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Guest Post: What Marx Got Right

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The crisis of capitalism has not been resolved; it's simply been papered over.

First, a disclaimer: this is an interpretive discussion of some aspects of Marx's analysis (which was based on the capitalism he observed in the late 19th century) applied to present-day cartel-state capitalism. It is not a scholarly or academic presentation.
The discussion covers a lot of ground, though, so please refill your beverage container and strap in....
That Marx's prescription for a socialist/Communist alternative to capitalism failed does not necessarily negate his critique of capitalism. Marx spent hundreds of pages analyzing capital and capitalism and relatively few sketching out a pie-in-the-sky alternative that was not grounded in historical examples or working models.
So it is no surprise that his prescriptive work is an occasionally risible historical curiosity while his critique stands as a systemic analysis.
Marx got a number of things right, one of which appears to be playing out on a global scale. You probably know that Marx expected capitalism to experience a series of ever-larger boom-bust cycles that would eventually precipitate revolution and overthrow of the existing financial-political order.
One driver of these cycles was the interplay of increasing production and declining labor costs. In broad-brush, Marx recognized that industrial capital (as opposed tofinance capital) could only increase profits and accumulate more capital by raising production and/or establishing a price-fixing cartel or monopoly.
Mechanization characterized industrial capitalism in the late 19th century, and Marx observed that as mechanization increased productivity, the marginal value of labor decreased on a per unit basis.
Here is a real-world example. When I first visited China in 2000, there was a massive glut of television production: the capacity to manufacture TVs had expanded far beyond China's domestic demand for TVs. To wring out a profit in a highly competitive industry, manufacturers had to ramp up production while lowering the unit cost of labor and the unit cost of each TV to undercut the competition.
If an assembly line of 100 workers could produce 1,000 TVs a day, the only way to lower the price of the TV is to either lower the wages paid to the workers or invest capital in machinery that enables the same 100 workers to produce 2,000 TVs a day.
At 2,000 TVs a day, the per unit labor cost falls in half. For example, at 1,000 TVs a day, the labor cost per TV might be $40. At 2,000 TVs per day assembled by the same 100 workers, the labor cost per unit drops to $20.
The key point here is that labor's share of the total production cost declines. If workers had taken home $1 million in pay to make 100,000 TVs at the old production rate of 1,000 TVs/day, they now take home $500,000 to make 100,000 TVs at the new production rate.
In other words, labor's share of value creation constantly declines as mechanization boosts productivity. Marx described the impact of another factor: oversupply of labor. As rural agricultural workers flooded into cities for jobs that paid cash, there was an abundance of factory labor. Competition for jobs pushes wages lower, so workers faced a double-whammy: their share of production relentlessly declined as productivity rose, and the pressure on wages constantly rose as per unit labor costs declined.
The competition to outproduce industrial rivals with cheaper per-unit production costs and labor's competition for jobs both generate a structural crisis in capitalism: as production of goods rises, both the cost per unit and the number of workers earning enough to buy the goods declines.
Lowering the cost of the TV no longer sells units if there are not enough workers with jobs to buy them. If you think this is only a 19th century or developing-world phenomenon, please examine this chart:
This chart shows that labor's share of the economic output is declining sharply.The reasons? The same two Marx identified: a surplus of labor and declining per unit labor cost. In effect, the economy produces more goods and services with less labor. Since the demand for labor is declining while the supply of workers increases, competition drives wages lower.
The crisis Marx foresaw appeared to unfold in the 1930s, but the expansive central state became a Savior State, marshalling its ability borrow huge sums of money to create demand by fiat.
In the postwar boom, the low-productivity service sector expanded as labor shared the bounty of cheap energy and rising industrial productivity.
Increasing cost of energy and marginal returns pushed capitalism back into crisis in the 1970s, but three forces emerged to increase labor's purchasing power:
1. The discovery of supergiant oil fields in Alaska, the North Sea and Africa.
2. Computerization improved the productivity of the service sector.
3. Financialization of the developed economies artificially boosted the purchasing power of labor and finance capital via highly leveraged debt and declining interest rates.
All those forces have been spent. No new supergiant fields have been discovered in the past 20 years, and while improving technology is extracting more oil from existing fields, that is maintaining global production rather than ramping it up by 25%-50%.
Digital technologies, software and automation have reached the point that capital is able to replace or reduce service labor in virtually all sectors of the economy. What happened to assembly-line jobs in the 1960s-70s is now happening to service-sector jobs.
Financialization has reached diminishing returns: interest rates are near zero and stagnant incomes cannot service more debt. Leveraged debt and phantom collateral have created shadow banking systems which are largely outside state control and vulnerable to systemic shock.
In effect, the Marxist crisis in capitalism has re-emerged. The "fixes" of declining energy costs, more service jobs and leveraging debt have run their course.
Though Marx didn't use the term rentier skimming operation, he described the mechanism in other terminology. Finance capital also plays a role in the emerging crisis of capitalism, as finance capital (aided immensely by the Federal Reserve /central banks and the Federal government /central states) uses its access to nearly-free credit to buy assets that generate rents without having to produce any goods or services.
By way of example, consider the recent purchase of thousands of rental homes by institutional investors. Finance capital buys 10,000 homes and rents them to people who earn their income from their labor. Finance capital is not producing any good or service; is collecting rent from labor, i.e. a rentier skimming operation.
Cartels are also rentier skimming operations, as the cartel price reflects the cartel's pricing power rather than the market value of the good or service. What is the market value of healthcare in the U.S.? Since healthcare is dominated by cartels, market pricing is purely for show: if you want to buy health insurance, there are only a few providers, and the price is roughly the same.
ObamaCare simply institutionalizes the healthcare cartels.
What is the value of a top-line fighter aircraft? Since there are only two producers left in the U.S., the price is understandably sky-high from either provider.
Care to guess the market value of TV/Internet service in areas served by one corporation? There is no competition, so the market price is undiscoverable. What's provided is priced by the cartel or monopoly.
The key feature of cartel-state capitalism is that increases in price do not reflect an increase in value provided, they only reflect an increase in rentier skimming. In effect, eliminating competition is the only sure way to maintain profits and accumulate capital. The best way to accomplish this is to influence the state to impose or support one's cartel.
This further squeezes those with jobs, as rentier skimming transfers more of their dwindling earned income to cartels. Since the State acts as the bagman for cartels, rising taxes are simply another form of rentier skimming.
You see the crisis brewing: earned income is under pressure and labor is in structural decline. The only way the system can maintain demand for goods and services is either cash transfers from the Central State or loans extended to those with enough earned income to service more debt.
Once their ability to service more debt vanishes, so does demand for goods and services.
The rentier skimming of finance capital and the increasing productivity /decreasing need for labor both crush small business. When a rentier skimming operator buys commercial property, rents for small businesses instantly rise, driving out all but chain stores and stores catering to high-margin luxury markets. As the number of workers with discretionary income declines, labor's support of small businesses also drops.
Once a niche market becomes profitable, a high-volume corporation will step in and either buy up the small suppliers or source lower-cost goods from its global supply chain and undercut the small producers.
This dynamic is clearly visible in the erosion of self-employment and small business:
This is the result of competitive squeeze and finance capital's access to limitless cheap credit:
All this creates a problem for the Savior State, which must provide incomes to unemployed labor and protect politically powerful cartels. The only way the State can placate labor, industrial capital and finance capital is to keep interest rates very low and borrow $1 trillion a year to fill the structural gap between tax receipts (based largely on earned income, which is in relative decline) and State spending, which must rise as labor's share of the economy dwindles and the demands of banks and other cartels constantly expand.
This state solution to capitalism's structural crisis only works if interest rates remain low and the buyers of state debt believe their capital will be returned to them at maturity. Once it become clear that their capital cannot be returned (or the money returned to them will be heavily depreciated), the only marginal buyers of state bonds will be central banks which can print money to buy state debt.
This "solution" doesn't resolve either the crisis of capitalism or the state's structural deficits; it simply papers over these crises with financial legerdemain.

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Fri, 07/12/2013 - 14:09 | 3745973 I am Jobe
I am Jobe's picture

Ah the clusterfuck times .

Fri, 07/12/2013 - 14:16 | 3745994 alphamentalist
alphamentalist's picture

the opposite of Suntory times

Fri, 07/12/2013 - 14:23 | 3746016 flacon
flacon's picture

"applied to present-day cartel-state capitalism"


Why does capitalism always get a bad rap? Do we say "crony virgins" when referring to prostitutes? Why do some authors INSIST on smearing capitalism with feces?


First rule of Capitalism: If there is a CENTRAL BANK then it ISN'T CAPITALISM. 

Fri, 07/12/2013 - 14:38 | 3746082 James_Cole
James_Cole's picture

If people actually bother to read this article rather than let their American brainwashing induce the predictable knee-jerk reaction (Marx was an evil commie!!) it's a surprisingly good introduction to some of Marx's concepts. 

This expands on some of Hugh-Smith's "rentier" points:

Fri, 07/12/2013 - 15:00 | 3746156 Meremortal
Meremortal's picture

I don't give a damn if Marx's system is the best ever.

I want to live in freedom.

Messy, imperfect, and unorganized as possible...freedom.



Fri, 07/12/2013 - 15:37 | 3746283 James_Cole
James_Cole's picture

Speaking of irrationality…

First, worth noting that Marx never proposed a specific system, he had proposals he thought might lead to a better economic system but did not believe in force justifying ends. 

But as far as if he had a system and even if you acknolwedged it was 'the best ever' logic dictates that it would be worth adopting yet you would reject it out of hand. Logically, doesn't make any sense. 

It's equivalent to saying: apples are my favorite thing to eat, even if a food comes along that tastes better, is healthier for me, is cheaper and easier to aquire and ultimately I'd prefer eating I'd still stick to apples. 

Probably some of the issue arises from the language, people never define anything. Did you stop to consider what your definition of freedom is? Not in the abstract 'personal liberty' and other vague nonsense, what does freedom actually mean to you? 

Broad concepts which are supposedly obvious, simple or straightforward usually aren't. 

