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Obama's economic policy in two sentences

Michael Hudson:

The problem is that there is not enough economic surpluses available to pay the financial sector on its bad loans while also paying pensions and social security. Something has to give.

Or somebody has to give. Who do you think that's going to be?

Look! Over there! Sarah Palin!

Whose economic policies would be exactly the same as The Lightbringer's, modulo some kabuki. That's because the entire legacy party apparatus, including the career "progressive" faction that sucks off a little stream of rent for putting on kabuki performances tailored to the requirements of the merit class, is servicing the rentiers in the financial sector, and has no electoral accountability whatever to "provide for the general welfare" (Constitution, Preamble).

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Roman Berry's picture
Submitted by Roman Berry on

I hope that it gets picked up and used far and wide. I'll be using it and linking it in an effort help get it established.

Submitted by lambert on

A government that's sovereign in its own currency isn't constrained by this "surplus" at all.

CMike's picture
Submitted by CMike on

Creating currency does not create additional wealth and, except under very narrow circumstances, it will not lead to the creation of additional wealth. As Hudson also says using the Marxist shorthand M=Money; M'=more Money; C=Commodities including labor:

Somebody must take a loss on the economy's bad loans – and bankers want the economy to take the loss, to "save the financial system." From the financial sector's vantage point, the economy is to be managed to preserve bank liquidity, rather than the financial system run to serve the economy. Government social spending (on everything apart from bank bailouts and financial subsidies) and disposable personal income are to be cut back to keep the debt overhead from being written down. Corporate cash flow is to be used to pay creditors, not employ more labor and make long-term capital investment....

The underlying reality is indeed that pensions cannot be paid – at least, not paid out of financial gains. For the past fifty years the Western economies have indulged the fantasy of paying retirees out of purely financial gains (M-M' as Marxists would put it), not out of an expanding economy (M-C-M', employing labor to produce more output). The myth was that finance would take the form of productive loans to increase capital formation and hiring. The reality is that finance takes the form of debt – and gambling. Its gains therefore were made from the economy at large. They were extractive, not productive. Wealth at the rentier top of the economic pyramid shrank the base below. So something has to give. The question is, what form will the "give" take? And who will do the giving – and be the recipients?

No matter how much new currency is suddenly available to go around, there's only so much in the way of actual useful goods and services for the population to consume. Here's Cassiodorus at FDL simplifying the Marxist critique:

Marx begins by defining the process of the circulation of commodities which is the "starting point of capital." The circulation of commodities is important because it separates out into two different, interwoven processes, defined by who is doing the circulating of the commodities. We have, Marx tells us, the process C-M-C, the process by which the workers and the small-scale producers make a living. The shorthand C-M-C stands for "commodities-money-commodities," in which you sell a commodity to make money so you can buy another commodity.

Here we will need to supply examples of our own as Marx is rather sparing. We might imagine a worker selling her labor in order to buy basic necessities, or (to use Marx’s example) a small farmer producing and selling corn in order to buy clothes. And then we have the process M-C-M, money-commodities-money, in which an investor buys a commodity (i.e. capital) with money in order to make more money. This, then, is the vortex of the Cult of Money.

...The capitalists would prefer, then, to shorten the chain: M-C-M’ should in their eyes become M-M’ so that the messy trade in commodities need not even be broached, and thus they could all become misers and live effortlessly ever after.

...So with the earning of interest, or also with the payment of dividends upon stock, we achieve the miser’s dream, M-M’. Got money? Get more money! That’s the miser’s dream.

I would put risk-free investment in the category of M-M’ as well. If you practically know you’re going to score a big profit, you might as well be living the miser’s dream. The defense industries have got to be like that. Health insurance will be like that after the Senate bill passes and the insurers are placed under permanent subsidy with your tax moneys. When your investment is guaranteed, life is M-M’.

This period of history, say, from Reagan onward, and especially since the repeal of Glass-Steagall in 1999, will be regarded by future historians as the Heyday of Miserdom, in which the miser’s dream is closer to realization than it ever was in any previous period of history. Inequality is at an all-time high, as the average global growth rate sinks further with the passing of each decade. The early 21st century will be remembered as a period dedicated to the rich, and their Ponzi schemes, which they milked on both the up and the downsides of the curve. This is the heyday of people like George Soros and Warren Buffett, whose wealth was gotten through currency manipulation.