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SYSTEMIC FEAR, MODERN FINANCE AND THE FUTURE OF CAPITALISM   Jonathan Nitzan & Shimshon Bichler

Crisis of Capital, Crisis of Theory: A Conference of the Forum on Capital as Power

ABSTRACT:
Is capitalism about to collapse? Like every other mode of power, capitalism rests on confidence in obedience: the confidence of the rulers in the obedience of the ruled. Emperors are sure of their rule over obedient subjects and slaves; lords are certain they can rule their obedient vassals and serfs; and capitalists trust the obedience of their underlying masses. The confidence of rulers is mediated through their dominant dogma: when the dogma holds, the rulers are hubristic, steadfast and ruthless; when the dogma disintegrates, the rulers, gripped by systemic fear, become hesitant and lose their ability to rule.

Systemic fear often culminates in systemic collapse. The downfall of the last Babylonian emperor, Belshazzar, the collapse of Easter Island, the French Revolution against the ancien régime, the fall of Soviet Union and many more such episodes were all preceded by systemic fear: for whatever reason, the rulers lost faith in their dogma and confidence in their subjects' obedience. But their systemic fear remained elusive: we know of it only anecdotally, subjectively, and always retrospectively - after their mode of power lies in ruins.

Modern finance has made systemic fear transparent. For the first time in history, we have an objective, numerical measure of the rulers' confidence in obedience - and this measure is available not in retrospect, but here and now. The indicator in question is forward-looking capitalization: the financial ritual with which capitalists discount to present value their expected future profit. This ritual stands at the heart of the modern capitalist dogma, and it is currently broken: for the past decade, capitalists have been looking not forward to the future, but backward to the past. In other words, capitalists no longer trust their own dogma: they are no longer confident in the obedience of the ruled or in their own ability to rule.

DATE/TIME/PLACE:

Friday, October 29, 2010, 3:00-5:00 pm || York Lanes, Room 280N || Keele Campus of York University Toronto, Ontario Canada

Original paper, HTML format, PDF

The paper came out this summer and was an update of one from the summer of 2009. His thesis seems increasingly confirmed by events. The financial sector has made such a mess of things that they cannot act in their normal way nor can they find an acceptable, (to them) way to deal with the massive fraudulent debt that they have created. The authors show that this has been the case since 2000.

That businesses act differently during times of crisis and times of prosperity doesn't seem to radical an idea, but it is not a part of Mainstream Economics.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 12th, 2010 at 03:23:14 PM EST
[ Parent ]
Is capitalism about to collapse?

If it does it will be replaced by something worse if a world war doesn't intervene. Think about who controls everything. If they are not viscerally threatened they will simply concoct another scheme to enslave and impoverish the masses.

The good news ... it's only a life sentence. You eventually leave this planet of idiots.

by THE Twank (yatta blah blah @ blah.com) on Tue Oct 12th, 2010 at 05:23:16 PM EST
[ Parent ]
I suppose a world war would not be manipulated by your supposed controllers of everything?

How about putting in some careful thought before hitting the Post button?

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Oct 13th, 2010 at 01:21:17 AM EST
[ Parent ]
The problem with that idea is that a world war, even if it avoided nuclear involvement, would involve mainland USA because if anywhere is gonna have a war, the US is high on the list.

and the rich do not want war in their own backyard as wars are messy and there might be collateral damage the rich do not want.

So, there won't be a war.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Wed Oct 13th, 2010 at 05:33:04 AM EST
[ Parent ]
Ketchup economists have been telling everyone who would listen that "finance is the brain of the economy".

It appears that the economy has a terminal case of Bovine Spongiform Encephalopathy.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Wed Oct 13th, 2010 at 02:49:30 AM EST
[ Parent ]
Bovine Spongiform EconomicsTM?

Maybe we need a macro...

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Wed Oct 13th, 2010 at 05:04:24 AM EST
[ Parent ]
Been done.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 13th, 2010 at 05:46:38 AM EST
[ Parent ]
Neo-Classical Economics = Bovine Spongiform Economics

or

NCE = BSE

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 13th, 2010 at 02:10:41 PM EST
[ Parent ]
The advantage of that is that the acronym for Bullshit Economics is the same...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Wed Oct 13th, 2010 at 05:30:16 PM EST
[ Parent ]
<blockqoute>It appears that the economy has a terminal case of Bovine Spongiform Encephalopathy.</blockqoute>

And here I thought it was just a serious case of Head in Ass disease.  

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed Oct 13th, 2010 at 11:05:35 AM EST
[ Parent ]
It is both. The Head In Ass Syndrome just tells us what the sponge has been absorbing.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 13th, 2010 at 02:03:35 PM EST
[ Parent ]
That's an interesting paper.

Completely unexpectedly, it turns out that you can't run an economy on trust while also demanding that financial transactions screw the counterparty and/or associated employees to the maximum possible extent.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 13th, 2010 at 05:58:33 AM EST
[ Parent ]

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