Same old Keynesian shrill....we have to spend more money we don't have on more unproductive investments we don't need....which will again deplete what wealth we have left.....The Caviliers of Finance never change

Our economist overlooks the fact that demand still exists even in the absence of financial means.

As any immigrant from a socialist country will tell you, America is the land of opportunity. If someone won't give you a job, then you make your own opportunities.

http://www.youtube.com/watch?v=jbkSRLYSoj Life has never been so good on this planet for the masses wrt health and wealth. The US overbuilt and soon enough, the demand will meet the supply. Capitalism means recessions, it's the price of admission. All in all there is no known better way we can get everybody contributing to the problem of hunger shelter snd clothing.

Mr. Roubini is correct in his diagnosis. It is clear that the world's financial system is crumbling. It is not just one country that is feeling this. Rather, the crisis is felt worldwide. Our economy is showing us to what extent we are connected. We see how what happens in Spain and Italy impact all of Europe and how the collapse of the financial system leads to social and political unrest. It seems the world is in complete chaos and no one knows how and where to act. Could more jobs or more financial stimulus really be the answer? It seems to be that the real problem is the foundation on which the entire economic system was built. Rather than looking out for the well-being of society, this system was built to benefit a small minority. Perhaps it is time to start looking at the economy as a means for providing life essentials to all. Maybe if we structure and begin using the financial system in this direction, we will see how things will begin to normalize and stabilize. 

Crony capitalism and Socialism are NOT capitalism. Both of the former are doomed to fail whenever they are tried.

Capitalism is not only the free flow of goods and services, but the free flow of INFORMATION: the price signals that supply and demand convey. When you choke off the free flow of information, the economic system is bound to fail.

Where is the mystery in that?

Marx was not only wrong, but he was a complete leech on society, borrowing the money from Engels to burry his own daughter.

Do we need to follow or listen to role models like that? I think not.

You can safely trash Marx, his progressive followers, and Nouriel Roubini's advice.

They and it are the problem, not the solution.

I agree the globalization is a cause of the present economic problems. On the other hand, I think they would not be solved just by increasing the productivity, because there is not just a competition between two similar economy types, but between two different political systems. There is a battle between China and the rest of the world. Many years of tradition, education, and discipline are involved here, which would be a true handicap for a free system to compete. I think the battle is so unbalanced that just restrictive rules would protect the capital to go out the border, and would restore the prosperity, and the economy health.

I disagree with the insightful Mr. Roubini. The way to future prosperity is to limit governmental regulation, make everyone a stakeholder by creating a universal flat-rate tax code, eliminate the mortgage tax exemption and force the government out of the home mortgage business. Force government to liquify its natural resources holdings and all land currently controlled by the BLM.  Force the government out of the education business. The list goes on...

It's not Marxism per se, it's centralized Authoriatrian--too big to fail-- government that is the problem.

Finally, we are getting somewhere. philgrimm has an excellent point about government debt and the divestiture of public assets. i.e. consumers should pay for services such as roads, hospitals, education etc.

I would only disagree to the extent the miilitary is involved as protection of the state cannot be left to opinion polls, debate and pay per use. Such action would result in eventual demise of the state. 

And can I have a pony for Christmas, too?

This economic crisis is just the result of an accounting error.  If the wealthy and corporations were taxed enough, held accountable, and the money redistributed down to labor, none of this would have happened.  That’s why the post WWII years were so good.   

Money is demand, and wealthy rentiers, since about 1980, were allowed to accumulate, and are still accumulating, all the money.  So demand is increasingly squeezed. The Producer-Consumer problem is a simplified version. See: http://anamecon.blogspot.com/2010/07/producer-consumer-problem-again.html

 But now that rentiers control the world’s governments, collapse may be inevitable. Remember the story?  They killed the goose.  Our masters have so much power they can no longer do the right thing, even for themselves.  So concerned with preserving their money, mere nominal wealth, they let the real economy, the foundation of their nominal wealth, go to hell.  They can only do wrong, to all our great harm. Pathetic, really. 

 Marx said capital would drive out labor, and so destroy its own market, as well as any wealth labor, or even the middle class, might have.  Marx said this would happen with unfettered capitalism. As far as I know, he didn’t have much to say about banks and governments, which are complications. But now that governments are the creatures of capital, they, and the people they ‘represent,’ are no longer a hindrance to the fulfillment of his prophesies.  See: http://anamecon.blogspot.com/2011/08/some-homage-to-karl-marx.html

 Just another problem as we approach the end of oil and Malthusian limits, and throw in global warming, etc.  This shows just how little the system, capitalism or what ever it is, is capable of dealing with reality.

