Collapse of the global financial system.
Discussion
youngsyr said:
I still don't follow your line of thought. If a guy buys a £500 tv, takes it around to the back of the shop and throws it forcefully into the skip, his £500 of wealth doesn't disappear into the skip with the TV - the £500 is shared between various people engaged in making and selling the TV plus their overheads and taxes and is used to increase activity elsewhere.
The TV is the wealth my friend. So when he skips it, or fires a shotgun at it, he destroys wealth. The £500 is only a means of exchange which allowed the guy to earn the money to buy it. Likewise his car, his house, his furniture, and if we are to get down to brass tacks, his wife. youngsyr said:
It's not an easy concept to grasp
No, I can see that from the trouble you are having. Fundamentally, chaps, cash is not wealth. Please remember that, though it seems counterintuitive. It's what you purchase with the cash that is the wealth. It follows logically that you should never sit with money in cash as it is only a means of exchange.Edited by cardigankid on Wednesday 21st September 17:18
youngsyr said:
The destruction of the asset does not equate to the destruction of the wealth used to pay for it though.
If it did the £500 of wealth would necessarily go into the skip with the tv, in which case, where does the wealth to pay the person who made the TV come from?
Let's make it more simple: I'll pay you £100 to run on the spot for 10 minutes. Once you've finished running and I've paid you, I've lost £100 and you've gained £100, so what wealth has been destroyed by the pointless activity?
Dear, dear you are in a fankle.If it did the £500 of wealth would necessarily go into the skip with the tv, in which case, where does the wealth to pay the person who made the TV come from?
Let's make it more simple: I'll pay you £100 to run on the spot for 10 minutes. Once you've finished running and I've paid you, I've lost £100 and you've gained £100, so what wealth has been destroyed by the pointless activity?
If you transfer the medium of cash to me I can use it to acquire wealth, and you can't. No wealth is created by either of us running on the spot for 10 minutes, unless you argue that I have acquired a fitter body which will require less visits to the hospital and allow me to live longer, which I would argue IS wealth. A win-win situation for me but nits hard to see what you would get outnof it hence it is unlikely to happen in reality unless you are my wife or father or similar. This only illustrates the interesting ways in which currency works.
The £500 to buy the TV came from gainful employment (if you work for Jaguar Landrover) or was stolen or gifted or obtained for doing damn all, which happens, a lot. Maybe it came from taxes which is a share of what we make from productive employment and give to the government, who waste most of it, i.e. hand it over in return for nothing. It goes to the retailer, who uses it to pay his staff and make his shop nicer, and some of it then goes to the TV manufacturer. From him some goes to his staff for their part in making TV's and some goes to his supplier, until ultimately it is all spent by individuals involved in the production process. It follows that the more that is spent of actual wealth, the more wealth is encouragfed to be produced. The wealth of a nation is based on its productive capacity, not the number of GP's it has or how many graduates it produces or anything else.
Am I giving you a clue?
230TE said:
To be of any use in a money-based economy, wealth needs to be measurable, transferrable and exchangeable. The former owner of said TV may have had £500 'worth' of happiness from watching Richard and Judy on it, but he can't sell his happiness.
No, he can sell his TV so that others can derive happiness from it. The point about wealth is that it makes people happier. That is it's defining quality.cardigankid said:
No, he can sell his TV so that others can derive happiness from it.
Not this particular TV. The screen's cracked.Not sure I agree with you about cash not being a form of wealth. It is a convenient means for the storage, exchange and transfer of wealth, just a rather flaky one as it is only as good as the government that issued the notes. What it provides is liquidity. If I have a million pounds cash I can use it to buy a house. If I have a million pound Ferrari and live in a cardboard box, it's going to be a lot easier to sell the Ferrari and use the cash to buy a house, than to find someone else prepared to swap his house for a Ferrari and a cardboard box.
