Politics

Когда всё рушится

Mar 31, 2016 Anatole Kaletsky

ЛОНДОН – Во всем мире сегодня ощущается конец эпохи – это глубокое предчувствие дезинтеграции ранее стабильных обществ. Говоря бессмертными строчками великого стихотворения У.Б. Йейтса «Второе пришествие»:

«Всё рушится, основа расшаталась,

Мир захлестнули анархизма волны...

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0 Comments on this paragraph, 127 Comments on this article

CH R Jan 23, 2017

There is evolutionary economics, which deals with precisely these issues:

evolution of economic processes involving complexity, uncertainty, ambiguity, knowledge and limits of human perceptions, innovation, entrepreneurship, capabilities of management and organizations, and adaptability (or lack thereof) of market participants.

It is linked to pragmatist psychology-philosophy and institutional economics, complexity perspectives and notably the 'subjective' school of Austrian economists and surrounding Viennese circles as well as ordo-liberal perspectives on setting foundational 'regulatory', legal guidelines to limit the abuse of power (or control) in economic interactions and help markets 'do their thing' fairly, effectively and efficiently.
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CH R Jan 23, 2017

Comment CH R JAN 23, 2017 -here it belongs:

In which provisions is the Maastricht Treaty influenced by or built upon 'neoclassical' economic orthodoxy, which I presume to be meant by the economic theories dominating since the 1980s? Also the adherents of neoclassical economics would identify the shortcomngs of the Maastricht treaty and subsequent steps, esp. of half a monetary union that produces regional imbalances, but lacks important (fiscal) balancing mechanisms,
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Mike Holly Apr 14, 2016

The US cannot represent any form of true private capitalism as long as the following industries are corrupted by the following regulations favoring monopolies:
Banking (Federal Reserve and Dodd Frank)
Home mortgages (FHA, Freddie/Fannie duopoly and tax deductions)
Agriculture (crop subsidies)
Health care (Obamacare and laws limiting supply of doctors, hospitals, drugs and insurance)
Energy (preferential environmental exemptions, grants, mandates and subsidies)
Common carrier industries (deregulation rules favoring monopolies among electricity and natural gas utilities, airlines, trucking, railroads, telecommunications and internet)
Manufacturing (environmental disadvantages in trade deals)
Retail (preferential zoning and subsidies)
- CH R Jan 23, 2017
  
  In which provisions is the Maastricht Treaty influenced by or built upon 'neoclassical' economic orthodoxy, which I presume to be meant by the economic theories dominating since the 1980s? Also the adherents of neoclassical economics would identify the shortcomngs of the Maastricht treaty and subsequent steps, esp. of half a monetary union that produces regional imbalances, but lacks important (fiscal) balancing mechanisms,
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Can Calhan Apr 11, 2016

One of the main handicaps of new-liberal economic system is to measure the success of firms on the basis of shareholder values that generate a wild competition at the cost of corporate social responsibility, moral and ethical values. The second handicap is the industrial growth is vertical, not horizontal. The vertical industrial structure ends with oligopoly that leave no opportunity for new company to emerge. I believe share holder values capitalised through stock exchange plays more negative role than positive role. As it puts too much pressure on corporation to look for constant profit, it destroy middle and small size business.

Conclusion; society a dynamic entity and therefore is in constant change. The political system defines the frame of economic system should be dynamic to meet the changing need and desire of society. In this regard capitalism, seems not to be dynamic enough, is increasingly causing more social, political and environmental problems.
- Mike Holly Apr 12, 2016
  
  Rather touchy, Mr Calhan. A comment that starts with the word "appear" is inconsistent with the definition of the word "accusation" (i.e., a charge that someone has done something wrong). You also appear to have misunderstood my comment. I was saying today's economies are not capitalist at all, but rather corporatist, state capitalist and proto-fascist.
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- Can Calhan Apr 12, 2016
  
  Mr Holly, your perception rather accusation is a typical example demonstrates about the "flexibility" of inflexible capitalism. Criticising capitalism even for the sake of capitalism is being accused of being communist, statist, pro-fachist... This is exactly the the point I underlined in my conclusion. The elite-class of capitalism has been building the wall of immunity through its strong media machine to accuse/label anyone straightforward, Wheres criticism is an important toll for improvement, self-correction, and transparency. There is no single social system that should/could/would be defined as whole being perfect. any system consists of parts can not function well, without compatibility between parts that form the whole system. Thus, defending the immunity of capitalism (as whole to protect the improvements of the whole system), to prevents the parts, has been the significant cause for increasingly failing capitalism to respond to the changing dynamic social, political and economic desire and need of society.
  