It is outrageous how the notion of unfettered capitalism (deregulation, reduction in taxation and government spending) which have led us to this economic abyss continue to be touted as the solution to our economic problems. Why do these ideas continue to have currency and why is their failure not being examined in our critical discourse. Slavoj Zizek insightfully points out that when communism collapsed in Eastern Europe the politicians blamed the collapse on failure to adhere strictly or purely to their failed ideology. He observes that capitalism is clinging to its failed economic policies just as the communist countries in Eastern Europe clung to their failed economic policies. The Tea Party continue to advocate for less regulation , less taxes, less government as the once virtuous circle morphs into a death spiral.

Advocates of free markets argue that interference in the markets lead to misallocation of capital and mis-pricing of goods. Ironically one of the important functions of market regulation is to ensure that goods are priced correctly. Regulation in the financial markets  ensures that risk is priced correctly and in the goods market, environmental and consumer regulations ensure that good brought to market reflect their true costs. Deregulation is not healthy for markets in the long term and confers unfair economic advantages to some groups over others.

Those who advocate less taxes and government spending fail to recognize that government is an important and essential part of the productive economy of any country. The infrastructure created by government is an essential aspect of wealth creation and must be funded.

We need to start having more critical discussion about debt. Is all debt bad? Is all debt the same? Debt used to fund present liabilities is not the same as debt used to invest in capital with long term returns. Some debt generates economic activity, some debt constrains economic activity. We need to find creative ways to expunge debt that constrains economic activity and perhaps introduce the concept of usury back into the lexicon. Contrary to those who clammer for higher interest rates, consumer interest rates are not reasonable or cheap.

God I hope capitalism is doomed.  The term "capitalism" is a Marxist creation.  We need to move toward something higher, that values the individual and does not deify corporations, governments and other vehicles for collectivism.  I wonder if the unlevered world of Jefferson and Adams is not the answer, a more localized world that is still able to benefit from technology and trade, but not in a way that is destructive.  Keynes was right to question the value of global capital flows, especially when the debtor controls the means of exchange. 

Nouriel Roubini claims to reject both Anglo-Saxon neoliberal and European welfare-corporatist models but offers in their place a mix of the two. He applies a lot of Keynesian hot spice but barely a sprinkle of Hayekian herb. Rather than take Marx he should draw on Weber's and Schumpeter's reworkings of Marx. Capitalism's capacity for self-recovery is the most remarkable lesson of theory and history. The self-destruct tendency might be softened if only economists and politicians would let the patient get better. Dr Roubini, your invasive policies are not the best way. 

http://tandf.net/books/details/9780415694452/

There are two real problems: complexity and carbon.  Easy carbon is over, and since that occurred, the world economy is hostage to it.  Energy prices drove the big crash, draining air from the bubbles.  They impede each halting recovery, going up when people make more things, then driving down people's ability to purchase them.  Nothing gets solved without addressing this.

Complexity is vulnerability, as mathematicians at MIT have proven.  The global economy is too complicated for anyone to realistically understand or analyze, and those who even get close cannot accomplish anything, as the diverse and contradictory greeds and appetites of nations, regions, and individuals cannot be reconciled, no structure exists within which to do so.  Some methods of simplification will either have to be found, or will eventually impose themselves, with serious attendant unpleasantness.

Idealists and idealogues of all stripes who fantasize about the return to some rugged individualistic Golden Age of unfettered greed and the further unleashing of the forces that have looted our society already, or some perfect mechanism that can be arrived at by essentially random collections of citizens and politicians, all of whom are partially responsible for our dire circumstances... fail to address the real issues, and cannot be right.

It’s true that “To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods.” The problem is that nobody knows what that balance is, for the simple reason that the world is more globalized than ever, making the balance trickier and more elusive than ever.

As you said, “Currency depreciation is not a feasible option for all advanced economies: they all need a weaker currency and better trade balance to restore growth, but they all cannot have it at the same time. ...Currency wars are thus on the horizon.” But not just currency wars. In the 1930, “Unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability” led to the global carnage known as WWII. In all honesty, are we really that far from Round III?

As I see it, the only way to avoid that horrifying scenario is for all the members of the G20 to sit down and begin with something they’ve never tried before: acknowledging each other’s needs. Afterwards, they should try to establish a first-ever global financial and fiscal policies, at least when it comes to tariffs. Since we’re living in a globalized world, we need to think globally, not nationally. When participants of the G20 begin to work together, it will provide the battered establishment with the public support it needs to actually execute its decisions. I think that in today’s world, economic stability is not so much a question of the economy leaning toward capitalism or socialism, but more on the question, “Have we determined our policy in sync with the world or alone?”

