Guest Post: Marx, Labor's Dwindling Share Of The Economy And The Crisis Of Advanced Capitalism

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Marx, Labor's Dwindling Share of the Economy and the Crisis of Advanced Capitalism

All attempts to reform the Status Quo of advanced finance-based Capitalism will fail, as its historically inevitable crisis is finally at hand.

It is self-evident that conventional economics has failed, completely, utterly and totally. The two competing cargo cults of tax cuts/trickle-down and borrow-and-spend stimulus coupled with monetary manipulation have failed to restore advanced Capitalism's vigor, not just in America, but everywhere.

Conventional econometrics is clueless about the root causes of advanced finance-based Capitalism's ills. To really understand what's going on beneath the surface, we must return to "discredited" non-quant models of economics: for example, Marx's critique of monopoly/cartel, finance-dominated advanced Capitalism. ("Capitalism" is capitalized here to distinguish it from "primitive capitalism.")

All those fancy equation-based econometrics that supposedly model human behavior have failed because they are fundamentally and purposefully superficial: they are incapable of understanding deeper dynamics that don't fit the ruling political-economy conventions.

Marx predicted a crisis of advanced Capitalism based on the rising imbalance of capital and labor in finance-dominated Capitalism. The basic Marxist context is history, not morality, and so the Marxist critique is light on blaming the rich for Capitalism's core ills and heavy on the inevitability of larger historic forces.

In other words, what's wrong with advanced Capitalism cannot be fixed by taxing the super-wealthy at the same rate we self-employed pay (40% basic Federal rate), though that would certainly be a fair and just step in the right direction. Advanced Capitalism's ills run much deeper than superficial "class warfare" models in which the "solution" is to redistribute wealth from the top down the pyramid.

This redistributive "socialist" flavor of advanced Capitalism has bought time--the crisis of the 1930s was staved off for 70 years--but now redistribution as a saving strategy has reached its limits.

The other political-economic strategy that has been used to stave off the crisis is consumer credit: as labor's share of the economy shrank, the middle class workforce was given massive quantities of credit, based on their earnings and on the equity of the family home.

The credit model of boosting consumption has also run its course, though the Keynesian cargo cult is still busily painting radio dials on rocks and hectoring the Economic Gods to unleash their magic "animal spirits."

The third strategy to stave off advanced Capitalism's crisis was to greatly expand the workforce to compensate for labor's dwindling share of the economy. Simply put, Mom, Aunty and Sis entered the workforce en masse in the 1970s, and their earning power boosted household income enough to maintain consumption.

That gambit has run out of steam as the labor force is now shrinking for structural reasons. Though the system is eager to put Grandpa to work as a Wal-Mart greeter and Grandma to work as a retail clerk, the total number of jobs is declining, and so older workers are simply displacing younger workers. The gambit of expanding the workforce to keep finance-based Capitalism going has entered the final end-game. Moving the pawns of tax rates and fiscal stimulus around may be distracting, but neither will fix advanced finance-based Capitalism's basic ills.

The fourth and final strategy was to exploit speculation's ability to create phantom wealth. By unleashing the dogs of speculation via a vast expansion of credit, leverage and proxies for actual capital, i.e. derivatives, advanced finance-based Capitalism enabled the expansion of serial speculative bubbles, each of whcih created the illusion of systemically rising wealth, and each of which led to a rise in consumption as the "winners" in the speculative game spent some of their gains.

This strategy has also run its course, as the public at last grasps that bubbles must burst and the aftermath damages everyone, not just those who gambled and lost.

Two other essential conditions have also peaked: cheap energy and globalization, which opened vast new markets for both cheap labor and new consumption. As inflation explodes in China and its speculative credit-based bubbles burst, and as oil exporters increasingly consume their resources domestically, those drivers are now reversing.

Advanced Capitalism is broken for reasons conventional economics cannot dare recognize, because it would spell the end of its intellectual dominance and the end of the entire post-war political-economic paradigm that feeds it.

Let's look at some charts to see what conventional economists must deny to keep their jobs.

