News & Analysis
Is Capitalism Dead?
As the recession grinds on, politicians in most industrial countries have an incentive to make exaggerated claims about the supposed coming economic recovery. Some say the recession is over. Obama is in the group that claims we're on "the road to recovery," while other nations can only spot recovery "on the horizon." Below are seven important social phenomena that point to a more realistic economic and political outlook. – Tehran Times
Dominant Social Theme: In this case, none. Tehran Times, an "international" newspaper tells the truth more succinctly than major Western media.
Free-Market Analysis: Is there a recovery? Do you feel it, dear reader? Deep down in 'dem bones? We don't. We've explained the reasons why in dozens of articles: The fiat meltdown of 2008 was a meltdown of MONEY caused by the Internet's ability to expose the truth of a fraudulent central banking controlled monetary system and the power elite who benefit from the process of wealth redistribution. It was not caused by "faulty" economies specifically. It is the system itself that collapsed and at the base of it all is the myth of the mighty US dollar. When Goldman Sachs, (as just revealed recently in Federal Reserve info about where US$3 trillion went in 2008 disbursements) needs billions on a regular basis to sustain itself, you've got a SYSTEMIC problem, not one having to do with sour investments.
What "melted down" in 2008, as we've long observed, was a 100-year-old central banking system. The mainstream Anglo-American media won't comment on this of course. We're still reading articles attributing the meltdown to the removal of Glass-Steagal or the mispricing of sub-prime mortgages. No, the same thing happened in 2008 that happened in 1929 (and in 1969, really). The system collapsed. But this is the mother-of-all-collapses. It is the Big Bang of Black Swan events (assuming you were a Keynesian and didn't see it coming).
You would think – as America teeters on the edge of a second Great Depression, as the European Union threatens to spin off into a million tiny ethnic states, as China promises to unravel when inflation (or its remedies) becomes intolerable – that there would be more introspection (more navel gazing) as regards to what went wrong. These mainstream journos are savvy people, educated at the best schools, often with Masters degrees and even PhDs. And yet ... nothing. Or not nothing – worse than nothing. We've charted the steady uptick in articles proclaiming that this region and that country is "on the way back." Disinformation. (Shall we call them outright lies?)
American unemployment makes an uptick (a statistically phony one to be sure) and suddenly the Great Recession is on its last legs. The European Union sets up a "bailout fund" and ... problem solved. China's Chicom rulers go to work to "cure" the inflation "problem" and a hundred articles on mainstream websites trumpet the latest, futile nostrums. Unlike some of the alternative 'Net press, mainstream media can't or won't face the truth. The system is broke.
It's like a busted balloon. You can huff and puff away but it won't make a difference. It won't reinflate. It can't. As we've written many times before, the system is on proverbial life support. The balloon trembles and inflates just a little, and it takes a steady inflation to keep it that way. Barely expanded. Why is this? The Anglo-American power elite in our view simply did not anticipate the violence of the collapse.
Hey, it's THEIR system. Those at the top know damn well what happens to central banking economies. But in their arrogance and hubris they no doubt believed that they could control even the most violence economic implosion. We think this confidence is misplaced. We believe they are finding this out. They were ready for 1969 but they got 1929 ... and they've been scrambling ever since.
Again, you won't read anything like this in the mainstream press. The top journos are too busy crawling around on the ground looking for "green shoots." (Remember that phrase?) So we turn instead to the Tehran Times for a better description of what's really going on. Seven points. Here we go:
1) "Central Banks are Dumbfounded." The article points out that rates cannot go any lower and quantitative easing is introducing a trade war. We agree with this as far as it goes. But again, we would travel even deeper. There are simply too many dollars sloshing around the world. The system is blown up. The dollar remains the reserve currency – held there by force of arms not preference – but that's a state of affairs that cannot last forever ...
2) "Trade War." As the US devalues due to quantitative easing, other countries devalue too. Gradually monetary tit-for-tat will give way to a genuine trade war, complete with regulations against buying or selling certain products, etc. Of course we don't see anything wrong with this. Most of what countries "trade" are unnecessary excrescences of fiat money, the spume of frothy economies. Let the system collapse. Perhaps private industry can rebuild it.
