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Topic started on 26-10-2009 @ 03:32 PM by johnny2127
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This is a very important questions that we should all ponder. This is not about Obama or Bush or either political party since BOTH had their hands in
where the US currently is. So which are we now? The case for each:
Socialism
Many people call the Bush and Obama administration's approach to the economic crisis "socialism".
Are they right?
Well, Nouriel Roubini writes in a recent essay:
"This is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been
socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest...
The releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending."
Roubini has previously written:
"We're essentially continuing a system where profits are privatized and...losses socialized."
Nassim Nicholas Taleb says the same thing:
After finishing The Black Swan, I realized there was a cancer. The cancer was a huge buildup of risk-taking based on the lack of understanding of
reality. The second problem is the hidden risk with new financial products. And the third is the interdependence among financial institutions.
[Interviewer]: But aren't those the very problems we're supposed to be fixing?
NT: They're all still here. Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to
air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them
into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient's
symptoms – and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too
much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden
unemployment.
[Interviewer]: Are you saying the U.S. shouldn't have done all those bailouts? What was the alternative?
NT: Blood, sweat and tears. A lot of the growth of the past few years was fake growth from debt. So swallow the losses, be dignified and move on. Suck
it up. I gather you're not too impressed with the folks in Washington who are handling this crisis.
Ben Bernanke saved nothing! He shouldn't be allowed in Washington. He's like a doctor who misses the metastatic tumour and says the patient is doing
very well.
Nobel prize winning economist Joseph Stiglitz calls it "socialism for the rich". So do many others.
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Continues on next post...
[edit on 26-10-2009 by johnny2127]
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reply posted on 26-10-2009 @ 03:36 PM by johnny2127
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Fascism?
Some, however, argue that the economy is more like fascism than socialism. For example, leading journalist Robert Scheer writes:
"What is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly
concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately
referred to as "financial fascism" [than socialism]. After all, even Hitler never nationalized the Mercedes-Benz company but rather entered into a
very profitable partnership with the current car company's corporate ancestor, which made out quite well until Hitler's bubble burst."
And Italian historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for
the blunders of private enterprise... Profit is private and individual. Loss is public and social" (page 416).
This perfectly mirrors Roubini's statement about the American government's bailout plan.
Remember that one of the best definitions of fascism - the one used by Mussolini - is the "merger of state and corporate power".
That could never happen in America, right?
Consider:
- The government has given trillions in bailout or other emergency funds to private companies, but is largely refusing to disclose to either the
media, the American people or even Congress where the money went
- Congress has largely been bought and paid for, and two powerful congressmen have said that banks run Congress
- The head of the Federal Reserve Bank of Kansas City, the former Vice President of the Dallas Federal Reserve, and two top IMF officials have all
said that we have - or are in danger of having - oligarchy in the U.S.
- Economist Dean Baker says that the real purpose of bank rescue plans was "A massive redistribution of wealth to the bank shareholders and their top
executives"
-The big banks killed any real chance for financial reform months ago
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reply posted on 26-10-2009 @ 03:44 PM by johnny2127
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Looting
As Examiner.com pointed out in May (it is worth quoting the essay at some length, as this is an important concept), looting has replaced free market
capitalism:
Nobel prize-winning economist George Akerlof co-wrote a paper in 1993 describing the causes of the S&L crisis and other financial meltdowns. As
summarized by the New York Times:
In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking
advantage of the government. The investors had borrowed huge amounts of money, made big profits when times were good and then left the government
holding the bag for their eventual (and predictable) losses.
In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer [co-author of the paper, and himself a leading
expert on economic growth] said, would have operated in a completely different manner. The investors displayed a “total disregard for even the most
basic principles of lending,” failing to verify standard information about their borrowers or, in some cases, even to ask for that information.
The investors “acted as if future losses were somebody else’s problem,” the economists wrote. “They were right.”
The Times does a good job of explaining the looting dynamic:
The paper’s message is that the promise of government bailouts isn’t merely one aspect of the problem.