Take a look at this chart. What reality does it reflect? A failure to cut taxes enough? A failure to print enough money or extend enough credit? No. What it reflects is labor's dwindling share of the economy.


The structural reality is that employment is declining:

Meanwhile, after-tax corporate profits have steadily climbed to nearly 10% of the entire national income:

Note the recent rise of finance-based profits:

This chart leaves no doubt that the engines of the past 30 years "growth" and "prosperity" have been credit and credit-fueled speculation:

If we look at disposable income, we find that direct government transfers have masked the systemic erosion of labor's earnings and employment:

By at least some measures, the top 1% are paying a greater share of total taxes than they were 20 years ago, which suggests that "tax the rich will solve everything" stopgaps have limited purchase on the deeper structural ills of advanced finance-based Capitalism.

Marx identified two critical drivers of advanced Capitalism's final crisis:

1. Global Capital has the means and incentive to keep labor in surplus and capital scarce, which means that capital has pricing power and labor has none. The inevitable result of this is that wages, as measured in purchasing power, fall while the returns earned on capital rise.

This establishes a self-reinforcing, inevitably destructive dynamic: once labor's share of the national income falls below a critical threshold, labor can no longer consume enough or borrow enough to keep the economy afloat with its cash and credit-based consumption.

We are at that point, but massive Federal borrowing and transfers are masking that reality for the time being.

2. The dual forces of competition and technology inevitably drive down the labor component of all manufactured goods and technology-based services. Mechanization, robotics and software have lowered the labor component of everything from running shoes to computer chips from $20 per item to $2 per item, and that process cannot be reversed. While the wage paid to the workforce designing and manufacturing the products and providing the services may actually rise, the slice of revenues given over to all labor continues shrinking.

This is what I have constantly referred to (using Jeremy Rifkin's excellent phrase) as "the end of work."

Put another way: the return on capital invested in techology greatly exceeds the return on labor. Industries and enterprises which fail to leverage capital invested in technology that lowers the labor component of their good/service eventually undergo rapid and inevitable creative destruction.

We are about to witness this creative destruction in the labor-heavy industries of government, education and healthcare.

Marx's genius was to recognize the historical inevitability of these internal forces within advanced Capitalism. He also recognized the inevitability of finance-capital's dominance of industrial capital--something we have witnessed in full flower over the past 30 years.

Finance capital now dominates not just industrial capital but the machinery of governance, rendering real reform impossible. Instead, the Status Quo delivers up simulacrum "reform" which change nothing but the packaging of the Central State/Cartel Capitalism's exploitation and predation.

Add all this up and you have to conclude the final crisis of finance-based advanced Capitalism is finally at hand. All the "fixes" that extended its run over the past 70 years have run their course. Life will go on, of course, after the Status Quo devolves, and in my view, ridding the globe of financial predation and parasitism will be a positive step forward.

The real solution is to understand advanced finance-based global Capitalism will unravel as a result of the internal dynamics described above, and be replaced with an economic and political Localism that I describe in my new book An Unconventional Guide to Investing in Troubled Times.I don't claim these ideas are unique to me; many others have described the same dynamics and historical trends.

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Gully Foyle's picture

Those are my principles, and if you don't like them... well, I have others.

Groucho Marx

wang's picture


where's Harpo when you need him?


Mistaken Marxist moments

During almost every one of the periodic crises that affect mercantile economies, voices are raised saying “Marx was right after all”. A few years ago Nicolas Sarkozy was seen ostentatiously clasping a copy of Das Kapital, while in recent weeks financial gurus, including Nouriel Roubini and George Magnus, have written articles referencing the communist thinker. When recovery occurs the cry vanishes, only to reappear next time there is a bust. The first thing wrong with the slogan is that it has little to do with Karl Marx. I remember the otherwise highly intelligent professional lady who, when asked why she was a Marxist, replied: “I got bored with my father’s friends.”

midtowng's picture

Most people, even some so-called Marxists, have no idea what Karl Marx actually said.

ratso's picture

Right you are.  Tyler is unfortunately writing some crap again.  He should stick to what he knows.  