Fri, 07/12/2013 - 16:32 | 3746511 macholatte
macholatte's picture

Broad concepts which are supposedly obvious, simple or straightforward usually aren't.



Marxism is an economic philosophy.

Communism is the political application of Marxism


The college professor was a Marxist.  The President is a Communist.  


Fri, 07/12/2013 - 16:36 | 3746538 WarriorClass
WarriorClass's picture

The Bankster cartel obviously thought communism was the way to go, they financed the communist revolutions in both Russia and China, as well as Central and South America.  A permanent slave class works out quit well for them.


Fri, 07/12/2013 - 18:26 | 3746791 Meremortal
Meremortal's picture

I'm not interested in writing you an essay about my concept of freedom.

In a nutshell, I want to live in a country with a government, not the reverse.

Fri, 07/12/2013 - 19:16 | 3746894 GernB
GernB's picture

What doesn't make logical sense is to want someone else to impose their idea of how they should earn and spend money on them. Capitalism, in it's ideal form is freedom. People contolling thier own economic destinay. If I like apples I should be able to eat appels, but if I don't then I don't want someone else force feeding them to me because they are the best fruit ever. What people have been brainwashed into thinking is that just because an idea or system is good and most people like it, it justifies forcing those who don't to bend to your will, or even worse it is worth enslaving your fellow citizens to enact it. What is wrong with people that they just cannot accept the concept of live and let live.  Why is it so hard to buy the idea that people have a right not to be told how to earn money or have it stolen from them to pay for someone elses "dream world."

Fri, 07/12/2013 - 20:04 | 3747003 James_Cole
James_Cole's picture

What is wrong with people that they just cannot accept the concept of live and let live. 

I think it's that people understand there is no such thing as 'live and let live.'

Freedom is only the given choices in any particular circumstance. The choices offered are far more important than the person's decision regarding the options. 

That's why a lot of people focus on the choices offered as it's more important & subversive. 

Fri, 07/12/2013 - 20:35 | 3747063 treasurefish
treasurefish's picture

Yes, you have the choice not to file taxes (not freedom), and go to jail (not freedom).  You have the choice to not mow your lawn (not freedom), and be fined by your HOA (not freedom).  You have the choice to speed through mainstreet (not freedom), and be forced to pay a traffic ticket (not freedom).

There may not be such a thing as 'live and let live,' but there is such a thing as 'live and let die."  What ever happened to the right to be left alone?  If you actually injure someone else through your actions, don't honor your agreement, or be dishonorable in some other way, then Common Law dictates that you will pay.  That is the natural order of things.  But, what if you don't injure someone?  What if you are honorable?  In today's America, you can still be thrown in prison and fined.  THAT IS NOT FREEDOM, and there is no choice but NO FREEDOM (not a choice).

There is no such thing as individual accountability if there is no freedom and no choices.  Why should there be?

Fri, 07/12/2013 - 21:33 | 3747208 James_Cole
James_Cole's picture

Your choices will always be constrained, the goal of a society imo should be to offer as many options to as many people as possible rather than focus on the individual's 'freedom' to choose among a narrow range of possibilities.

Americans seem to accept that 'freedom' is the ability to choose bettween a wide array of combinations within a very narrow range - see wal-mart and then pretend their options are limitless.

Sat, 07/13/2013 - 00:03 | 3747539 DestituteYetJovial
DestituteYetJovial's picture

And you can supply those many options to those many people by employing a hands-off approach form of government. Simply by having a 'goal of a society' you're taking a trip to failure-town.

If an option is desired and unavailable, people will work to make it so that it is available, naturally. There's no reason to subsidize it.

Sat, 07/13/2013 - 01:39 | 3747643 James_Cole
James_Cole's picture

Simply by having a 'goal of a society' you're taking a trip to failure-town.

Since societies inevitably exist wherever humans exist goals of societies form naturally. Over the course of human history different societies have coalesced around different principles.

As the industrial changes into a post-industrial society there's the obvious question of what our societies will form around. 

In the past personal freedom has been extremely limited but due to technological and social evolution that no longer needs to be the case. I was giving my opinion that I think a goal of a post-industrial society should be to offer as many options to as many people as possible. 

The reason being for the first time it is possible to distribute the totality of human knowledge & technology on a highly distributed model which greatly increases the likelihood of further scientific breakthrough. The more people you have independently working on a problem the better. 

If an option is desired and unavailable, people will work to make it so that it is available, naturally. 

People make choices based on available data and more importantly available options, desire has little to do with the majority of people's choices. Think about how many decisions you make day to day and consider how many were based on a fixed set of options and how many were based purely on desire. 

Fri, 07/12/2013 - 20:31 | 3747062 Anusocracy
Anusocracy's picture

Blue Ribbon Winner.

Control benefits the controller, not the controlled. An unpleasant reality that is often downplayed by those seeking control.

Fri, 07/12/2013 - 20:22 | 3747041 Anusocracy
Anusocracy's picture

My idea of freedom is the ability to reject or accept anybody or everybody else's idea of freedom.

Not to be a forced subject of other's belief systems.


Sat, 07/13/2013 - 07:55 | 3747874 Lebensphilosoph
Lebensphilosoph's picture

Logic dictates no such thing. It is not possible to deduce imperatives from facts. That is an is ought fallacy. "Worth" always presupposes an IRRATIONALY presumed value, and his evidently differs from yours in this regard. That does not make him "illogical". Get over yourself, you halwitted buffoon.

Sat, 07/13/2013 - 15:25 | 3748832 James_Cole
James_Cole's picture

Let me try this again for the brain-dead crowd. 

Logic dictates no such thing. It is not possible to deduce imperatives from facts. 

He said if it were true that Marx's system were the best ever, which means in his estimation he had become convinced it was the best system ever -- it has nothing to do with facts -- he would still prefer something that in his own estimation was inferior.

This is very basic irrationality. 

I made no opinion on it either way as factually he was incorrect from the start considering Marx never proposed any specific 'system' so whatever he's referring to only exists subjectively in his mind and no one here could know what he's talking about.  

Sat, 07/13/2013 - 19:42 | 3749400 FreedomGuy
FreedomGuy's picture

Yeah, except for the fact they never get past broad concepts like "the dictatorship of the proletariat". Those proletariat leaders have a single name like Stalin, Lenin, Castro, Kim, Mao, etc. the practical application seems to be bad for the health of entire populations starting paradoxically with their own countrymen.

Has anyone ever noted that one very unique characteristic of communist dictatorships is the wholesale enslavement, imprisonment and murder of their own populations first? Generally speaking, while autocrats are no fun for anyone besides the autocrat you did not hear about the mass destruction of Romans by Rome, Mongols by Genghis, Persians by Darius, or even Americans by King George. It is a unique characteristic of the 20th century leftists.

So, you can keep all that communist-Marxist theory to yourself and shove it firmly where it belongs. I will take the imperfections of liberty and no autocrats.

Fri, 07/12/2013 - 17:05 | 3746624 Matt
Matt's picture

You did not read the article, did you?

Marx's works can be seperated into two halves:

1) Analysis of the challenges facing capitalism over time

2) His proposed solution (World Socialism)

You can throw out part 2 completely, and still appreciate the valid points in part 1.

Sat, 07/13/2013 - 15:56 | 3748915 Reven
Reven's picture

So is the solution libertarianism?

Fri, 07/12/2013 - 17:46 | 3746698 xtop23
xtop23's picture

I REALLY want to know why in the FUCK anyone would down vote that statement.

So the option is a perfect society, where you are told where and when to wipe, how much pressure to apply, how many ply the tissue must be, and what trees are appropriate to sacrifice for the maintenance of your rectal health?

Well fuck you very much.

I'll use steel wool to wipe with if I have to become a slave for option A. 


edit; I did however enjoy the read and a lot of Marx is intellectually satisfying. 

The problem is human beings are involved. I cringe at the thought of how ideas that are intellectually pristine, become sheer madness in real world application.





Sat, 07/13/2013 - 15:59 | 3748922 Reven
Reven's picture

Simple really, many people are scared of freedom, to rise or fall based on merit alone can be a frightening concept, like a child who is suddenly told he must grow up now because his parents are dead.  That may not be the best analogy but you get the idea.

Sat, 07/13/2013 - 16:59 | 3749090 xtop23
xtop23's picture

I hear ya. Yet another reason, of many, that prove the entitlement / nanny state is quickly destroying the last vestiges of personal responsibility left in our nation.

It seems to me we're at the point, where the only thing that will work to wake people up to the cold hard realities of the world, is a complete and utter collapse of everything they've known.

Sad, but I'm getting to the point where I actually welcome it. 

Bring it on, Darwin.


Sat, 07/13/2013 - 17:53 | 3749206 Reven
Reven's picture

That which is inevitable should not be feared.  It is what it is as the kids say now.

Fri, 07/12/2013 - 18:09 | 3746757 giggler123
giggler123's picture

You've been brainwashed in the belief that your democratic vote buys you freedom, something you feel only capitalism will give you when in truth your as free as bird in a cage.  Looking at alternative systems should not be considered as a fight against your freedom, when this thing blows up they'll be needing alternatives.

Sat, 07/13/2013 - 16:10 | 3748949 Reven
Reven's picture

It can be effectively argued what we have today is not capitalism.  Declining real wages for labor should lead to deflation, which will collapse the debt superstructure the Fed has built with constantly pushing inflation into the system.  Real interest rates will actually rise under this free-market scenario as the risk that your principal will be returned to you will increase dramatically the longer you loan money out to anyone.  Imagine a scenario where the 10-year is at 7.5%, when deflation is running at 2.5-5%.  The artificial price structure the rentier class has built (excessive asset prices) will collapse, and people will be able to eventually to afford to pay cash for homes again and hold zero debt (and therefore pay nothing to the rentier banking class).  This is what sound money can provide for the free-market.

But the accumulation of false signals to the economy must inevitable lead to an earthquake or collapse.  This is where we are today as we hit zero on the keynesian multiplier.  Deflation means the end of our 'modern' banking system as we know it, which makes hyperinflation inevitable.

