezuela has joined Mercocur - as of only a few weeks ago, and already bearing important fruit.

Chavez has actually mellowed, and so have the Chavistas as a whole.

And franky, in this case, good for Goldman, if they've been on the other side from the Financial Times and Barclay's.



Wed, 01/30/2013 - 18:00 | 3200403 smacker
smacker's picture

"If you wanted to bash Venezuela, you should have done it several years ago."

Better late than never ;-)

Joining Mercosur does not indicate a change of heart by the Chavez whacknut towards accepting free market capitalism, not least because Mercosur's largest member by far (Brazil) is also run by socialists. And then there's that other loony member: Argentina.

Wed, 01/30/2013 - 16:31 | 3200068 NidStyles
NidStyles's picture

Those were not markets though, they were state ran take overs. It is theft plain and simple.

Wed, 01/30/2013 - 17:50 | 3200281 falak pema
falak pema's picture

nope its bankruptcy of US capitalism plain and simple; and consequent take over of a watered down crony statist model to stop the hemorrhage of private mayhem by subsequent corpo controlled publically socialised, under Oligarchy regulation, super mayhem; double whammy for empire; normal consequence of when shit hits the fan in Roman lands.

Rome is made to rule so when ROme dies; only blatant lies can fill that size of vacuum; as big as the grand canyon. 

As you sow so shall you reap, and sowing on the scale of the global scale is an ominous undertaking that hurts bad when it boomerangs...

Wed, 01/30/2013 - 21:15 | 3200941 jonjon831983
jonjon831983's picture

If anybody recalls the free fuel Venezuela has been sending up north to the American poor.

"Sixth Annual CITGO-Venezuela Heating Oil Program Launched in Boston"

Wed, 01/30/2013 - 22:39 | 3201153 Totentänzerlied
Totentänzerlied's picture

Actually, where Goldman is, markets aren't.

Do NOT follow this link or you will be banned from the site!