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Fictitious Capital.

Currencies across the world are being debased - including Sterling.

This is because to avoid a depression governments effectively print money.

Most of this printed money does not get put to any productive use.
It artifically increases reported profit rates by increasing assets prices.

The asset bubbles are a form of inflation.
As these assets include commodities expect inflation to take off in regards to the everyday items we need to survive.

Inflation without accompanying increases in wages means real wage cuts.
The ordinary person is & will continue to get poorer in an attempt to restore profit rates.

But the likely devaluation of capital required to restore 'true' productive profit rates is likely huge.

The issue isn't about cutting government spending to maintain solvency, but people taking control collectively of the means of production (socialism) & creating a civilised world.

"Highly paid economists weigh in to remind the government - current and incoming - to slash the wages of low paid public servants, close museums and let social housing crumble."

Really? I'm very surprised by that. I'm sure the majority of economists would recommend no such thing. Even those who do think public expenditure needs to fall (like Tim Besley) would certainly not identify low paid public servants and social housing as the places to cut. I suspect you have grotesquely mischaracterised what economists are saying. Can you provide some evidence to back-up your claim here?

and keep the red flag flying here...?

one could almost hear the tune.

I'm no market fundamentalists but in this case the markets are correct about the view of the uk as a basket case. what else can one say about a country that needs to borrow 150 billion a year for the next four years?

The politicians don't like this as it makes selling their 'we are brilliant economists' story to the public look stupid so its 'the evil markets have to be stopped short selling'

a transaction tax is just emotional gratification by the trots. Taxes should be on profits of a trade not the mere transaction of it. Trades also make losses. Try it and then find why 90% of people LOSE in the markets. All a transaction tax does is reduce transactions. what is the different between 10 x 1 million bets and 1 x 10 million bet?

actually the transaction tax is a belief in market fundamentalism because it suggests an economic law which is not at work in forex. Because forex is a not a complete market.

the elephant in the forex room is of course China. Their currency should be the the strongest in the world and not weaker than cable. The global imbalances are are chinese one.

why is the uk in the mess? Domestic greed and stupidity in the context of aggressive imperialist claiming of wealth by china through currency manipulation.

so through chines currency manipulation the uk [and everywhere else] become artificially uncompetitive. You ask why there is no growth in other industries so the uk could earn its way out of the debt? Because its cheaper to import nearly everything half way around the world from china than to make it here. which is the way they like it.

excluding china from any talk about forex is like excluding manchester united from any talk about football.

remember the only thing politicians fear is the markets. they do not fear the public who they believe do not understand economics. without markets giving their opinion on what the politicians were doing then the politicians would have no restraint on wrecking the economy in the interest of their own careerist ambitions.

And you may wish to unpack the phrase "make high risk bets with almost no risk" which looks rather like a contradiction in terms as it stands.

And you really cannot claim that a Tobin Tax would reduce volatility - you just can't. Prices need not move around less if trades are less frequent. The theory and the evidence just isn't there. I could cite a lot of research here. Paul Oremond is a reasonably easy read:

You don't even really have any basis for claiming that recent moves in exchange rates are explained by cheap money and increased speculation - there are plenty of good reasons why the "right" exchange rates for the Sterling/Euro/Dollar might be highly uncertain right now and subject to dramatic changes of sentiment.

Fascinating article Paul.

You know, a few thousand years ago if I wanted your stuff, your cave and your woman I would sneak up behind you, bang you on your head with a club and wander off to count my spoils.

Over time this evolved into armies invading other people's lands so that one king could lord it over others... and have all the spoils, a bigger 'cave' and his choice of women. Go forward again in time and you end up with World Wars and millions dying.

These days you don't need to go to war to get all spoils and to bring the other guy down. You simply short their currencies, wage economic war on them and, wey hey, you can make the kind of riches that kings and emperors and the stronest cavemen could only dream about.

It is about time that we all woke up to the fact that such speculators, and the economic turmoil they create on hundreds of millions of ordinary people, are no different to the caveman who sneaks up behind you with a big club or the king who turns up on your doorstep with a big army. I think it is long over-due that much of what they do is, at least, punitively taxed if not made illegal with serious penalties for any individual or organisation wishing to make financial gain by economically destorying a country.

Failing that, those nice men in Hereford are only a phone call away.

Good essay reviewing the possibilties.

A lot of this is already happening, but quietly.

Both the EU and the USA are implementing anti-dumping duty measures against certain products imported from China. In some cases the Chinese are retaliating. This is inevitable as a country needs to keep its workers employed as people with work are less likely to take to the streets.

In the end it will be the need to keep people productively employed as this will be the only way to feed the population.

I find it incredible that farmers in this country find it difficult to make a living at the same time as imported food brought halfway round the world is cheaper. No wonder there is climate change!

In the end the bursting of the debt bubble might be the best thing that ever happened. It is just that we haven't worked that out yet.

