• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Guest Post: Crisis And Opportunity

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

That which is unsustainable will pass away and be replaced with a more sustainable arrangement. That is the crisis and the opportunity.

"Never let a crisis go to waste" need not be the exclusive agenda of the Power Elite/ parasitic Aristocracy: it could be the agenda for the rest of us, i.e. the debt-serfs. If you are unfamiliar with the neofeudal/neocolonial financialization model, please read The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012). The same dynamics apply to the American Empire and domestic economy.
 
The Eurozone's Three Fatal Flaws (September 21, 2011)
 

My definition of Neoliberal Capitalism differs significantly from the conventional view: markets are opened specifically to benefit the Central State and global corporations, and risk is masked by financialization and then ultimately passed onto the taxpayers. In this view, the essence of Neoliberal Capitalism is: profits are privatized but losses are socialized, i.e. passed on to the taxpayers via bailouts, sweetheart loans, State guarantees, the monetization of private losses as newly issued public debt, etc.

Before we begin, please glance at the following six charts: To cut to the heart of the matter, always ask: cui bono--to whose benefit? The charts reveal the answer.
 
1. Federal debt (skyrocketing as a result of monumental deficit spending funded by debt);
2. labor's share of the nonfarm business sector (collapsing);
3. GDP (rising modestly on the back of Federal Reserve money creation and monetization of Federal borrowing);
4. financial profits per employed person in the U.S. (exponential rise, interrupted by that spot of bother in 2008 that the Fed fixed with QE1-4);
5. output per person (i.e. productivity per worker, rising steadily)
6. real (adjusted) household income (tanking, depsite trillions of dollars created and borrowed by the Central State and Bank)
 
Can you say "exponential" and "unsustainable"?
 
Off a cliff, even as productivity has risen smartly:
 
Here is GDP, expanding on the back of Federal borrow-and-blow deficit spending:
 
Gee, the financial Aristocracy seems to be skimming all the productivity gains; they certainly aren't flowing to the wage earners:
 
Productivity per worker keeps increasing--where is the net going?
 
Not to the wage earner households:
 
As I have endeavored to explain this week, this financialization of the economy is the direct result of Federal Reserve and Federal government policies. The fact that gains in productivity are not flowing to wage earners is not some mysterious warp of space-time--it is the direct consequence of the Fed's financialization of the economy, supported by the political Elites of Federal government.
 
In the neofeudal, neocolonial model, speculation by the parasitic Aristocracy is backstopped by the taxpayers--the perfection of moral hazard.
 
Future taxpayers are burdened with crushing mountains of debt taken on to fund corrupt state fiefdoms and politically sacrosanct cartels and constituencies.
 
Debt (that profits the parasitic financial Aristocracy) is heavily incentivized while saving capital (cash) is punished with negative yields.
 
There are no financial limits on State borrowing and spending when the Federal Reserve is monetizing Treasury debt. The Federal government is thus free to borrow and squander trillions of dollars supporting cartels (sickcare, national security, war-on-drugs gulags, higher education, etc.) and pass the interest costs on to taxpayers, present and future.
 
There are also no limits on the skim of the financial Aristocracy when the Fed gives them unlimited 0% money, backstops their gambling and destroys the incentives to accumulate cash capital and invest it productively rather than speculatively.
 
This is the essence of the neocolonial model: make money cheap, reward consumption and speculation in asset bubbles and draw once-prudent citizens into debt-serfdom. Those not ready for big-mortgage serfdom are snared with the $100,000 student loan skim.
 
This is the same mechanism used to stripmine colonies with financialization: no coercion necessary. "They did it to themselves."
 
This neocolonial model leads to neofeudalism: Oops, the asset bubble burst, so your (phantom) wealth has vanished, but you still owe us the debt. Funny how that works.
 
In an economy based on debt, servicing that debt absorbs much of the income. So you need to borrow more to get by.
 
Since labor is in surplus, you need multiple university degrees to hope to get a high-paying job. (After taxes and debt service, the "high-paying" part is revealed as illusory--but by all means, please pursue the high-debt, high-consumption American Dream--you're enriching the parasitic Elites immensely.)
 
Each degree will rack up $100,000 in debt, and if you can't get a job, then the "solution" is another degree--oh, and of course, another hundred thou in debt.
 
