Quote note (#314)

Political economy as it ought to be done:

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates. The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain’s abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed “a mixed gold standard”; yet it is gold that took the blame.) But the opposition to the gold standard in any form — from a growing number of welfare-state advocates — was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

The Great Depression myth is among the most disastrous ideological catastrophes in history.

The article (all good) is by a young Alan Greenspan, which is a cautionary lesson in personal degeneration.

December 8, 2016admin 39 Comments »
FILED UNDER :Political economy

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39 Responses to this entry

  • frank Says:

    Ever since I’ve read this in the The Unknown Ideal, I’ve wondered what happened to Alan Greenspan. Did he suffer a head trauma?

    [Reply]

    smg Reply:

    As a man of some ability & ambition, Greenspan did what any sensible person does when faced with the choice between power & truth.

    [Reply]

    frank Reply:

    He probably also changed his mind. No mind can contain cognitive dissonance of that magnitude.

    [Reply]

    Alrenous Reply:

    A man with ability can lie about his intentions daily and never get caught. This avoids dissonance. Further, lying gets easier the more you do it.

    G. Eiríksson Reply:

    Lying is for scum.

    Wagner Reply:

    Lying is good, it helps the Earth turn and the grass sprout.

    G. Eiríksson Reply:

    You know that it´s against values of White people, both Christian and so-called Pagan (e.g. Roman, and other Indo-European/Aryan)?

    There´s obviously a whiff of atheism running through you.

    You don´t figure that the values are living.

    You don´t experience that…

    Alrenous Reply:

    https://youtu.be/Bpim_n0r0z0?t=3965

    Make sure it loads to the timestamp.

    G. Eiríksson Reply:

    He nailed it.

    Wagner Reply:

    Erikson, do you contend that atheism is not part of God?

    Babushkas may have a robuster faith than any of us, but do they have articulable knowledge?

    We are atheists about the astrology of Babushkas and alt-reichists. But we draw from the same source. The source of the river is different from the crashing of the waterfall, though they are on the same channel.

    G. Eiríksson Reply:

    I like the ” the astrology of Babushkas and alt-reichists “, but if I am more atheist to some than to other, which yes of course I am, atheist too: needless to say that is still a part and parcel of the divine emanation of the Supreme Galactic Lordship Omega Deus Omnissiah.

    all hail! om!

    Then everybody is a relative atheist. Sure. That works. Relatively.

    I recently accused a mate of mine of ‘atheist religion’, and he´s “Catholic.” Indeed, most “Christians” have a rather nondivine experience of religion. Of Life. Stale. Vapid. Carrierlike. Mere crust and crumbs. Rotten, putrid even. Dust.

    Dictionary.com: ” a person who denies or disbelieves the existence of a supreme being or beings. ”

    To not believe in being bigger than oneself?

    Is the earth suspended in a void?

    And is not void being?

    To be is be

    in g

    SVErshov Reply:

    Lying incompatible with any tribal tradition from nomads to polpots. question is if those cultures matter nowadays. in times between epochs only current state is matter. that is a key characteristic of system in state determined mode. in this mode one have to redifine core values and re instate it in current mode. then only it can be use to define obligation and rules of transition into future current state. societies and cultures what stack in the past does not have future.

    [Reply]

    Posted on December 8th, 2016 at 3:12 pm Reply | Quote
  • bomag Says:

    …the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

    The buyers of bonds seem happy to throw their money into the maw of the welfare state. If there are not better uses for their money, that is one kind of problem.

    Bond buyers are betting that they will always have access to interest payments funded by other taxpayers. Do they think their political power will always exceed that of the taxpayer? Maybe, but there comes a point where interest payments exceed any perceived value of keeping the rickety structure operating; I suppose the smart guys figure they will stop buying one dollar before that point, but inertia tends to ruin these things.

    [Reply]

    Posted on December 8th, 2016 at 3:53 pm Reply | Quote
  • collen ryan Says:

    One could argue this was white internationalisms fault, or at least anglophilias fault.