5

..You simply short their currencies,..

be careful with the idea of shorting currencies. its not the same as shares. what you are doing is buying a different currency.

if people could buy chinese money then you would see a lot more 'fairness' in the world economy because places like the uk would naturally become competitive against china as people buy stronger currencies. So the uk would be a cheaper place to get goods from than china. so the uk could trade its way out of economic problems.

australia raised its interest rates yesterday. what did they do right that Gordon did wrong?

people make a judgement the australian economy is better than the uk so they buy the oz dollar against the pound. why is that 'caveman'? who created the uk to be a basket case? and why is australia [and nearly everywhere else] in a better position than the uk? ask Mr 'i have ended boom and bust' Brown.

but i think much of the debate is on the level of those ideologues who stormed the Exchange during the credit crunch hoping to provoke 'a revolution'.

6.

bursting of the debt bubble might be the best thing that ever happened. ..

last time it caused a world war first?

why is everyone batting against sterling? What about the whackiest currency of the lot, the dollar. A nation with the worst deficit in history, that will not cut back on it's rapidly dissapearing energy and carries on like a drunken sailor and it's currency is the oil currency, what madman let that happen. Why do we all slavishly follow the almighty dollar? If any currency was to be given some sort of economical respect it should surely be the Euro as it has maintained it's value even with PIGS in it's midst it is still a respected currency and it did not get into bed with the mad Yanks and mad Brits over property bubbles......

Two, I hope pertinent observations:

1)Anyone who thinks broad economic benefit flows from competitive 'chain' devaluations need look no further to understand their true tragic consequences than within Joan Robinson's: "Beggar My Neighbour Policies", written some 60 years back.Here she lays out in fine detail what catastrophic ramifications flowed from this competiitive devaluation spiral to the bottom in the inter-war period.

2)While forex trader publicly underwritten 'funspec' correctly may need to be adressed and critiqued, please do not forget that overseas owned businesses residing, and in some cases dominating key sectors, in the UK economy are also playing fast and loose with their sterling holdings. The UK is probaly more vulnerable in this respect than any of her main OECD competitors.

8

`..last time it caused a world war first?'

Not solely: the Versailles Treaty set Europe up for the second round. The Great Depression just created the opportunity to bring it on.

Remember: we haven't quite reached 1931 yet this time round.

Watch out for strutting men in dodgy moustaches.

What about the next step?

Economic crisis, competive devaluation, trade controls...and war

The mirror image of the Western deficits is the Chinese surplus, maintained via an artificial exchange rate to ensure high unemployment and thus avoid social unrest in China.

If this policy starts to unravel then may be creating an external enemy becomes the only way to boost the current rulers (see Argentina in 1982 and now if you are looking for evidence). And where is that pressure point for China especailly if America is blocking Chinese imports? Why Taiwan of course.

I posted somethign similar on another board about 18 months ago - sadly the odds of me being right are probably increasing. Are their the statemen to avoid this happening? I fear not as the political classes focus more and more on the next election rather than the benefit of their country.

Inflation = "too much money chasing too few goods". The description of a World "awash with cheap currency" sloshing around looking for a repository of "value" seems to fit the definition to a T.

So enter inflation and the cheap money disappears up its own fundametals.

As for the currency. Many years ago I tried a few sums to show that even if one set the same rate of tax in the EU, varying rates of inflation and currency exchange would soon lead the rates to diverge. When I put them all into a matrix, however, the exchange rates and inflation cancelled each other out over time.

So with inflation comes proportionate devaluation.

The only way out would be to increase the amount of "goods" available - and there's no sign of that happening.

Very interesting article. If the world is to split into currency blocks, the UK will almost certainly find it is under increasing pressure to join the Eurozone. That would be much more practical at our current, reduced exchange rate, but could a Tory government ever take such a step?

# 9

'why is everyone batting against sterling? What about the whackiest currency of the lot, the dollar'.

Don't worry its coming to them, well yes do worry.

Fine post Paul

The dreaded word in the era of the Transnational Corporations is always protectionism. Insofar as average wages remained pegged to the floor whilst overproduction continued apace and the only way people could survive was via debt (remortgaging, credit cards etc.) Having therefore crashed all economies, they then flooded them with non-existent cash, and now inflation and currency collapses are knocking on the door.

What if corporation tax went back up to 50%, a ceiling limit was imposed on banksters wages to a max of x3 of the median wage instead of the astronomic x400, emphasis on national production was created with % for each country in agriculture, in manufacturing etc.?

The world economy will fragment and massive dislocation will occur, no two ways about it.

This is raw meat economics to continue the caveman imagery. At least is points towards what we all suspect that what ever the political claims the recovery will have a difficult birth if not be still born. You can be sure that no matter what the economic events are over the next few months there will be an irresistible chorus from the well heeled elites for GBH to the public sector when what is needed is pan national controls on the finance and exchange 'markets' and direct management of the domestic economy. Time to end outsourcing such matters to the monetarist freaks of Threadneedle Street.

