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It's going to take another crisis and another Keynes-like figure.

Hard money or "gold-standard" thinking is just too attractive, too easy a sound bite - likewise the notions of economics as morality play fit too conveniently with the history of Western religious thought.

Running government finances like a virtuous, prudent household is just too powerful a meme.

Further of course, until it is in the interests of the finance sector to give up on the government bond kabuki, we'll be continually confronted by a wave of propaganda about it.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Aug 1st, 2011 at 07:11:24 AM EST
[ Parent ]
Needed: economic + media reformation.

Any volunteers?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Aug 1st, 2011 at 07:26:58 AM EST
[ Parent ]
Sure - do you have a better "just so" story than "we can't afford to be in debt, we need to cut back, just the way you stop buying luxuries when money gets tight" ?
by Metatone (metatone [a|t] gmail (dot) com) on Mon Aug 1st, 2011 at 07:30:51 AM EST
[ Parent ]
That wasn't a very helpful from me. Sorry. I guess I'm just jaded today.
by Metatone (metatone [a|t] gmail (dot) com) on Mon Aug 1st, 2011 at 07:46:10 AM EST
[ Parent ]
Accurate, however.


Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Mon Aug 1st, 2011 at 11:47:40 AM EST
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I guess "if we stop swimming we all drown" is too unsubtle?

It's an impossible problem, in its own terms. I think you can only really remove the meme by creating worker-run corporations which give everyone as many people as possible experience of economic democracy. Then the existing meme becomes outdated and irrelevant.

You have to create the experience first, and then tell the story about it. It's difficult to go the other way.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Aug 1st, 2011 at 07:51:28 AM EST
[ Parent ]
"we don't belong to the banks!"

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon Aug 1st, 2011 at 08:20:34 AM EST
[ Parent ]
I'm reading that Iceland is giving the big middle finger to the IMF and neo-liberalism, and is growing into a newly democratic nation rewriting its constitution through direct citizen input. They're also prosecuting the heads of the three major banks that brought about the country's economic downfall.  

Interesting story, little told here in the U.S. More information wanted.

by altoid (tom.casadecampanas AT gmail dotcom) on Mon Aug 1st, 2011 at 10:31:18 PM EST
[ Parent ]
You're not alone:

Interesting story, little told here in Europe. More information wanted.

by Bernard on Tue Aug 2nd, 2011 at 02:08:30 AM EST
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Stjórnlagaráð 2011
The Constitutional Council presented the Speaker of Althingi, Mrs. Ásta Ragnheidur Jóhannesdottir, with the bill for a new constitution in Idnó, today. The bill was unanimously approved by all delegates, at the last meeting of the Council, on Wednesday 27 July 2011. The bill assumes that from now on, changes to the constitution will be submitted to a vote by all who are eligible to vote in Iceland, for either approval or rejection. All delegates agree that the population should be given the chance to vote on the new constitution before Althingi's final vote on it. In the case of ideas arising to make changes to the bill prepared by the Constitutional Council, the delegates of the Council declare themselves ready to revert to the matter before a national referendum is held.
by gk (g k quattro due due sette "at" gmail.com) on Tue Aug 2nd, 2011 at 02:15:35 AM EST
[ Parent ]
We are having the crisis and, just like stagflation in the 1970s, it is being used to discredit Keynesian economics.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Aug 1st, 2011 at 09:48:17 AM EST
[ Parent ]
Right - we didn't develop enough of an alternative in time to take advantage of the crisis.

But after the eurozone fragments - a bigger scale crisis - and there's a couple of fascist governments back in Europe, then maybe we'll be getting somewhere...

Or maybe not - after all, even now I hear people telling me that the problem in the UK is "too much regulation and too much public spending/debt stifling the private sector..."

by Metatone (metatone [a|t] gmail (dot) com) on Mon Aug 1st, 2011 at 09:52:28 AM EST
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We'll have to wait until 2025 or so...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Aug 1st, 2011 at 10:29:16 AM EST
[ Parent ]
The system is in non-linear, chaotic mode. 2025, 2015, 2035. All is possible.

This is not to nag on dates, just to notice that things can change quite fast. Think 1930s. Like, say, Spain in the 30s speed of change.

by cagatacos on Tue Aug 2nd, 2011 at 08:42:42 AM EST
[ Parent ]
I'm thinking generationally. 2025 is when we should expect the Erasmus generation to achieve politically seniority.