Fri, 07/12/2013 - 21:44 | 3747237 Shooting Shark
Shooting Shark's picture

It is right and good to knee-jerk the ridiculous, unsound, discredited observations and theories from Marx.  Knee-jerk reactions have evolved to protect us, as has capitalism, unlike the sustained assault of Marxism.  The only brainwashed fool here is you.  

For a real education, pick up a BOOK, such as Thomas Sowell's _Marxism_.

Fri, 07/12/2013 - 14:42 | 3746099 DogOfSinope
DogOfSinope's picture

Because it doesn't work?

Or, if there is a dictator in a socialist state then it isn't socialism?

See the problem?
If we relabel things to preserve dogma -> consequences of dogma stay.

Fri, 07/12/2013 - 14:42 | 3746103 optionsman
optionsman's picture

most people around the world consider American system as the best embodiment of Capitalism as a notion. So when people say capitalism they mostly mean what anyone experiences in the US.

In theory and of course what you see and live in the US is not capitalism at all.

The article is spot on!

someone is going to ask- when is it going to change? while interesting question, for a real change to happen it would be equivalent to what Taleb calls a black swan ;) unpredictable. but i would say not any time soon. there has to be a long period of popular economic suffering which has not even started in the US .....

just saying

Fri, 07/12/2013 - 16:51 | 3746549 Cheese Potpourri
Cheese Potpourri's picture

The people around the world only consider our system best because we have all the stuff, because we took more than our fair share by force.  Of course everyone wants to live here = we have a disproportionate share of the world's resources.  Also, the political spectrum is a circle, not a line.  You will notice that National Socialism had quite a bit in common with the modern Communist states and even our Crony Capitalist state - it is merely a matter of branding and who is in charge and gets all the perks.  All systems are the same until we evolve. 


"If men are good, you don't need government; if men are evil or ambivalent, you don't dare have one." – Robert LeFevre

Fri, 07/12/2013 - 21:48 | 3747243 Shooting Shark
Shooting Shark's picture

First, we didn't "take.  We built.  Second, it wasn't "us", it was those who went before, so show some respect to those who delivered freedom to your cheetoh-smeared lap.  Third, into what shall we evolve?

Fri, 07/12/2013 - 19:22 | 3746914 NOTaREALmerican
NOTaREALmerican's picture

Re:  First rule of Capitalism

First rule of any fantasy ISM - including Capitalism.

There are no smart-n-savvy people hiring sociopaths to create bullshit to manipulate the dumbasses out of their money.

Capitalism is just as much a fantasy as socialism or Marxism is.

Fri, 07/12/2013 - 16:01 | 3746079 McMolotov
McMolotov's picture

For relaxing times... quite possibly the best opening scene in film history:

EDIT: What kind of sick bastard down-votes Scarlett Johansson's ass?!? I was responding to alphamentalist above, who was referencing "Lost In Translation." And besides, no matter what the discussion is, Scarlett Johansson's ass is always on-topic.

Fri, 07/12/2013 - 14:18 | 3745999 true brain
true brain's picture

What Marx and modern thinkers don't take account of is human tendency to corruption. Moral entropy. It takes a lot of hard work to be morally courageous and righteous. Wherever or whenever there is a chance to corrupt the system for selfish gain, human beings will do. This has occurred in communism, capitalsm, religion, etc. Communism would work had it not been for moral entropy, same as capitalism. So it's not the system, any system, it's the human beings. Fix thyself first.

Fri, 07/12/2013 - 14:49 | 3746116 James_Cole
James_Cole's picture

Communism would work had it not been for moral entropy, same as capitalism. So it's not the system, any system, it's the human beings. Fix thyself first.

Human nature is completely inflexible, it's in our DNA. The only way to truly change human nature is to evolve (which takes quite a while last I checked). 

The best cure for the ills of human nature is to not let any individuals have very much power over the group. Wisdom of crowds is far more reliable than leaders and the herd. The idea that human beings are fundamentally rational agents who simply need to be guided to find their centre is itself totally irrational. 

Biases that we face within ourselves are often impossible (literally it's in the wiring) to overcome, which is why we need other people..

^ funny about human stupidity

Fri, 07/12/2013 - 15:15 | 3746206 PiratePawpaw
PiratePawpaw's picture

"wisdom of crowds is more reliable"?!? You must hang out with different crowds than the ones I see. 

People can be just as stupid collectively as they can i dividually. The crowd just magnifies the effect.

Fri, 07/12/2013 - 15:23 | 3746238 James_Cole
James_Cole's picture

"wisdom of crowds is more reliable"?!? You must hang out with different crowds than the ones I see. 

I meant the specific cognitive concept:

At a 1906 country fair in Plymouth, eight hundred people participated in a contest to estimate the weight of a slaughtered and dressed ox. Statistician Francis Galton observed that the median guess, 1207 pounds, was accurate within 1% of the true weight of 1198 pounds.[4] This has contributed to the insight in cognitive science that a crowd's individual judgments can be modeled as a probability distribution of responses with the mean centered near the true mean of the quantity to be estimated.


Wisdom-of-the-crowds research routinely attributes the superiority of crowd averages over individual judgments to the elimination of individual noise,[5] an explanation that assumes independence of the individual judgments from each other.[3][6] Thus the crowd tends to make its best decisions if it is made up of diverse opinions and ideologies.

Fri, 07/12/2013 - 15:32 | 3746272 PiratePawpaw
PiratePawpaw's picture

That is statistical averaging, which does eliminate the errors of the extremes. It is however, not an accurate model of crowd behavior. The "anonymity" of being in a crowd tends to elicit more extreme behavior, and the crowd follows along. (herd mentality).

Fri, 07/12/2013 - 16:03 | 3746397 James_Cole
James_Cole's picture

I think you're getting hung up on the words, it isn't referrencing a literal 'group' crowd. Specifically wisdom of crowds refers to a bunch of individuals as opposed to a collective group or as you say 'herd.' 

There are obvious problems you bring up but these relate to the methods not the concept. It's basically separating the signal from the noise in a way that doesn't pollute the results. 

Fri, 07/12/2013 - 17:16 | 3746645 Matt
Matt's picture

The wisdom of the crowd works until someone opens their mouth. So, we need a Direct Democracy where no one is allowed to discuss politics, EVER. If there is a bill (or proposition) to be voted on, anyone discussing that topic must be publicly flogged and both the contaminater and the contaminated must not be allowed to vote on that bill / proposition.

Fri, 07/12/2013 - 22:26 | 3747363 malek
malek's picture

"wisdom of crowds" is just another euphemism for Tyranny Of The Majority.

Sat, 07/13/2013 - 10:50 | 3748079 TrulyBelieving
TrulyBelieving's picture

JC, You said it yourself 'funny about human stupidity' and it applies quite well to your logic. First, Human nature, though it is evil and inflexible, can be overcome, just don't depend on evolution to do it for you. Second, You say 'the best cure for the ills of human nature is to not let any individuals have very much power over the group. Wisdom of crowds is far more reliable than leaders and the herd'. Is not the herd 'the crowd' and an individual a member of the crowd?  Just Laws are what keep the ills of human nature at bay, not the consensus of the crowd. The consensus of the crowd can and does change, but a just and right law will never change, as truth and rightousness is inflexible and eternal. Now stack up your own fallacies against what is eternal, and make the adjustments.

Sat, 07/13/2013 - 15:41 | 3748879 James_Cole
James_Cole's picture

First, Human nature, though it is evil and inflexible, can be overcome, just don't depend on evolution to do it for you. 

Human nature is simply the way the brain is wired. If you watch that TED video it compares human reasoning to monkeys and there are abundant similarities, has nothing to do with 'good' or 'evil.'

People like to pretend the brain is some mystical magic device unsusceptible to the failings of the rest of the body yet in reality it's actually far more vulnerable. 

Is not the herd 'the crowd' and an individual a member of the crowd?  Just Laws are what keep the ills of human nature at bay, not the consensus of the crowd

A lot of people on here don't seem to understand the difference between "widsom of crowds" and "herd mentality." If I were to get 40 people into a room and poll their opinion on something the results will be far less accurate than if I were to take the same 40 people on an individual basis outside of a group context and ask the same question and then statistically compile the results. 

This is the basic difference. 

The consensus of the crowd can and does change, but a just and right law will never change, as truth and rightousness is inflexible and eternal.

This is simply a faith-based belief and has nothing to with what I was talking about.

If you look at marketing for instance it's now mostly done based on the principles from wisdom of crowds (recurring focus group statistical analysis done on an individual basis) and the results are far more accurate in determining what consumers want. 

Fri, 07/12/2013 - 14:56 | 3746139 Acet
Acet's picture

Well, it's all about Society.

My personal experience of having lived in several places is that Societies where "take how it affects those around you in account when making a decision" is the standard have a lot less moral corruption.

In all Societies, there are always individuals which are more towards the sociopathic side of the spectrum. The difference of outcomes between Societies is how easy it is to hide that one is a sociopath, how easy is to act as a sociopath without standing out and how hard are you punished if caught.

My impression is that Societies that celebrate pure greed, where wealth is the top measure of the worth of an individual and where people live on appearences are the ones were sociopaths prosper.

Fri, 07/12/2013 - 15:05 | 3746174 DogOfSinope
DogOfSinope's picture

Good thinking!
Only one small correction: replace the term Society with the term Culture and you'll be spot on.

Fri, 07/12/2013 - 15:07 | 3746180 Muppetrage
Muppetrage's picture

bingo! Technology is also rapidly making human labor and intellect obsolete, with an ever expanding population. Good times ahead.

Fri, 07/12/2013 - 17:47 | 3746709 GeezerGeek
GeezerGeek's picture

So can we come to this conclusion: is human society at an advanced technological level simply unsustainable?

I wonder if anyone ever figured out what most people would be doing if all the technology of the various versions of Star Trek were available. 