    [Reply]

    Posted on December 8th, 2016 at 4:32 pm Reply | Quote
  • Seth Largo Says:

    Money, at this point, is entirely politicized, which is necessary both for endless growth (the neoliberal endgame) and for an ever-expanding welfare state (the progressive endgame). This is why, ultimately, the neoliberals and the progressives have made somewhat rational bedfellows: the former grows money with a magic wand and the latter taxes it for redistribution programs. It’s a very symbiotic relationship. The progressives need endless money to pay for their programs, and the neoliberals provide an endless tax base for them.

    When the gears burn out and the whole machine goes up in flame, it will be a sight to behold.

    [Reply]

    Posted on December 8th, 2016 at 5:24 pm Reply | Quote
  • Brett Stevens Says:

    [quote]
    But the opposition to the gold standard in any form — from a growing number of welfare-state advocates — was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state).
    [/quote]

    Ah, Leftism — always a parasite.

    [Reply]

    Posted on December 8th, 2016 at 5:31 pm Reply | Quote
  • gud munny Says:

    Quote note (#π)

    [Reply]

    Posted on December 8th, 2016 at 6:00 pm Reply | Quote
  • Alrenous Says:

    Can’t agree. When your business depends on ‘confidence’ it’s called a ‘confidence game.’ When your economy depends on ‘confidence’ it’s already a dead man walking.

    [Reply]

    D. Reply:

    All financial systems rely on confidence. To quote J.P. Morgan: “…a man I do not trust could not get money from me on all the bonds in Christendom.”

    [Reply]

    tsk Reply:

    It’s got to be depressing for Nick to come online everyday and see that this is the kind of mind who reads his blog.

    [Reply]

    Alrenous Reply:

    “Every day” is two words.

    [Reply]

    G. Eiríksson Reply:

    I like Alrenous. But ‘everyday’ is a single word.

    E.g. “Land is an everyday web-surfer.” “Land is an everyday tinker.” “Land may be an every day thinker, but he certainly isn´t an everyday thinker.”

    http://www.dictionary.com/browse/everyday

    Wagner Reply:

    Notice Land is almost totally silent on the woman problem?

    G. Eiríksson Reply:

    The woman problem begins and ends in man.

    Alrenous Reply:

    “Everyday” is an adjective. If you want the noun, it’s two words. You were even forced to use the two-word construction in your example.

    G. Eiríksson Reply:

    The guy said « It’s got to be depressing for Nick to come online everyday and see that this is the kind of mind who reads his blog. »

    There is nothing necessarily wrong with that. He said « everyday » and you said « “Every day” is two words ». But he used the single word.

    He literally used a single word and you hoped to one-up him by correcting him, but did not as no correction was performed. Merely a hope was made a comment.

    Then your imagination imagined for your convenience that I had been forced, when I just added what you inferred from — not as a necessary example, what to speak of a forced one, but — out of my own free league playfulness!

    Human, all too human.

    Inferring, all too inferring.

    Wagner Reply:

    Less being grammar nazis and more being literal nazis.

    G. Eiríksson Reply:

    o_o

    Confidence is relatively required for things to work for humans, at least in relatively sustained usage. It´s like fidelity for humans.

    If you ain´t got no confidence, absolutely, you won´t leave bed.

    No confidence in tools? How would you even pick them up? After a phase of curiosity, you´ve built up confidence in that the tool will work, or you can call it “knowledge” (but you really don´t *know* you find it likely and act on the likelihood so that´s fidelity).

    History is full of examples of people losing confidence in things and thus losing the thing/system/process.

    I get that autonomization is increasing independence and thus less need of confidence of others, but obviously it requires confidence in the sense of it being fidelity.

    As for expansion, and economising the poor:

    —>”which is necessary both for endless growth (the neoliberal endgame) and for an ever-expanding welfare state (the progressive endgame)”

    If it´s an ever expanding state, what´s the problem? Yeah, you´re gonna say it´ll crash, but leave that for a moment.

    By bringing in the poor into economic systems where you can harness them somehow, you´ve expanded the market. You know how much Negroes spend on Timbies and Nikes?

    [Reply]

    Alrenous Reply:

    History is full of examples of people losing confidence in things and thus losing the thing/system/process. Which is exactly why something that relies on confidence is moribund.

    If I lose confidence in my hammer, I can check it again. It doesn’t spontaneously break.

    If society loses confidence in its confidence game, it -does- spontaneously break.

