The Recent Economy up to Covid-19

In the previous post I noted that Keynesian economics tended to fail because governments overlooked the second half of the prescription: when the going got strong, it was necessary to “pay back” the debt, or at least reduce the money supply. That results in politicians being party poopers, restraining the good times and what politician wants that with an election coming? The net result was with too much money floating around, we had the rather unexpected result of inflation coupled with stagnation/recession. More money would not solve that. Friedman had the answer, perhaps: stop government priming the economy and correct structural deficiencies. That was not followed either – Friedman had no more success than Keynes in getting politicians to behave. What resulted was the likes of Reagan reducing government expenditure, lowering taxes, and maintaining and expanding the government deficit. Then the US Federal Reserve set the tone by reducing the money supply, even though it knew that would send unemployment soaring. They simply did not care. Anything went in the name of “economic efficiency”. 

What was undefined was “efficiency.” To answer that we have to ask what is the purpose of the economy? To the bankers it seems to be to make nice profits for banks, but surely it is more than the keeping of tidy books. For some, it is to maximize wealth, especially for themselves. For some it is to generate the means of enabling people to live in a pleasant place and live alongside nature. For others it is to enable all people to get the best out of life. Under the new economics of Reagan and others, the emphasis was on the “basics”: get the government out of the economy because they don’t know what they are doing, focus on low and stable inflation, let the rich get richer, following which the wealth would trickle down. Except the evidence is, it didn’t.  Then when it became clear that squeezing the money supply, while it might have helped make the books tidier, was generating unemployment that was too great, so central banks switched to using interest rates as their primary tool. Which gets us to where the bankers are now. Interest rates have got to the point where depositing in banks is only good for security, as long as the bank does not go belly up.

What actually happened was that when the corporations noted that the government did not care about employment it fired its workers, thereby saving money on benefits, etc. and moved manufacturing to low wage countries. Basic manufacturing, like clothes, were exported to places like Indonesia or Bangla Desh, and more difficult manufacturing to China. That undoubtedly increased the wealth of the rich, but it sent the workers into low-paying jobs in the service industries. Meanwhile, there was a somewhat unrecognized crisis in the academic community, and in particular the physics community. Funding had dropped and we had a large number of highly educated unemployed. The physicists, in particular, were good at computer modeling, and they got jobs in banks to create new “financial products”. The banks made huge profits until about 2008. The problem with these “products”. which were sliced and diced debt, were based on the assumption that nothing significant could go wrong, but in the US, for political reasons, a huge number of houses were sold to people who had no hope of repaying the mortgages. Oops. 

We have sort of recovered from that, but the legacy is that thanks to COVID 19 the debt levels of so many countries is extraordinarily high, interest rates are ridiculously low they cannot go lower, so there is no incentive to save. Money goes into assets, which merely inflates the price of the assets. Stock at $100 is worth that if you can sell it for that, but at the end of a period of time, you have to look at the overall returns on investment. In a bubble, everyone makes money until the music stops, then the losses are concentrated on the then holders. COVID has forced the nervous investors to cash out and the stock market fell, but it is coming back because of the quantitative easing. So what happens when the quantitative easing stops and the bonds are cashed out?What is clear is that we cannot look to the past for ways to get out of this. We have to try something new, but what? If you look at our leaders, do any of them have a solution to what happens after quantitative easing? Or do they have their heads in the sand and assume that will be for another electoral cycle?

16 thoughts on “The Recent Economy up to Covid-19

  1. It’s called PLUTOCRATIC GLOBALIZATION, and it destroyed the Roman Republic… turning it into the evil oligarchic empire invented by Augustus, which could only get worse, and did.

    The wealthiest Romans called themselves the “Optimates”, the best, proceeding to make wars all over, subduing (democratic) Carthage, (free) Numentia (in Spain), and all of Greece, including Rome’s ally, Athens. Compare with the present “Democratic” Party in the USA. Joe Biden, average Joe, invented (he was the head of the Senate Foreign Commission) the argument to invade Iraq, a war crime, and crime against humanity, which killed at least two million Iraqis. Now we have the same plutocratic corporations who give millions to “Black Lives Matter” while employing enslaved Uyghurs in China under Xi, a dictator that Gates and Buffet, pillar of the “Democratic” party, have themselves contributed to install.

    Did we see that before? Recently, not just Rome? Yes. The “Democratic” Party helped, financed, and conspired with Adolf Hitler. Who was most important in the “Democratic” Party in most of the Twentieth Century? The Harriman Brothers, sons of the guy who owned US railroads. They developed the Baku oil fields for Stalin. they did everything for Hitler. One of the Harrimans got the highest decoration from Stalin, and the highest from Hitler. Hitler himself had been launched, in all ways but learning German, by Henry Ford.