Mr. Roubini's prescriptions are valid, but can only take place after, not before, there is a breakout from the encirclement of deficit financing and austerity measures to address the double envelopment of America's past, present, and future liabilities. This breakout can only be accomplished by an asset-based approach.

Though Keynesians consider gold to be a "barbaric relic" it does not make it so. The American Gold reserve, 8,133 tons, without a gold standard, has a commodity value of $400 billion at $1,500 per troy ounce. If monetized or securitized with a 10% cover ratio, this gold reserve will yield 4 trillion inconvertible gold notes, effectively $4 trillion. These debt free gold notes, separate and apart from Federal Reserve Notes in general circulation, can be used to amortize or re-purchase foreign creditor debt holdings. In the case of re-purchase, debt interest payments become disposable income, perhaps $2 trilion per decade, depending on interest rates.

Benjamin Franklin actually preferred land backed currency to the precious metal-backed kind. He successfully argued for its adoption in Colonial Pennsylvania in 1729, and later printed this type of currency. His example was later adopted by the French and Germans in subsequent periods. The United States possesses 700 million acres of public land with mineral estate i.e. oil, natural gas, coal etc. With a modest valuation of $10,000 per acre, the land will yield $7 trillion at a 100% cover ratio; $14 trillion at a 50% cover ratio; and $28 trillion at a 25% cover ratio. The contra-lateral proof of this approach exists in the practice of gold banks which lease portions of the U.S. gold reserve for 1%, in turn, securitize them into a $6-7 trillion annual gold market.

With $32 trillion on hand, America can tame its debt and unfunded liabilities with enough money left over for robust human capital development, public investment, and tax holiday for the populous and business.

These propositions require no borrowing, taxation, or over-issuance of fiat money, and are thus perfectly suited to America's feckless body-politic. For more details visit "Obama Memo#8; A $32 Trillion Proposition,"  The Coming Crisis blog, June 1, 2011 

PS: A reduction of the gold cover ratio of Euros, from 15% to 10% would produce 1/3 more Euros, separate from those in general circulation, with which to deal with the Eurozone debt and deficit crisis; with a lot left over for public investment, tax reduction and human capital investment.  

Bethel 06:22 16 Aug 11

Mr. Roubini's prescriptions are valid, but can only take place after, not before, there is a breakout from the encirclement of deficit financing and austerity measures to address the double envelopment of America's past, present, and future liabilities. This breakout can only be accomplished by an asset-based approach.

Though Keynesians consider gold to be a "barbaric relic" it does not make it so. The American Gold reserve, 8,133 tons, without a gold standard, has a commodity value of $400 billion at $1,500 per troy ounce. If monetized or securitized with a 10% cover ratio, this gold reserve will yield 4 trillion inconvertible gold notes, effectively $4 trillion. The contra-lateral proof of this approach exists in the practice of gold banks which lease portions of the U.S. gold reserve for 1%, in turn, securitize them into a $6-7 trillion annual gold market.

These debt free gold notes, separate and apart from Federal Reserve Notes in general circulation, can be used to amortize or re-purchase foreign creditor debt holdings. In the case of re-purchase, debt interest payments become disposable income, perhaps $2 trilion per decade, depending on interest rates.

Benjamin Franklin actually preferred land backed currency to the precious metal-backed kind. He successfully argued for its adoption in Colonial Pennsylvania in 1729, and later printed this type of currency. His example was later adopted by the French and Germans in subsequent periods. The United States possesses 700 million acres of public land with mineral estate i.e. oil, natural gas, coal etc. With a modest valuation of $10,000 per acre, the land will yield $7 trillion at a 100% cover ratio; $14 trillion at a 50% cover ratio; and $28 trillion at a 25% cover ratio. With $32 trillion on hand, America can tame its debt and unfunded liabilities with enough money left over for robust human capital development, public investment, and tax holiday for the populous and business.

These propositions require no borrowing, taxation, or over-issuance of fiat money, and are thus perfectly suited to America's feckless body-politic. For more details visit "Obama Memo#8; A $32 Trillion Proposition,"  The Coming Crisis blog, June 1, 2011 

PS: A reduction of the gold cover ratio of Euros, from 15% to 10% would produce 1/3 more Euros, separate from those in general circulation, with which to deal with the Eurozone debt and deficit crisis; with a lot left over for public investment, tax reduction and human capital investment.  

Everyone here is thinking too inside the box. this policy, that policy...

What we need is a single world currency to end this capital fleeing the country game and reactivate local economies.