The older generations mostly have exclusively national formative experiences.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue Aug 2nd, 2011 at 05:27:23 PM EST
[ Parent ]
I'm starting to doubt that that would help. Are we talking about nationalism destroying the EU or simple class war? If it is the latter then having an international elite won't help.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter
by generic on Tue Aug 2nd, 2011 at 06:37:30 PM EST
[ Parent ]
IMO, it won't help much.

When Complex societies collapse - as ours appears to be doing - they simplify.  Areas that supported hundreds of thousands or millions pre-collapse only support hundreds or thousands post-collapse.

Or none, as in the case of Chaco Canyon.

This is based on non-industrialized societies and we've only seen one system cascade collapse of an industrial society: The Great Depression.  

But we've never seen a cascade collapse with systematic multi-feedback loops, e.g., such as a collapse of global food production causing a collapse of raw resource extraction in Africa, etc., causing a collapse of First World manufacturing.  

The nearest I can come to it, others may be able to shed more light than I, was the collapse of the Celtic oppida in the Second and First BC.  In that time a relatively high degree of urbanization across Europe quickly collapsed, wrecking large scale manufacture (of fibulae, among other things), causing a localization of manufacturing and other economic activity.  They didn't lose their technology, per se, but they did lose the mass-market and other economic networks that made widespread, large scale, urbanization possible.  Towns still existed but they reverted to a lower scale of influence and depopulated.

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue Aug 2nd, 2011 at 07:02:14 PM EST
[ Parent ]
But we've never seen a cascade collapse with systematic multi-feedback loops, e.g., such as a collapse of global food production causing a collapse of raw resource extraction in Africa, etc., causing a collapse of First World manufacturing.  

 The nearest I can come to it, others may be able to shed more light than I, was the collapse of the Celtic oppida in the Second and First BC.

The collapse of British hegemony in the first two decades of the previous century, and the resulting rollback of international trade in the Interbellum.

While industrial society as a whole did survive that experience (albeit a couple of hundred million of its inhabitants and half the global capital plant poorer), it was entirely too close a shave for me to feel sanguine about its repetition.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Aug 4th, 2011 at 04:15:40 PM EST
[ Parent ]
it was entirely too close a shave for me to feel sanguine about its repetition.

Mr Understatement has spoken. :p

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Aug 4th, 2011 at 04:33:38 PM EST
[ Parent ]
While we're recreating the 1930's, let's have a rerun of political violence on the streets of Spain in the run-up to the Civil War: The Madrid PP is considering to call out their 90 thousand members to confront the indignants
In statements to Europa Press, the Madrid PP Secretary General has denounced that "300 indignants are affecting the life of over 3 million inhabitants" of a city like Madrid. And, against that number of demonstrators, he pointed out that in this region only the PP has over 90 thousant members. "I hope the Government delevate, Dolores Carrión, doesn't object to us demonstrating, because then it would be a clear comparative grievance", he added.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Aug 4th, 2011 at 06:12:51 PM EST
[ Parent ]
I rather think that having international elites will make the situation even worse.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Aug 2nd, 2011 at 08:19:23 PM EST
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But keynesians deserved to be discredited on this issue? They don't understand stagflation...
by kjr63 on Tue Aug 2nd, 2011 at 11:08:55 AM EST
[ Parent ]
The Phillips curve neither follows from nor implies what Keynes wrote in The General Theory. What was done in the 1970s was to use the failure of the Phillips curve to discredit Keynes' insight about lack of aggregate demand causing recessions.

In particular, Keynes was not particularly concerned with inflation.

But, more importantly, in the 1970s there were a number of financial crises that were successfully contained by means of government intervention even as the economy spent a decade in crisis. But by discrediting government intervention we then spent 20 years removing the ability of the government to contain financial crises, as well as filling the civil service and international functionanriat with neoliberals who believe the market will provide...

Another idea of the 1970s which was immediately discredited was The Limits to Growth, which turned out to be pretty much on the mark.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue Aug 2nd, 2011 at 05:25:14 PM EST
[ Parent ]
Keynes was smart enough to know if the goddamn house is burning down you don't worry that the toilets are backed-up.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Tue Aug 2nd, 2011 at 05:57:59 PM EST
[ Parent ]
But, more importantly, in the 1970s there were a number of financial crises that were successfully contained by means of government intervention even as the economy spent a decade in crisis.

Perhaps, but did they know what they were doing? I'm skeptical.