There are no limits on Central State and financial Aristocracy exploitation, but there are limits on what debt-serfs can pay. Since we can't print money, there are limits for us debt-serfs. There are also limits on how much we can extract from a neocolonial/neofeudal system as wages (see above charts).
 
This neocolonial/neofeudal financialization model will implode under its own weight, and that will be the crisis. The opportunity will be to renounce all the unpayable debt and resolve to establish a radically lower-cost way of life that doesn't need "high incomes" for a fulfilling, prosperous life.
 
Such a way of life is based not on an extractive, expansive State or its partner, the exploitative parasitic Aristocracy, but on the forgotten third foundation of the economy, the community.
 
There are no apolitical “personal choice” acts; there are only profoundly political acts of resistance or complicity. (pages 205-6)
 

That which is unsustainable will pass away and be replaced with a more sustainable arrangement. That is the crisis and the opportunity.

NEW VIDEO: A DELUSIONAL & DYSFUNCTIONAL STATE (29 minutes, 25 slides), CHS with Gordon T. Long:

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Fri, 02/01/2013 - 13:53 | 3206733 Say What Again
Say What Again's picture

BULLISH

I'm now saying DOW 16,000

Fri, 02/01/2013 - 14:02 | 3206759 SamAdams
SamAdams's picture

Quote from ZioNazi controlled media (Bernanke substituted for original name):  "You should challenge Bernanke to a boxing match, show up with a semi-auto and pop him!  I love to see that, in uniform!  I'll wear my brother's uniform...."

Fri, 02/01/2013 - 14:05 | 3206768 Say What Again
Say What Again's picture

My new mantra is....

VIX down to 5!!!

Fri, 02/01/2013 - 14:11 | 3206791 SamAdams
SamAdams's picture

You know it's bad when the house of cards is brought down by a busted hot-water heater...

Fri, 02/01/2013 - 14:22 | 3206827 CheapBastard
CheapBastard's picture

"three kids" and a "big house"....thar's the problem mate.

Fri, 02/01/2013 - 16:29 | 3207330 Totentänzerlied
Totentänzerlied's picture

Nothing wrong with it ... if you can afford it.

Fri, 02/01/2013 - 13:53 | 3206742 vote_libertaria...
vote_libertarian_party's picture

ummmm...buy buy buy?

Fri, 02/01/2013 - 14:08 | 3206743 Landotfree
Landotfree's picture

The system is the same system used over and over.   The system must expand exponentially or start to collapse.

http://2.bp.blogspot.com/--RkLZLRlRi8/UGAGOUg7fNI/AAAAAAAAABs/HHgMlfUYP2...

Attaching interest to your medium of exchange is not a good idea.  This will end just like all the priors, except in this instance the boom will be louder.

http://www.youtube.com/watch?v=DGwmrFJymZ0

http://www.youtube.com/watch?v=7TuqrEcf4tw

Learn to swim.

The Top just returns a portion of what the bottom generates, once the bottom is not able to expand the system at the exponential rate needed... not much the Top can do about it.  

Fri, 02/01/2013 - 15:04 | 3206950 Anusocracy
Anusocracy's picture

The conclusion of CHS that the community is the savior is totally wrong. The community is the origin of all the problems by simply being the basis of the government, everything else that has happened to the economy falls in place from just that fact.

Empowering the community is the problem, empowering the individual is the solution. Until one can understand that, it's best to remain silent and hide your ignorance.

Simple-minded are those who assign any power to the mob.

Fri, 02/01/2013 - 16:11 | 3207261 TheGardener
TheGardener's picture

Are you talking to me CHS ?

Obviously not. You have no idea of an Aristocracy , how it evolves and that any civilized conduct derives from no other source.

I could have a go at the cheap bourgeoise , bringing about your revolutionary kind that feeds from it.

I really agree with most of what you have to say though,
but we are centuries apart as you are seemed to be stuck
in the Enlightenment, the very kind of folly we need to
roll back full course.

Fri, 02/01/2013 - 16:30 | 3207335 Totentänzerlied
Totentänzerlied's picture

As I've said all along, CHS is a cryptosocialist. I only say crypto- because apparently most can't see it.