Ahhh, looks like the good doctor read our commentary, published on Monday: SRI This Week - http://eepurl.com/fd3BE

I think there's more to the comments than to the subject matter:  veronica1979: I submit that you've diagnosed the sympton and not the cause, go deeper. You say perhaps its time to... this is a normative response and requires someone to do something.  I ask you, by what authority does that someone have to act and by what standard are their actions to be judged as just?  This is the problem with any command system such as communism, socialism, facsism, vs. a demand system such as lassiaz faire capitalism.  See stepan1 who's on point relative to how justice is served up with the pricing mechanism, i.e. what should be produced and what are you willing to give up (vs. confiscated) to obtain that good?  sco: I would argue that globalization is not the cause of our economic probems but the delivery mechanism.  The cause is much more complex and is generally speaking a result of free flow of goods and capital corrupted by command style insertions (thus "mixed" economy), the details of which will earn someone a doctorate;  to Charlesst: I submit that you have the cause/effect backwards - pent up demand was the reason for economic recovery after WWII (and significant inflation btw) and strengthening unions took advantage as there was plenty of excess weath made by their employers with little in global competition - this process now in reverse and the leverage labor had - successful domestic employers, no longer exists (further - by what standard do you hold corporations accountable so that you know it's happening and by the same logic, by what standard do you measure enough in taxation?);  pflanagan:  As Ronald Reagan would say, "there you go again".  You say that regulation ensures proper pricing. Again, by what standard do you measure proper? When you remove the individual decisions of millions and put all that power in the hands of an uniformed regulator, how is that going to solve anything on the grounds of fairness?  Stepan1 is still on point.  As it relates to discourse, have you observed the volume of blogging going on?  You should take positive note of that;  mgheller - point is dead on, capitalsm for all its clumsiness is the most self correcting social contract that history can deliver.  Those that would question then what's going on right now, read your economic history and you'll observe that corrections with lite governement invovlement were rapid and those with deep fiscal intervention were prolonged (depression and the great recession - which argueabley we're still in).  The obvious reason for this is that a central component of any economic system is the producer as the risk taker.  Without a rational basis to make decisions, their actions are postponed.  In our current affairs, this abounds; gpanfile: you say that energy and complexity are the problems but you don't specify the problems to what, our current circumstances?  I fail to see energy as the problem to a failing monetary system (i.e. economic growth through the velocity of currency - and this is what's going on right now). Complexity, well yes, but that's why capitalism is the most just form of flowing capital, that that doesn't concern me (or that I don't understand) isn't part of my indvidual consumption decisions.  Methinks you're on to something but tying into the curent issues of this string is challenging;  Bethel:  Wow! how inventive.  Now I have to figure out how I'm going to find the time to study those propositions.  Extremely interesting.

Without all you thoughtful people, I would likely have nothing to say. 

Sorry Prof. Roubini, but it's not Capitalism. It's the market process.

If somebody insists that he has discovered the real cause of the current economic crisis – and, moreover, developed a clear solution, what would you do? Are you going to simply refuse to listen?  

I hope you have a few moments to take a look at the following post - "Our economy is in imminent danger – What should we do?" http://t.co/d2R0wns 

Ayer se esucho en medios de prensa que una invasion ovni seria el medio para salir de la crisis, con ese humor tan ácido que no hay que abandonar. Lo cierto es que constibuía a demostrar, lo artificial de esta crisis, creada por alquimistas financieros, dosificada a mediad que va evolucionando, sosteniendo el "miedo" como armas, el rumor,etc. 

Asi las cosas, y para hacerlo más terrenal, la propuesta mía para salir en forma automática de la crisis, y a la vez comensar el proceso de actualizacion y puesta a punto de los aparatos estatales betustos y burocráticos que son el resultado de políticas nefastas, pero lo peor, que su obsolescencia ya hace crujir por todas las costuras, la basta TELA estatal.

Propongo, 1º ferreo control de precios, obligatoriedad de trazabilidad de todos los artículos (código de barras universalizado, con Precio Origen, Precio  Tramo)

2º bancarizacion de economía sercana al 100 %

3º evación fiscal tendiendo a 0 Cada TRAMO tributa de acuerdo a la diferencia entre tramos por renta directa

4º aumento inmediato de salarios privados de 100% sin aumentar el aporte a la Seguridad Social, ni al trabajador, ni a la empresa.

La formula matemática es que si engrosamos la capacidad de consumo de los privados, reactivamos la economía de inmediato, NO aumentamos los sueldos de los estatales, para que la función pública deje de ser un atractivo laboral y produscamos la emigracion laboral al sector privado en forma natural. 