It is the core problem. Promised bailouts mean that anyone lending money to Wall Street — ranging from small-time savers like you and me to the
Chinese government — doesn’t have to worry about losing that money. The United States Treasury (which, in the end, is also you and me) will cover
the losses. In fact, it has to cover the losses, to prevent a cascade of worldwide losses and panic that would make today’s crisis look tame.
But the knowledge among lenders that their money will ultimately be returned, no matter what, clearly brings a terrible downside. It keeps the lenders
from asking tough questions about how their money is being used. Looters — savings and loans and Texas developers in the 1980s; the American
International Group, Citigroup, Fannie Mae and the rest in this decade — can then act as if their future losses are indeed somebody else’s
problem.
Do you remember the mea culpa that Alan Greesnspan, Mr. Bernanke’s predecessor, delivered on Capitol Hill last fall? He said that he was “in a
state of shocked disbelief” that “the self-interest” of Wall Street bankers hadn’t prevented this mess.
He shouldn’t have been. The looting theory explains why his laissez-faire theory didn’t hold up. The bankers were acting in their self-interest,
after all...Think about the so-called liars’ loans from recent years: like those Texas real estate loans from the 1980s, they never had a chance of
paying off. Sure, they would deliver big profits for a while, so long as the bubble kept inflating. But when they inevitably imploded, the losses
would overwhelm the gains...
What happened? Banks borrowed money from lenders around the world. The bankers then kept a big chunk of that money for themselves, calling it
“management fees” or “performance bonuses.” Once the investments were exposed as hopeless, the lenders — ordinary savers, foreign countries,
other banks, you name it — were repaid with government bailouts.
In effect, the bankers had siphoned off this bailout money in advance, years before the government had spent it...Either way, the bottom line is the
same: given an incentive to loot, Wall Street did so. “If you think of the financial system as a whole,” Mr. Romer said, “it actually has an
incentive to trigger the rare occasions in which tens or hundreds of billions of dollars come flowing out of the Treasury.”
In fact, the big banks and sellers of exotic instruments pretended that the boom would last forever, siphoning off huge profits during the boom with
the knowledge that - when the bust ultimately happened - the governments of the world would bail them out.
As Akerlof wrote in his paper:
[Looting is the] common thread [when] countries took on excessive foreign debt, governments had to bail out insolvent financial institutions, real
estate prices increased dramatically and then fell, or new financial markets experienced a boom and bust...Our theoretical analysis shows that an
economic underground can come to life if firms have an incentive to go broke for profit at society's expense (to loot) instead of to go for broke (to
gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay
themselves more than their firms are worth and then default on their debt obligations.
Indeed, Akerlof predicted in 1993 that the next form the looting dynamic would take was through credit default swaps - then a very-obscure financial
instrument (indeed, one interpretation of why CDS have been so deadly is that they were the simply the favored instrument for the current round of
looting).
Is Looting A Thing of the Past?
Now that Wall Street has been humbled by this financial crash, and the dangers of CDS are widely known, are we past the bad old days of looting?
Unfortunately, as the Times points out, the answer is no: At a time like this, when trust in financial markets is so scant, it may be hard to imagine
that looting will ever be a problem again. But it will be. If we don’t get rid of the incentive to loot, the only question is what form the next
round of looting will take.
Bottom Line
So what do we really have: socialism-for-the-giants, fascism or an economy which calls itself "capitalism" but which allows looting?
Ultimately, it doesn't matter. They are just different brand names for the same basic type of economy. All three systems allow giant businesses which
are friendly to the government to keep enormous private profits but to pass the losses on to the government and ultimately the citizens.
Whether we use the terminology regarding socialism-for-the-giants ("socialized losses"), of fascism ("public and social losses"), or of looting
("left the government holding the bag for their eventual and predictable losses"), it amounts to the exact same thing.
Whatever we have, it isn't free market capitalism.
Note: Yves Smith has called the financial services pay arrangement of "heads I win, tails you lose" looting, and has also argued that our form of
capitalism is evolving into Mussolini style corpocracy, meaning fascism. But the label most often pinned on the Obama administration is socialism.
The bottom line is that I don't put much stock in what socialists might label a system, any more than what fascists or corporate looters would label
a system. Whatever you call it, if the giants get all the benefits and pawn all of the losses off on the public, it is a very dangerous
system.