The way I understand it, if you have something you can either turn into cash, or exchange for other things of equal value, that is wealth. If you can't, it isn't. A bright idea inside your head isn't wealth, although it has the potential to be so. A bright idea turned into a set of drawings and a patent, is wealth (provided it has at least some commercial potential).
turbobloke said:
Given it's the Express, I'm surprised it didn't come with the subheading "only Diana can save us".hornet said:
turbobloke said:
Given it's the Express, I'm surprised it didn't come with the subheading "only Diana can save us".IMF Report said:
Risks are elevated and time is running out to tackle vulnerabilities that threaten the global financial system and the ongoing economic recovery.
Alternative coverage:http://www.independent.co.uk/news/business/news/im...
http://blogs.ft.com/beyond-brics/2011/09/21/imf-ri...
turbobloke said:
hornet said:
turbobloke said:
Given it's the Express, I'm surprised it didn't come with the subheading "only Diana can save us".IMF Report said:
Risks are elevated and time is running out to tackle vulnerabilities that threaten the global financial system and the ongoing economic recovery.
Alternative coverage:http://www.independent.co.uk/news/business/news/im...
http://blogs.ft.com/beyond-brics/2011/09/21/imf-ri...
230TE said:
cardigankid said:
No, he can sell his TV so that others can derive happiness from it.
Not this particular TV. The screen's cracked.Not sure I agree with you about cash not being a form of wealth. It is a convenient means for the storage, exchange and transfer of wealth, just a rather flaky one as it is only as good as the government that issued the notes. What it provides is liquidity. If I have a million pounds cash I can use it to buy a house. If I have a million pound Ferrari and live in a cardboard box, it's going to be a lot easier to sell the Ferrari and use the cash to buy a house, than to find someone else prepared to swap his house for a Ferrari and a cardboard box.
The way I understand it, if you have something you can either turn into cash, or exchange for other things of equal value, that is wealth. If you can't, it isn't. A bright idea inside your head isn't wealth, although it has the potential to be so. A bright idea turned into a set of drawings and a patent, is wealth (provided it has at least some commercial potential).
"Are we seeing the final crisis (pdf) of capitalism? What I mean is that Marx envisaged that the end of capitalism would see four features, all of which are in place now.
1. The rate of profit would fall, reducing the motive to invest and producing slower growth and bigger recessions.
Although observed, past profit rates are high, companies’ reluctance to invest and the low valuations on shares suggest that bosses and shareholders anticipate very low future profit rates.
2. Low returns on real assets would lead to speculative bubbles and swindles and hence financial crises.
To some extent, the banking and euro area debt crises are the results of the dearth of real investment opportunities arising from the fall in (expected) profits. This lack of investment, combined with high Asian savings drove bond yields down. That led to the growth of mortgage securities, as banks tried to synthesize securities to meet demand for them, and encouraged governments to borrow. In this way, the seeds of the financial crises were sown by the fundamental crisis of real profitability.
3. Increased inequality would exacerbate economies’ propensity for crises, by creating a mass of people too poor to buy the goods which capitalism produced.
This has not quite happened. But, as IMF research has argued, inequality has had a very similar destabilizing effect. It led to the build-up of debt which contributed to the banking crisis.
4. By its end, capitalism would cease to be a means for developing the economy’s productive forces and become instead a barrier to their development. As Marx put it:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production…From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution.
This too fits capitalism today. Capitalists invest only if it is profitable to do so. When returns to investment were monetizable, this meant that capitalism was indeed a form for developing the productive forces. But returns have become less monetizable, and so capitalists are now less willing to invest. I mean this in several ways:
- Investment is no longer about building big factories and using capital-intensivity as a barrier to entry and hence form of monetizability; this is done in Asia rather than the west. Instead, investment here is more closely tied to innovation. But capitalists have always had trouble appropriating the returns to innovation, and so are - now they have wised up to this - are reluctant to undertake it.
- Some/many investments (such as in green technologies?) have higher social returns than private returns. But capitalists don’t invest merely because social returns are high.
- Technology and changing social norms mean that many capitalist investments in the media are no longer monetizable.
Insofar as there are potentially useful investments which are capitalists are not undertaking because they are not profitable, then capitalism is indeed a fetter on the development of productive forces.
Now, of course, the death of capitalism has been hailed many times before. But I suspect that this crisis differs from that of the 30s and 70s.