The fact is the American families and workers are being continually manipulated, exploited and lied to by the multinational corporations and the governments that these corporations have bought and paid for.


Conrad Murray's picture

Congratulations, you have recieved first prize in the shithead of the day runnings, not simply for your inability to read the very first line of the post, in which it is made clear this is not a ZH/Tyler piece, but also to have not read one word at all, bash it, and then draw the same conclusions it put forth(and are the macro themes of this guest writer). Jackass.

Timmay's picture

I could only give you one positive vote up, I would have given more if I could. Sad to see this type of riff raff has infiltrated (allowed) to post comments here.

Michael's picture

"Though the system is eager to put Grandpa to work as a Wal-Mart greeter and Grandma to work as a retail clerk, the total number of jobs is declining, and so older workers are simply displacing younger workers."

There should be an entire thread discussion on this one sentence alone. 

i-dog's picture

The real problem is that the MIC (Morons-In-ChargeTM) are making absolutely zero attempts to encourage / promote / foster high value-added employment for the millions of college graduates each year.

The opportunities to move up the food chain that are afforded by off-shoring dirty / menial / dangerous jobs to "developing countries" have been totally ignored by the regulatory and taxation arms of the American and British Central PlannersTM. Of the Western economies, only Germany has continued to develop a high quality manufacturing base that exports equipment and products sought after by both the developing and developed world -- while they were the first country to offshore labour-intensive manufacturing to the BRICs.

Co-incidentally, Germany also still maintains a high degree of family ownership of major corporations (ie. innovative private enterprise fostering both employment and customer satisfaction).

Sudden Debt's picture

When the IMF and the World Bank force a country to cut wages, lay off workers, produce for export instead of their own people, and sell off public property to cronies for less than its value, that's called "economic reform”.
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it

Sudden Debt's picture

And you have people who know what Marx said but don't know what he meanth by it.

They are called "Marx Wannebe's", WB's in short.


Newsboy's picture

Marx is really hard to read. Compilations of excerpts, with historical introductions and analysis may be the best bet.

I think being to obtuse and wordy and soporiphic probably kept him alive. If everybody could read and comprehend what he wrote, he would have been killed in his 30s, like Jesus was.

jakethesnake76's picture

Kinda like global warming huh lol  

NOTaREALmerican's picture

Being right about what is wrong with capitalism, doesn't mean he knew what the solution was.

None of the economic ISM's work unless humans are perfect.

The socialists need their perfect humans, the libertarians theirs,  the capitialists their's.     The only ISM that naturally works is fascism, because humans are mostly sociopathic assholes.    Fascism doesn't need perfection, that's why it's the natural ISM. 

baby_BLYTHE's picture

none of our problems will be solved until wage arbitrage comes into balance with that of China and the developing world which means real wages have no where to go but down. At which point we won't have much of a nation left

LedMizer's picture

If the US had a sensible trading policy we would slap tariffs on the goods coming into this country by means slave labor wages and environmental poisoning occuring around the world.  Couple this with scaling back our own non-labor cost to manufacture and we might see a return to growing our manufacturing sector.

Leopold B. Scotch's picture

Or the U.S. could:

  • Stop the massive dislocations of its economy by ending the money printing / credit expansion and return to honest money
  • Free the system from concentrated central power that is inevitably co-opted by special interests -- like banking, corporatist parasites, the parasite service class that enables legislated technocracy that produces no wealth, etc.

Marx's problem, like so many today -- even Warren Wanker Buffet recently -- is that they size up the problem along the lines of classes... labor vs. management, rich vs poor... instead of what's really going on.  This is wealth creators / producers thereof vs. exploiters of said wealth / productive ability. 

Yeah, labor is a component, but the biggest problem in the u.s. is the slouchy business environment, the uncertainty, the crumbling property rights, and the mega govt co-opted by parasites on all levels.