As ever you are ahead of the curve.

The politicians depend on the vast number of people not reading blogs like yours.

Pity! At least they could prepare themselves a bit better for what's ahead. But when did people matter to politicians anyway?

The endless pursuit for 'growth' is causing the damage to the UK and around the world - it is unsustainable.

Most of us probably suspect this to be the case but few will admit this.

Perhaps we would be better off setting other national macro-economic targets:

full 'self sufficiency'?
full employment?
balanced inputs and outputs?
wellness indicators?

Pie in the sky? Wait and see when things really go 'pear shaped'

Good and thought-provoking analysis. I thought I would just say that the April 2009 London summit pledged the G20 not to pursue competitive devaluations. Your graph is interesting. It took seven months for the BoE to slash rates from 5% to 0.5% - Sep08 to Mar09.The bank recapitalisation didnt work weakening Sterling further.But during this time QE was being trailed.QE then helps Sterling recover whilst the deficit increases. QE stops. Sterling then takes a dive. Extraordinarily loose QE monetary policy appears to have a major influence. Has QE maintained a falsely elevated level of Sterling exchange rate- contrary to logic by boosting demand for sterling denominated assets/bonds? Will it now seek its floor with QE closed?

#19

What you suggest (with the exception of full employment)is the only thing that makes any sense when you start to look for what will be the end game of this paradigm shift.

A good test is to look at the alternative, does any free thinking person of sound mind really find it in them to believe that the end game will be 'The restoration of world economic growth' as it was before . In the context of our huge capacity for efficiency, mechanisation and making more and more human beings who live longer and longer squabbling for less and less finite resource, well, it simply defies even the most basic of logic applied to it.

How is it then that so few people are talking about it and actively planning for what it may look like?

How is it that the world 'leaders' still talk of 'restoring growth' with an aparent conviction that this will solve all problems that borders on the religious.

Many people here already know the answer, the answer is they do that because the system sustains the current crop of ' robber barons' in a position of extreme influence and personal 'wealth'. It is not a conscious conspiracy, just human nature that these people whom control the media, financial, legal, learning and political institutions (and therefore the [people by default) will do nothing consciously to challenge the status quo unless they have no choice.

Those in the know just have to hunker down for now, prepare as best we can and wait in the wings for this to play out in the years to come.

It will be very very uncomfortable for many, it would be better if something mainstream credible and media supported alternative emerged sooner rather than later so that we dont have to wait for the existing system to collapse (with the chaos that would ensue) before we start to construct a new one.

The right ideas are all out there, there is just no way for them to break through into the mainstream, there is simply too much leveraged social, political and economic momentum behind the status quo for it to be overturned by force of intelligent reasoning alone.

The real shame is with a bit of vision, honesty and team work it is actually still possible to turn this around and create a new economic model based around a re-definition of 'value' fit for our age of advanced technology. The transition could create millions of jobs and give people a vision to work collectively for again, something positive for our children, a worth while legacy, y'know the stuff that makes you get out of bed in amorning with spring in your step.

Most of us now exist in a quasi zombi like state, the living dead, existing to pay a mortgage, striving to retire at 55 or afford 2 foreign holidays a year, a nice car and a home theatre system, then we wonder why all that still leaves us feeling empty.


There is a tangible alternative, just no way for it to get through.

21. At 10:44pm on 02 Mar 2010, Jericoa

It strikes me a lot of people have their heads in the sand.
The state has a job to do and as one of the primary jobs is to provide security. I can't help thinking that they are failing. A bunch of rich guys are playing a whistle, playing a tune, and the states are all dancing to their tune, rather than the tune the population want the band to play.

Who rules the UK, the band - the people who elect the government, or some other group? It's like terrorism without the violence as the initial manoeuvre. How many people will be unemployed? How many of them will be middle-aged with mortgages thrown on the scrap heap this time, how many will be under 24s and left with ruined futures, how many will be new graduates up to their eyeballs in debt with the broken promise of eduction leading to a better life?

There will be lots of angry people in this country, yet it all seems to be ignored; we had Willets on the Channel 4 Political slot 'The Conservative Party: David Willetts MP talks about an innovative new website that he says will help to inform and inspire young people about their Higher Education choices.'

We do not need another website to inspire people - it's like the 'Why Don't You..' TV programme we used to have years ago. Remember. I do.

Why don't you learn to canoe, climb a mountain, buy a saxophone and learn to play it, take up go-karting - mum and dad can't pay the electricty bill so I'll not ask them to take me there this month!