Sat, 02/02/2013 - 11:26 | 3209013 TimmyB
TimmyB's picture

The opposite conclusion, that when a powerful band of criminals begins looting you and other like minded people should NOT band together to defend yourselves, because people banding together to work for a common goal is the root of all evil, will lead to disaster.

If good people do not band together to defeat the criminals, we are doomed.

Fri, 02/01/2013 - 13:54 | 3206745 LongSoupLine
LongSoupLine's picture

and when that fucking crisis hits, I'll be sitting on my fucking boat in the general area where I had my unfortunate precious metals accident.

 

Fuck off Bernanke.  Asshole.

Fri, 02/01/2013 - 14:01 | 3206755 Sellmoney
Sellmoney's picture

After seeing this i might be long an effishint delinquint debt collection agency. ideas anyone?

Fri, 02/01/2013 - 14:04 | 3206756 Banksters
Banksters's picture

Senate Rejects Paul Amendment to Prevent Arms Sales to Egypt

The peace prize winner continues to sell weapons at a break neck rate.   
Fri, 02/01/2013 - 14:09 | 3206779 SamAdams
SamAdams's picture

Let there be no mistake, our funding of AlQueda in Syria has now totalled $550M.  The good citizens of America support the spread of freedom and democracy to all people oppressed by tyrannical regimes....

Fri, 02/01/2013 - 14:11 | 3206790 Banksters
Banksters's picture

“Would that this amendment was as simple as the junior senator from Kentucky described it,” Leahy said, after Senator Paul sat down. “His amendment would hinder our military assistance program, licenses for commercial sales of all major military equipment, including aircraft, ships, tanks, armor, parts and so on.”

“It would mean a loss of thousands of American jobs. We’d incur more than two billion dollars in contract-termination penalties for U.S. taxpayers,” Leahy added.

 

 

 

 

Fri, 02/01/2013 - 14:19 | 3206807 SamAdams
SamAdams's picture

I remember when America manufactured items other than weapons of war.  This wasn't all that long ago, but now look at the decrepit wreck the neo-cons have created in their rampage of terror and greed.  Nearly every manufacturer is dependent on the government for a percentage of their revenue.  The collapse is near and the Commies/Fascists are itching to take full control of the wreckage...

Fri, 02/01/2013 - 14:36 | 3206849 petolo
petolo's picture

Yes, it was not long ago when american industry made farm machinery for thr small and medium family farm that was the envy of the world. Some of it is still being used in third world countries. I still use horse machinery that was built 75 years ago. I don"t giv e a fuck what the price of oil is. Horses and horse-shit are ready for the fall of the empire. WhileI"m here might as well submit some poetry: Fuck Bonanke and the rest of the scum.

Fri, 02/01/2013 - 14:26 | 3206834 fuu
fuu's picture

"We’d incur more than two billion dollars in contract-termination penalties for U.S. taxpayers,” Leahy added."

16.94 hours for Big Ben.

Fri, 02/01/2013 - 14:42 | 3206870 Henry Hub
Henry Hub's picture

Military Keynesianism is alive an well in America. In fact it is the only thing keep the manufacturing sector alive.

Fri, 02/01/2013 - 14:02 | 3206758 ebworthen
ebworthen's picture

My Son got laid off last week.

Telephone research firm of at least 50 employees, they shut the entire operation down overnight.

And this was a place that paid between $8-$9 per hour and wouldn't give anyone full time or benefits.

No notice, no warning, the head supervisor didn't even know it was coming. 

Boom!  Oh yeah, just gotta' love this recovery!

Fri, 02/01/2013 - 14:23 | 3206828 Ying-Yang
Ying-Yang's picture

Sorry for your son and you. Companies that pay $8-9 an hour with no benefits should be ashamed of themselves.

It is a rigged game slanted in favor of those who cheat. Sorry for your son's loss of work.

Fri, 02/01/2013 - 14:24 | 3206832 ebworthen
ebworthen's picture

Thank You.

Fri, 02/01/2013 - 16:33 | 3207347 Totentänzerlied
Totentänzerlied's picture

"Companies that pay $8-9 an hour with no benefits should be ashamed of themselves."

Wrong. Nothing to be ashamed of in trying to run a private business. The people who should be ashamed are the ones who work round the clock to make it damn-near-impossible for small business owners to afford full time employees, etc.