Das Kapital is fleeing for more reliably safe shores... that, oh... BTW... has lots of exploitable labor.

sun tzu's picture

We need fair trade, not free (unfair) trade. The government is out to deindustrialize and destroy American industry

Leopold B. Scotch's picture

Watch out for what happens to CPI when you bottle up all the money printing inside U.S. borders.

We'd have more balanced trade if we didn't subsidize the exportation of our economy (and "unfair" trade)  with massive money printing and credit expansion.  We'd have no choice, otherwise.

myne's picture

At the end of the day, it's not wage arbitrage. It's lifestyle arbitrage. They are competing with you for the same inputs, but they deliver higher outputs with thier lifestyle than you can.

You could all chose to live like the Chinese, and then you should find that you can compete with them.


That aside, the end of work is inevitable. And I've commented at length on here before. The answer is to enforce lower working hours.

Only then can the current system continue to work AND increase the labour share of profit. Ignoring the debt from the wars, if the USA tomorrow instituted a 20% cut in the work week, within a month there would be full employment. With full employment comes lower taxes to pay for welfare. With lower hours, comes better health, saving taxes/wages there too. With more free time, comes more integrated families and communities. Reducing depression, crime, etc.

Basically, it can be fixed and it's easy to fix. It will happen - eventually. Probably after the global debt default because people are stubborn creatures.

lasvegaspersona's picture

I doubt this would work. What about people who are just naturally productive? Would you stop them from producing just so some other person could have 'a job'? What would stop someone from working 2 or 3 jobs? Should we actively insist the most effifient become less efficient? Instead of digging with shovels have folks use spoons?

myne's picture

Google "The 8 hour movement"

Then consider the implications to the economy as a whole when 1/6th of the working week was cut.

Did it collapse? Did it fundamentally change? Did anything about human nature change?


It rebalanced and continued. The more productive got promoted, and the less productive didn't. Everyone continued to use the most effective tools to achieve the desired outcome. I think you're mistaking my proposition for the Keynsian idea of digging and filling ditches. I'm not suggesting being less productive.

I'm suggesting that we need less hours to achieve the production required to sustain everyone. Therefore, rather than impose taxes on the workers to support the non-workers or give the unemployed tasks that achieve no production; you cut hours for the workers, to increase the overall number of workers. Which should achieve the same net production and the same net income, with a lower tax burden. Like it or not, the workers support everyone with their product. Giving someone a useless job for the sake of having a job does not change this fact.

Leopold B. Scotch's picture

The problem is the lack of the efficient use of scarce resources. That problem is created by meddling in the nature of price discovery which is governed by supply / demand and time preferences.

You complicate the process and create distortions by legislating these sorts of things, which compounds the problem rather than solving it.  Labor has a clearing price and a finite demand.  Let it be found by the market, not minimum wage / big labor / 8 hour movement advocates.

To that point, the 8 hour workweek was a luxury that could be supported on the back of tremendous savings and wealth production.   Same can be said for child labor laws, schooling of children, etc.  Undeveloped economies lack any semblance of such since all labor must go to survival first and foremost.  Absent savings, we're all hand to mouth.  The problem is the economic policy and political environment of the United States in the last century has devastated the pool of real savings and the ability to create more of it.  It has nothing to do with the hourly work week of the average laborer.  Just ask your average sub-Saharan African.

myne's picture

A lot of that, especially the 20th century had to do with very cheap energy from locally sourced oil. You're now a net oil importer clinging to the lifesyle of an oil exporter. I'm not discounting savings. Just saying there was a big leg up back then. When oil was spurting freely from randomly drilled holes in the ground, it's extremely easy to create a fantastic lifestyle from your wealth.

Soon enough, we'll all be riding motorcycles.

Leopold B. Scotch's picture

My undersstanding is, adjusted, the cost of energy today is really not that different and might even be better priced all things considered (inflation adjusted, etc.)... Heck, oil was at $12 a barrel in '98 or so -- not all that long ago.  Technological advancements in extracting the stuff, its comparatively quite affordable.  And really, you should be talking Coal, not oil, if we're talking about the U.S. and its massive strides in industry and wealth.