Las arcas del estado refrescadas por la tributacion NO podran tener deficit NINGUNO, NO podran agotar el presupuesto de GASTOS sin amortizar antes una cuota parte de sus DEUDAS

En buen Romance, economía doméstica para el estado, si no tengo, no gasto, y cuando tengo pago deudas y supervibencia antes que superfluos,(gastos militares,etc)

Throwing good money after bad. It is a masterful piece of propaganda how the money given to banks and corporation has been characterized after the fact as a Keynesian stimulus package rather than the bailout of the financial industry whose pursuit of profit was irresponsible if not criminal. The bailout money went to cover the losses of financial titans who made bad bets and who are now sitting on the cash. It is no wonder that they now clamour for policies that show fiscal restraint as cash is very useful in a deflationary environment and apparently there is more wealth to be squeezed out of the middle class. There seems to be no objection to printing money to put cash in the hands of the very rich but cash for initiatives that stimulate employment and god forbid inflation are met with outrage and moral indignation. It is however outrageous and crafty propaganda how the money spent on bank bailouts is being characterized as Keynesian stimulus.

@RangerHondo

Whenver a comment starts with Same old Keynesian shrill, you can be sure that the comment will be content-free.

BTW, you mean shill, not shrill.

Unstable political ideologies and flawed economic models merely mask the one true issue that hangs over us like the proverbial sword of Damocles - Overpopulation.  The human race has grown sevenfold within just over 150 years. There will come a point when our small planet, with it's finite resources will not be able to support us on mass anymore.

I'm not saying we're there yet. If anything, our home still has much to give to us - and our ingenuity will no doubt help us to discover new and more complex methods for sustaining us.

The economic shudders that are reverberating around the globe are merely reminders that unless we address this issue of overpopulation, life will continue to detiorate for many people.

We in the west are ahead of the game, as our early days of plunder have generated great wealth for our own populations, but now even this tap is starting to run dry.

The financial system is straining because it is required to support too many people. Those using politics and economics to manipulate this system for their own benefit are doing so, consciously or not, to ensure the survival of their own line.

Any fiscal solutions are merely temporary. Dealing with an overpopulated world should be priority number one for our governments.

As to how this is achieved, natural disasters and war have typically served this purpose in the past, but our growing resilience to nature through our technology and the advent of mutally assured destruction mean that we must endevour to find more constructive solutions.

China's one-child policy, while seemingly fascist in nature would surely be preferable to death and destruction.

If you don't agree with me, you should at least accept that there is something wrong with this picture:

http://en.wikipedia.org/wiki/File:Population_curve.svg

Odd thing, Roubinis definition of marxism seems oblivious of actual errors of the marxian reproduction schedule. It seems to me the fundamental error in Marx's views lies in the value theory. Laid down working hours in capital goods doesnt conform to value in any reasonable way. Laid down work cannot be saved, so accumulation doesn't take place. Value must be measured in terms of produced goods and the value of capital goods measures up to the increased production made possible. Hence no falling profit will be observed and hence the connection to prices will be firmly stated.

But ofcource Roubini is right about the marginal saving rate and it's connection with distribution of income. One can wonder why macro economics doesn't take as it's fundament sector analysis as tried by Marx including a notion like profit but based on value added and extended with the effect of money. of savings, of export/import and investment and letting supply curves on this aggregated (through the use of state produced money) meet the aggregated demand curves based on income and baskets of goods and services.. 

A systems approach based on this fundamental base would extend the analysis into actual banking sector functioning, the control of central banks etc.

One wonders about how ideological stands like the beleve in efficient markets and rational behavior on micro level hinders a fully fledge analysis.

To use your analogy, are you making best use of your rabbits by simply putting them out one at a time to burrow and graze at will? If you put Fiscal Drag and QE out at the same time, but use FD feeding on Warren Buffet and his (willing?) friends to support QEs burrowing work on a tidal barrage, does that not meet the different needs of two sub-economies?  And if you put Reg in to take profit out of the zero-sum speculative sub-economy in a stabilising way (ie only when it goes into oscillation) would the selectivist policy a0 work, and b) appeal to both camps - or would it fail because hypothecation is a dirty word that offends everybody?

It's funny to see so many decry socialism, when socialist economies of the Nordic countries have always been economically stronger.

Even more funnily, S&P's AAA list essentially consists of strong economies + all 4 of socialist nordic countries. Socialism is such a failure indeed.

Oh, you were talking about "socialist people's democracies" of Warsaw pact. Well, why don't we also talk about how democracy is a failure too then.

To 'realist'. You are right. The 'socialism' in the nordic countries is actually a mixed economy, a capitalist economy with private enterprise combined with a welfare state providing public goods like free education, free health service (at much lower cost than the US but of good quality), pay as you go retirement systems,social security, strong unions and from the early 30s until the 80s economic policy was based on Keynes (in sweden similar thoughts were brought forward by the so called Stockholm school (Myrdal and Ohlin) during the 30s.