  Lastly If you read my short initial statement I neither stress nor defined any specific name for what kind of alternative system would be alternative to capitalism.
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- Mike Holly Apr 11, 2016
  
  You appear to share a common misconception with the author of this article that there exists something close to a free market economy somewhere in the world. Try corporatism, state capitalism and proto-fascism.
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Mike Holly Apr 11, 2016

@Jose You are completely ignoring the benefits of competition resulting from free markets. For example, before 1965, the US had a relatively competitive health care market and very affordable health care. Then, the government caused a Health Care Cost crises by increasing demand with Medicare and Medicaid while restricting the supply of doctors, hospitals, drugs and insurance. The problem is the US government has thwarted competition in all three industries with regulations favoring monopolies (and oligopolies).
- Alisdair Hamilton-Wilkes Jul 21, 2016
  
  Healthcare is a difficult market to compare against its own historic performance because technological change across the decades means you are not comparing oranges with oranges.
  
  A hospital in 1965 had a fraction of the technology, specialist skills, medicines or health outcomes of its equivalent today.
  
  Though on the whole I do agree with your sentiment.
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Mike Holly Apr 7, 2016

@Jose
It is clearly just your pro-government opinion that Health Care, Education and Electricity Utilities "are clearly areas where government is much more efficient than markets" because I have studied all three industries extensively and I know no such proof exists either in theory or practice. My learned opinion is markets perform much better in all three.
- Jose araujo Apr 11, 2016
  
  Just compare the spending of the US and the results, vs any average European country..
  
  Why would markets perform better in this industries when clearly they are not perfect competition markets?
  
  How can markets deal with the fact that this industries value comes most from externalities? Free ridding alone would make the private production of this goods much less efficient then public production.
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Björn Stefánsson Apr 6, 2016

One of my conclusions when reading this article is in short that there is a general lack of the feeling and conviction that popular engagement in politics brings results. I maintain that group choice with individual fund voting shows how the participants´ efforts, wether it be representants or ordinary people, in dealing with cases, give accountable results. This has been explained theoretically and shown by use.
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Tomas Kurian Apr 6, 2016

We don´t need just zero interest rates, we need NEGATIVE RETAIL interest rates.
Without them, democracy cannot be preserved.

Negative interest rates as condition of democracy
http://www.genomofcapitalism.com/index.php/16-7-negative-interest-rates-as-condition-of-democracy-2
- Mike Holly Apr 14, 2016
  
  And here is an explanation from the Fed in San Francisco:
  http://www.frbsf.org/education/publications/doctor-econ/2002/january/federal-funds-discount-rate-2001
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- Mike Holly Apr 14, 2016
  
  @jose
  If you can't even believe Kliesen, there is little I can do to educate you, except to provide the following graph to show interest rates were indeed low.
  http://www.fedprimerate.com/fedfundsrate/federal-funds-target-rate_chart-graph-graphic.htm
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- Jose araujo Apr 14, 2016
  
  @Mike
  
  I have no problems being thought on economics, actually that is something I love. Now, I don't see how someone who skip the Hayek /Austrian part (because those theories were already dismissed when I studied economics) can teach me about economics...
  
  The article you sited is a treaty on how ignorant you can be. Actually Kliesen thought that back in 2011 that the interest rates were artificially low....
  
  Please refer to a more credible source, you can use Bullard the president of the SLF.
  
  Still you have failed to explain on how were the rates low before the great recession, and how monetary expansion caused it...
  
  Austrian always get into troubles with facts...
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- Mike Holly Apr 11, 2016
  
  I really don't have time to teach you basic economics. You can read this information from the St Louis Federal Reserve Bank:
  
  https://www.stlouisfed.org/publications/inside-the-vault/spring-2011/low-interest-rates-have-benefits-and-costs
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- Jose araujo Apr 11, 2016
  
  @Mike
  
  What utterly non-sense, again, we didn't live in times of low interest rates and monetary expansion at the time of the crisis.
  