Granted, we're seeing supply issues becoming more of a problem more recently, likely because the easy to get at stuff is running a bit dry compared to the past (in addition to geo-political issues, and the debasement of the petro dollar...).

But it was no uber cheap affair in the 1800s and early 1900s to extract oil or, for that matter, the more dominant energy source: Coal.  It's much easier today with super advanced machinery vs. the old labor-intensive methods back then.

What's changed mostly when it comes to the price of oil is the adjustment vs. a depreciating petro dollar, ties into the point about destroying savings through inflation.

Leopold B. Scotch's picture

Precisely why such suggestions today or in FDRs time were simply moronic.

What's lost in this discussion is the concept of savings and how inherently important it is to the health of an economy.  What's been squandered in the United States over the last century is its vast store of accumulated savings, it's national seed-corn, if you will.

Consumed more and more irreverently by the exploitation class (politicians, power mongers who own government, special interests, etc., who co-opted legislation to their benefit at the expense of the common man (looking at you Big Corporatist Biz and Big / Govt Organized Labor), the economic seed corn has been put to crappy use if not simply consumed by non-wealth producing activities, and so the U.S. gradually reverts to its past.

How'd it happen?  In the U.S. you once had full rights to your body, labor, and fruits thereof.  (Ok... big mistake was initially this was not acknowledged among those with the wrong skin color, but table that for now... but the premise was sound for most...)  People could operate in the U.S. knowing that they were entitled to the full wage of their labor, and that they could then acquire property based on the fruits thereof.  Those who were most industrious would set aside that production as savings, and then convert it to investment / capital that itself would produce more wealth = more stuff.  Compounded year after year after year, and with laws preventing the parasite classes of government, business, special interests from the means of stealing those rights, that wealth grew and grew and grew.   Someone could come off the boat as a former European serf and have the chance to save and acquire property.

Certainly there were always newcomers on the low end of the totem, and then there were those simply not terribly able... but the opportunity was there, as was there the always the opportunity to create a new business to invent ideas, and create competition, raise standards of living as more and more people grew into the system as the system protected and nurtured the growth of the store of productive capital and savings.  And for the most part, the economy was geared towards meeting genuine wealth creation/ life improving / focused needs of others, like plumbing, clothing, housing, new transportation, farming, new technology, etc.

Where things went bad was once government was consolidated sufficiently to be for sale, and when special interests could start raiding the pockets of others either  directly or through legislation that made competition more difficult, limited competitive labor environments.  Bankster frauds were legislated into existence where they could legally counterfeit and not be prosecuted for having loaned out / issued more bank demand deposit notes than gold they had in storage to back those notes.  The economy was transitioned away from producing real stuff to producing unnecessary, even hated things... like "tax compliance services", or small business stiffing regulation compliance... or overpaying for labor (vs. the private / real wage market), for government projects that produced political cache vs. real, genuine need...  for welfare that exceeded the charitable intent of a community helping hand, instead creating a near permanent (and massively growing) underclass of citizens whose time preference is the next 5 minutes, who see no benefit / need for a nuclear family, an entitlement dependent environment which increasingly is crime-riddled and lacks any sense of productive responsibility / opportunity.

Then there is the industrial warfare complex... The varied  special interest global policeman types... etc. etc.  The Uber Green socialistas / Marxists, who outright hate private property.  The corporatist greens looking to make a fast buck off even the stupidest neo-green movement, never mind how damaging it really is to an economy and its long term viability... the $ billions into failing green projects that are politically connected and never were really ready for prime-time... The ethanol subsidy and requirement regulation... the Carbon Trading Exchange concept which forces everyone to pay uber extra through the trolls at the toll bridge, run by the likes of Goldman and Al Gore.

And, so the economy converted from one that provided safe opportunity for wealth creators and overall improvement in the quality of life, to parasites and opportunists who have absolutely no respect for your or my right to say "no thanks" to their demands to meddle at the expense of your paycheck, your nation's solvency, your currency's viability, and fundamentally to your body, life, and property. 

Nothing is sacred.  Special Interest Government Uber Alles!