3) "Military War." Depressed economic circumstances give rise to increased military activity as state-leaders turn to the only mechanism that assures their power: conflict. The idea is to take people's mind off their misery by creating an outside enemy that rage can focus on. Always in bad economic times, war and talk of war increases. But breaking things rarely results in healthier economic circumstances for anyone.
4) "U.S. Economy at a Standstill." This is because first the Bush and then Obama administration decided to bail out large corporations and banks. As a result, the economy itself (and its players) cannot tell who is solvent and who is ruined. Nobody wants to loan in this sort of environment. The uncertainty has nothing to do with animal spirits and everything to do with the uncertainty injected by various, ill-judged bailouts.
5) "Bailout Capitalism." What is being pointed out here is that bailouts are never-ending because no single entity is allowed to fail. The ruin keeps expanding along with the bailouts. First the US needed bailing out and then Europe. Sooner or later China will need to be bailed out as well. That should be interesting.
6) "Bailout Repercussions.' The bailouts have prolonged the downturn. Instead of a sharp, short bust, there is an ongoing, endless unraveling that is tearing at the very fabric of civil societies. The longer it continues (the downturn) with all of its inequity and devious refundings, the worse it will get and the more distrusted "capitalism" will become.
7) "The Far Right Emerges." As times grow worse, finger pointing grows worse. People blame each other, blame other ethnicities and become more protective of their own culture, regions and even neighborhood. Nothing kills generosity of spirit like hard times imposed from the top down. People feel entirely helpless and are apt to lash out in anger.
The article we've been analyzing was written by Shamus Cooke, a socialist, apparently, and writer for Workers Action. Of course here at the Bell, we are not socialists but free-market types, libertarians. Our paradigm is different from Cooke's. We believe a small group of tremendously wealthy banking families (an Anglo-American elite) are responsible for the West's current economic chaos. Socialism, communism and other "isms" have been put in circulation – promoted – by these families to confuse the situation. But that doesn't diminish the impact of Cooke's analysis. We think the power elite over-reached. We think Cooke is closer to being right than wrong when he points out that this time it's different – this time "capitalism" isn't coming back.
What will take its place? Capitalism in the 20th century, especially, was closer to communism in the West than to free markets. Actually it was a kind of corporatism on steroids. What is needed now is a retreat from "capitalism" – from regulatory democracy, state funded monopoly justice and the Anglosphere's serial warfare. What is needed is a renewal of entrepreneurism, local (municipal) rule at a level where an individual can actually make a difference and capital markets writ small that can help people with funding.
Conclusion: Cooke would try to mandate such solutions through some sort of rational but populist regulation. We would rather do away with Leviathan and then let the market (and local governance as necessary) have its way. But we agree with Cooke that the central banking capitalism of the 20th century won't return, or not in its current form.
Posted by Brent on 12/09/10 07:07 PM
The status quo worldwide will do whatever it takes to maintain its power. We have seen this already with the ceaseless 'happy talk' about how things are improving economically.
We will not want to be around for the chaos and insurrection that will result if existing governments fall due to their own fiscal and policy stupidity.
It is important, however, not to underestimate the ability to gloss over problems with abba dabba. Such palaver allows perpetual sins of overspending, militarism and exploitation freely engaged in by the existing powers. The mass of people have neither the time nor the interest in holding their leaders accountable; what they fear most is chaos and government will play on that theme to justify any future actions they may take, e.g. the full-body scans implemented by the U.S. TSA at airports for "public safety."
Even on the subject of "safety," the power structure won't admit the sad reality that it can't protect the populace from a wide range of terrorist threats no matter how much money it spends, or how far it might lurch toward a police state at the expense of freedoms Americans take for granted.
Posted by Obsvr-1 on 12/09/10 06:16 PM
We have a label, crony-capitalism, for what happens when the PE corrupt the 'capitalistic' economic system morphing it into a plutocracy, corptocracy or oligarhy while maintaining the popular perception of Capitalism as alive and well (or recovering). In the crony-cap system bankers are debt pushers enslaving society in a web of debt, fosters wide spread corruption and fraud, societal value destruction with wealth distribution to PE.
Perhaps we need a label for capitalism based on free market principles and minimalist government objective, called citizen-capitalism (or capitalism for the people). Based on moral and ethical foundation, rule of law, free market principles, competition in banking services (read: no central banking monopoly/cartel). In the citizen-cap system banks would facilitate capital formation, support innovation and entrepreneurial endeavors, enforce the rule of law, root out corruption and fraud, societal value creation, and wealth distribution to society.