Inspire! We've got more than enough websites to inspire each and every one of us. Why another? Will there be jobs at the end of an expensive education for the kid growing up on the housing estate? And the best a politician can do is come up with a bleedin' web site. How productive is that? Can we export it Mr Willetts? Does it have the kind of inspiration accompanied by an MPs expense account for each kid who finds it so inspiring they can afford to follow the inspiration? Or is intended to inspire only for those who can afford a computer and broadband? Yes or no? If it is no, then please, sit down and shut up while we look for someone who will roll their sleeves up and get down to some serious political and economic work!

I suppose it means the politicians have given up telling us what shape a banana should be before we can eat it, and are struggling to think of some other useless thing to do as they try to con us into believing they take their jobs and their responsibility to each and every one of us seriously.

A website on the run up to an election! Even Mrs Thatcher, during her most insane moments wouldn't have had the brass neck to think that would get her elected! The ambition is of truly shocking proportions. We'll have a better chance putting Blue Peter in to govern and saving the nation - with extra rolls sticky back plastic!

Whats going on here is pretty obvious. You just have to understand that the government is not some magical organisation out for the good of the nation. The state is a group of individuals who, like everyone else, are out to improve their own positions. Unlike the rest of us though they have 2 very special powers.

1.) Taxation (The seizure of resources through force)
2.) Counterfeiting (The dilution of the money supply)

In the past 2 years the state in an effort to preserve itself and its favoured banks (which it needs to counterfeit and underwrite its bonds) has printed MASSIVE sums of money.

Like any good bananna republic their next step is to try to stop the public from getting rid of the cash (which is sure to lose value) and thus quickening the effects of the inflation. To do this they are quite likely to

1.) Blame evil speculators (a gullible public will generally fall for this, not suspecting that the massive sums of money printed out of thin air has anything to do with it)
2.) Attempt some to place some form of capital controls (e.g. Tobin Tax)
3.) Enact Price controls (Prevent certain industries from charging more than a given price for a product or service... This, of course, always leads to shortages)

The establishment will, all the while, say this is for our own good. If you listen to them, you will go broke. The Pound is toast. The state is going to inflate it into oblivion. If you have any sense you need to get your money out of the UK ASAP before the govt attempt to steal the rest of its purchasing power.

The only way to stop this is for the central bank to stand up to the state and not monetize the debt. Since they're main function is to subsidize the government and the big banks I would be shocked if they do this.


PS
For those who think that a weaker pound will help the UK... Please wake up. It will help the state, no one else. Inflation destroys the accumulation of capital and distorts the flow of capital in the economy. The dollar index went from 90 to 70 (priced in gold it went from 200 to 800) between 2000 and 2007 and its industry was GUTTED in that time.
If a weak currency helped an economy Zimbabwe would be the worlds best exporter.

Tell me, please, that I am wrong.

Pondering the World awash with cash (chasing too few goods) I returned to bthe question, often asked on these blogs "where did the money come from?"

We know the answer, most of it was conjured into existence by the banks - who lent more and more money on ever increasing house prices. this money wnet back inton the banks - and was lent again. meanwhile all the homeowners had bigger and bigger mortgages and were paying more and more of their future income to service them. The money came from our future earnings.

Second, who now owns that extra money, and is busy running round looking for somewhere to put it before it devalues? Not us! Is it not the same banks and the other financial service people who persuaded us to take out ever bigger mortages in the first place?

If so, is the logical conclusion that we have all been conned out of our future incomes? And is the only way to get our money back an inflationary spiral which erodes the nominal value of those mortages while fueling wage increases?

Only asking!

The New York Times had an interesting article yesterday on the coming UK debt crisis.

They seem to think that the BOE has been buying up most of the UK debt and keeping interest rates artificially low in order to prop up house prices. They also think it can't go on much longer and that interest rates will have to rise sharply.

Britain Grapples With Debt of Greek Proportions

Paul

'So the real endgame comes when countries realise devaluation is a dead end and go for the only escape route left, which is actual physical trade protectionism accompanied by the creation of currency blocks'.???

These penultimate comments really worry me - the old spectre of 'protectionism' being raised by someone who speaks with authrotiy, but perhaps lacks knowledge of what 'free trade' now means.

I suspect you are still stuck in the 'trade as corn and widgets' mode ie primarily trade in goods. Your reference, though it maybe not literal, to 'actual physical trade protectionism' suggest this is the drift.

But 'trade-in-services' is the much bigger deal, as a part of effectively binding trade commitments (though kept out of the trade agreement limelight, which is pretty much hidden behind bushels anyway)

Trade in services is ALL about deregulation - so must be read in that light. And the most key part of 'services' is financial services. So - surely if financial deregulation is key to the current central thrust of free trade - you should not be using the pat 'anti-protectionist' rhetoric so easily.

International Financial Services London must have a right larf when they read what you say. They spend all their time in secret meetings, aided and abetted by BIS officials, working out how to push forward this services deregulation agenda and there, you do it for them!