So instead we get proposals for people to work less... because, I suppose, everyone already has all they need?  Nobody can contribute anything further to the economy than a lower hour work week?  WHAT A JOKE!

The problem is there is insufficient capital and savings to make these people more productive, no different than the problem in China under Moa.  Note how china allowing for more vestiges of private property, personal opportunity to save and reinvest while not having it all belong to the state has manged to turn the economy around?

Granted, still many problems in china.  But low wage alone does nothing.  Never worked for them for the first 40 years.

The U.S. needs to restore private property rights and the right to say "No Thanks" to those stealing your rights, money, purchasing power, etc.

blunderdog's picture

It's not easy to "live like the Chinese" in most of the USA.  We don't have the infrastructure they have which makes it so practical.  Mass transit, dormitories, low-cost food providers, etc.

You're right about the lifestyle arbitrage bit, wrong about how simple it is for an individual to adapt.

sun tzu's picture

You could all chose to live like the Chinese, and then you should find that you can compete with them.

You mean we can choose to live like slaves.


if the USA tomorrow instituted a 20% cut in the work week, within a month there would be full employment. 

Stupid idea. The French already tried it and their normal unemployment rate is nearly 10%. Businesses would move overseas within a year and the cycle would continue

myne's picture

I think it can be done right. I think it can achieve a win for businesses, a win for workers, and a win for overall efficiency.

I posted how here:

falun bong's picture

Then explain why French GDP per capita is the same as the USA, even with a much shorter workweek?


myne's picture

It's not. Though it's not that far behind.

I'm surprised Australia's (me) is so much higher than the US though!

Debugas's picture

absolutely right. It just happens that there are so many jobless chinese there that they all agree to work for food only.

narnia's picture

the natural tendency of a free market is deflation.  products or services are introduced into the market if they can be delivered for less cost or provide greater benefit.  the end game of free markets is the plentiful production & widescale availability of products people want.

the only force that can prevent deflation is taxation imposed by force.  taxation is the arbitrary allocation of costs on the private sector to finance politically determined economic activity, such as the purchase of bombs & a bunch of other products that the free market would not otherwise produce (which have to be financed, in addition to making the free market determined products more scare), the standards by which the free market is producing the products people want, or the charitable reallocation of resources.

we reached the point long ago in our centrally controlled nation where the taxation exceeded the the ability of the private sector to pay for it.  we are now coming close to the end of the borrowing capacity of the private sector to perpetuate this deficit.

the reset is the ultimate liquidation of the perceived price effect forced on the market by taxation & the extension of credit born by deficits in financing taxation.

midtowng's picture

Either that, or we could re-introduce some sanity in our trade policy.

Granted, that is unlikely, but it still is an alternative.

DUNTHAT's picture



Mountainview's picture

China makes no secret out of it and the EURO seems to fluctuate around some mutually accepted 1.45 rate. Remains Gold as the only true money.

Rynak's picture

Sorry blythe, but this is the most stupid post of you, that i have read so far, and i over time have red quite a few (and agreed with most of them).

Unemployment CANNOT logically be solved, by trying to outrun each other, by engaging in a race to the bottom. In fact, what you propose is pretty much impossible to do, for a very simple reason: Exporters like china and germany intentionally discount wages, so that corporations can produce at wages, that are so low, that local buying power dries up - so that said corps can then export the goods to countries that can afford them. Alternatively, the state one way or another subsidizes the wage discounting, via entitlements for the poor.

To get to the point: Countries like china are producing at wages too low for the domestic market to function on its own. THAT only so far SEEMED to work, because govs paid for the lack of buying power and/or the goods were exported to countries that can afford them.

Phrased another way: What you propose, would result in near unlimited gov spending, since if wages are low everywhere, exporting is no option anymore... and thus the only bitch of last resort left, to prop up buying-power, is the gov.