Posted by TeresaE on 12/09/10 05:29 PM
"...what is being pointed out here is that bailouts are never-ending because no single entity is allowed to fail. The ruin keeps expanding..."
Oh so not true. The independent capitalist, the small business guy, the commissioned salesman, he has been slaughtered and his blood, 'er customers, gifted to the mega-corporation.
While on this path of utter destruction, once all us little guys have been sacrificed, then the less-connected mega-corp will suffer if we continue on.
Reply from The Daily Bell
"Oh so not true."
You have to read the full article. It is OBVIOUS that we are focusing on the targets of the bailouts - the transnationals, banks, etc. Not the "little guy." As we always do - and have for two years.
Posted by WorkingClass on 12/09/10 12:11 PM
Is capitalism dead? I'm not sure what capitalism is. But I can say with confidence that the American dollar is dead. The American economy is dead. The American Empire is dead. And the American constitution is dead.
Posted by Rmp on 12/09/10 09:36 AM
Gee, I don't know what all the fuss is about, (secret backdoor Fed lending of 12.3T) it seems the Fed simply monetized the national debt. So, what did they get in return for the twelve thousand billion? I guess an audit is in order.
Posted by Jacob on 12/09/10 04:16 AM
"The corporatist model explains the modern Democratic paradigm very well ‒ with its overtly legalistic mindset, its reliance on intricate yet brutal legislation and ongoing, massively calibrated military campaigns. The corporatist signature is one that marries the fraud of modern money with pious protestations of legal rectitude. It mixes together the meretricious nature of fiat paper bills with the endless complexity of modern legislation which will not be satisfied until every aspect of human existence and behavior is fully moderated."
This one paragraph I found in your January 25, 2010 "Obama's Failing Corporatist Presidency" article sums up the matter for me. Your term, the "fraud of modern money," is a polite way of saying that people are legally enforced (enslaved) by their government to trade the wealth of their goods and services for mere debt instruments (Federal Reserve notes, or "US Dollars") created from nothing, from the mere "stroke of a pen."
Here is the fraud in a nutshell: I would love to be able to "purchase" (acquire by extortion) goods and services from others with my own privately issued IOU's that the sellers of those goods and services were forced by law to accept in trade, except that I would first need to have no moral code constraining me. Thank God I have such a moral code, as I believe do most people. Unfortunately we suffer under the control of rulers hiding behind elaborate systems, who don't live by such a moral code, yet don't hesitate to enforce that same code upon their unwilling and unwitting subjects. All of those privately issued IOU's streaming out of the Federal Reserve counterfeiting system constitute the very money we all are legally forced to use every day.
I see only one solution to this extortion racket: permit everyone to choose any currency, any medium of exchange they wished, and all counterfeiting, legal or otherwise, would instantly vanish.
Posted by Elray on 12/09/10 03:29 AM
A "Free Market" does not mean only "Capitalism" but allows for all forms of trade/exchange to occur at all levels of society for the benefit of the people who should determine which one works the best in a given situation.
Gold IS NOT an investment, it is a means of Wealth Storage and as such gold will be removed from the system.
Gold is the means by which wealth can be transported from one generation to the next.
The power elite have not and do not think in terms of a single generation and therein lies one of their greatest strengths, multi-generational movement towards their goal.
Posted by RT Carpenter on 12/09/10 12:14 AM
Capitalism did not "fail". It was corruptly taken over by the power elite you describe. The only difference in the Panic of 2008 and earlier collapses is how open the looting has become. There has been no serious effort to conceal the trillions being looted by Wall Street through their insiders at the Treasury and Fed. "Too Big to Fail" is apparently the only name they could figure out for this massive swindle of America. "Sub-prime mortgage crisis" and "quantative easing" may confuse some, but not DB or this old timer. Keep up your good work.
Posted by Vauung on 12/08/10 11:27 PM
... and 'communism' is just socialism taken to its ultimate conclusion: murder, slavery, famine, and radical de-civilization. It has only been approached by societies in a state of auto-cannibalization (and the cannibalism is quite literal): Mao's Great Leap Forward, Pol Pot, and the outer-edge of Juche.