    What to do now? First bring back all essential jobs to the West.

    Italy and Rome especially, had been forbidden, first, to work, then to own weapons, and finally even to serve in the army… Roman plutocrats were afraid of a coup against themselves. It worked, until there was strictly no army left (September 394 CE, exactly) . What to do? The plutocrats negotiated with the Barbarians, jut like now advocates of Sharia are allowed to sit in the US Congress (and have infected some city halls in France, where they promote the subjugation of women).

    So the first thing to do is to bring back the essential jobs to the USA and Europe, from China where the plutocrats have exported them. In the COVID 19 crisis, France, Europe and the US had to organize air bridges from China for swabs, masks, Personal Protection Equipment.

    Instead the “Democratic” Party chose a guy elected Senator before he was able to serve… who then served Reagan global plutocratization (all Reagan laws were passed by “Democrats”), and whose son, not a financial guy, got a one billion and a half dollar deal from China (and also diamonds, he had to admit during divorce proceedings). Pelosi is also a war criminal: she knew, she admitted recently, as Ranking Member of the Congress Intelligence Committee, that she knew there was strictly not one weapon of mass destruction in Iraq.

    Having filthy, immensely corrupt politicians, is what brought Rome down. Feinstein, who stumbled into the San francisco city hall because of an assassination, has now a personal fortune of more than one billion dollars (yes, 10^9 dollars, billion with a b). How? She headed the Foreign Com. of the Senate when Biden did not. Her husband organized the deals with China.

    But all people know is what they read in the media. The New York Times, owned by the same Jewish family, since the nineteenth century, knew about the Holocaust… But stayed silent, because greed is most important. They are doing the same now. Bezos owns whores and prostitute all over, including the Washington Post, telling their outrageous lies… Obamas and Clinton have now immense fortunes… And individuals such as your truly get shut down by the tech monopolies… They told me they had to, because otherwise they won’t be able to sell in some countries…

    Human beings are not nice, this is how humanity is kept in check. Civilization has enabled evil to be leveraged, that’s called Pluto-Kratia, Evil-Power.
    It worked in the past. It will not now, because the power evil can muster is too great.

    • Bad players will spoil anything, and unfortunately there are many bad players out there. It is also not restricted to the US. I missed out on a fortune simply because somehow some politicians tore up a contract and gave it to someone else after the venture I was involved with had $5 mil in the hole. Not nice, and what was especially pathetic was the politicians did not benefit, in fact overall, as far as I can make out, nobody did!!!

      However, the real problem in these troubling times is I am not sure there is a way out of this mess that does not hurt many of the innocent. We have got ourselves into a position where I think there will be major structural change, and it is hard to see in what direction it will go

  2. To answer you, Ian, I was also stolen by banks, thrice… Big time, the way they did it was crafty….
    But back to the subject at hand:
    Well the solution is the same as that which should have been applied under the Roman republic: break the power of the self-declared “Optimates” (the best). Use a plutocrat (Trump) to do it, same as was nearly done with Gracchi, Marius, or Caesar. That was so true that the much derided Sulla did this pretty well: he reinstalled the Tribunate. Then, having it all, retired (!) He then promptly died of natural causes…

    The Gracchi, their thousands of friends, Caesar and his Populares Party failed… because of assassinations (Caesar had finally succeeded to implement a land redistribution law in 59 BCE, when he was Consul. We know better now.

    We know that, if We The People is weakened too much, the state collapses and invasions results. Europe kept that notion front and center during the Middle Ages. There was no more plutocratic globalization during the European Middle Ages.

    Plutocratic globalization reappeared with the slave trade… Which was highly successful economically… for all those who survived it (yes, including the slaves… Doesn’t mean I approve slavery, Rome’s second error…)

    • Yes, but the [roblem is how to break the power of the optimates? I am not saying it cannot be done, but the Gracchi brothers and Caesar show how difficult it is. The problem for we the people is to get someone in a position to do something when getting into such positions requires huge amounts of money. Trump was someone who could get around that problem of getting there, but that did not finish off the machine opposing him. It is not easy.

      • Indeed. Trump became the victim (hard to imagine Trump as a victim!) of stealth coup, something never seen before… except in the case of the attempted impeachment of President Johnson.

        The impeachment of Andrew Johnson was initiated on February 24, 1868, when the United States House of Representatives resolved to impeach Andrew Johnson, the 17th president of the United States, for “high crimes and misdemeanors,” which were detailed in 11 articles of impeachment.

        Johnson, a Democrat, and Lincoln’s VP, was hated for extending Lincoln’s lenient policies relative to the south. Johnson had been a rare anti-Secession Democrat before and during the war, and military governor of Tennessee…

        The primary charge against Johnson was that he had violated the Tenure of Office Act, passed by Congress in March 1867, over his veto. Specifically, he had removed from office Edwin M. Stanton, the secretary of war—whom the act was largely designed to protect—and attempted to replace him with Brevet Major General Lorenzo Thomas. (Earlier, while the Congress was not in session, Johnson had suspended Stanton and appointed General Ulysses S. Grant as secretary of war ad interim.)