Fri, 07/12/2013 - 20:19 | 3747036 Muppetrage
Muppetrage's picture

I think Capitalism as we know it may be unsustainable. Technology may offer ways to make energy and agriculture free to everyone. how we get to that point is a completely different story. Cartels. monopolies, governments, and oligarchs would lose power., but at some point people will have no means to compete with technology and then there will be no money to be made from them.

Sat, 07/13/2013 - 16:14 | 3748964 Reven
Reven's picture

I remember my grandfather saying business deals were done based on a handshake, no legally binding contract was necessary between honorable businessmen.

Fri, 07/12/2013 - 16:32 | 3746516 TheReplacement
TheReplacement's picture

Stopped reading false math choices about TVs.

Fri, 07/12/2013 - 14:12 | 3745980 Gringo Viejo
Gringo Viejo's picture

My slogan for today's America:

From each according to their productivity,
To each according to their "disability".

Fri, 07/12/2013 - 14:13 | 3745982 ParkAveFlasher
ParkAveFlasher's picture

Marx was a pamphlet writer with a big beard.  BFD.  Let's stop draping bullshitism with the traceries of higher-minded concepts.  A liar is a liar, a thief is a thief, a cartel is a cartel, a cheat is a cheat.

Fri, 07/12/2013 - 14:27 | 3746039 duo
duo's picture

Bernanke has a beard, does that make him a liar also?

Fri, 07/12/2013 - 15:21 | 3746197 ParkAveFlasher
ParkAveFlasher's picture

"LIAR" first appears in your comment, not mine.  I can say that Bernanke is worshipped, essentially, for his beard, just like Marx, for the lack of any other redeeming qualities.

Have you read the Communist Manifesto?  It isn't an economic theorem, it's rabble-rousing.

Fri, 07/12/2013 - 15:25 | 3746246 DogOfSinope
DogOfSinope's picture

Nope. It's wrong from contemporary perspective, but it's assessment of capitalism still holds. Capitalism always ends as crony capitalism. Which in reality is no different than crony socialism.
See, it's not about "isms" - it's about cronies. :-)

Fri, 07/12/2013 - 15:33 | 3746275 duo
duo's picture

If Marx=bullshitism, then Bernanke=Liar

Fri, 07/12/2013 - 14:35 | 3746072 DogOfSinope
DogOfSinope's picture

a ignorant fool is a ignorant fool

Fri, 07/12/2013 - 15:16 | 3746210 ParkAveFlasher
ParkAveFlasher's picture

+1 x 2

Fri, 07/12/2013 - 15:17 | 3746214 PiratePawpaw
PiratePawpaw's picture


Fri, 07/12/2013 - 15:26 | 3746250 DogOfSinope
DogOfSinope's picture

Not an native English speaker. My deepest apologies.

Fri, 07/12/2013 - 15:30 | 3746265 ParkAveFlasher
ParkAveFlasher's picture


Fri, 07/12/2013 - 15:37 | 3746286 DogOfSinope
DogOfSinope's picture

How inspired! :-p

Fri, 07/12/2013 - 16:03 | 3746399 ParkAveFlasher
ParkAveFlasher's picture

"a" before consonant

"an" before vowel

Stop up arrowing yourself, Herr SmartyPants.  You've insulted me multiple times in poor English, but have yet to offer a counter point.  That means you are trying to get my attention, not refute a point.

Fri, 07/12/2013 - 16:27 | 3746479 DogOfSinope
DogOfSinope's picture

You exhibited poor understanding of economy, poor understanding of philosophy, poor understanding of mathematics (pathetic topping attempt), poor manners, poor reading comprehension and finally poor ability to guess nationality (hint: German and English share the same linguistic root, so German speaker would never have problem with articles).
Yet, you try to compensate for all above with the excess of theatricality.
I just find this amusing (I''m not particularly serious person). So, in for a penny, in for a pound... ;-)
I'm apologizing if I have offended. Not my intention. In fact I kind of like you. Let me guess now: solid intellectual potential with a lack of life experience, Mr. FutureSmartyPants? ;-)

Fri, 07/12/2013 - 16:51 | 3746576 ParkAveFlasher
ParkAveFlasher's picture

You're of the strain of bacteria that insults first, apologizes second (of course the apology's wording is most florid and elaborate, like that helps).  Perhaps if you had reversed that order, I would have let you into my fan club.  As it stands, no fruits allowed!

Fri, 07/12/2013 - 15:42 | 3746303 PiratePawpaw
PiratePawpaw's picture

Sorry. No offense intended, and your point was taken.

I just couldnt resist. :) 

Having some familiarity with Spanish and German, I can appreciate that English has a lot of odd little rules.

Fri, 07/12/2013 - 15:48 | 3746327 DogOfSinope
DogOfSinope's picture

No offense taken!
Every little lesson helps.
But, articles are nightmare... ;-)

Fri, 07/12/2013 - 19:06 | 3746867 Serenity Now
Serenity Now's picture

A nightmare.  :)

(Sorry, I couldn't resist.  I'm just teasing you.)

Fri, 07/12/2013 - 21:29 | 3747199 akak
akak's picture


I would bet any money that DogofSinope is Slavic --- the Slavic languages (inexplicably) do not use articles of any kind, and they invariably have trouble with them in English.  Having many Polish and Russian acquaintances, I can spot the Slavs a mile away from their predictable omission of articles.

Fri, 07/12/2013 - 14:39 | 3746086 Skin666
Skin666's picture


Marx and Keynes were not economists, they were morons.

Economists describe the way the real world works, not the theory of how the world works in their shit for brains.

Both Marx and Keynes were fantasists, and political apologists for state theft and larceny.

Fuck them both.


And if Charles Hugh Smith uses the word Capitalism again for what we have today, he's also a moron.

Capitalism is the voluntary exchange of private property in a market. Period...

Fri, 07/12/2013 - 14:59 | 3746154 DogOfSinope
DogOfSinope's picture

They got some things right and some other wrong, but Marx and Keynes were some of the smartest people that ever walked the Earth.
Economists are morons.
Or, as N.N. Taleb put it: "The curious mind embraces science; the gifted and sensitive, the arts; the practical, business; the leftover becomes an economist"

Fri, 07/12/2013 - 15:25 | 3746243 Skin666
Skin666's picture



Historically an economist was a person who described the way the world works. (See Mises, Jean Baptiste Say, Turgot, Adam Smith, Nicholas Oresmi, Thomas Aquinas et al...)

The idiots that practice 'economics' today are not economists. They are political apologists, and logical positivist purveyors of statist propaganda. The term economist has been corrupted by idiots that think they can mathematically model the 'market' and human choices. They can't, as they keep confirming to us everyday!

Keynes and Marx were smart in the way they knew their simplistic view of the world would be picked up by the so called 'intellectuals', these second hand dealers in ideas to confuse and corrupt terms like 'capitalism' and 'economists'. I'll give you that...

Read Schumpeter and Mises and the rest of the Austrians and it becomes apparent that these are economists, not 'economists' in the modern sense.

The best evidence of how smart Keynes was, was that he called time preference and the interest rate that drives entrepreneurs, "animal spirits!"

Keynes never understood the real importance of interest, and how it sends signals on the length and complexity of the production structure to entrepreneurs.

And if you don't know what you're talking about, you need to explain it in a mystical way, to cover up your ignorance.

You call it "Animal Spirits"





Fri, 07/12/2013 - 15:31 | 3746270 ParkAveFlasher
ParkAveFlasher's picture

You both confuse what is complex with what is profound. 

Fri, 07/12/2013 - 15:35 | 3746277 DogOfSinope
DogOfSinope's picture

You must be an economist?
Hence, all this bullshit...
Economy is not even a science. Or how do you explain that there are no two economists with the same opinion on the same topic? That, my dear sir, is mysticism.
Economist: a person with a gift to plausibly explain tomorrow why the thing he said yesterday didn't come true today.
BTW, economy needs economists as much as fish in the ocean need diving instructors. Leeches...

Fri, 07/12/2013 - 17:07 | 3746614 putaipan
putaipan's picture

@skin- not my stong field, but i agree with you whole heartedly. a perfect example of a seriously overlooked/neglected "economist" with simple but profound observations of societies is henry george. we need an modern fullfilment of many of his insights.


(actually upon rereading- i disagree with you on marx. i agree with the article, his critique of capitalism is usual spot on. offering solutions- not so much. see henry george)

Fri, 07/12/2013 - 18:17 | 3746773 Skin666
Skin666's picture

This is how Schumpeter put it, which is a lot closer than Marx got...

Schumpeter and capitalism's demise

Schumpeter's most popular book in English is probably Capitalism, Socialism and Democracy. This book opens with a treatment of Karl Marx. While he is sympathetic to Marx's theory that capitalism will collapse and will be replaced by socialism, Schumpeter concludes that this will not come about in the way Marx predicted. To describe it he borrowed the phrase "creative destruction", and made it famous by using it to describe a process in which the old ways of doing things are endogenously destroyed and replaced by new ways.

Schumpeter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for restrictions upon entrepreneurship that will burden and destroy the capitalist structure, but also emphasizes non-political, evolutionary processes in society where "liberal capitalism" was evolving into democratic socialism because of the growth of workers' self-management, industrial democracy and regulatory institutions.[17]

Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy. In his vision, the intellectual class will play an important role in capitalism's demise. The term "intellectuals" denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is, however, limited, and this lack, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organize protest and develop critical ideas.

Schumpeter and democratic theory

In the same book, Schumpeter expounded a theory of democracy which sought to challenge what he called the "classical doctrine". He disputed the idea that democracy was a process by which the electorate identified the common good, and politicians carried this out for them. He argued this was unrealistic, and that people's ignorance and superficiality meant that in fact they were largely manipulated by politicians, who set the agenda. This made a 'rule by the people' concept both unlikely and undesirable. Instead he advocated a minimalist model, much influenced by Max Weber, whereby democracy is the mechanism for competition between leaders, much like a market structure. Although periodic votes by the general public legitimize governments and keep them accountable, the policy program is very much seen as their own and not that of the people, and the participatory role for individuals is usually severely limited.


