Friday, August 20, 2010

The Germanic peoples jointly and severally bear the guilt of the Holocaust.

But the Jews took their revenge by imposing 30 years of Republican rule on the US.

Sunday, August 15, 2010

Is this Doubletalk or Tripletalk? A Critique of Pathocrookis

I cite one James Pathocrookis: “… Goldman Sachs is today’s scapegoat ...”

Later in the same article Pathocrookis allows as how:

“All of that makes the recommendation that you and I share — strong government support of basic free market principles — one that looks increasingly vulnerable to populist politics within free market democracies. The problem is even larger in Europe and Japan than in America.”

May 11, 2010 14:42 EDT
State capitalism, crony capitalism | New Normal

My bemused comment:

Fascinating! So Goldman Sachs is just a scapegoat! I see.

And furthermore “you and” I “share” a “recommendation”, to wit “strong government support of basic free market principles”, no less!

If you were really desirous of free-market policies -- and not just using them as a cheap rhetorical device, as you do in your rant -- you would at least mention in passing that if Goldman Sachs -- like the rest of the Wall Street mob – managed to achieve notoriety through its reckless speculation, it was only because Goldman Sachs (and the rest of the Wall Street mob) had previously persuaded the US congress and the SEC to remove all curbs on speculation.

When a participant in the market, in this case Goldman Sachs (plus the rest of the Wall Street mob), has the power to change the rules, then it is grossly inaccurate to speak of a free market. To back up this statement I cite the great German free-market economist Walter Eucken (1891-1950).

Eucken recommended a policy of strict division of labor between government and private business. The government regulates the economy, i.e. it makes rules about how private parties should behave on the market, but is not itself a market player. On the other hand market players are barred from trying to change the rules, unless it be through the ballot-box. Eucken’s thinking formed the basis of West Germany’s “socially aware market system”, which was the propitious framework in which the German economic miracle (1948-1973) took place.

Cite by Walter Eucken:

This [i.e. the strict division of labor explained above] is the only way in which we can accomplish the goal of enabling all citizens to control the economy through the price mechanism, instead of allowing a small minority to control it. The only economic system in which this is possible is that of complete[ly free] competition. IT CAN ONLY BE ACCOMPLISHED IF ALL MARKET PARTICIPANTS ARE PREVENTED FROM CHANGING THE RULES OF THE MARKET. [1] (my stress)

Walter Eucken (1891-1950)

To her credit, Margaret Thatcher observed Eucken’s rule and forbade members of her government to have any contract with lobbyists of any sort. To expect such a policy of an US Republican would be an act of madness.

[1] From Walter Eucken’s preface to the first issue of Ordo (an annual publication reflecting free-market views) in 1948. This is my translation of the cite found in the article Walter Eucken in the German-language Wikipedia.

Critique of libertarianism

The idea you propose of libertarians as intellectual heavyweights who rightly despise the crude thinking of the left, is devastatingly comical. Do you write your own material, siamdave?

Although I sympathise – up to a point -- with the ideas of freedom and self-reliance from which libertarianism derives its strength, libertarianism itself is a shallow, mechanistic doctrine whose partisans continually commit gross logical blunders when they think, or try to.

I grant that the Austrian School has made important contributions to the theory of planned economies and yields interesting results when used to criticise mainstream establishment economic theory. But the Austrian School is far removed from espousing the robotic extremist chatter that emanates from the current crop of libertarians.

Hayek’s critique of Keynes, for example, does not call Keynes’ economic policy recommendations into question – Hayek expressly admitted that in a situation of underemployed resources Keynes’ policies were appropriate, at least in principle. Current libertarian fashion on the other hand demands a thoroughly deflationist standpoint, namely by proposing that economic policy actively promote unemployment, virtually as a goal in itself. In politics such a propensity is known as a death wish.

Hayek does not dispute Keynes’ substantive conclusions, which constitute the essence of Keynes' work and have always drawn the most ire from the right. Hayek’s critique of Keynes merely challenged Keynes’ claim to universal validity (i.e. GENERAL theory of unemployment, etc.) for his theory. Hayek is just saying that Keynes theory isn’t general at all, but rather only applicable to special conditions.