I hope you are getting the idea that what you say is not just sloppy but very damagingly sloppy.

As if financial services is not enough, a further VERY important aspect of 'trade' is now the movement of workers from cheaper labour countries to higher wage countries - a total commodifying of labour, and obviously heading towards undermining labour conditions, (forever?). The fact that this part of the trade agenda is kept REALLY seret does not unfortunately, mean it isn't there. Or that its not your job to take account of it.

The import of cheap foreign labour is currently a submerged irritant, effecting sporadically or at least seeming that way because of the failure to report it. But accepting the right of transnationals to work this one on UK labour, and bring in cheap labour as they like, will become a mainstream international trade obligation once signed up in 'anti - protectionist' trade agreements.

Now is this really all to be so casually given the go-ahead by your remarks, which are presumably just ill -informed (if not the implications are far worse). Perhaps you think its such safe 'common sense' that you dont actually have to think about it. Actually I suspect someone has been in your ear - getting you to spread the hegmeony - without you realising it. Gramsci dear boy, Gramsci

Re tFoth

'If so, is the logical conclusion that we have all been conned out of our future incomes?'

Of course we have! Artificial credit has committed future earnings for far too far into the future than is economically sensible and the 'toxic debt' still has to be expunged from the system. Goodness only knows how that will be done. Certainly not me - nor the politicians.

On another tack. Investment banks have given bankers huge bonuses on the enormous profits they have made. All the investment banks do this.

Two questions.

1. Where do all these profits come from? What is being traded by who (on both sides) to create these profits so that the banks can dish them out to the 'highly skilled traders' who manufacturer these profits?

2. Why doesn't the 'market' operate to moderate the payments to lower levels? Surely new entrants should be able to join in and operate at lower costs?

3. Lets legislate to pay bonuses at a flat rate per successful deal rather than as a % of 'profit' made. I don't see why dealer should be paid more just because the numbers are bigger.

I know that's three but the last one isn't a question it is a suggestion.

Thanks Paul

Maybe soon we will be able to pay for our McLifestyle with McPounds:



Meanwhile if your philosophical journey is still seeking a post-critical solution to the use value/ exchange value conundrum then John Gribbin may be up your street:

s_Kittens_and_the_Search_for_Reality

Reflect a little on the impossibility of access to absolute time ( see also Stiegler) then benefits to Goldman et al of adopting the 'transactional interpretation' in their front-running approach to market making may come clearly into focus?

#26 stayingcool: -

I have read your post several times and, sorry - perhaps I am just not bright enough - but I don't have a clue what you are talking about?

Are you for or against protectionism? Are you for or against free movement of labour? Or services? You appear to have something very interesting to say but can you please explain your point in simpler language please?

Secret meetings? A bit too black helicopter and lizard people controlling the planet for me personally!

The fundamental problem with the free trade of financial services/banking is that the people who want it are the people who profit enormously, arguably obscenely from it... and they usually do so by outsourcing, off-shoring and movement of companies and jobs to the detriment of tens, if not hundreds, of millions of people.

I think Paul is right and sooner or later countries are going to realise that allowing the so-called 'free' markets to always pursue the cheapest labour in order to maximise profit actually does significant long-term damage to the countries that lose those industries, that lose those service sectors, that lose those jobs.

Trade protectionism will become job protectionism - they are one and the same. How we, so dependent on financial services, will fair in all of this will be interesting.

'Hopefully we are past the era of market fundamentalism where it would be seen as blasphemy to suggest anything but "the markets are always right".

The real question is - even if the markets are "wrong" - can states do anything about it?'

That's the really scary (irrational) issue in a nutshell.....but....hold on.. what if market fundamentalism was/is the policy?

#25

very good article you refer to, thanks for that. Funny how such views never seem to get reported here though in the mainstream...well we would not want the public to panic and start opening bank accounts in Chinese yuan now would we.......

#28

Ah, Schrodinger's cat and the use value/ exchange value conundrum!

Money is indeed not the same thing as REAL value. It CAN and DOES get disconnected from reality now and then (and more often than politicians will admit - just working my way through Reinert & Rogoff's This Time is Different).

Seems a bit like an inverted version of Scrodinger's cat:

- At any one point in time, Money is neither real or imaginary (it is
actually capable of being both at the same time)

- So long as everyone believes it is real, it can be treated as if it is actually real (i.e. paper promises can buy REAL goods /services)

- However, if there is a lack of trust in the acceptance of the money(e.g. repayment in physical terms) then the value of the money will evaporate before your eyes

From reality to imaginary in a puff of smoke. We have a monumental credit system layered atop an already debt based Fiat money system. Therefore rendering the modern concept of money as nothing more than a mere faith.

Why else do politicians keep saying that we need to pump "confidence" into the economy to restart it?

Alas, the real engine of economic wealth is black gold, Texas tea......