Schumpeter is seriously underrated as an economist



Fri, 07/12/2013 - 20:08 | 3747015 jon dough
jon dough's picture

Greenie for you

Schumpeter rocks

Fri, 07/12/2013 - 15:30 | 3746266 yrbmegr
yrbmegr's picture

According to Merriam-Webster, capitalism is "an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."

Mostly the same as what you said, except for "characterized by" and "mainly".

Fri, 07/12/2013 - 15:05 | 3746176 smacker
smacker's picture

"Marx was a pamphlet writer..."

Too funny :-)

Fri, 07/12/2013 - 15:24 | 3746241 AchtungAffen
AchtungAffen's picture

You gotta be kidding me. Pamphlets? Das Kapital is a huge book full of math.

Fri, 07/12/2013 - 15:28 | 3746254 ParkAveFlasher
ParkAveFlasher's picture

"Huge book full of math" ... I had one of those in third grade.  Does that make me a genius?

Fri, 07/12/2013 - 15:45 | 3746312 DogOfSinope
DogOfSinope's picture

If you read it, it could have.
Or you gather knowledge through photosynthesis? ;-)

Fri, 07/12/2013 - 16:05 | 3746402 ParkAveFlasher
ParkAveFlasher's picture

Your mom photosynthesizes ... my cock.

Fri, 07/12/2013 - 16:34 | 3746524 DogOfSinope
DogOfSinope's picture

Now, who arrows himself?
No arguments?
You'll get ulcer before you are 21. ;-)

Fri, 07/12/2013 - 14:14 | 3745984 g speed
g speed's picture

time to automate uppermiddle management and politicos.

Fri, 07/12/2013 - 15:13 | 3746200 ParkAveFlasher
ParkAveFlasher's picture

Already there.

Fri, 07/12/2013 - 15:32 | 3746271 Kprime
Kprime's picture

automate/eleminate, seems the same to me.

Fri, 07/12/2013 - 15:38 | 3746288 Mad Cow
Mad Cow's picture

Garbage in, garbage out.

Fri, 07/12/2013 - 14:14 | 3745986 JR
JR's picture

To call a banker tyranny of the economy anything resembling capitalism is to arm our enemies with the propaganda they constantly use against free enterprise.

Fri, 07/12/2013 - 14:40 | 3746091 Shell Game
Shell Game's picture

Right?  But folks must put square pegs in round holes....   Without Rule of Law there is no free enterprise. 

Fri, 07/12/2013 - 15:07 | 3746182 DogOfSinope
DogOfSinope's picture

Who are your enemies?

Fri, 07/12/2013 - 14:19 | 3746003 DCFusor
DCFusor's picture

Good article for a change.  I've been pondering this one for a number of years myself.  Not that I've found "the answer" or anything, it's truly a tough problem when human nature (assumed immutable) is taken into account.

Fri, 07/12/2013 - 14:33 | 3746063 GreatUncle
GreatUncle's picture

There is no answer when the problem is human advancement it only gets harder to maintain. We really need a new economic system now because the old one is going to hell in a handcart.


First rule -> People will be unemployed like it or not need a minimum level

Second rule -> The top needs capping on what they are allowed to take that is the maximum level.


Constrained between limits now you can set out the structure without being torn apart as the gap opens up more and more.




Fri, 07/12/2013 - 14:40 | 3746092 McMolotov
McMolotov's picture

The older I get, the more convinced I am that the Amish have it figured out or at least are on the right track. Aside from those weird-ass beards, that is.

Fri, 07/12/2013 - 14:49 | 3746118 HermesHiccups
HermesHiccups's picture

I agree throw out the religious for the spiritual and sign me up!

Sun, 07/14/2013 - 10:30 | 3751093 Jimmy Carter wa...
Jimmy Carter was right's picture

The Amish are true communists with religion involved.  Everything is shared, true communists yet they are respected because they are religious.  If they weren't religious they would be viewed as dangerous subversives.

Fri, 07/12/2013 - 15:30 | 3746165 Kprime
Kprime's picture

I too thought it was a good article.  It begs the question then, "How do you create an institution that cannot be corrupted?".   Unfortunately, it now appears the founding fathers gave it a great try but failed.

You can blame the FED, IRS, NSA, CPS, SSA, FIAT or any other government follies’ that you wish to name, but truth is the founders were not able to write the constitution in such a way to prevent it being taken hostage.  Presidents, including the current clown and voter representatives are able to ignore the document with impunity.  There is no way to hold them to it.  They twist and turn in every direction until we have our current state of affairs.  It was always inevitable because the original setup was not foolproof.  It was never of the people, by the people, for the people.

Benjamin Franklin quote: “When the people find they can vote themselves money, that will herald the end of the republic.”  The problem with this quote is we think it applies to the majority vote.  What Ben Franklin did not notice is that "Government Officials" had the power of the purse from day one and they began on that day to steal away the country one gold coin at a time.  This theft has simply grown larger and been granted to others for their vote.  Now it is entering the runaway stage.  Point is, it was there all along in the original structure.  That gave rise to all the add-on thieving institutions the government has expanded itself into; in which organizations that now rule us, we have no representation.


Fri, 07/12/2013 - 15:47 | 3746323 PiratePawpaw
PiratePawpaw's picture

By his nature, man will corrupt any institution he finds given enough time.

I think our founding fathers would be both suprised that it lasted this long, and that we havent revolted and started over.

Fri, 07/12/2013 - 16:03 | 3746395 Wave-Tech
Wave-Tech's picture

The moment the US strayed from strict adherence to the constitution was indeed the beginning-of-the-end.

Particularly abandoning that which was the only item in the constitution specified as NECESSARY to the security of a free state.

The Last Legitimate Measure of Hope


Reclaim the Power of the Purse & the Power of the Sword | County-by-County & State-by-State

OPEN CALL TO ZH (from every last Tyler on down) It’s time to find out what we’re all really made of…

The Forum Directive:

Bring to life actionable ideas on how to crowd source and rapidly fund a viral, universal, politically expedient, and OFFICIAL, working strategy for FAST TRACKING implementation of the last constitutionally mandated line of defense, which harbors the legal authority to restore law and order across the US -  (And by extension, across the globe)

A massive, well-funded, universal, well-organized, official, and viral campaign focused on a universal return to the rule of law with eternal vigilance to adhere to it forever thereafter, is the very last bastion of hope remaining for any remaining semblance of good to triumph over (or at least, check-to-balance) the ever-pervasive and growing powers of widespread evil.

Any hope to pull this off will require a concentration of extremely intelligent persons of means and persuasion that can shake things up, and make things happen in a tangible and substantial way.

It is time to abandon old-paradigm business models that perpetually point to the problem, and replace them with business models that point to and exemplify successfully, sustainable and plausible solutions.

Now that a critical mass are AWAKE, it’s time to get them dressed and off to work.

I for one pledge to do whatever lie within the scope of my ability and means to advance this cause.

The Hour is Late:

If you are not part of the solution, you are part of the problem.  If you wish to be part of the solution, log into the dedicated ZH forum and offer all appropriate value toward restoring the mandated legal checks and balances as presently outlined in the Supreme Law of the Land.

My CONTACT info: 


Fri, 07/12/2013 - 14:20 | 3746009 Seasmoke
Seasmoke's picture

Kick the foreign banks out of the country. your debt is unsecured and/or paid off. No more mortgages = no need for pensions or social security. So what if they collapse. 

Fri, 07/12/2013 - 14:22 | 3746019 Mark_BC
Mark_BC's picture

1) Reduce the work week to offset increasing per-hour labour productivity that computers and robots have achieved. This will maintain full employment. Allow automation technology to do what it was supposed to do -- make our lives easier.

2) Ditch income tax and replace with a wealth tax that specifically targets the ultra wealthy. Income tax is one of the worst, most inefficient and unfair taxation systems.

Fri, 07/12/2013 - 17:11 | 3746634 putaipan
putaipan's picture

land/rentier tax. henry george.

Fri, 07/12/2013 - 17:45 | 3746704 Matt
Matt's picture

More and more, the work week is being shortened to 10-20 hours of part-time. The problem is, how do you reduce the cost of living to meet the new, lower income?

Particularely fixed costs, like mortgages, property taxes, or rent, etc.

Fri, 07/12/2013 - 17:58 | 3746729 akak
akak's picture

You can't much reduce the cost of living --- you can only reduce living, period.

And that is precisely the goal of the the elite.

Sat, 07/13/2013 - 01:48 | 3747651 Mark_BC
Mark_BC's picture

"how do you reduce the cost of living to meet the new, lower income?"

2) Ditch income tax and replace with a wealth tax that targets the ultra-wealthy overlord elite oppressor parasites.

Fri, 07/12/2013 - 14:26 | 3746036 Atomizer
Atomizer's picture

Hayek's 'The Road to Serfdom' in Five Minutes

Central Planning Infrastructure fallout is getting closer

Fri, 07/12/2013 - 14:29 | 3746047 GreatUncle
GreatUncle's picture

About sums it up. What Marx did not truly envisage is the difference in cost between west and east being so massive because the Keynes stimulus and inflationary mechanism gets added in later. He also never envisioned all the corporations demanding free trade and the next point.


-->> China 1/10th of the cost to produce than the West.

-->> Meet you in the middle for free trade then or lets go dutch, split you 50/50.


On that kind of change China has to change its cost base by +500% while the west see a -50% drop and we have done next to nothing.Yet people cling to free trade making it necessary to equalise the system. Will China or the west be able to stand these necessary movements if you want free trade? Doubt it ... after that we can worry what Marx thought although yup is that too.


Fri, 07/12/2013 - 14:30 | 3746053 Vidar
Vidar's picture

The root cause of this problem has nothing to do with capitalism and everything to do with the state and fiat money. If workers were paid in sound commodity money that increased in value over time (as they would be in a true capitalist society) they would be able to save money and accumulate a share of capital for themselves. Because they are instead paid in fiat paper that constantly declines in value, they are unable to save and must live either by borrowing ever-increasing sums from the banking cartel or get lucky in the gambling house formerly known as the "stock market". Otherwise they must accept a declining standard of living as their wages become ever-more worthless.