    Indeed, e.g, pre-flight checks. It is mandatory and a great idea to lose confidence in my plane every time (not ‘everytime’) I power it down, and demand the plane rebuild that confidence.

    Gnon equally considers it mandatory for banks, stock markets, insurance companies, all the foundation of the economy. If losing confidence in the bank leads to a bank run instead of rebuilding that confidence, it is time to lose confidence in my bank account and withdraw it all before they go all Cyprus on it.

    [Reply]

    frank Reply:

    Cooperation that leverages confidence outcompetes non-leveraged cooperation very fast.

    That’s how expanding economies work. People start having confidence that investing will pay off. In reality, most investments won’t work. Yet, if people have no confidence (which is rational on average), no investment will be made, no credit will be created. So the economy is confined to capital investment through personal savings alone; while the neighboring polity is growing 3 to 4 times faster thanks to an irrational confidence. Yes, they will crash at some point. But meanwhile, you’re losing all your human capital, and a seizable portion of your savings — further depressing your growth — to them because the party is over there.

    So the expectation is that once they crash, markets will learn that their system is fundamentally unsound, punishing them through capital flight. So they will have to reform. Yet this is not empirically the case as far as I can tell. (We still practice rampant maturity mismatch even though it’s known to be harmful since the 19th century).

    It’s kind of like the case of rich cocaine user. If he can afford it, and roughly understands the drug’s effects on his mind and mood, he could use it as a competitive edge against his rivals. Isn’t this the case in over-competitive scenes like Wall Street, competitive sports/gaming? Cocaine consumption is a diminishing returns game. So you’ll have to periodically detox to keep doing it. If you can time it well by, say, using it on performance demanding days, and abstaining on holidays/vacations/breaks, you’ll boost your overall performance considerably.

    So once the confidence economy crashes, there will be buyers — it’s a buying opportunity you see.

    It’s rational to heed the warning “never collect pennies in front of a steam-roller”, yet it’s often impossible to tell how distant the steam roller really is. What is the acceptable plane crash rate for me to use air travel? Isn’t this a form of penny collecting? We all know that bail-ins are a real possibility. So how risky is it to keep your cash in your safe compared to bank deposits? Why not bitcoin you say? What is the probability that bitcoin will halve in dollar value next year? Impossible to tell. So, naturally you diversify, leaving a portion of your liquidity in the banking system. And the system keeps going.

    Posted on December 8th, 2016 at 6:14 pm Reply | Quote
  • Dale Rooster Says:

    I read the Unknown Ideal as en evil proto-fascist teenager many years ago. I learned in college that I was a fascist for admiring Ayn Rand, which was very triggering. Then I read Nietzsche in college. Now I just roll with the fascist slur. It’s fun. Greenspan’s great reversal was a tragedy for fascists everywhere. Except for anti-fascists who adore monetary totalitarianism, who can’t despise him for his turn to the Light?

    [Reply]

    Posted on December 9th, 2016 at 12:04 am Reply | Quote
  • SVErshov Says:

    India nowadays is disaster in opposite direction, huge country with no money in form of cash can be found anywhere. on arriva’l in airport tourist can change usd 40 it is inr 2400. with no cash most businesses suffering greatly. people fighting near ATM for what ever still possible to get.

    [Reply]

    Wagner Reply:

    “people fighting near ATM for what ever still possible to get.”

    Strikingly reminiscent of Little Artxell.

    [Reply]

    G. Eiríksson Reply:

    Why don´t they have cash?

    [Reply]

    Blogospheroid Reply:

    The government recently demonetized the biggest 2 notes Rs. 500 and Rs. 1000. This is a big topic on this side of the world, though people on the other side may be unaware. It was done suddenly, with the intention to catch those who held unaccounted money unawares. But India is a majorly cash driven economy and the transition sucked big time.

    There are currently many controls on how much money can be withdrawn. This has also affected the locals and tourists.

    The long term idea is to improve the taxing ability of the Indian state, which has historically not been good.

    [Reply]

    Posted on December 9th, 2016 at 4:11 am Reply | Quote
  • John Hannon Says:

    Angry progressive equates debt reduction with murder –

    https://www.youtube.com/watch?v=OIRqKsIkVbM&t=1533s

    [Reply]

    Posted on December 9th, 2016 at 5:24 pm Reply | Quote
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