In the 30s, profits were depressed by weak aggregate demand, something which could be cured. In the 70s, they were depressed by labour militancy, and when this was killed, capitalists’ desire to invest was rekindled.
But the problem now is deeper than then. Capitalism has lost its underlying oomph; investment was low, remember, even before the recession. And this suggests that its vitality cannot be restored by policy measures, be they Keynesian (“boost demand”) or Thatcherite (“attack workers“).
Herein, though, lies the problem. Even if capitalism is dying - and I say if - there is no-one to kill it off; Marx’s prediction that the working class would become a powerful agent of change was wrong. And there is no well worked-out vision of an alternative. Gramsci’s words fit the bill:
The old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear."
http://stumblingandmumbling.typepad.com
1. The rate of profit would fall, reducing the motive to invest and producing slower growth and bigger recessions.
Although observed, past profit rates are high, companies’ reluctance to invest and the low valuations on shares suggest that bosses and shareholders anticipate very low future profit rates.
2. Low returns on real assets would lead to speculative bubbles and swindles and hence financial crises.
To some extent, the banking and euro area debt crises are the results of the dearth of real investment opportunities arising from the fall in (expected) profits. This lack of investment, combined with high Asian savings drove bond yields down. That led to the growth of mortgage securities, as banks tried to synthesize securities to meet demand for them, and encouraged governments to borrow. In this way, the seeds of the financial crises were sown by the fundamental crisis of real profitability.
3. Increased inequality would exacerbate economies’ propensity for crises, by creating a mass of people too poor to buy the goods which capitalism produced.
This has not quite happened. But, as IMF research has argued, inequality has had a very similar destabilizing effect. It led to the build-up of debt which contributed to the banking crisis.
4. By its end, capitalism would cease to be a means for developing the economy’s productive forces and become instead a barrier to their development. As Marx put it:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production…From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution.
This too fits capitalism today. Capitalists invest only if it is profitable to do so. When returns to investment were monetizable, this meant that capitalism was indeed a form for developing the productive forces. But returns have become less monetizable, and so capitalists are now less willing to invest. I mean this in several ways:
- Investment is no longer about building big factories and using capital-intensivity as a barrier to entry and hence form of monetizability; this is done in Asia rather than the west. Instead, investment here is more closely tied to innovation. But capitalists have always had trouble appropriating the returns to innovation, and so are - now they have wised up to this - are reluctant to undertake it.
- Some/many investments (such as in green technologies?) have higher social returns than private returns. But capitalists don’t invest merely because social returns are high.
- Technology and changing social norms mean that many capitalist investments in the media are no longer monetizable.
Insofar as there are potentially useful investments which are capitalists are not undertaking because they are not profitable, then capitalism is indeed a fetter on the development of productive forces.
Now, of course, the death of capitalism has been hailed many times before. But I suspect that this crisis differs from that of the 30s and 70s.
In the 30s, profits were depressed by weak aggregate demand, something which could be cured. In the 70s, they were depressed by labour militancy, and when this was killed, capitalists’ desire to invest was rekindled.
But the problem now is deeper than then. Capitalism has lost its underlying oomph; investment was low, remember, even before the recession. And this suggests that its vitality cannot be restored by policy measures, be they Keynesian (“boost demand”) or Thatcherite (“attack workers“).
Herein, though, lies the problem. Even if capitalism is dying - and I say if - there is no-one to kill it off; Marx’s prediction that the working class would become a powerful agent of change was wrong. And there is no well worked-out vision of an alternative. Gramsci’s words fit the bill:
The old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear."
http://stumblingandmumbling.typepad.com
turbobloke said:
Was capitalism ever allowed to get going?
The classic response of the defensive free market fundamentalist is "it would work better if you just let me do it properly". Nobody but the gun-toting, baked-bean-hoarding libertarians are prepared for the consequences of unleashing a truly free market.
Fittster said:
"Are we seeing the final crisis (pdf) of capitalism? What I mean is that Marx envisaged that the end of capitalism would see four features, all of which are in place now.