Right wing politicians like Bildt and the prime minister Rhenfeldt in Sweden tries to implement some kind of light version of republican policy in Sweden.

The crisis of the 90s was a financial crisis basically created during socialist governments adapting free capital movements and liberalising the finance industry whith a property bubble as result. The bank crisis was handled well and the state took over some banks but unfortunatle the right wing governement with Bildt as primeminister choose not to leave ERM, the european currency system, mainly holding currency parity to german d-mark, until forced by the market (Soros) and the currency fell 25 %. The parity to the Euro now is roughly the same. The swedish currency was overrated because inflation was higher in Sweden as compared to Germany. The crisis made the jobbless rate go from 2 % to two figure numbers and have stayed at 7-8 % since.  

After the crisis social democrats was in government position for 12 years. The state debt was nearly 100 % of GDP at its peak 1996 but has fallen to roughly 35 % 2006 due to growth of the economy. Between 1997 and 2007 a budget surplus of 2 % was imlemented resulting in export driven growth. Export as share of GDP has grown from roughly 30 % to 50 % during this time and import is of about the same share of GDP.

So, the socialist sweden is a modern wellfare state with political differences between the left and the right mainly following the economical-political ideologies: Keynes for the socialdemocrats, the green and the left and neo liberalism with supply side economics on the right side, the 'moderates', cristian democrats, the center and the liberal parties. Naturally other differences exist but the main differenses are these and no party intends to dismantle the welfarestate, but privatizing is popular to the right.

So in part Sweden was swept into Reagan/Thatcher economics during the 80s and the social democrats are on the retreat. The current financial crisis seem to be a result of neo liberalism and lack of Keynesian policy hindering the economy to take off again, the Euro problems disregarded....

" The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment." This is it. This is the key. Along with "progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline;" I agree with Professor Roubini. In addition to providing tax incentives for US companies to remain in the US rather than seek tax shelters elsewhere. We have critical needs facing our planet and solution based growth industries that respond to these needs. We need to encourage this as well. This part of the investment. 

Well to pin all of this on Capitalism is a bit hasty and not to say misplaced. Sure, its a corection of sorts and therein lies the beauty of Capitalism. Do we need adjustment to Capitalism? Yes, but the system is not going anywhere!

As Einstein said :"The significant problems we have cannot be solved at the same level of thinking with which we created them"!

Rumors of capitalism's demise has been greatly exaggerated . As soon as we elect another capitalist POTUS and replace deer-in-headlights Geithner, we can expect the economy to rebound. Yes, I have a knee-jerk reaction to Marx, having been born in Communist Hungary and having lived in socialist Israel. I am happy to report the demise of Communism in Hungary and socialism in Israel. Is unbridled capitalism good? No. Regulations are needed to control greed, but the Marxist alternatives are pure evil.

There is only one way to a solution. For the USA, the bad debt must be liquidated and destroyed. The lenders have to go down and the depositors paid by the FDIC up to the 250K limit. The collateral for the bad mortgages must be liquidated in a giant auction. No more extend and pretend. The minimum wage laws must be repealed because we are going to have horrific deflation once the great liquidation takes place. Lower ages will allow the labor markets to clear and the economy to grow. Then it will be all over, and the economy can rebuild from a much lower level.

- "growing inequality, poverty, unemployment, and hopelessness"

A possible sign:

the incarceration rate per capita in the U.S.

much greater compared to other countries

most prominently drug-related -

Hopelessness, sickness at heart,

seeking happiness not in the received society but in escape,

termed of course a crime against society, and -

25 percent of office furniture sold in the U.S.

produced by the resulting wage slaves.

- "political instability"

I suspect from the transition toward

government of the people,

by lobbying organizations,

for their rich clients (e.g. large corporations)

while government of the people,

by the people,

for the people,

perishes from the Earth.

I am not so sure that it isn't "capitalism as we know it today" that is failing.  I have always puzzled over the equations in economics classes where inflation is factored in.  The answer to my question "where did that money go?" was always the cost of living increased, but it didn't make sense.  I think the western manufacturing capacity and the lower-middle class jobs that go with it for uneducated workers has moved en-masse to China, et all because Western business cannot compete given labor costs, corporate (not personal) tax rates.  Fix that and you fix the economic problems.

Gamesmith94134: Dr. Doom Warns Wall Street and Washington---- Heed Karl Marx's Warning!