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reply posted on 26-10-2009 @ 03:51 PM by Paroxysm
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I made a similar thread a little while back:
www.abovetopsecret.com...
IMO, our current economy and form of government would be best described as Corporatism/Corporatocracy.
One response in my other thread which I thought rang very true, came from ATS member dooper:
Originally posted by dooper
It's become a Federalized oligarchy.
The erosion of the Tenth Amendment, and the personal income tax are the enablers.
That Washington crowd is dug in deeper than a tick, and they aren't pulling their heads out of the trough until they either pop, or someone rips them
out with force.
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reply posted on 26-10-2009 @ 06:58 PM by johnny2127
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reply to post by Paroxysm
Somewhat similar. I am talking more about the economic structure than the political one though. What do you think of the economic structure?
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reply posted on 26-10-2009 @ 07:18 PM by Fromabove
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The US economy is a "free enterprise". That means there should be no limit to the wealth success you can achieve, and also that government has hands
off from interfering in whatever enterprise you employ yourself to. Capitalism has some similar attributes except that it is a matter of investment
and return based on certain promissory agreements. One person agrees to put up a sum of money on the hope of receiving a return based upon the
expected outcome.
Wall street or the "Stock Market" started as a small group of men who "invested" in crop futures and other import commodities. For a time it was
limited to this but then found it's way into industry where it took off to what we see today.
Capitalism can lead to excessive greed and foolish investment schemes that can hurt millions of people, such as we have seen recently. Under free
enterprise, collateral was and is used to back up any investment proposal.
Unfortunately, the nation has given itself over to capitalism.
[edit on 26-10-2009 by Fromabove]
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reply posted on 26-10-2009 @ 07:35 PM by TheWalkingFox
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reply to post by johnny2127
None of the above.
The United States produces very little for trade, but it conducts a lot of trade. Here's how it works.
A tangible gizmo is made. Say a cellular phone, one on the assembly line. This doodad has direct value - it can be passed hand to hand, bought, sold,
used, resold, it's a product. In a traditional economy, the manufacturer would make money by passing it to a distributer, who would make money by
selling it to a customer, who would then get value out of hte doodad's use. basic stuff.
The way it really works though, is that there are a bunch of other people uninvolved with production, distribution, or any other aspect of the product
itself. They never see its parts, tough its buttons, or anything. Instead, they speculate on the worth of the item, invest based on that speculated
wealth, and then if they say the value is up, the value goes up, and they make a profit.
Essentially these people are paying themselves to play with imaginary money only loosely tied to actual wealth. If I have a dollar in my hands, I have
a dollar. If I have a dollar in the books, it could be fifty cents or it could be five dollars, depending on what people say my value is worth and
what those people are saying the dollar is worth.
It goes around and around in circles, wealthy men and women attaining high reaches of wealth that exists only digitally and is not backed by actual
wealth.They aren't so much "wealthy" as that they have very large credit thresholds and no due dates. If htye end up owing, they say the bill is
paid with their imaginary money and it is so.
Starting in the 70's and taking off in the 80's, this system of magic money is what our economy became based around, because it's very easy to get
very rich very quickly.
it is not communist, it's not socialist or fascist, and it's only vaguely capitalist - all those models are "old economics" that rely on tangible
wealth. We're running a phantom economy. What's left of the solid economy is basically a quasi-monopolist capitalism, but even that is beholden to
the imaginary money.
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reply posted on 26-10-2009 @ 07:49 PM by Zosynspiracy
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reply to post by Fromabove
Just because you CAN doesn't mean you should. There is no limit to how fat someone can get either. With capitalism and a free market comes
RESPONSIBILITY and ACCOUNTABILITY and most of all HONESTY. This used to be a country of self before service, the greater good, etc. There is no
f'ing need for someone to be as rich and wealthy as Bill Gates. The government shouldn't have to play referee in a free market but unfortunately
our human thirst for greed wins out. That's why we have a system of checks and balances in government. That's also why we need a system of checks
and balances in the corporate world. I don't like government dictating private enterprise but do you really think CEO's should be able to make
hundreds of millions of dollars? Come on. There should most definitely be a cap on how much money and wealth a single human being can
accumulate........if people weren't as greedy and evil government wouldn't have to legislate it and people would step back and say you know what I
have enough. I don't need anymore I should share it with others.