It seems that nothing less than the actual un-availability of their next meal will be enough to wake most Americans from their television-induced comas, so this is the point to which the crisis will eventually have to reach.

Something that can't go on forever will eventually stop, there is no getting around it. The state is doomed. If the human race is to survive the end of the state, it is up to those of us who are aware to prepare for the dark times and be ready with education and the ability to survive. And I can't say it enough: Read Rothbard!

Fri, 07/12/2013 - 14:35 | 3746073 NOTaREALmerican
NOTaREALmerican's picture

Re:  The root cause of this problem has nothing to do with capitalism

Capitalism is just a word.

The smart-n-savvy people screw the dumbasses.    

Life is screwISM.


Fri, 07/12/2013 - 15:15 | 3746208 Kprime
Kprime's picture

But I am not in a television-induced coma, I spent to much time on ZeroHedge.  hmmmmm a ZeroH zombie, maybe that's what I am suffering from, lol.

Ok, Ok, how do you do that sarcasm thingy  \zarc  :-}

Fri, 07/12/2013 - 15:59 | 3746381 Wave-Tech
Wave-Tech's picture

The moment the US strayed from strict adherence to the constitution was indeed the beginning-of-the-end.

Particularly abandoning that which was the only item in the constitution specified as NECESSARY to the security of a free state.

The Last Legitimate Measure of Hope


Reclaim the Power of the Purse & the Power of the Sword | County-by-County & State-by-State

OPEN CALL TO ZH (from every last Tyler on down) It’s time to find out what we’re all really made of…

The Forum Directive:

Bring to life actionable ideas on how to crowd source and rapidly fund a viral, universal, politically expedient, and OFFICIAL, working strategy for FAST TRACKING implementation of the last constitutionally mandated line of defense, which harbors the legal authority to restore law and order across the US -  (And by extension, across the globe)

A massive, well-funded, universal, well-organized, official, and viral campaign focused on a universal return to the rule of law with eternal vigilance to adhere to it forever thereafter, is the very last bastion of hope remaining for any remaining semblance of good to triumph over (or at least, check-to-balance) the ever-pervasive and growing powers of widespread evil.

Any hope to pull this off will require a concentration of extremely intelligent persons of means and persuasion that can shake things up, and make things happen in a tangible and substantial way.

It is time to abandon old-paradigm business models that perpetually point to the problem, and replace them with business models that point to and exemplify successfully, sustainable and plausible solutions.

Now that a critical mass are AWAKE, it’s time to get them dressed and off to work.

I for one pledge to do whatever lie within the scope of my ability and means to advance this cause.

The Hour is Late:

If you are not part of the solution, you are part of the problem.  If you wish to be part of the solution, log into the dedicated ZH forum and offer all appropriate value toward restoring the mandated legal checks and balances as presently outlined in the Supreme Law of the Land.

My CONTACT info: 


Fri, 07/12/2013 - 14:32 | 3746060 Bastiat
Bastiat's picture


Cancel all the debt held by the Fed, let its charter expire. Reclaim any US gold held by the Fed.  Call it all "liquidated damages."

Fri, 07/12/2013 - 14:44 | 3746105 Shell Game
Shell Game's picture

Absolutely.  But let's call it what it is, Emminent Domain.

Fri, 07/12/2013 - 14:34 | 3746064 NOTaREALmerican
NOTaREALmerican's picture

Thanks for this article !

Fri, 07/12/2013 - 14:38 | 3746083 polo007
polo007's picture

According to CIBC World Markets:

The world remains a place where enormous amounts of debt just keep stacking up. Paying this debt back is constantly believed to be less of an issue given the crucial assumption that economic growth rates in the order of 3% to 5% will return AND will be sustainable. Even if it does, it must be noted that “total payback” of the debt could be unlikely to ever be achieved. At some US$18 trillion of total debt in the U.S., it would take 14,400 million ounces of gold or some 160 years’ worth of annual global gold mined supply (at the current price of some US$1,240/oz. and at current global output of some 2,800 tonnes per annum) to pay this down. At the same time, gold production is about to take an almighty knock and we won’t be surprised to see as much as 25% less gold output in the next five years.

Still, much of this precarious (let’s just stop the debt load from growing) position is critically dependant on very low interest rates being maintained – once rates start moving higher, debt repayment schedules quickly blow out, while the value of bonds, in particular government bonds, starts to decline. The current dramatic decline in the value of government bonds will already see banks’ balance sheets shrinking again, with possible resultant liquidity squeezes across the globe. Euro sovereign debt costs are already up dramatically and Italy is seemingly also sitting with an apparent +30 billion euro loss in the derivatives market…

This could very quickly turn out to be a very bad scenario, but the point, as far as we are concerned, is really that it does not even need to get to this for the markets to start realizing that currencies will have to depreciate much further – we believe this to be a crucial mechanism for delivering lower sovereign debt levels long term. Gold will be the currency that continues to benefit in the longer term. So, making a positive case for the gold price is not too difficult – particularly if inflation becomes a problem much sooner than everybody currently expects.

The real problem, unfortunately, is that all of this argument is dependant on data that will only become apparent much later down the line. Right now, nobody is willing to go against the Fed. That simply means bonds and gold are both getting the “chop” because the Fed is signaling a return to stronger economic growth – leading to a stronger U.S. dollar.

Fri, 07/12/2013 - 14:39 | 3746087 FreedomGuy
FreedomGuy's picture

To say that we anything resembling the capitalism of Adam Smith, the Austrian school or similar theories would be a joke...and leftist wishful thinking.

Leftists blame everything on too much freedom if you get to the natural conclusion of their ideas. So they want to blame capitalism which is to blame freedom.

There are so many errors in this article I would have to write an equally long piece. However, I will add another government piece of the problem and that is the consistent drive of Western governments to force labor and business costs ever higher with mandates and taxes.. If this author is correct and the marginal value of labor is falling at the same time governments increase the cost you will quickly run into disaster. There are no counter balances and checks as in unfettered economies.

Let me assert that a government controlled economy is a politically controlled economy (conspiracy theorists enter here). Virtually all systemic long term problems in an economy connect back to government actions and power. Government will bury you in it's strangling "good" intentions and bad theories.

Fri, 07/12/2013 - 14:57 | 3746147 Mark_BC
Mark_BC's picture

Adam Smith's insights were remarkable for their time but they have many inconsitencies, holes and problems. That is to be expected since they were from hundreds of years ago and back then people really had very little idea about how the world works -- ie where energy and food come from, and what is actually entailed in this mystical thing called "production". Smith's theories should not be used as a basis for running an economy -- they are much much too simplistic. But they do provide valuable insights.

Fri, 07/12/2013 - 16:17 | 3746417 bjfish
bjfish's picture

Mark, I had to laugh after reading your pseudo-intellectual post.

"That is to be expected since they were from hundreds of years ago and back then people really had very little idea about how the world works -- ie where energy and food come from, and what is actually entailed in this mystical thing called "production"."

You think that ppl TODAY have a better understanding of where food comes from than people in 1776, when 1/2 the pop. worked in AG and they farmed by hand.  WTF?

Can you share some of those flaws in Adam Smith's work?  I'm really interested.

Sat, 07/13/2013 - 01:22 | 3747631 Mark_BC
Mark_BC's picture

Yes, we do have a much better understanding of where food comes from today -- the laws of thermodynamics weren't discovered until a century after The Wealth of Nations, and food is basically just (chemical) energy. I would doubt that anyone back in Smith's age had any idea about how nutrient cycling in ecosystems works and enables "productivity" (did they even have a clue what nitrogen, phosphorus, and potassium are?), beyond some anecdotal knowledge that when you throw shit on the fields or let them go fallow with clover for a year, you get more growth the next year. DNA wasn't fleshed out to any meaningful degree until the 1950's, and I think you'd have to agree that genetic manipulation of plant strains for the purposes of maximizing "food production" has advanced quite a bit as a result.

I'm actually right now working on an essay / post / treatise that will finally define this nebulous topic of "economic productivity" and how it is that so many people have developed so many widely varying economic theories based on this idea, yet hardly anyone understands what it actually means. It is precisely for this reason that we can have such a wide range of conflicting political and economic beliefs out there in this age of supposed intellectual enlightenment -- because virtually no one promoting these various beliefs (both left and right) understands, or is willing to admit, what the fundamental basis of all "economic productivity" actually is. IMO this is the greatest oversight in the history of humankind, because it seems likely that our collective failure to address this topic will be the reason we blindly careen into a Malthusian Collapse.

I've been working on it for a while, but I'm realizing that in order to do the topic justice it's going to be longer that I originally envisioned -- probably something around 100 pages -- essentially a book, which I will provide for free on my website. But alas, I have a 7 to 5'er that takes up so much of my time... I've written several other essays that provide the framework from which this next one will develop, available here. (and yes, it will include a section critiquing the relevant parts of The Wealth of Nations).

Sat, 07/13/2013 - 13:36 | 3748361 bjfish
bjfish's picture


Does understanding "nutrient cycling" help a person feed his family?  NO, of course not.  Growing a potato on the other hand ....

What is that word for a person with ZERO common-sense, who routinely over-intellectuallizes, and over-complicates matters which are really quite simple ... ? 

I know ...  Mark ... you must be a Univeristy professor. And you teach Sociology no less.  That is a field specifically designed for folks who are too emotional and irrational to comprehend economics.

P.S. "economic production" is not a "nebulous" thing at all.  You are simply an OVER EDUCATED MORON.

Sat, 07/13/2013 - 18:21 | 3749209 Mark_BC
Mark_BC's picture

"You are simply an OVER EDUCATED MORON."

Now now, no need to get nasty. If what I say stikes a nerve then maybe it would be more "productive" for you to instead analyze why it bothers you. And FYI, since you are questioning my education, while I do have an extensive education, it was not in the Faculty of Arts like so many economists throughout history -- it was in forest management, mechanical engineering, and pre-med biochemistry. I also have 25 years of work experience in a variety of these fields designing, building, and maintaining the kinds of structures that you depend on every day for your comfort and, indeed, survival (and I get paid well for it in the private sector, so I must have some idea what I'm doing). If you don't like the education that has enabled this kind of infrastructure (and the inevitable conclusions it reveals, that you don't seem to want to accept), then you should probably cut the electrical wires to your house, cease buying gasoline or anything else made from hydrocarbons, and not buy food anymore at the grocery store.