Posted by Vauung on 12/08/10 11:19 PM
"[C]loser to communism" might be a slight stretch, but the basic point is correct. Corporatism (or mercantilism) is just flexible socialism, achieved through regulatory constriction and politicization of property rights, rather than direct state appropriation. The idea that fundamentally distinct class dynamics are involved is deeply illusory. The ruling ('political') class is exactly the same in both cases. This is clearly shown, 'in reverse', when socialist regimes transition to mercantilist capitalism and the ruling class is seen re-coding its politico-bureaucratic economic power as legal ownership, whilst preserving the substance of its class authority.
Posted by Bill on 12/08/10 10:52 PM
Do not confuse predatory corporatocracy with communism. These are actually at the opposite ends of the spectrum. I sense ignorant people upset with the current situation like to throw socialism and communism around very loosely. In the USA to top 10 % control 80 % of the wealth. At the same time the Government with the help of the FED has created a situation where the bottom 90% own 73% of the nation's debt.
What will take its place? Capitalism in the 20th century, especially, was closer to communism.... I THINK NOT.
Posted by Vauung on 12/08/10 09:41 PM
@DB -- thanks for the editing, but you've chopped the o-umlaut from dikoetter (my bad, I should have known to use the 'oe' form after seeing the 'ueber' case up-thread).
Posted by Vauung on 12/08/10 09:28 PM
@ Gary J. Mallast -- nice post. I especially liked "Capitalism is ... an even-more hardy weed than Creeping Charlie. It keeps springing up in even the most repressive places despite the best efforts to eradicate it."
One of the highlights of Frank Diktter's recent book on the Great Leap Forward (Mao's Great Famine) is his evidence for the survival capitalism that continuously re-emerged even in the midst of the most horrific socialist experiment in human history.
Nevertheless, DB certainly has a point that the current mercantilist-ponzi system of statist rapacity is reaching its sell-by date, and the spread of the Internet is making it ever more difficult for the PTB to get the crisis politics to line up tidily.
Posted by Ingo Bischoff on 12/08/10 07:20 PM
"Capitalism in the 20th century, especially, was closer to communism in the West than to free markets."
In order to discuss questions of political economy, it helps to define terms. Capitalism is an Economic System. Socialism/Communism is a Distribution System.
There are in classical economics three, and only three factors of production. They are land, labor and capital.
An Economics System is a system where the primary factor of production is owned or controlled by a particular group or elite. Slavery relates to the Labor factor, Feudalism relates to the Land factor and Capitalism relates to the Capital factor.
While Slavery and Feudalism flourish under dictatorships and oligarchies, Capitalism works best under a governing system such as was designed with the U.S. Constitution. (People's law, private property, personal liberties, etc.)
In Slavery and Feudalism, the distribution system is a decision by the slaveholder or the feudal lord.
With Capitalism, the most successful and most equitable distribution system is the "free market". In the mid-1800s, a new distribution system was discussed and promoted in England and Europe by people known as Socialists and Communists.
The "free market" in the U.S. has proven to work extremely well, until the "socialist/communist" ideas made their appearance in America at the beginning of the 20th Century. The "free market" system was assaulted with the ratification of the 16th, 17th and 18th Amendments to the U.S. Constitution. "Free markets" in the U.S. have been reduced ever since, particilarly with the creation of the FED "Central Bank" in 1934.
Talking about the demise and change of the economic system known as capitalism, misses the point.
The question is whether to restore "free markets" or to continue to enlarge "government controlled distribution systems" known as democratic socialism, national socialism or communism, which is the most severe form of socialism.
Posted by Rrust on 12/08/10 06:38 PM
-- suddenly a nice fresh breeze here! The regular posters are excellent, but this is a worthy addition in a new voice. Thanks. I too look forward to US private gold going into investment -- love the image of all us happy smiling dogs across the land digging up our hidden bones, bringing a new and vibrant economy into being, fertilized by the decaying ashes of the defunct PTW. (Powers-That-Were)
May we all live so long!
Posted by Beverlee on 12/08/10 05:38 PM
Great article. If and when we convert to a default gold standard, it will be fascinating to see where the actual gold now resides (God knows, GATA is doing its best to find out).