By publicly advocating the Byzantine equivocations of Thomas Sowell, the notorious ideological mouthpiece for monopoly capital, Ron Paul has given notice that the libertarian Utopia will just be a remake of the current squalid setup, consisting most likely in changing a few labels and then muddling through as usual, leaving us firmly under Wall Street’s thumb.

Ron Paul also takes a shine to another icon of rightist economic ideology, namely Robert Murphy, who produces a unified, homogenized but nonetheless profoundly eclectic and feeble-minded extremist economic discourse that, despite its pretensions, is thoroughly incompatible with free-market economics. That is because Murphy does not theorise. What he does is string together a whole Shi’ite-load of right-wing economic clichés that serve to buttress the claim to a place at the feeding-trough for each of a number of factions of capital. It is an unreflected patchwork of special-interest slogans, which largely cancel each other out. All threaded together with admirable dexterity by Murphy, a master of the theoretical slalom, who athletically zooms from one theoretical position to its opposite and back again without pausing to catch his breath.

My esteemed Siamdave, you and I are in a way mirror images of each other: You, a rightist, keep an eye on the dangerous collectivists at Alternet and I, a leftist, keep an eye on the libertarian wackos by regularly reading their web sites. However my beat covers broad segments of the right, not just the libertarians.

My father was one of those people who have far more opinions than they could ever hope to find support for in observing and reflecting on reality. I was so repelled by his self-indulgent attitude of only noticing information that happened to confirm his prejudices and ignoring the rest, that I became his opposite and refused to accept any opinion until all objections to that opinion had first been satisfactorily refuted.

Consequently I had no firm political beliefs until I was over 40. By that time I had accumulated a huge mass of observations and considerable theoretical ability to reflect on them. That enabled me to read critically opposing arguments and draw promptly firm conclusions from them, a skill that I took 25 years to acquire.

Although my attitude remains one of resolute objectivism and hard-nosed skepticism tous azimuths, as the French say, for some reason most right-wing discourse seems to me consistently detached from reality.

After reading the right-wing US media for some 8 years now with the greatest effort at objectivity and sober analysis, I have reached the inescapable conclusion that – in a nutshell -- the right-wing US media basically exude a concoction of assorted horse-pucky whose main purpose is to entertain, deceive and confuse the populace. Although I try to seek reasons to challenge my own conclusion, I find it constantly reinforced by my observations.

That does not mean the left is perfect. As a matter of fact I constantly get static from certain lefties because of my reluctance to worship at their respective shrines. Nonetheless reading the left-wing media I do not get the same queasy Kafkaesque feeling I get when I read National Review or Weekly Standard and others. The right-wing US press gives off that unmistakable stench of propaganda that I recall so clearly from when I was living in Communist East Germany. (Strictly speaking I was in capitalist West Berlin, surrounded by communist East Germany, but I monitored local communist media of both East Germany and West Berlin.) One has the feeling that even the most innocent remark published in such a press is merely setting the stage, presenting the cooked evidence that will soon be necessary to justify their next hypocritical piece of outrageous effrontery. [1]

I grant the libertarians are less hypocritical than most of the right – but to make up for it, libertarian thinking is much more mechanical and easily distracted from the real issues.

The 18th-century rationalistic Enlightenment approach that lives on among libertarians – despite its respectable historical antecedents – is, owing to its unfortunate reluctance to incorporate findings of current social science and psychology (specifically their ignorance of behavioral economics), much too flimsy an instrument of analysis to yield any but the simplest of reliable conclusions. The Austrian School’s obsession with its atomistic methodology consistently prevents the Austrians from incorporating a theory of government into their lucubrations. See my critique on of Hayek’s Road to Serfdom, where by suspending one of Hayek’s tacit assumptions about the nature of government I expose the whole argument of the Road to Serfdom as a silly misunderstanding, merely the fruit of professorial absent-mindedness.


[1] In A brief history of GOP lying, Robert Parry tells us, "It's not entirely clear when the Republican Party made disinformation a political weapon of choice. In covering the emerging U.S. policy toward Central America in late 1980, Robert Parry encountered a systematic strategy of lying. Coming as he did from movies, President Reagan seemed to have only a casual relationship with the truth anyway.

