Submitted by Jeffrey Snider via Alhambra Investment Partners [16],
It may just be fitting that it is May Day weekend, the old remembrance of the once “great” destructive force of international communism. Of course, it still resonates largely because its proponents view it from the standpoint of actual purity. Stalin, you see, never really practiced it; as such it has supposedly never really been tried. Repeating that lie long enough has left generations susceptible to the same cowing interpretations.
Normally, these fascinations with Marx and Marxism are left to the ivory towers of academia, who have apparently taken heart to the KGB’s “liberation ideology” and brought it to America’s college youth. I don’t mean for this to be such a political discussion, but it is somewhat unavoidable. After all, one of the most trending topics on Twitter earlier this week, just in time for May Day itself, was #ResistCapitalism.
The open spaces for this backlash are provided neatly by the recovery that doesn’t exist outside of various DSGE and GARCH models central banks employ to tell us how well they have done. Today’s youth are being inundated with Marxism that once appeared ridiculous in obviousness, but now contains, seemingly, some righteous prescription. This is not just “inequality” but it isn’t apart from it either, as stock bubbles and the very real lack of wage opportunity sharpen this great sense of divide.
From the perspective of anyone who appreciates actual freedom and free markets, there is an easy answer to the problem – that all these neo-socialists that don’t appreciated the irony of being “afforded” the opportunity to resist and renounce capitalism by all its very successful fruits. They are confused over the nature of capitalism itself, as maybe should not be so unappreciated or unexpected since it has been buried for some decades now. The smartphone technology and the internet fabric that draws it all together, the very means with which the Marxists gather each other for more comforting online serenades about how much better the world would be under more “equal” terms, is actually more ancient. The capitalism revolution of the information age was birthed and came of age long before Alan Greenspan started directing key economic variables from his computer.
The last two generations have seen nothing but the financial version and have heard it proclaimed and embraced as the true avatar of capitalism. If you were to ask anyone at Occupy Wall Street (if they could be resurrected out of their own anarchical self-destruction) the target of capitalism’s most dire edges, the name of the movement itself gives off the very answer – they view JP Morgan and Goldman Sachs as the true leading lights of capitalism.
That was never the case before in our history. Banking has always played a special role, and a vital one, but that was because of true money and not so much the dedication that modern pretenders have for debt and credit. The financial domination that came about starting in the 1980’s was unique to the capitalist tradition even though central bankers have claimed to be fully compatible. It is somehow taken as such because the Fed can intrude massively – but only up to a self-determined point. A point, by the way, that keeps getting moved further and further into what was once free asset markets.
And that is largely the unappreciated factor of the “recovery” such that it actually exists in the real world that is abhorred about it, that central banks do not represent capitalism at all in the 2010’s, if they had at all prior to 2007. They have absconded with the label and betrayed everything about it. The attempts to kill each and every currency, including the modern “dollar”, are not at all consistent with actual capital. Capitalism itself produces and describes a stable currency not one that is manipulated at the whims and will of a central elite authority.
The purpose of all this intrusive nature through finance is actually to dethrone the defining quality that makes capitalism so useful in society’s advance – dynamic destruction. The central bank, as any central government, abhors discord and disorder, and thus appeals of all its tools to deny dynamic processes in favor of what it thinks amounts to stability. And, indeed, that is exactly what they have produced and exactly what the young Marxists are railing about [17].
The fires in Baltimore right now are certainly caused by decades of progressive policies being carried out, that the “investments” of government are the only ones to be made. But what Baltimore has become on a smaller scale, like that of Detroit, has been leaking into the wider system for some time too. The results are exactly the same – if you analyze the major problems of these large inner cities where disturbance is so sharply turning up the common feature is stability; in other words, these places don’t ever change despite the untold promises and unimaginable millions (maybe billions) spent on that direction.
If you are to describe the US (and global economy) right now, stability is exactly the problem. The socialization of money has taken place for exactly that reason, discounting the role of variability in fostering actual economic growth and sustainable advance. Monetary policy is dedicated to a “smooth” existence, one without too much peaks and valleys – and we have certainly attained that if only after an impossibly deep valley. That is the “deflationary vortex.”
Socialism’s essential appeal is “order”, including the idea of “equality” (of result) within that order. Central banks have been agents with which to attain it, especially that while they heighten the divisions among the supposed rich and poor, they have also guided a massive increase into that latter category. The equality of result has been, through heavy and repeated monetarism, to make more Americans impoverished and thus fulfilling at least parts of the expectations of socialism’s effects.
For all the supposed divisions with the economics apparatus, it remains highly restrictive to anything but a financial-led recovery. And that is precisely the problem as it relates to socialism. That isn’t capitalism, at all, and the continued reverence for all things banking and interbank are killing whatever chances there are to break free of this malaise before the socialist impulse turns rapidly more intense. The true disappointment of 2008 was that the same framework was left in place, and thus another true crisis might well be necessary to finally get beyond it. However, the longer this goes on, and the tighter Marxists twist capitalism toward the Fed, ECB and BoJ, the greater the possibility that free markets do not come out the other side – at all.
As all good socialists, central banks have locked the global economy onto but a single path without any possibility of choice. And to do so they have, ironically, taken cues from today’s communists. The lack of recovery is, they say, that pure Keynesianism has never been tried, as even all that Keynes-type stimulus done throughout the years was “not the right” amount or type. And so it is being prepared that we go all through it again, with updated formulas, regressions and theories that don’t amount to the slightest bit of “science” as they are never permitted to be countermanded by actual observation.
That is, I think, the true appeal of the entire endeavor to begin with, as socialism in all these forms promises not only order and equality but a scientific, and thus objective, means to describe and deliver it. None of those characteristics are true, of course, as even the most complicated and elegant econometrics is essentially a prevarication [18] and twisting of inescapable subjectivity into what can only look like science to those that don’t understand the mathematical limitations – and they are numerous. If there were truly science at the end of all this socialization of money, they wouldn’t be repeating, to all exclusions, the same thing over and over.
Bernanke argues against the Journal, and Krugman is associated in both and against both, but in reality their disagreements are truly superficial amounting only in the degree to which the same thing has or hasn’t happened; there is no difference between any of them in the formal processes they wish to see.
The Fed has been saying, all along, that the recovery must either be financial in character or nothing at all. If it isn’t driven by credit and debt then they don’t want it. And so they haven’t got it.
Despite the radical alteration as to what is taught in “business” schools, credit is not capital and it will never be. No amount of math will make it so, but the longer it remains operative the greater the potential we all end up with something even worse.
Happy May Day Weekend...
[19]
[20]
[21]
[22]
[23]
