Ooh, Shiny!

I can barely believe this...

Robert Zoellick, the head of the World Bank, kicked it off on Monday. In an op-ed in the FT he called for changes to the the global currency system. Among other things, he wrote:

"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today."

I tend to agree with Brad DeLong's assessment of Zoellick's claim that markets are already using gold as a an alternative form of money:

They do not. They simply do not. That is not true. Markets are using gold as a speculative asset and a hedge. They are not using it is a medium of exchange, a unit of account, or a safe store of nominal value.

He really may be the Stupidest Man Alive.

Harsh, but accurate. I do find it shocking that the head of the World Bank is this confused about the difference between shiny things and money. When Ron Paul or Glenn Beck makes this mistake, I can chalk it up to ignorance. This is harder to fathom.

If we are going to go back to linking money to some other commodity, I think we should at least pick something more interesting than gold. My personal choice would be bubblegum. I like the idea of money as something you chew up and spit out. I'm also pretty sure the price of bubblegum has been less volatile than that of gold in recent years.

Crisis Cartoon

Animated David Harvey!

Stimulating Unemployment

Limited, Inc. has very lucid post on the crisis and current economic stimulus plans:

So the only argument about the stimulus is this: should the government absorb the extra unemployed or not? That is, should the government grow 3 or 4 percentage points?

The argument against this is not an efficiency argument. That is a stupid argument. The argument is, rather, that somehow, business can absorb the extra unemployed. Which means that the right is saying that, in the next year, the private sector can expand 4 or 5 percentage points to assume its usual standing in the economy.

Do you believe this? Does anybody? No tax break tax cut bullshit should take anybody’s eye off that ball. The question is: how can the private sphere possibly expand to absorb the 4 to 5 percent of the unemployed?

In reality, the right is saying, let the unemployed grow. And underneath that is the notion that if we can actually diminish the salary of the average worker, then businesses will be inclined to hire them.

Very clear. And exactly right.

Wolff Crisis Lecture

Via. Here's a very accessible Marxian economics lecture on the current crisis from Richard Wolff.



Wolff's basic argument is that the current U.S. economic crisis is due to the decline of real wages in recent decades coupled with unchecked consumption fueled by increases in credit rather than increases in wages. This strategy for accumulation has now run afoul of its own success and produced a crisis every bit as epic as the exploitation, inequalities, and profits it produced.

Not Forbidden

"Whatever is not forbidden is mandatory" -- George Orwell.

I've been working at talking with students about the current financial crisis in these terms. In part, as an effort to counter the idea that somehow the fault lies with individual "greedy" capitalists and CEO's.

What the striking lack of regulation in these strange new markets trading in mortgage debt has meant is that every risk becomes not just possible, but mandatory. The competition to produce the highest rate of return possible insures that those too squeamish to pursue unforbidden risks will fall behind. This is different from individual greed. It is institutionally required greed. This line of thought has been spurred on by a recent post from Rough Theory and a reminder of this passage from Marx:

I do not by any means depict the capitalist and the landowner in rosy colours. But individuals are dealt with here only in so far as they are the personifications of economic categories, the bearers of particular class-relations and interests. (Preface to the First Edition, Capital, Volume I.)

Capital makes mandatory all that is not forbidden. Capitalists just carry out these mandates.

This line of explanation seems to have been somewhat successful. It has worked to tie these recent headlines back to other areas where students also tend to see individual moral failings rather than institutional requirements: sweatshop labor, greenhouse gasses, polar bears, child-labor, mountaintop removal, genetically modified food, pesticides, nuclear power, health care reform, etc. All of these areas can be discussed as a result of the imperative to maximize capital accumulation, rather than from the simple moral ignorance of individual managers and capitalists that can be remedied by forceful enough moral arguments.

The impulse seems to be to try to excuse capitalism by blaming its failures on the "imprudent bearers" of its class-relations and interests. Finding ways to move beyond these moral arguments is always difficult.

Note that this makes the current crisis very different from the Savings and Loan scandal and the Keating 5 which was garden variety forbidden fraud. Capital, though, never does very well at obeying the restrictions placed on it. In note 15 the end of Chapter 31 in Capital, Volume I, Marx reproduces this amazing quote:

With adequate profit, capital is very bold. A certain 10 per cent will ensure its employment anywhere; 20 per cent certain will produce eagerness; 50 per cent positive audacity; 100 per cent will make it ready to trample on all human laws; 300 per cent, and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged. If turbulance and strife will bring a profit, it will freely encourage both.

This seems a salutary quote to consider this month in particular.

A's All Around?

I'm teaching Marx this semester. My students have been, understandably, absorbed by all the news coverage surrounding the current financial crisis. Two weeks ago, I glibly announced that should global capital collapse this semester everyone in the class would get an A. I explained that they should really keep studying, though, since I was confident that the cost of the market failures would be speedily passed on to us, the citizenry, and that capitalist accumulation, newly emboldened, would continue apace. I still believe this will happen. But today's news that the bailout package failed in the House makes me wonder if maybe I won't be giving out a lot of A's this semester after all.

The Paulson Scam

Via.

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

Inequality Crisis

Our friend Limited, Inc. has been posting away on the current economic crisis in his usual clear-sighted way. Here's the best paragraph on the subject I've read anywhere:

It isn’t a credit crisis. It isn’t a liquidity crisis. This is an inequality crisis. The massive increase in the inequality between the wealth of the working and middle class and the upper class is the sole perpetrator of today’s implosion, and of tomorrow’s implosion too. You can’t run a consumer economy on extended credit and frozen wages. You can’t trade the residual. You can’t make the financial sector, of all sectors, the engine of the economy ... As the government transfers appalling hundreds of billions to the plutocrats and assures the CNN viewing audience that it is for the good of all, the spectator must wonder if the servility of the general population, its inertia, its ignorance, its general incapacity to chew gum and walk, will allow this, too, to pass. So far, it does look like the hugest robbery in history will proceed without a hitch, and with no suspense, even. Why dress all in black and map out the sensors that guard the vault of Fort Knox when the treasury secretary gives you a key and your own gilded wheelbarrow?