1. The rate of profit would fall, reducing the motive to invest and producing slower growth and bigger recessions.
Although observed, past profit rates are high, companies’ reluctance to invest and the low valuations on shares suggest that bosses and shareholders anticipate very low future profit rates.
2. Low returns on real assets would lead to speculative bubbles and swindles and hence financial crises.
To some extent, the banking and euro area debt crises are the results of the dearth of real investment opportunities arising from the fall in (expected) profits. This lack of investment, combined with high Asian savings drove bond yields down. That led to the growth of mortgage securities, as banks tried to synthesize securities to meet demand for them, and encouraged governments to borrow. In this way, the seeds of the financial crises were sown by the fundamental crisis of real profitability.
3. Increased inequality would exacerbate economies’ propensity for crises, by creating a mass of people too poor to buy the goods which capitalism produced.
This has not quite happened. But, as IMF research has argued, inequality has had a very similar destabilizing effect. It led to the build-up of debt which contributed to the banking crisis.
4. By its end, capitalism would cease to be a means for developing the economy’s productive forces and become instead a barrier to their development. As Marx put it:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production…From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution.
This too fits capitalism today. Capitalists invest only if it is profitable to do so. When returns to investment were monetizable, this meant that capitalism was indeed a form for developing the productive forces. But returns have become less monetizable, and so capitalists are now less willing to invest. I mean this in several ways:
- Investment is no longer about building big factories and using capital-intensivity as a barrier to entry and hence form of monetizability; this is done in Asia rather than the west. Instead, investment here is more closely tied to innovation. But capitalists have always had trouble appropriating the returns to innovation, and so are - now they have wised up to this - are reluctant to undertake it.
- Some/many investments (such as in green technologies?) have higher social returns than private returns. But capitalists don’t invest merely because social returns are high.
- Technology and changing social norms mean that many capitalist investments in the media are no longer monetizable.
Insofar as there are potentially useful investments which are capitalists are not undertaking because they are not profitable, then capitalism is indeed a fetter on the development of productive forces.
Now, of course, the death of capitalism has been hailed many times before. But I suspect that this crisis differs from that of the 30s and 70s.
In the 30s, profits were depressed by weak aggregate demand, something which could be cured. In the 70s, they were depressed by labour militancy, and when this was killed, capitalists’ desire to invest was rekindled.
But the problem now is deeper than then. Capitalism has lost its underlying oomph; investment was low, remember, even before the recession. And this suggests that its vitality cannot be restored by policy measures, be they Keynesian (“boost demand”) or Thatcherite (“attack workers“).
Herein, though, lies the problem. Even if capitalism is dying - and I say if - there is no-one to kill it off; Marx’s prediction that the working class would become a powerful agent of change was wrong. And there is no well worked-out vision of an alternative. Gramsci’s words fit the bill:
The old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear."
http://stumblingandmumbling.typepad.com
The recession isn't a failure of capitalism - it's a failure of Govt and Euro interventions. - Essentially the US policy of low interest rates to keep the US out of an early 2000 recession. Tax too much, intervene too much and try to fix dodgy economies exchange rates together at any time but especially when they've lied about their economies.... Interest rates should be far higher than now and things would reset - not painlessly but there's no such thing as a free boom. 1. The rate of profit would fall, reducing the motive to invest and producing slower growth and bigger recessions.
Although observed, past profit rates are high, companies’ reluctance to invest and the low valuations on shares suggest that bosses and shareholders anticipate very low future profit rates.
2. Low returns on real assets would lead to speculative bubbles and swindles and hence financial crises.
To some extent, the banking and euro area debt crises are the results of the dearth of real investment opportunities arising from the fall in (expected) profits. This lack of investment, combined with high Asian savings drove bond yields down. That led to the growth of mortgage securities, as banks tried to synthesize securities to meet demand for them, and encouraged governments to borrow. In this way, the seeds of the financial crises were sown by the fundamental crisis of real profitability.
3. Increased inequality would exacerbate economies’ propensity for crises, by creating a mass of people too poor to buy the goods which capitalism produced.
This has not quite happened. But, as IMF research has argued, inequality has had a very similar destabilizing effect. It led to the build-up of debt which contributed to the banking crisis.
