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I think we miss something if we look at these sector-specific bubbles one by one and not in the context of a larger cultural/social paradigm now prevailing among the rentier and speculator classes:
Ingenious and precarious schemes in the world economy today have great legitimacy, and they profit in the sense that classical economics is fast becoming irrelevant. It is the era of the fast talker and buccaneer-snake-oil salesmen in suits. Nothing old-fashioned has credibility. Joseph Schumpeter and other economists worried about pirates, but they are more important today than ever before, including than during the late 19th century when they were immortalized in Charles Francis Adams Jr's Chapters of Erie.

The leitmotif is "innovation", and many respectables are extremely worried. I argued in Counterpunch earlier (June 15 and July 26) that gloom prevailed among experts responsible for overseeing national and global financial affairs, especially the Bank for International Settlements, but I grossly underestimated the extent of anxieties among those who know the most about these matters.

More important, over the past months officials at much higher levels have also become much more articulate and concerned about the dominant trends in global finance and the fact that risks are quickly growing and are now enormous. Generally, people who think of themselves as leftists know precious little of those questions, questions that are vital to the very health of the status quo. But those most au courant with global financial trends have been sounding the alarm louder and louder.

The problem is that capitalism has become more aberrant, improvised, and self-destructive than ever. It is the age of the predator and gamblers, people who want to get very rich very quickly and are wholly oblivious to the larger consequences. Power exists but the theory to describe the economy that was inherited from the 19th century bears no relationship whatsoever to the way it operates in practice, a fact more and more recognized by those who favor a system of privilege and inequality.

Even some senior officials at the International Monetary Fund (IMF) now acknowledge that the theory that powerful organizations cherish is based on outmoded 19th-century illusions. "Reconstructing economic theory virtually from scratch" and purging economics of "neoclassical idiocies", or that its "demonstrably false conceptual core is sustained by inertia alone", is now the subject of very acute articles in none other than the Financial Times, the most influential and widely read daily in the capitalist world.

Kolko in Asia Times Online

overextension, overcapitalisation, a mania for liquidity, compression of traditional financial cycles, expectation of ridiculously inflated returns, etc. are epidemic and not limited to one sector;  increasing shortages of commodities from fuel to food to water only increase the opportunities for short-term looting and gouging, which in turn exacerbate shortages (cf earlier thread on the crash of world fisheries).  an insane dogma of unlimited growth and contraphysical rates of return has led to insane expectations (some of which are realisable in the near term for a very limited number of players) which lead to insane behaviour including irresponsible risk taking (on every front -- financial, geopolitical, physical).

I note in passing that behavioural researchers have discovered that inconsistent, intermittent or arbitrary reward is more conditioning than predictable reward.  people and other animals will exert more effort and take higher risks to obtain a reward which is less predictable or certain than one which is predictable, even if the two rewards are of apparently equal value.  which is why gambling is addictive;  and there is a good reason why we call it "casino capitalism".

The difference between theory and practise in practise ...

by DeAnander (de_at_daclarke_dot_org) on Thu Nov 30th, 2006 at 05:03:17 PM EST

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