11. stanilic 'Watch out for strutting men in dodgy moustaches.'

Can we count on you to explain to them why their statist intervention in 'the markets' will neither be necessary nor helpful?

32. Hawkeye_Pierce ' - So long as everyone believes it is real, it can be treated as if it is actually real (i.e. paper promises can buy REAL goods /services)

- However, if there is a lack of trust in the acceptance of the money(e.g. repayment in physical terms) then the value of the money will evaporate before your eyes

From reality to imaginary in a puff of smoke. We have a monumental credit system layered atop an already debt based Fiat money system. Therefore rendering the modern concept of money as nothing more than a mere faith.'

Yup, and from the 60s onwards, social-science courses in the USA (and over here) started to promulgate the myth that perception is reality. Guess which group predominantly peddled that? These subjects now are also predominantly female. Over the years, those who fought the verbiage of 'cognitive science' gradually disppeared too.

Behaviour(ism) (and reality with it) along with good science, slowly started to disappear. This is why we have what we have today - it was good for sales to the stupid.

Seriously. Keynesian economists starting going AWOL too. Look at who replaced them.

Tawse57 @ 29

Sorry if this was obscure to you.

Unfortunately, contrary to what you say, Paul says nothing here about:

'sooner or later countries are going to realise that allowing the so-called 'free' markets to always pursue the cheapest labour in order to maximise profit actually does significant long-term damage to the countries that lose those industries, that lose those service sectors, that lose those jobs' ,

or not that I can see.

What I am pointing out is that he throws out in this piece an inherent criticism and warning about 'protectionism' but wihtout seemingly taking account of the fact that movement of cheap labour is now inherent in the free trade agenda.

So - you want it or you dont want it?

Beyond what you say about jobs going overseas, offshoring, and companies moving offshore, it is now included in trade agreements to allow companies to bring cheap workers into a country such as the UK. This is called Mode 4 in trade language.

So - should someone who is being listened to (Paul) be throwing out random, undifferntiated reamarks against 'protectionism'?

Similarly with financial services - as the free trade agenda is now PRIMARILY about financial services DEREGULATION, is it wise or logical to be talking up regulation on the one hand while throwing out random negative remarks about 'protectionism'on the other, when protectionsims is, per se, the antidote to deregulatory free trade in financial services???

'Protectionism', painted as a global bad, is a con. So why fall for it?

Sorry if you dont agree that there are secret meetings. As Ive been in some, what can I say? Don't you ever wonder by what processes a govt that is supposed to work for the population actually works against its interest and in the interests of transnational capital? And better still cons us into going along with it? Does it just happen on a sunny day? Or are some people paid high wges to ensure its that way? Now which is most likely? Such things do take quite a bit of planning.

The reference to Gramsci - about getting us to accept their version, as natural.
I call on Paul NOT to be part of it, even, or perhaps especially, inadvertently
as he appears to have been here in realtion to his random remarks about 'protectionism'.

Hope that helps

BYW - 'how we fare' can be an active, not just a passive process. And one in which media people have a key role - if they get it right.

33 Statist

Indeed we can. Arbitrary power is unacceptable whether it be at the hand of a supposed `market' or at the hand of a tyrant. Both add up to the same thing: an attack on the public liberty.

We should understand by now that a `market' is a mechanism which has no moral authority. It is the public liberty that must be sovreign.

32. Hawkeye.

The upshot of Gribbin is the impossibility of drawing a line between reality and belief. They inextricably pollute each other. You get to choose your mythology along with attendent logos and it's inherent ethos.

Incidentally Gribbin's commentary supports the Soddy thermodynamic view of economy.

I guess cheap travel and communication makes anarchism inevitable today?

But is it entropic? Realistically, that's what my post at 30. is really asking. We make out that the technology has been for the better, but has it? Has it taken control at all our expense?

35. At 3:28pm on 03 Mar 2010, stayingcool

Secret meetings remain secret so we'll never know for sure.
But the signs are there.

If you've really been in any of these meetings, should they have happened, then blow the whistle properly.

36. stanilic 'public liberty... moral authority. It is the public liberty that must be sovreign.'

Are you going to explain to them what 'liberty' and 'moral auhority' actaully is and how it helps them find work and food? I fear they'll just brand you a subversive, i.e assert that your talk is the very reason that they're needed :-(. There will be millions scared out of their wits who will agree with them. That's the way it's always gone in the past. The masses will be calling for a father figure to protect them against the slings and arrows of outrageous economic misfortune, not a liberal, equalitarian/all understanding (but in the end, helpless), mom.

I have been in secret meetings too. Oops, darn it! ;-)

I argue all the time that the focus of our public policy must be to ensure that get people work and food. This is essential to any assertion of life.

Any assertion of life must ensure liberty as it is through being free to manage their own lives that people will generate more work for themselves and thus more food. This is all about allowing people to take control of their own lives.