Anyways, we have state corporatism right now which will eventually turn into full blown financial fascism. But we are not there yet.
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reply posted on 26-10-2009 @ 07:52 PM by Zosynspiracy
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reply to post by TheWalkingFox
Its called the Federal Reserve. The ability of private citizens i.e. banks to print money out of thin air and lend that money to whoever at interest
is a complete and utter travesty against mankind. What you say is absolutely correct. The problem with the FED is there is no oversight and no
accountability. That's why the rich and powerful love it. With freedom comes responsibility and the necessity to police the system and police each
other. We as humans are inherently flawed in my opinion............we all somewhat greedy, gluttonous etc. We need each other to keep us in check.
That was the whole point of our government and political system. And that was also the point behind the Founding Father's insistence that the
creation of money be BY THE PEOPLE.
[edit on 26-10-2009 by Zosynspiracy]
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reply posted on 27-10-2009 @ 02:25 PM by FritosBBQTwist
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reply to post by Fromabove
No limit to the wealth you can have can end up with monopolies ruling the most basic necessities of our country.
There is not really a "limit" on wealth (besides crazy taxes), but there are measures put in to prevent SEVERE abuse to society.
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reply posted on 27-10-2009 @ 02:40 PM by David9176
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Capitalism gone wild/Corporatism. Since our government has failed to enforce anti-trust laws.....along with passing NAFTA....our government is no
longer working for the people. International Corporations and Banking powerhouses control our government. It's all about the greenbacks...and the
American people don't have any....so we have no voice. When companies go international...no longer do they hold their "home" country in their best
interests. Our government is tainted.
Capitalism CAN work. It just has to be capped at the top and regulated. We don't need to change the entire system...we just need to fix it and
actually PROSECUTE those who abuse their powers...whether it be a government official, CEO, stockbroker, or stock holder.
If things don't change...it will just continue to get worse.
[edit on 27-10-2009 by David9176]
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reply posted on 27-10-2009 @ 02:50 PM by Kaytagg
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Originally posted by johnny2127
reply to post by Paroxysm
Somewhat similar. I am talking more about the economic structure than the political one though. What do you think of the economic structure?
With out a doubt, we socialize the losses, but privatize the gains (unless you're a small business owner).
What "ism" that kind of behavior falls into I'm not exactly sure.
Oh, and this is going to continue happening, because the same institutions that were "too big to fail," are now "too too big to fail," as some of
these institutions have merged together, and nothing has been done to reduce systemic risk caused by these guys.
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reply posted on 27-10-2009 @ 02:57 PM by OmegaLogos
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Explanation: Simplest most accurate answer ever is that it is Idealogicaly Broken and Financially Broke!    
Personal Disclosure: I hope the NAU likes it Amero's! Because regardless of which political divide of the global NWO the NAU has its majority
idolizing, if the other 6 multinational unions believe/percieve it to be worthless then the NAU will be left holding the bag of useless financial
shrapnel!
Edited to Flag the thread and St*r the OP's 1st 3 posts. 
[edit on 27-10-2009 by OmegaLogos]
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reply posted on 27-10-2009 @ 03:05 PM by Paroxysm
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Originally posted by johnny2127
Somewhat similar. I am talking more about the economic structure than the political one though. What do you think of the economic structure?
As I stated above, IMO our current economic structure most closely resembles one of Corporatism.
I also feel that our Political structure, or form of government closely resembles a Corporatocracy....or a Federalized Oligarchy.
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reply posted on 27-10-2009 @ 03:30 PM by David9176
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reply to post by Paroxysm
As I stated above, IMO our current economic structure most closely resembles one of Corporatism.
I agree for the most part...but really I think our country is all 3 things in some regard. Corporatism/Facism is the same thing to me for the most
part.
If we do not get some form of "Campaign Finance Reform" to get special interests/corporations/banks that gets their money out of Washington...the
rest of us will continue to suffer. Nothing is changing folks. It's crazy seeing how incompetent some of our supposed "leaders" are. I just
don't think that these people could actually be THIS STUPID.
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