If you feel that I'm over-intellectualizing the production of all these goods and infrastructure that you seem to casually accept as being "really quite simple", then perhaps you could explain to me how it all comes together. Do as I say, and follow the resources and energy from the earth through the manufacturing processes, to the final end consumer. But don't over-intellectualize it, we wouldn't want to actually exercise our brains now, would we! On second thought, maybe it's just easier to pretend the intellectual challenge will all go away and instead blindly brown-nose some long-dead Austrian theorist's ideological imaginary thought experiments.

I guess the alternative to knowledge is the infamous Nazi book burning parties and the Polpot regime in Cambodia. Seems it served them well, eh?

An understanding of nutrient cycling would indeed help a farmer feed his family, because he'd then be able to grow more potatoes as a result.

Sat, 07/13/2013 - 01:05 | 3747613 FreedomGuy
FreedomGuy's picture

Actually, Smith's observations are significant for his time and virtually the entire science of modern economics rests on his shoulders. Even the counter reactions based in Marxist drivel are actually anchored in his theories. Adam Smith correctly bases his economics in human behavior, the very root of economics. It is at it's best a description of aggregate human behavior. His first book was an examination of the morality of the time.

My point is not a biography of Smith but to suggest a little humility. I do not think men of this age are any smarter than several centuries or even millenia ago. It is just that we have a large head start in developing our ideas.

Additionally, each society and each government will follow some economic, philosophical and moral path. Hate Adam Smith? Fine. Will you pick Marx, Keynes or someone else? You will follow something.

Sat, 07/13/2013 - 01:43 | 3747646 Mark_BC
Mark_BC's picture

I follow "thermo-economics" -- follow the energy, resources, and processes from their sources, through the economy, and where they end up afterwards. That, coupled with legitimate sociological studies describing how we behave collectively, is the only way to truly gain a genuine understanding of how economies work. Anything else is pseudoscience -- or, in other words, "economics".

Modern economics is not "science". Economics is about as far from science as you can get (except some of the statistical sociological studies that economist do). Science is defined by the scientific method, in which hypotheses are developed to describe observed phenomena and then they get raked over the coals of real world testing and scrutiny by other scientists. If, after several years of this abuse, the hypothesis cannot be disproven, even in a small way, then it is elevated to the ranks of "theory". This is what keeps science and engineering true to the real world, and why it is that you can rely on so many unimaginably complex processes and innovations coming together to allow you to type on your computer on the internet right now, and then go into your fridge in your comfortable abode and eat some food.

Economics does none of this (nor can it be expected to, to any significant extent, given that it would be our societies, over multi-decade time frames, that would be the "guinea pigs"). Economics is not much more than mathematicized politics. And very unfortunately, the average person does not understand this and they lump all academics together into the same heaping stinking pile of shit that economists will be thrown onto when society loses faith in economics (and it really is a leap of faith that's necessary to believe anything coming from any school of economics).

Sat, 07/13/2013 - 14:10 | 3748511 FreedomGuy
FreedomGuy's picture

Economics is as much a science as sociology, psychology or anthing else based in human behavior...and it really really works when you have the right information. Science is simply the study of any particular area of inquiry and interest and becomes an -ology, -onomy, etc.

Your definition of capital seems flawed, as well as you try to make economics into some sort of energy based theory. Capital at its base is simply human ingenuity and energy based applied to natural resources. Humans take their natural surroundings and modify it to make it more pleasant, productive and self we can sit here and "type on the computer right now". This is NOT mystery.

Your comments on academics and economists is rather puerile for someone supposedly writing a sophisticated academic paper. Maybe you want to throw out a number of other disciplines, too. The entire idea that a society can lose faith in economics is ridiculous. Maybe they want to lose faith in physics and medicine, too. It does not make them go away. What they should lose faith in because it requires true faith is in the belief in the government, elitist, genius, academic planners and directors of all human activities. They are called Congressmen, Fed Chairmen, Regulators, Central Bankers, and occassionally, "Fearless Leader". Throw that religious faith out, if you will. It is the core faith of the Leftist.


Sat, 07/13/2013 - 17:35 | 3749174 Mark_BC
Mark_BC's picture

I'm sorry FreedomGuy, but economics is not science, no matter how much you would like it to be. If you'd like, you can read about what makes science science on Wikipedia. Economics, by the very nature of how that field of "study" works, does not fit in this category.

Yes, I am "trying" to make economics into some "energy based theory", because believe it or not, every single thing that happens in your life, in the economy, at your dinner table, on your computer, on your bicycle, when you blink your eye, brush your teeth, 100% of everything that happens, is driven by and enabled through energy transformations. Without energy, there is literally nothing. Any economic "theory" that does not incorporate energy as the fundamental driver of it all is, simply, wrong. Of course, there is more to understanding economies than just energy, but energy is the basis of it all.

"Humans take their natural surroundings and modify it to make it more pleasant, productive and self we can sit here and "type on the computer right now". This is NOT mystery."

Oh really? Then can you please explain to me how this production actually works? Summarize the flow of resources from "producers" of both the computer, and the energy and resources needed to manufacture and power it, as well as the internet networks to bring it all together, that you claim to have figured out.

Fri, 07/12/2013 - 16:35 | 3746357 bjfish
bjfish's picture

Thanks Freedom Guy, You are exactly right.

While free market-based systems are demonstrably superior to any alternative (see 19th-20th century history), there are a few types of market imperfections or flaws (see econ 101 class). I'm refering specifically to market power (i.e. monopolies are not good).  The proper role of Gov't (in a free society) is maintaining property rights and the rule of LAW, and fostering competition (blocking Monopolies).

Instead, we have Gov't trampling the rule of law and in bed with Big Biz/Labor helping each other to consolidate their power. As  Mussolini said, "facism is the merger of corporate and political power".

Fri, 07/12/2013 - 17:24 | 3746667 Seer
Seer's picture

"The proper role of Gov't (in a free society) is maintaining property rights and the rule of LAW, and fostering competition (blocking Monopolies)."

Sounds good (and noble), doesn't it.

BIG PROBLEM: If the govt has the right to kill you then it has, or will have at some point, the "right" to do just about anything else to you (basically all the bad shit that we see happening today).

If there was ample of everything then NO govt would be required.  It should be clear, then, that the issue is about managing scarcity- who decides?  Further, we totally disavow knowledge, other than on a personal basis, of REAL scarcity as applies to Nature's capital.  We're running around whining about all the bad things and masturbating on all sorts of make-believe things (or the "past," in which things NEVER did happen as written [the victorious, the thugs, wrote history]).

Smith wrote some decent things.  Marx wrote some decent things.  They're fucking DEAD, and the world is FAR more complicated* than it was during their days.  * Largely owing to the over-abundance of large-scale weaponry and MASSIVE population size**.

** Given our population size of 7+ billion I'd have to say that on the whole we've been more "better" to ourselves than "bad" to ourselves.  As nature's capital starts running dry this is likely to reverse.

Sat, 07/13/2013 - 01:14 | 3747627 FreedomGuy
FreedomGuy's picture

The proper role of government is in fact protecting life, property and civil rights. Government never has the right to arbitrarily kill you. That's what the justice system, warrante, Miranda's etc. is supposed to be about. Government is force. Properly done, government force is only directed against hostile force. However, it always devolves the other way around. All government over time become the hostile force.

The other two errors is that government manages monopolies. Monopolies are a theoretical problem and none have ever existed without the assistance of government, even protection. The other statement that is fingernails on the chalkboard is "the issue is about managing scarcity- who decides?". I reject the idea that society is to be managed at all by anyone. That is the beginning of tyranny. Even a bunch of dupes on the Right fall for this. See the very first sentence I wrote. Where do you see any idea of managing society? There is none. You let society through individuals do as it pleases while protecting person, property and rights.

Society might be more complicate by the rise of the bureaucratic state but human nature and the lure of power have not changed a bit. The essential principles of government and individual liberty are still the same.

Fri, 07/12/2013 - 14:46 | 3746107 crzyhun
crzyhun's picture

To posit that Marx was right is to suggest that he is right about merely the Keynesian reality to which we have fallen, more -been drowned in. Another wool attempt over our eyes, Mr. highSmith.

Fri, 07/12/2013 - 17:38 | 3746692 Seer
Seer's picture

Do you even know WTF you're talking about?  Probably not... just another piker spewing what sounds good...

BOTH Smith and Keynes would puke at what's going on today.  Keynes, for all the bashing he takes, was never meaning for things to be permanent- seems everyone creates this story.  Yes, it's pretty obvious that his ideas puked when handled by POWER, which is pretty exactly what's happened to anything that Smith was pushing- totally corrupted by POWER.  Things will ALWAYS get corrupted NO MATTER what System is in place, as long as that system relies upon a top-down hierarchy that imparts unequal power to "some animals."  As I'd noted above, you can NOT have a just and one that serves "justice," as as soon as it has the power to apply force it will end up using that force, which will always end up as being unjust.

I don't know what the "answer" is.  But I do know that a bunch of feel-good, sound-good phrases and words ain't going to cut it, no matter how folks deify (or condemn) those long-dead.

Sat, 07/13/2013 - 02:05 | 3747667 Mark_BC
Mark_BC's picture

Hey Seer, do you have a blog? You make a lot of sense.

Fri, 07/12/2013 - 14:46 | 3746111 smacker
smacker's picture

Quoting Marx as having identified the inherent crises of capitalism is not good.

Not least because we do not have capitalism and have not had it for a very long time. Anybody who understands Austrian School economics will know that capitalism works when it's not interfered with and the markets are allowed to clear. The issues of corruption, dishonesty, crookery et al are matters which can be dealt with by effective laws/regulation (eg: strict rules about the size of corporate ownership).