Within the conduct of those perfectly reasonable affairs people will develop their own standards of morality to govern their relationships. Those standards will be based on mutual respect.

I find it difficult to understand how anyone can think in any other way. This requires no -ism or dogma it is about allowing human life to be, well, human.

There is sufficient historical and anthropological evidence to support this case. There are the irrational fears of the crazed mob so beloved of wealthier people with the agenda of protecting their own interests, little realising that it is those interests that caused the problem in the first place.

I appreciate we live in maddening times and it is easy to get cynical but to recall the words of the FDR `we have nothing to fear but fear itself'. By all means let us engage in responsible argument and debate as this is the way we will drive our society forward and eventually find the correct prescription to resolve our current difficulties. However, this will not be achieved by devoting ourselves to dogma: that is precisely how we got into this mess in the first place.

A very interesting post. If understand it right, the implication is that the UK faces a contradictory position - it needs to sell UK bonds (Gilts) to finance its significant public sector deficit - the result of bailing out the banks in particular and of the falling tax and increased public spending associated with recessions in general. But at the same time, it wants stirling to fall to make our exports more competitive.

So foreign investors are being asked to buy Gilts which are likely to fall in value. The danger is that they will demand a higher interest rate for doing so, to cover them against anticipated falls in sterling. This in turn will force up UK interest rates, squeezing growth.

My doubt about Paul's arguement is, how far we can generalise from the UK's position to that of the rest of the world? We can learn from history - but our future will be both similar and different to the 1930's. We can perhaps see the pressure on Toyota and Sony as part of a brewing trade war. But the relations between the Euro, dollar, Chinese renimbi and Yen are the key to forex markets. I'm not so sure about stirling.

#37 SS

Cheers for the link to Soddy. Is this contained within the book "Schrödinger's Kittens"?

Just doing a quick search I came across an article "Embodied Energy and Economic Valuation" by Robert Constanza. Will read this on the way home, if I can just tear myself away from a curious thread about criticisms of Einstein's Special Relativity:

#44 hawkeye

Gribbin updates the Newtonian physics which underpin Soddy's arguments. He doesn't discuss Soddy , you have will have to make your own inferences. He does discuss Einstein though.

Tawse57 @ 41

I didnt say secret from my persepctive

Wasnt much point in re explaining anything to you eh?

Don't ask again

State subsidies to the banksters is a form of protectionism. The issue is who gave what and how much in relation to the other. From the moment that was breached then all the previous directives on protectionism are thrown out of the window. If budget and monetary rules eg the EU's stability pact are meant to be broken, then why follow any rules when there are no sanctions? The world economy is unravelling and coming apart at the seams.

More importantly and a question most economists don't ask is the issue regarding the destruction of value. Where can you get change from buying a Big Mac Meal, a house and only spending $5? Detroit, that's where according to todays Guardian althoug old news by about a year as it circulated on the net. One day the media will deal with the reality on the ground, instead of just focusing on fictitious capital and its problems of not being able to generate fictitious profit as before the ...crash.

#28 supersnapshot

use value/ exchange value

Remember Marx never looked for absolute universal truths.
His analysis of value was very much tied to capitalism.

In respect to use value, there is no universal measure of it.
It is 10 tons of steel, 1,000 miles of railway line, etc.
No moralistic judgement is used.

Similarly, for exchange value, no judgement is inferred.
But the difference with exchange value relative to use value, is one unit of quantification - money.
And behind money the only thing that all commodities have in common is labour.

But there is also value, which is distinct from exchange value.
This is when exchange value in the aggregate becomes divorced from the aggregate labour value.
A good example is an asset price boom fuelled by fiat money.
The ficticious capital I keep referring to.
The aggregate exchange value is greater than aggregate labour value.
Or, in other words, paper money & reported profit rates have become divorced from the fundamentals of the real economy.

Of course it's pretty much impossible to quantify the discrepency.
How much does capital need to be devalued to restore profitability?

Judging by history perhaps more than the combined destruction of both world wars.
But even this might not be enough as oil & increased labour productivity were very much part of the post war economy.
If anything productivity looks like its going backwards with the end of cheap oil.

Which takes me on to Rosa Luxemburg & her analysis on the importance of looting for capitalism to be able to grow (& so survive).

Only in a post capitalist society can we meaningfully discuss the 'value' of certain economic activity.
And at the end of the day the activity will be deemed worthwhile by the people expressed through councils.

# 37 supersnapshot

"The upshot of Gribbin is the impossibility of drawing a line between reality and belief."

How close is this to Wittgenstein's Philosophical Investigations?

I'm not a philosopher & don't pretend that I fully understand Wittgenstein, but reading him it was as if he had put into words what I intuitively felt about philosophy - that it is essentially the misuse of language to create a problem that cannot be answered & so entangle us in a web.