        Impeachment failed by one vote.

        That a coup would be directed at Trump show the hatred of GLOBAL plutocracy for anything local.

  3. Hello Patrice. I have always been amused by “high crimes and misdemeanors,” A high crime is presumably something very serious, such as treason, but a misdemeanor, here at least, is a rather minor crime that does not rate as being a felony. The implication is, if you are going to be naughty, be really bad, but don’t overdo it.

    More seriously, my view is the Democrats simply could not concede that a beloved Clinton had lost and a lot of Americans did not want her. This has resulted in Trump not really having had the chance to implement the policies in his election platform, and has unfortunately brought out the worst in him as he fights back against the continual harassment.

    • Yes, you are right, “high crimes and misdemeanors” is like “murders and unpolished shoes”. Weird. Very Yankee, though: quirkiness to hide… racist, tribal, exploitative bias…

      Namely one can accuse anybody of unpolished shoes. So the Democrat US Congress accused Trump to have intervened in Ukraine… when they had done the same, just, way worse.

      My interpretation of the coup against Trump is much deeper and more sinister: it’s the case of GLOBAL plutocracy (how Rome fell) against LOCAL plutocracy (how the European Feudal systems thrived… and protected Europe).

      Here, in the SF Bay Area, it’s sheer madness, all the forests are burning, because, basically, Trump told them to clean them and how to do it, but it can only be charlatanism, because his opponents, who are in command in California, say Trump is a charlatan, so they didn’t do anything, and now one has world famous trees burning…

      But Black Lives And Unpolished Shoes Matter.

      • I disagree that Trump is a sole agent of global plutocracy – The Clintons were doing very nicely in that area too.

        Sorry to hear about the forest fires. Our news has shown some Californian forest fires, and they look awful, so I hope you are not losing property. But you are right, there are things you can do about such fires, at least some of the time. The hills opposite where I live used to have regular fires, but clearing dead brushwood and bulldozing fire breaks seems to have cured that. Mind you, nothing much will stop the Australian Eucalypt fires because the trees spit out terpenes that leave the air like a petrol/air mix. The flames go at a terrifying speed.

        And for what it is worth, I have unpolished shoes on right now. Aargh!

  4. Sorry about the miscommunication: Trump is LOCAL plutocracy: most of his revenues are from offices in Manhattan and and San Francisco. The Clintons, who were agents of the extremely globalized Goldman Sachs (Robert Rubin, ex-CEO was Sec. Treasury) were, and are, servants of GLOBAL plutocracy. For example Senator Feinstein’s husband made more than a billion in deals with China. The hatred against Trump comes from GLOBAL plutocrats whining that Trump is destroying the profit machine they had established to exploit the world… while brining back power to US production (something obvious on the Federal Reserve data graph I put on my site).

    Well, my personal property is not burning, what’s burning is world heritage, mostly irreplaceable trees, thousands of years old. Those trees were evolutionary created to resist normal fires. But the present infernos are caused by allowing the building of brush by a combination of little-fires suppression and killing large animals eating or trampling brush. The Californian forests are, as Trump pointed for years, in a terrible state… whereas they were in a wonderful state under Native American husbandry.

    I use only synthetic shoes…

    • Yes, and being the husband of a senator had nothing to do with making a million. Yeah, right.

      A lot of people do not understand that removing something like large animals from an ecosystem can cause massive problems. They eat and trample brush.

      And as an aside, my shoes are also synthetic and supposedly don’t need cleaning. Unfortunately, I accidentally spilt some red dye on my left one, which cannot be corrected. So that was clearly a misdemeanor

      • Feinstein’s husband made more than a BILLION, yes a thousand millions. Organizing deals with China, while his wife was overseeing trade with China, as a US Senator… In the last few decades. That’s corruption to the Biblical level. And the woman is viewed as a pillar of society and the Democratic Party. I am ashamed to be a member of the latter, as I am to be a subscriber to the New York Times, which allowed and then censored a comment of mine after too many saw it:

        Prescribed burns could be easily made during the wet season, winter. Re-installing the large animals is also a must.

        I recently repaired a pair of beloved European running shoes with glue, so called gorilla glue. I expect it to stay supple like neoprene, but instead it cured as hard as stone…

  5. Patrice, completely agree re Feinstein. I don’t know enough about your forests to comment, but there are ways to get rid of brush. Large animals do it fairly well.

    I have given up trying to repair shoes with glue – it never seems to work out right somehow, so I succumb and buy new ones.

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