Stagflation is the simplest form of inflation. It is caused by rising (economic) rent. And there is a very simple and quick fix to it. Rent tax. (But you don't find this in any textbook.)

by kjr63 on Fri Aug 5th, 2011 at 05:29:45 AM EST
[ Parent ]
But if the rent is captured outside your borders through a cooperation on the sales of vital raw materials, then that rent would be hard to tax.

OPEC - Wikipedia, the free encyclopedia


Long-term oil Prices, 1861-2007 (orange line adjusted for inflation, blue not adjusted).


A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES!
by A swedish kind of death on Fri Aug 5th, 2011 at 06:01:09 AM EST
[ Parent ]
Yes, indeed. But that is a political problem, not an economic one.
by kjr63 on Tue Aug 9th, 2011 at 04:19:23 AM EST
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Depends on how greedy the colluding suppliers get.

If they go all the way to demand destruction pricing, you can eat their markup by imposing taxes on the raw material in question. You will still have high prices and attending issues for your industrial production, but you won't be hemorrhaging hard currency.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 10th, 2011 at 05:53:29 AM EST
[ Parent ]
If anybody tells you that he knows The One True Cause Of All Inflation (or stagflation, for that matter), you should check your wallet because you are being taken for a ride.

In the particular historical case of the '70s, the primary causes of the growth slowdown were (a) increasing demand drain from deteriorating foreign balance between The WestTM and raw materials producing countries (principally OPEC) and (b) the end of the rebuilding of the European capital plant destroyed by the world wars.

The growth slowdown created a distributional problem, because the Fordist political economy's distributional policies were based on high real growth rates. Inflation followed from the failure to resolve this distributional conflict. Inflation was firmly and finally arrested when the distributional conflict was resolved by breaking the labour side's power to sustain the conflict.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Aug 5th, 2011 at 04:21:20 PM EST
[ Parent ]
Neither should we mystify these matters.
It is just a simple logical conclusion that growing monopolisation rises prices and cuts production at the same time.
by kjr63 on Tue Aug 9th, 2011 at 04:32:56 AM EST
[ Parent ]
Simple and logical, perhaps, but not necessarily true. There are plenty of historical examples of monopolies leading to lower prices and more production, when profit maximisation is rendered subordinate to the logic of industrial mass production.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 10th, 2011 at 05:55:19 AM EST
[ Parent ]
James K. Galbraith: James K. Galbraith: The Final Death (and Next Life) of Maynard Keynes
This is a bad movie and we have, of course, seen it before. You may recall that in 1960 the Uncle of, as it happens, of Larry Summers, co-invented a concept called the Phillips curve, stipulating on very weak empirical evidence and no clear theory the relationship between the unemployment rate and the rate of inflation. True Keynesians, including my teacher, Nicholas Kaldor, Joan Robinson, Robert Eisner, a great hero of mine, and my father were appalled. The construct was doomed to collapse and when it did, after 1970, the school that most people thought of as Keynesian was swept away in the backwash.

Today, the failure behind the recovery forecast is conflated with the failure of the stimulus itself and the same thing is happening again. Those who failed most miserably to forewarn against the financial crisis have, as a consequence, regained their voices as scourges of deficits and public debt. There is a chorus of doom as those who once thought the new paradigm could go on forever are now inveighed against living beyond our means and foretell federal bankruptcy and the collapse of the dollar and the world monetary system amongst other scary fairy tales. This includes such luminaries as the leadership of the International Monetary Fund and of all things, the analytical division of Standard and Poor's -- an enterprise on which one might hope at least a small amount of modesty might have developed or devolved in the wake of recent events.

It would be pathetic if it were not so dangerous. But the fact is, these forces are moving down a highway which has been cleared of obstacles by the retreat, indeed the destruction of the False Keynesian position.



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue Aug 9th, 2011 at 12:11:15 PM EST
[ Parent ]
Keynesians understand stagflation just fine.  Morons in DC who think they understand Keynesianism don't understand Keynesianism and stagflation.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Aug 2nd, 2011 at 06:03:38 PM EST
[ Parent ]
European style, we'd be expecting a couple of these clowns to be strung up, and perhaps a war of a size to be determined.
by redstar on Tue Aug 2nd, 2011 at 09:21:26 AM EST
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We've historically a pretty good line in grandiose and extremely murderous wars.

We've got to be good at something.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Aug 2nd, 2011 at 09:59:06 AM EST
[ Parent ]

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