Using science (essentially observation) we can construct theories (explanations) which we then try to disprove through more science (observation).
Explanations evolve over time with the science.
In this sense we can never say we have the absolute truth.
We just have better explanations than others.

And when it comes to economics we also find that the explanations of how the economy works are coloured by class propaganda, e.g. the current concept that Greeks (& the British) have all lived beyonds their means & need to worker harder, longer & for less.

49. At 9:36pm on 03 Mar 2010, duvinrouge wrote:
Using science (essentially observation) we can construct theories (explanations) which we then try to disprove through more science (observation).
Explanations evolve over time with the science.
In this sense we can never say we have the absolute truth.
We just have better explanations than others.

There is one thing you don't mention here. After gathering enough evidence, scientific theories can stop being theories, they can become fact.
ie, It is a fact you digest and absorb food in your stomach and intestines. It is a scientific fact your DNA is electrically charged (negative) and the blueprint to make you is your DNA. That is a no longer a theory, it is a fact.

The class propaganda is worrying. We'll have the poor told to struggle even more, suddenly the poor had no reason to buy a house. "After all, what would the poor being needing with a roof over their heads?" It seems to be the one thing that too many people are pointing at but know they can't humanely say. I've seen one or two commenters suggest (not here on the ±«Óãtv) that yes, indeed tents may be suitable accomodation for some. It's -2 centigrade outside right now and people are seriously suggesting we house the poor in tents for the sins of those who ran this economy - I could cry - that even one person would suggest this.

50. copperDolomite 'The class propaganda is worrying. We'll have the poor told to struggle even more, suddenly the poor had no reason to buy a house.'

Is it possible that 'the poor' is just a euphemism for the class (category) of people who are not naturally very bright/skilled?

What does the science say here? For example, did countries North of the equator become richer, and more productive, because the 'poorer' people died out?

#50 copperDolomite

So was Newtonian physics a fact?

There was a theory that the sun went around the earth.
Now we have a theory that the earth goes around the sun.
As remote a possibility as it is we may find in the future that the whole universe is centre upon the earth & we are back to the sun going around the earth.

Isn't a fact simply a theory that hasn't been disproved (& has plenty of evidence to support it)?

#45 SS

I'll take a closer look at Gribben, thanks. Does this mean that Gribben sides with Essen's view that Special Relativity (SR) was a swindle (see link in #44)?



Did Einstein also help to "promulgate the myth that perception is reality" (courtesy of Statist)?

Not read the full piece, but this excerpt from near the bottom of the page is intriguing:

"Later, when SR was sacrosanct, Essen maybe forfeited a Nobel prize for his caesium clock due to his criticism. He revealed that Sir Ernest Rutherford and Sir Frederick Soddy regarded SR as 'a joke' and 'a swindle' (hoax?) This is surely relevant to Einstein's strange absence from his Nobel award ceremony in 1921, seen as a rebuke to the Awards Committee who also rejected Relativity. A more likely reason is that Einstein, now world famous due to Eddington's eclipse fraud, could not risk another Michelson experience in a public showdown with the hostile Soddy, the other 1921 Nobel recipient."

48 Duvinrouge,

Marx was radical in his day, but as John Caputo says "he chased away one ghost too many "

When you dissolve the concrete idioms of "commodity" and "labour" then the logic starts to dissolve.

Derrida - Spectres of Marx
Keen - Debunking Economics
Stiegler - Technics and Time
Caputo - Tears and Fears

These where my way in to smudging out the dichotomy, I guess there are many others too.

53. Hawkeye_Pierce 'Did Einstein also help to "promulgate the myth that perception is reality" (courtesy of Statist)?'

You'd be better of of starting with spin-doctors like Jerome Bruner (and chums at Harvard in the late 50s and 60s). In essence they (ra6ther typically, as they have a 'language disorder' ;-)) 'plagiarised' and reversed/translated what smarter folk had done before them, i.e these 'muppets' psychologised mechanical logic!

(that's a pearl you know....;-)

#55 Statist

And as antidote, do you prescribe a hearty dose of Quine (Word & Object)?

56. Hawkeye_Pierce 'And as antidote, do you prescribe a hearty dose of Quine (Word & Object)?'

There are many logicians of that ilk who would do. The real point to grasp is that logic is computational and mechanical, not psychological. That's something which shouldn't take much effort to see....if one only looks at one is doing. The aforementioned charlatans droned on and showing how people are poor computers - especially 'girlie' people. How they got away with it bemuses me (and sometmes depresses me) as they have done much harm whilst making fame and fortune.

If we consider gold as the ultimate currency:-
Sterling was the inverse of 606 Oz/GBP in April 2009, it is now around 750, for a drop of 19%.
This is IMHO a better comparison, as the US dollar has also depreciated over the same period.
Comparing against gold could be considered as an absolute comparison, whereas comparison against the US$ is only a relative comparison.