Mr. Gert van Vugt,

You make the best description on the theory on the economical growth Paradigm that the economic change seems like Malthusian’s diminishing return, and I agree. However, Mr. Roubini makes his point on the social disruption reverse itself through the diminishing demand. If we can put away the elements like the Ponzi scheme and benefactors in social caused deficiency or defects to growth. Corruption by capitalism and the dependency by socialism among societies both caused failure in the economical and societal development.

Perhaps, we focus on the circuitry on the accumulation of wealth and consumable wealth that runs the economy. It seems both the capitalism and socialism ran short and proven wrong in the economical model or social model that became self-destructive; eventually, the economy runs from diminishing demand to diminishing return, or vice versa. So, if we use the living standard as the equilibrium position to the supply line of the circuitry of wealth balanced by both of the diminishing return and diminishing demand.

How about I call my paradigm on the wealth circuitry in economical and social growth that supports and balances both accumulated wealth and consumable wealth; and it created a “Z” shaped development running both on the diminishing demand and diminishing return; which is based on the assumption, the route above the standard of living equal in length with the one below the standard of living is in agreement of its living standard to sustain a viable growth, which contains;

·         The base line as the diminishing return where the societies kept peace with its populace that consumable wealth that cause economical displacement like with its negative growth or no growth; it provides entitlement or social programs with non-productive individual citizens for example, 27% of its population on welfare with add-on with subsidies to sustain a standard of living.

·         The top line as the diminishing demand that ended with accumulated wealth favors of concentrated wealth owned by individuals that ended with profitless, 1% holds 27% of the global or national wealth, plus those with extra wealth is not in production yields to no growth.

·         And the diagonal line that connected to both ends is the support of the price and value in the middle is the standard of living which contains the most of the productive individuals who is moving up and down the ladder of growth.

If more of the wealth accumulated than the wealth consumed, then it causes saturation of the wealth. The diminishing demand under the standard of living agreement made the demand idle because of the shortage of consumption. In the process, the standard of living will go down to meet its demand after the deflationary measure to make it consumable. In reverse, the wealth consumed is over the wealth accumulated, as it is less profitable. Then, it triggers the inflationary measures to aggregate demand to accumulate more wealth in its diminishing return mode; eventually it will balance itself again with the agreement of the standard living with a viable growth.

It is not the supply and demand. It is rather the circuitry of wealth under the spells of the lower living standard that diminishing demand is being part of the deflationary measure. If the accumulated wealth became saturated, then it means the lower living standard that made the demand finite like lesser demand in loan of dollars in ECB.

I am certain I am not being introspective; I may twist the theory a little; but the proof of the lower living standard in Europe made it plausible.

May the Buddha bless you?

Gamesmith,

Like it or not economics is bedeviled by several problems. In the first instancethere is a serious disconect between the 'common useage' and the presision of concepts by the knowlegeable. Without which conversation is nigh on impossible.

e.g. In is fact that neither socialism nor capitalism as writ have and can never exist.

All variations on the themes are deficite in essential ellements both defined and not defined. Capitalism relies on 'the silent hand', 'trickle down' and 'level playing fields' for a myriard of reasons they either don't exist or are so perverted by externalities etc  as the render economics i.e. the study, prediction  scientifically and practically impossible. Not to make too fine a point economics is a soft science.

Perhaps the biggest undefined element is,  practically speaking, the imponderable human factor.

One aspect of thisis the one between the 'rationalists' (those that base their reasoning that capital [humans] in general behave rationally) and the 'irrationalists' who maintain that capital [people] make decisions based on emotions.

The problem with the debate is thatboth sides talk in terms of statistical absolutes. The mere mention of statistics adds the uncertainty to results. In my mind the biggest issue is to decide which specific 'value judgement' (i.e. rational or irrational.) to factor in to calulations.

One thing is certain though is " in order to go broke in the most 'efficient' way in gambling on the odds, one needs a system".

This leads me to two sub conclusions..... people tend to fundementally misunderstand  the true nature of statistics, simply because human nature lends towards simplistic absolutism. i.e. we had a once in 1000 year flood last year so we're safe for the time being.

The second point is that we place too much reliance on the efacacy/infallibility on economics. Rather than taking it for what it really is........an educated guess based on certain prerequisite  conditions that tend to suggest a conclusion.

Therefore bold statements that "Capitalism (?) is better than X" has very narrow provisors and a plethora of assumptions at it's base.

Economics isn't like chemistry in that all factors can be isolateded much less  allowed for and tested ....well....

So back to the original question the answer is that Capitalism as we know it  will cease  to exist because of its inbuilt flaws. notwithstanding I have little doubt that some form as yet unknown of capitalism will exist if for no other reason that not everyone has the same ability or motivation to listen to Buddha......