Trying to outrun other countries in a race to the bottom cannot fix the unemployment problem. Actually, unemployment shouldn't even be a problem.... it only is a problem, because the economic model relies on people being employed. Understanding why "you need a free market job to survive" is totally braindead, especially in nowadays industrialized civilization, does however require to for a moment forget everything you take for granted from capitalism, and go on a slightly "communist" thoughtpath...... because, the reason for the unemployment anomally, lies not on the individual level, but on the collective level.

sgt_doom's picture

"..wage arbitrage comes into balance with that of China ..."

baby_BLYTHE (Blythe Masters, perhaps????) makes the most absurd, nonsensical and typically International Chamber of Commerce talking point repitition.

Obviously, the Totalitarian Capitalist State of China specifically sets their wages -- Point 1.

Obviously, labor arbitrage (jobs offshoring to cheapest labor markets) will always continue, regardless of how low the wages fall, because it most conveniently aids in tax evasion -- Point 2.

Obviously, since there is no real "competition" with anyone as the American-based multinational facilities and factories and R&D are located offshore to which they ship said jobs, then re-import said goods (although frequently listing them as "exports"), there exists no actual compeition in a completely artificial and rigged environment -- Point 3.

You're an idiot..... -- Point 4.

baby_BLYTHE's picture

Chamber of Commerce is all for free-trade (not fair trade). There are number of policy tools (including Constitutional ones- like tariffs) that could easily resolve global-wage and environmental imbalances

final suggestion-- Throw yourself on a rusty nail.

docj's picture

"Advanced Capitalism"? Is that what we have?

Unless by "Advanced" you mean "Crony" I really have no idea what the heck you're talking about here. Sorry.

gmrpeabody's picture

I believe you are correct, Doc. He really is talking about "crony", only he's a lot more polite than we are.

Buckaroo Banzai's picture

You can call it crony capitalism, but frankly the system we have in place now is a lot closer to marxism than it is to capitalism. Capitalism died in 1913, but the body only started to rot in 1971... and it really only started to smell in 2008. So most people haven't even noticed. Our current economic failures are failures of marxism and socialism, not failures of capitalism.

Bearster's picture

Capitalism is the system based on the absolute individual rights of life, liberty, and property.

Today, we have fascism: nominally private ownership under public control.  For example, look at today's news about AT&T.

The dishonest continually try to blame capitalism for the failures of fascism and socialism.

The Limerick King's picture



You guys have been smokin' some weed

Some perspective you both sorely need

Our system is busted

As men can't be trusted

Once corrupted by power and greed

Caviar Emptor's picture

There are other kinds of unfettered capitalists: drug lords, mafia gangs, robber barrons etc....that model died because it too was unsustainable 

sgt_doom's picture

Outstanding and most appropriate points.

Of course, there are some highly suspect assumptions made in the overal blog post, which ignores the fact that in order to function, an economy MUST be a SYSTEM, not a criminal enterprise (and with any fiat economy, naturally, it is somewhat of a criminal enterprise, although if kept at an 8:1 ratio of money creation -- it at least functions at the "controlled greed" level)

With everything outgoing -- offshored production assets and offshored capital assets --- and bleeding the tax base in every manner possible, there is no attempt, even at the superficial level -- to even give the false appearance of any SYSTEM.

Anyone today who doesn't even understand the concept of "amortization" won't even begin to understand either Caviar Emptor's excellent comments, nor my own......

sun tzu's picture

The bankers made it legal for them to steal from us

TruthInSunshine's picture

Case-Shiller reports that home prices are down in 20 major metro areas YoY.

The carnage begins in two months. November forward is going to be a bloodbath.

Stay liquid.

vast-dom's picture




Chump's picture

Sure, right, just like the bloodbath after QE2 expired.  Just like the bloodbath after QE1.  Just like August was supposed to be a bloodbath.  Just like QE3 was a definite (still lol'ing hard on that one Tyler).

I agree a bloodbath is coming, and that liquidity is key, but just shut the fuck up already with the right-after-this-we-all-die bullshit.  I'm responding to all such predictions, not singling you out.  Denninger is the chief screaming monkey right now, trying to predict individual days when the collapse starts.  Such epic stupidity.