My guess is that much is stashed away in home safes and safety deposit boxes. But, assuming arguendo, that the Rockefellers (OOOPS!) I mean, the Federal Reserve or some other entity owns all of it (hardly realistic), what would happen? If the rich guy wanted to buy anything, that gold would need to be distributed. If he tried to rule by force, the masses could overcome him, no matter how much gold he owns (he'd need to buy armies and arms). In other words, gold isn't magic, it's just an honest medium of exchange.
Sitting in Economics 101 class years ago learning Austrian economics the professor reminded us that in capitalism, as opposed to the Rajah's in India, people with wealth (even a little), were always interested in investing it, as opposed to burying it in the back yard. Look at India today in a capitalistic free-wheeling system. The Rajah's had better be investing along with the entrepreneurial little guy, or the little guy will reverse positions with him shortly. On the other hand, look at the U.S. After TARP many saw the signal (as discussed in the article) and began buying physical gold and holding it. If nothing else, that human action proves that the U.S. is no longer a capitalistic system. When otherwise investors choose to hold the metal and "bury it in the backyard" as opposed to investing its value in some entrepreneurial venture, it's not capitalism.
As indicated by the article, post TARP the system is irrevocably broken and will fail. When that happens Americans on a very local basis will work together to survive. All we need is a rule of law to make the playing field fair (and it might be better to keep the referees private per M. Rothbard), and an impersonal, competitive method of exchange. Gold's been good forever -- why change? Already folks here are discussing how 100% private gold-backed banks will be created.
This is a GREAT country. Capitalism siphoned off the best and the brightest from all over the world. We're heterogeneous, and lest anyone think we're all asleep at the switch, that's just not the case. The sooner the better ....
Reply from The Daily Bell
Great feedback, thanks.
Posted by Dogwood on 12/08/10 04:56 PM
Gary, if you didn't book the trade, your memory will lie to you. If you didn't book the trade, you didn't really believe in it anyway.
Posted by Gary J. Mallast on 12/08/10 04:50 PM
If you want, I can dig out my old e-mails. I was telling people to "short" oil by July 2008, maybe even earlier. There was no after the fact involved. And no rocket science either. Read a few of the books I mentioned and you can do it too.
Dear Daily Bell,
O.K. Anything that gets information out is great and is going to serve to collapse frauds sooner rather than later. In that the aid of the internet cannot be denied. We obviously both agree the fundamental dynamic was there regardless.
The money issue was one of the chief political and economic squabbles from 1873-1913. Whole trainloads of literature were published on the issue in that period. I mean that too. Republican Party Chairman Marcus Alonzo Hanna ordered literally that for the 1896 campaign alone.
Beyond "Fiat Money Inflation in France" and "Coin's Financial School" having been reprinted and most big libraries possessing a copy of William Jennings Bryan's "The First Battle," most of it appears to have disappeared down the memory hole. Interested in the matter, I have been keeping my eye out for stuff since 1972. But I have found almost nothing in libraries and old book stores. Now there is one for conspiracy theories!
Posted by Dogwood on 12/08/10 04:34 PM
DB – re: shortselling. I agree. It's a big part of my life, but it comes under constant regulator assault. What most people who watch 60 Minutes don't realize is we have a valid system of borrowing assets in place already (you can't make fraudulent sales). Meanwhile Frank, Merkel, Trichet (and John Mack) want it to stop. They actually shut it down in 2008. Anyone recall?
Posted by Dogwood on 12/08/10 04:30 PM
Re: corporatism. Something that really stuck out to me during the crisis as a player in the markets.
Main street was, in fact, adversely impacted by the interconnected nature of the markets during the first few weeks of the crisis. There were, in fact, troubled or fire sale securities that were clogging the system and wreaking havoc due to mark-to-market rules. There was, in fact, an opportunity for a large player to step in and buy good assets at fire sale prices, unclog the system, and quickly realize profit. Paulson's TARP made sense. Paulson sounded like a free market trader.
What happened next with TARP was strange. No troubled (attractive) assets were purchased. Barney Frank got involved. TARP funds were used to buy ownership of the owners of the troubled securities. The system was not unclogged for months until small pools of private capital could be cobbled together to unclog it by buying "troubled" assets! The crisis ended in March of 2008. It has been over since.
Now, I would never profess that Hank Paulson was not an elitist, but his first incarnation of TARP was his inner free-market trader. The fact that he proposed it, and something so different actually took place is a huge red flag with LEED certified LED blinkers.