Like so many problems that arise in western countries - economic, societal, when you trace back the responsibility and often the cause of them, you invariably find it is the political ruling class and central banks at fault.

Would economic booms and busts arise so frequently if central banks did not manipulate interest rates? print so much money? or if politicians did not overspend their tax revenues and borrow to bridge the gap? if the politicians measured economic activity (GDP, CPI etc) using sane criteria instead of the garbage they currently use?

The current crises have been caused by: banking fraud, inadequate regulation, bank bail-outs, unsustainable levels of sovereign debt and a bunch of other related things, which have little to do with the system of free market capitalism and everythng to do with corruption, dishonesty, incompetence and political/bankster agendas.

Centrally planned socialist economies suffer even worse problems, which should prove that it's not the capitalist system but those who manipulate it.

Fri, 07/12/2013 - 14:46 | 3746112 rwe2late
rwe2late's picture

 Marx also wrote that the misery would not necessarily be from economic deprivation. Rather, he wrote that capitalism would create what he called alienation from oneself, society, and the natural world. That would result from the unbridled, exploitative, and one-dimensional pursuit of materialism.

At its core, what we call the capitalist system rests on the belief  (not shared by all cultures) that the world, and all that exists, can be owned, or privatized. Privatization is all about limiting access and/or privileges (to resources, markets, etc.)

 That system operates by:
1) privatizing the natural wealth of the world, all its species, even the activities of its human and other denizens.
The privatization necessarily includes “rights” of individual ownership.
2) The rights of ownership are used to channel power and wealth to the owners. Owners compete to own more, and to prevent what they own being taken away. Monopolies and owner institutions are established.
3) A money system is developed to facilitate the exchange of property and as a means for property owners to extract wealth and services from the non-owners of property. (Imposing a  tax on natives  has been a traditional colonial method of forcing natives to work or trade in order to get the money to pay the tax).
4) Everything privatized is a commodity and becomes priced. The competition between owners, and the collective actions by owners force every “property” to be valued monetarily, and ultimately by its functionality in obtaining more property and services ( profit in money-measured terms).

Privatizing, gaining control of the world and others is built into the “capitalist” world-view.
Conquest for ownership of the world is its ultimate logic.

Fri, 07/12/2013 - 15:10 | 3746191 Peter Pan
Peter Pan's picture

The concept of materialsm is an interesting one indeed. One of the Chrstian desert fathers St Isaac of Syria wrote back in the seventh century that, "the beginning of the path of life is always to be instructing one's mind in the words of God and to spend one's life in poverty. Filling oneself with the one helps to gain perfection in the other. If you fill yourself with study of the words of God, this helps towards progress in poverty; and progress in non-acquisitiveness ( ie. non-materialism) gives you leisure to make prgress in the study of the words of God. So the two combine to help the speedy building of the whole edifice of virtues."

I found this passage quite interesting because firstly it recognises materialism as an illness and secondly it espouses poverty (the simple and frugal life) as an alternative that leads to a more virtuous and hence more sustainable life.

It is interesting how society has developed in the intervening period.

Fri, 07/12/2013 - 16:13 | 3746434 NOTaREALmerican
NOTaREALmerican's picture

Re:  That system operates by:

1)  The smart-n-savvy people screwing the dumbasses for fun and profit.

2) The smart-n-savvy people screwing the dumbasses for fun and profit.

3) The smart-n-savvy people screwing the dumbasses for fun and profit.

4) The smart-n-savvy people screwing the dumbasses for fun and profit.

Privatizing, gaining control of the world and others is built into smart-n-savvy people's natural behavior.
Conquest for ownership of the world is its ultimate logic of aquiring bling and females.

WTF,  like a bunch of children here.

Sat, 07/13/2013 - 14:20 | 3748554 FreedomGuy
FreedomGuy's picture

Shallow leftists continually equate materialism and capitalism. Capitalism is voluntary exchange, pure and simple. Materialism is frankly not a philosophy any more than what it gets equated to, greed. Materialism as commonly used simply connotes the idea that an individual can find satisfaction and happiness in life by acquiring many things. You simpletons do not admit that there is actually some truth to this. Look at any study of societies. Those who have more including leisure time are happier.

If you want to be an ascetic or study the wonders of God in poverty, it is okay. Materialsim or "things" by themselves cannot bring inner satisfaction. The completely stupid idea that socialism is some sort of antidote to evil materialism is one of the great straw men of history. The great lie is that socialism-collectivism-statism brings some sort of innner joy not provided by other means. Now, that takes faith.

Fri, 07/12/2013 - 14:50 | 3746123 Roger Knights
Roger Knights's picture

Murray Rothbard said: "There's one good thing about Marx: He wasn't a Keynsian."

Fri, 07/12/2013 - 14:51 | 3746124 Roger Knights
Roger Knights's picture

(double post)

Fri, 07/12/2013 - 14:57 | 3746145 Peter Pan
Peter Pan's picture

The system has missed its chance to reap the benefits of technology by scrapping workers instead of reducing their hours whilst not reducing their real pay.

As real pay levels have reduced, that other great enabler, stepped in with super cheap rates which flared up property values and also caused consumer borrowings to leap. This feel good effect of spending could only last for so long and the euphoria of more and more shopping with more and more malls is now reversing.

Now we are back to the historical reality of shrinking real wages.

Thus we are stuck with the great disconnect of abundant (excess cpacity), plentiful labour and plenty of raw materials with the excption of oil.

Fewer work hours with more people sharing the load, less wasteful consumption, an endto speculative plays for commodities, an end to financialization of just about every aspect of the eonomy and an end to military pursuits might just unleash some change we can believe in.

Otherwise we will condemn our young to an inheritance that none of us would want for ourselves.

Fri, 07/12/2013 - 15:02 | 3746162 smacker
smacker's picture

Following on from my previous comment:


IMO, a much bigger question which needs dealing with is whether true free market capitalism can co-exist with democracy as we know it.

Something has to change. Either we move to a fully centrally planned economy and look forward to permanent poverty OR we take the ruling political elites out of economic management because they simply do not understand economics and are weighed down with agendas.

Fri, 07/12/2013 - 16:08 | 3746415 NOTaREALmerican
NOTaREALmerican's picture

Re:   true free market capitalism


Is a "true free market" like a "true patriot"?    WFT,   can a "true free market" exist when highly skilled sociopaths use bullshit to manipulate dumbasses?

Believing bullshit is was politics and religion is built on.   How can "true free markets" exists with huge numbers of bullshit beleivers?

Fri, 07/12/2013 - 19:38 | 3746947 smacker
smacker's picture

That was my point. Whacknut ruling elites manipulating everything without actually knowing what they're doing because they don't understand how markets operate.

One example:

How can a true free market for capital operate when interest rates (IRs) are not set by market forces?

For a long time, we have IRs set by government or central banks at levels which are either too low or too high, but never right. Set like this to manipulate other distortions in the economy which they themselves created by previous manipulations.

Hence I believe the ruling elites have to be relieved of all responsibility for economic management.

Fri, 07/12/2013 - 15:07 | 3746181 TrumpXVI
TrumpXVI's picture

The problem is increasing energy costs.

Hayek would be quick to point out that although labor's share of economic output may indeed decline within any particular industry, it is the expansion of industrial activity across the board that creates an expanding stream of new jobs.

We are at the end of the expansion of industrial activity however, due to the increasing cost of the one crucial determinant input; oil.

Fri, 07/12/2013 - 16:24 | 3746406 NOTaREALmerican
NOTaREALmerican's picture

Re: Hayek would be quick to point

Did ANY of these semi-austist economists EVER point out that their fantasy economic systems DO NOT INCLUDE THE BEHAVIOR OF SOCIOPATHS MANIPULATING THE HUGE NUMBER OF CLUELESS DUMBASSED FOR FUN AND PROFIT?



Fri, 07/12/2013 - 15:08 | 3746185 Atomizer
Atomizer's picture

Michelle Caruso-Cabrera | CNBC Chief International



Just watched your Green screen TV segment an Cuban cars. I think we should duct tape your rather large snout up the tailpipe of those taxi drivers historic vehicle’s. The driver can rev the engine and gage how soon you’ll past out from carbon monoxide. Those Cubans will revoke once you pass an omission law to sell your channel stuffed 2013 auto inventories.   

Lastly, there was no one sweating to get into a cab. This is what sweating looks like from Berlin.

Fri, 07/12/2013 - 15:14 | 3746203 disabledvet
disabledvet's picture

it's still the problem of surplus capital. and Karl Marx's solution was highly effective namely EMPIRE. I find it very interesting that the USA is almost shy if not bashful about using it's present position of power and authority in the world inasmuch forward a manner as possible. this is especially true given the aggressiveness of the first term of this Administration. I agree with the thesis presented on this site that "wars of convenience" have appeared. interestingly in a kind of Teddy Roosevelt manner the bait isn't being taken. hmmm. we'll see if a recession is the result. the same was supposed to have happened in Teddy's second term...instead the White Ships set sail and the economy boomed again.

Fri, 07/12/2013 - 15:18 | 3746212 A. Magnus
A. Magnus's picture

The only reason Marx got anything right is because when he was writing his marketing campaigns called 'Das Kapital' and the 'Communist Manifesto' he was living in England under the financing, care and protection of...THE FUCKING BANKERS!!!

THAT is why the 10 planks of communism include the centralized state control of money and credit, because the BANKERS want that. Along with a centrally planned economy and banker control of ALL private property.

Communism is nothing more than marketing for an ad-hoc criminal gang of banker-paid 'revolutionaries' to seize power and steal all the wealth of a nation for the fucking bankers. It was NEVER about helping the working class or providing greater opportunity for all.

What's even more ironic is that supposedly 'capitalist' entities like corporations function the same way the communist state does - all top-down decision making made by the party, only in western countries they call the party 'management'...

Fri, 07/12/2013 - 15:40 | 3746295 A. Magnus
A. Magnus's picture

I love how the banker cocksuckers down-voted the truth about how communism is a banker ideology; you fucktards just HATE being outed, don't ya?

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