  Sub-prime didn't occur because of easy credit and low interest rates, sub-prime occurred because of Fraud and deregulation.
  
  For sure you can read about it in google, after all there are a big number of Hayek/Asutrian supporters in this world, that can't face the fact that not even Him believed in this absurd theory.
  
  There is no reason for easy credit. The rational behind investment doesn't suddenly change because you have low interest rates or easy money, why would it?
  
  Low interests doesn't promote high risk investments, on the contrary, high interests promote risky investments, because that's the only way you can repay them.
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- Mike Holly Apr 7, 2016
  
  @ Jose -
  (1) If you are going to call something nonsense at least offer an alternative explanation. Just google "Great Depression caused by low interest rates" and you will find all the proof you need, like the following:
  http://fskrealityguide.blogspot.com/2008/04/federal-reserve-caused-great-depression.html
  (2) The Bush administration caused the housing bubble by promoting home loans securitized through the Fannie and Freddie duopoly and the Fed monopoly’s big banks, while encouraging the Fed to lower interest rates. Soon after the Fed started raising rates, the bubble burst leading to the Subprime Mortgage Crisis and Financial Crisis. Investment banker Steve Eisman said the banks knew they would get bailed. Bailouts were justified since regulators pushed them to increase home ownership. Of course there was fraud but that was a result of being pushed by the Bush administration.
  https://www.theobjectivestandard.com/issues/2009-spring/altruism-financial-crisis/
  http://www.nytimes.com/2008/12/21/business/21admin.html
  (3) Easy credit at low interest rates promotes debt, risky investments and inflated asset prices like houses.
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- Jose araujo Apr 7, 2016
  
  Great depression wasn't caused by easy credit and low interest rates, what a big non-sense. Fraud was the cause of the sub-prime crisis, it had nothing to do with easy credit, it was a scheme and lack of regulation.
  
  Low interest rates are a cause of the depression due to the generalized risk aversion.
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- Mike Holly Apr 6, 2016
  
  It was crazy just to repeat the mistakes that led to the Great Depression by providing easy credit at low interest rates. Now you want to send them below zero? The result would be unbelievable debt, risky investments and inflated asset prices. The world may never escape from that without another world war. All this to avoid simply deregulating and de-monopolizing economies so everyone shares in the opportunities.
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David Kinder Apr 4, 2016

We already know what zero interest rates will do, just look to the last thirty years in Japan, STAGFLATION!!!
I mean REALLY, isn't this where your conversation is leading? Ask the seniors in America how ZIRP has hurt them? The WW2 generation has been betrayed by their governments. Apparently, governments plan to use everyone for WARS OR WELFARE and then discard the elderly that have sacrificed sooo much! Take heed all, government is your worst enemy!
- Mike Holly Apr 6, 2016
  
  I think you mean stagnation, not stagflation, since Japan doesn't have a high inflation rate (maybe 2%). Moreover, the mistakes made by Japan since the late 1980s have already been repeated by the US and Europe since 2007.
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- Edward C D Ingram Apr 5, 2016
  
  David they are basically stuck in the Low Inflation Trap/ It REALLY IS A TRAP.
  
  Check out why.
  
  http://ingram-dropbox.blogspot.co.za/p/a-short-tact-on-financial-stability.html
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jagjeet sinha Apr 4, 2016

The triumph of Private Capitalism always ends in tears - until State Capitalism returns to perform duties that Democracy demands.
Several challenges that require collective responsibility and commensurate authority have remained outside Private Capitalism.
The Reagan-Thatcher euphoria over Private Capitalism capacities and efficiencies was obviously overdone, in hindsight.
The advent of State Capitalism triumphant return perhaps a consequence of Two Red Squares reentry into World Trade.
Keynes underscored State Capitalism as the Foundation upon which Private Capitalism thrives.
Democracy cannot simply "eat cake", the return to "bread" must not be termed "when things fall apart".
Financially, the return to Permanent Monetization and Debt by Design - both tools that Governors had mistakenly forsaken.
Democracy demands a return to Keynes - responsibility authority and accountability restored.
Truncation of three zeroes perhaps needed to end Weimar 2.0
- jagjeet sinha Apr 14, 2016
  