The Austrian School of Corporate Crime

Review of The Mystery of Banking by Murray Rothbard

This book by “Mystery Murray” – the most prominent American exponent of the Austrian School of economics -- is a true model of ingeniously argued and highly refined right-wing horse-shit. Pardon me for being so gauche as to criticize this book on the basis of reviews, instead of actually reading it. However I can smell the dogmatism a mile off, when “a surge in bank failures, central banks around the globe bailing out failed commercial and investment banks, double-digit inflation rates in many parts of the world and hyperinflation …” is attributed to technical banking issues and excessive government intervention.

It totally ignores the notorious fact that the financial crisis was largely caused by fraud, i.e. criminal activity on the part of bankers and other Wall Street crooks. I concede that The Mystery of Banking was published many years before the Republicans managed to wreck the economy in the 2008 crisis. But contemporary Austrian authors persist in ignoring financial fraud. Hence it is reasonable to attribute the same obtuseness to Rothbard.

The financial crisis was not caused by any intrinsically economic event, but rather by a breakdown of law and order, euphemistically known as “deregulation”. I cite from a letter written by the noted economist James K. Galbraith to the US Congress in May 2010:

“Economists have soft- pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the bubble. They continue to do so now.”

“[I]s it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: ‘liars' loans,’ ‘ninja loans,’ ‘neutron loans,’ and ‘toxic waste,’ tells you that people knew. I have also heard the expression, ‘IBG,YBG;’ the meaning of that bit of code was: ‘I'll be gone, you'll be gone.’”

“In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case.”[1]

More evidence that the financial crisis was caused by fraud is provided by the Financial Times, which in July 2010 interviewed Guan Jianzhong, chairman of Dagong Global Credit Rating, a privately owned Chinese rating agency. Mr. Guan stated, “The financial crisis was caused because rating agencies didn’t properly disclose risk and this brought the entire US financial system to the verge of collapse, causing huge damage to the US and its strategic interests.”

The Financial Times notes: “… [W]estern regulators … have heavily criticised the big three agencies for handing top ratings to mortgage-linked securities that turned toxic when the US housing market collapsed in 2007.”

Mr. Guan went on to say: “The western rating agencies are politicised and highly ideological and they do not adhere to objective standards.” The Financial Times adds that Mr. Guan ”specifically criticised the practice of “rating shopping” by companies who offer their business to the agency that provides the most favourable rating.”[2]

Rothbard’s ideological blinkers prevent him from noticing fraud. This is characteristic for the Austrian School of Economics. I have searched in vain in the works of Hayek and von Mises for any mention of business crime.

Such consistent neglect of business crime is a clear indication that the sort of economics practiced by these worthies serves primarily as an apologetic discourse intended to protect the interests of the business class come hell or high water and regardless of the facts. Moreover this obsessive avoidance of the subject of fraud serves as the principal justification for their crackpot opposition to government regulation of business.

After 30 years of deregulation, largely justified by reference to the Austrian School’s convenient doctrines – which, by the way, are largely unsupported by any logical argument -- the GOP finally managed to demolish all the safeguards that the New Deal had prudently put in place to prevent a recurrence of the massive fraudulent speculation that triggered the 1929 Wall Street crash. The inevitable result was that the entire US financial sector started systematically breaking the law, culminating in the financial catastrophe we are now experiencing.[3]

In a nutshell, libertarians and Austrians are nothing but enablers and justifiers of criminal activity by the wealthy. Their specious theories should be judged, not from the standpoint of economics, but from that of criminology.[4]

[1] James K. Galbraith: Why the 'experts' failed to see how financial fraud collapsed the economy,
[2] China Calls Our Bluff: The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation, by Washington's Blog,
[3] The insouciant recklessness of the Republicans’ deregulating frenzy is briefly recounted in Joseph Stiglitz’ article 5 Disastrous Decisions that Got Us into this Economic Mess, of December 2008. On the same subject:
[4] I will expand on this subject in a forthcoming article entitled Slouching towards Catastrophe; A Brief History of GOP Economic Lunacy