When he said the path to happiness is by first conquering desires (as opposed to needs) first.

The real problem in Europe is the lack of a Federal Union, with commom goals and interests. As it stands, Europe is a group of countries looking out only for their needs. You need less country governance and more EURO-governance, which I feel it will be quite difficult for all of what history has taught us. Let's hope Europe has REAL leaders and not just puppets.

The underlying cause of the problem is increased cost of governement (including entitlement spending) has stiffled the private sector. This has happened because the public sector has sucked in both labor and capital. This is enormously exasperated by the fusion of the financial sector with the public sector leading to severe misalocation of capital and resultying very poor returns for society. Nouriel seems to be suggesting that the solution is more governement intervention - but that is the problem and not the solution.

Вижу логические размышления автора,но не вижу доказательств.Кризисы будут всегда.Причина в стоимостном подходе к оценке эффективности предприятий.Мною получен ответ на вопрос-возможен ли мир без кризисов? Попробуйте и вы ответить на такой вопрос.rusideya3000,Assistant Professor,Senior Scientist, филиал МАИ

Notice how every so often we experience an economic crisis. All the smart guys and gals in the world can't figure what is going on. Why is this happening?

Notice how totalitarian or authoritarian systems experience a huge governing crisis from time to time, but these types of crises tend not to happen to democracies. Why is happening?

The clue to our economic crises is provided by the crises of governing systems. Democracies provided a natural break at fixed intervals which automatically relieve governing stress in society. Other governing systems continue to build stress until society explodes at some point. This just applies to governing stress. Economic stress is a different story.

Our economies also build stress, but these stresses are not allowed to be released. Governments consistently suppress economic recessions. The suppression of volatility (recessions) ensures that stress is not released. This stress will build up until it explodes. All governing systems that suppress voatility experience these economic problems.

The solution is to stop suppressing recessions. A better solution is an economic break at fixed intervals. Ancient Israel used this technique: Release all debts every 7th year. That probably wouldn't fly today.

The wealth distribution is still massively unequal because we did not allow Capitalism's self-corrective mechanisms to do their work. The natural corrective is called bankruptcy. It is the means by which excessive debt is destroyed.  If all the big banks and AIG had been allowed to go under in 2008, no one would have any deposits in excess of the FDIC insured limit, and all annuities and munis would have been wiped out. The DOW would have gone below 1000. Only holders of T-bills would have been able to keep any wealth. From such a lower base, the bottom would have happened quickly, and we would now be in a long and sustained recovery. Instead, we are in a muddle-through, Japan-like Depression that will probably last 30 years.

1.Капитализм обречён на вечное существование.2.В любом обществе даже первобытном существуют доли капиталистических,феодальных и рабовладельческих отношений.3.Вопрос лишь в том умеете ли вы эти доли оценивать численно.Я могу.rusideya3000

La tesis fue el capitalismo, la antitesis fue el socialismo y la sintesis es CHINA!!!

Capitalism is already dead, and it has been dead for a while.

Capitalism died  the moment capital seased to be scraced. Resources are scarced, money isn't, we are just acting like money is still a problem.

We just have to create money, put the idle resources to work, increase consumption and the crisis will be gone...

Capitalism is dead, FIAT money killed him, and capitalists know it, they are just acting like he is still alive and kicking.....

As others have observed, the solution is to allow banks to go bust.  Saving the backsides of the banks in 2008 was wrong.

Unfortunately, capitalism will not expire until people en masse reject it. It will continue to lurch from boom to slump ad nauseum, blighting the lives of billions, degrading the very earth we live on, sending young men and women off to wars at its behest, extruding its poisonous values into every corner of life. Its time now for people everywhere to reject this anachronistic system, and consider the only sane alternative: A world in which money, wages and profits would not exist, where goods and services would be freely accessible, and where the means of production would be held in common. http://andycox1953.webs.com/

Nouriel Roubini, your suggestion  advanced economies will need to invest in human capital, skills and social safety nets to increase productivity and enable workers to compete, be flexible and thrive in a globalized economy is the need of the hour.

Dr.A.Jagadeesh  Nellore(AP),India

Marx died in 1883.  Ford introduced the Model-T in 1908.  The term "Planned Obsolescence" was not coined until the 1930s.  Ford's methods increased productivity so Freudian psychology came to the rescue to increase consumption.

So with television we have had corporate consumerism since 1950 with technology evolving continuously since then.

But people keep debating this subject on the basis of 19th century ideas and jargon which does not apply to the world of today.  So how do we solve the problems of today with obsolete thinking?  I also do not doubt that plenty of the propaganda being thrown around is deliberate in order to help maintain the confusion.