Fri, 02/01/2013 - 17:27 | 3207539 Ying-Yang
Ying-Yang's picture

Fail

Fri, 02/01/2013 - 14:42 | 3206863 _ConanTheLibert...
_ConanTheLibertarian_'s picture

"Telephone research firm" ? Like a call center?

Fri, 02/01/2013 - 15:12 | 3206985 Anusocracy
Anusocracy's picture

A position that is a thousand times more honorable than any government job.

Fri, 02/01/2013 - 16:13 | 3207269 GubbermintWorker
GubbermintWorker's picture

Hey, I provide a needed service!!

Fri, 02/01/2013 - 16:18 | 3207294 GubbermintWorker
GubbermintWorker's picture

Who down voted me?! Its true, I provide a needed service!

Fri, 02/01/2013 - 17:43 | 3207592 GubbermintWorker
GubbermintWorker's picture

Dammit, another down voter....show yourself and engage in conversation!

Fri, 02/01/2013 - 18:24 | 3207693 GubbermintWorker
GubbermintWorker's picture

Ok then, you all can just carry your own shit and piss in a bucket and dispose of it yourself!

Fri, 02/01/2013 - 15:56 | 3207173 strangewalk
strangewalk's picture

Your son's job was probably outsourced to a call center in the Philippines. However, he can be gratified in knowing that it's good that many millions of American workers have and are surrendering their jobs in order to increase the level of debt servitude of those in despotic and corrupt nations whose governments do not possess the competence or will to work toward managing this outcome for themselves—so we need to do it for them, while strengthening their kleptocrcacies.  

 

Fri, 02/01/2013 - 14:09 | 3206780 ebworthen
ebworthen's picture

"Don't worry, your money is safe, we get whatever we need from the FED."

Fri, 02/01/2013 - 14:17 | 3206809 donsluck
donsluck's picture

Your money is safe, you just can't have it.

Fri, 02/01/2013 - 14:23 | 3206817 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

My money is safe because it's NOT with BOA.

 

edit: safe(ish).

Fri, 02/01/2013 - 16:14 | 3207274 GubbermintWorker
GubbermintWorker's picture

If it is in form of fiat dollars, your money is not safe.

Fri, 02/01/2013 - 16:34 | 3207355 Bad Attitude
Bad Attitude's picture

My money is safe... it is a series of ones and zeros on some hard disk in a server farm somewhere. Hmmm, guess I should turn more of it into FRNs, then I could at least use it to wipe my ass and start cooking fires when everything collapses.

Fri, 02/01/2013 - 16:41 | 3207395 GubbermintWorker
GubbermintWorker's picture

No, you should turn it into more tangible items such as gold, silver and .....lead.

Fri, 02/01/2013 - 17:58 | 3207651 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

I dunno - fiat seems somewhat safer than gold, silver, lead, and brass. In my experience, those four are too susceptible to theft, loss, and accidents. I'm sticking with fiat from now on. 

Fri, 02/01/2013 - 18:23 | 3207689 GubbermintWorker
GubbermintWorker's picture

You don't consider inflation to be theft of fiat?

Fri, 02/01/2013 - 20:27 | 3207893 Bad Attitude
Bad Attitude's picture

The FRNs aren't getting any smaller, unlike each sheet of toilet paper.

Fri, 02/01/2013 - 21:04 | 3207987 GubbermintWorker
GubbermintWorker's picture

But the toilet paper is still more absorbent.

Fri, 02/01/2013 - 21:08 | 3208004 Bad Attitude
Bad Attitude's picture

True, toilet paper is more absorbent. But, would you rather have a roll of toilet paper or a wheelbarrow of FRNs?

Sun, 02/03/2013 - 06:45 | 3210626 Ctrl_P
Ctrl_P's picture

I dont care what I use, it just has to pass the "grip and rip" test.

Fri, 02/01/2013 - 14:47 | 3206876 _ConanTheLibert...
_ConanTheLibertarian_'s picture

How about a bank holiday. Yay!

Fri, 02/01/2013 - 17:40 | 3207583 mkhs
mkhs's picture

Holidays for everyone.  Take the rest of the week off.

Fri, 02/01/2013 - 14:46 | 3206877 waterwitch
waterwitch's picture

Warren B needed to pay for a hooker.

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