4. By its end, capitalism would cease to be a means for developing the economy’s productive forces and become instead a barrier to their development. As Marx put it:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production…From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution.
This too fits capitalism today. Capitalists invest only if it is profitable to do so. When returns to investment were monetizable, this meant that capitalism was indeed a form for developing the productive forces. But returns have become less monetizable, and so capitalists are now less willing to invest. I mean this in several ways:
- Investment is no longer about building big factories and using capital-intensivity as a barrier to entry and hence form of monetizability; this is done in Asia rather than the west. Instead, investment here is more closely tied to innovation. But capitalists have always had trouble appropriating the returns to innovation, and so are - now they have wised up to this - are reluctant to undertake it.
- Some/many investments (such as in green technologies?) have higher social returns than private returns. But capitalists don’t invest merely because social returns are high.
- Technology and changing social norms mean that many capitalist investments in the media are no longer monetizable.
Insofar as there are potentially useful investments which are capitalists are not undertaking because they are not profitable, then capitalism is indeed a fetter on the development of productive forces.
Now, of course, the death of capitalism has been hailed many times before. But I suspect that this crisis differs from that of the 30s and 70s.
In the 30s, profits were depressed by weak aggregate demand, something which could be cured. In the 70s, they were depressed by labour militancy, and when this was killed, capitalists’ desire to invest was rekindled.
But the problem now is deeper than then. Capitalism has lost its underlying oomph; investment was low, remember, even before the recession. And this suggests that its vitality cannot be restored by policy measures, be they Keynesian (“boost demand”) or Thatcherite (“attack workers“).
Herein, though, lies the problem. Even if capitalism is dying - and I say if - there is no-one to kill it off; Marx’s prediction that the working class would become a powerful agent of change was wrong. And there is no well worked-out vision of an alternative. Gramsci’s words fit the bill:
The old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear."
http://stumblingandmumbling.typepad.com
All the new Labour state no-job roles created and in the US, Bill Clinton forcing banks to lend to poor people who should never have tried to own a house and then the low interest rate policy.
We either need a severe recession or 10/20 years of as we are now to readjust....
Fittster said:
But the problem now is deeper than then. Capitalism has lost its underlying oomph; investment was low, remember, even before the recession. And this suggests that its vitality cannot be restored by policy measures, be they Keynesian (“boost demand”) or Thatcherite (“attack workers“).
Interesting and mostly coherent analysis, somewhat spoilt by the instinctive need to put the boot into Maggie Fatcha. The decline of British heavy industry in the 1970s and 1980s was a human tragedy of epic proportions. But even with the benefit of hindsight, I can't see how there was any alternative to what happened to coal, steel, shipbuilding and of course British Leyland. The Government of the day could have carried on increasing taxes and using the money to support dying industries, but for how long? If you want to look for someone to blame, start with the management of the day. They are the people who took the bad, inept, short-termist and blinkered decisions that destroyed their industries. All the Government could do was stop the inevitable collapse from taking the entire economy with it. I don't think they did too badly, considering.I agree with you that capitalism has lost its 'oomph', but I think that is because investments that provide decent returns are becoming harder to find. It is getting steadily harder and more expensive to come up with genuinely new products and services that people want enough to pay good money for. If you can't find anything worth investing in, you sit on your money. Even now, British companies are awash with cash: they just can't think of anything useful to do with it.
And it doesn't help that we have just had fourteen years of a government publicly saying 'profit is bad, profit is greed' while ministers privately cooked up deals with private sector giants to enrich them at the taxpayers' expense (I'm thinking PFI deals and defence procurement here). Now half the population seems to think that profitability is morally wrong and that the entire private sector should be handed over to the United Nations to run for the benefit of the whales and dolphins.
HundredthIdiot said:
turbobloke said:
Was capitalism ever allowed to get going?
The classic response of the defensive free market fundamentalist is "it would work better if you just let me do it properly". Nobody but the gun-toting, baked-bean-hoarding libertarians are prepared for the consequences of unleashing a truly free market.
Anyway never mind the beans would the burgers taste better?
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