  Mike - of course, the point you make is indeed valid and very "American".
  And, I have respect for what you say, because there is merit in your point.
  Europe and India and China - all believe in The State much more than America, intrinsically.
  Perhaps because The State has always remained accountable - like the faith in The Church and The Sangha.
  Albeit The State is not efficient.
  But it is The State - that takes charge when Civilizations face failure, and design the template to emerge again n again.
  2000 years of history versus 200 years of America !!!
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- Mike Holly Apr 14, 2016
  
  @jagjeet
  My point is a free market economy has never existed and deserves the next chance, especially since virtually all failed markets (in the US) have been corrupted by government intervention, including deficit spending, manipulation of interest rates, and regulation of industries. In the US electricity market, regulation blocks alternative energies by allowing utility monopolies to purchase from cronies, and excessive subsidies for wind and solar. Yet, Bill Gates said the “intermittency” of solar and wind makes it unviable. The future would be far better off with free markets that allow everyone and every technology the opportunity to compete, instead of politicians that pick winners and losers.
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- jagjeet sinha Apr 14, 2016
  
  Indeed, the author and the debate challenges all of us into shedding our thoughts, that may lead us into light.
  Permanent monetization - and the author's allusion to Universal Basic Income - is predicated on The State.
  The State alone has the prerogative to inject helicopter-money directly, a minimum modicum that is guaranteed.
  The State can deliver through Templates that are triggered by Employment Targets.
  
  Debt by design - and the author's allusion to Infrastructure Targets - is assumed @ Zero costs, given ZIRP.
  The State - and its Agencies - can enable the channelling of Trillions into Infrastructure and Innovation.
  The State can deliver through Templates that are triggered by Sectorally driven Targets.
  
  The Private Sector dovetails into The State's Programs - and ensures that The Masterplan is in place ASAP.
  E.g. - Should Solar emerge as The Alternative Energy, it is The Teslas that will take the Nation to 100% by 2020.
  Given the Zero level of Interest Rates, Trillions can be channeled provided The State's Templates are in place.
  
  Excesses and abuses - that always happen - does invite opprobrium, but the feedback loop can ensure corrections until perfected.
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- Mike Holly Apr 14, 2016
  
  Unlike you, at least Kaletsky realizes the global economy is on the verge of crisis and needs new economic thought.
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- Jose araujo Apr 14, 2016
  
  Since Lord Keynes died, we have experienced to most enlightened era of human life.
  
  Its not just Keynes, but Bismark and other. Stating that health, education, security, environmental developments made possible due to governmental intervention is a failure is just being a complete ignorant, to say the least.
  
  Stop criticizing something you don't understand.
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- Mike Holly Apr 8, 2016
  
  This article by Kaletsky demonstrates the lack of understanding among economists about economic problems that started with Lord Keynes. Because Keynes made the mistake of focusing on economy-wide problems, his solutions relying on government intervention, namely manipulating interest rates and picking winners and losers, have failed.
  
  Throughout US history, all economic problems have been caused by corrupt regulations promoting monopolization of major industries, either by private or public companies. The result has been wealth disparity, collapse of demand, slower economic growth and crises.
  
  In the 1920s, the Keynesians just made the crisis worse by trying to promote growth through lower interest rates that increased debt, risky investments and asset prices, and led to the Great Depression.
  
  The post-war boom (1945-1965) was an accident benefiting from a dismantling of war time regulations and global rebuilding.
  
  During the late 1960s and 1970s, inflation resulted from a previous nationalization of industries (state monopolies) that started under FDR and continued under subsequent Democrats, including the Fannie Mae secondary mortgage monopoly and crop subsidies, but especially Medicare and Medicaid, and the nationalization of oil industries.
  
  From 1975 to 2000, corrupt deregulation and privatization led to deregulated monopolies.
  
  In the 1980s, inflation was suppressed by high interest rates and global trade. Subsequently, declining interest rates and deficit spending have delayed crises. But now the debt is even worse than during the Great Depression.
  
  The only hope is real free markets (private capitalism) by abolishing all corrupt regulations promoting private and public monopolies.
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- jagjeet sinha Apr 8, 2016
  
  Precisely, Mike.
  Disagreement over examples cited - can be researched and concluded.
  Disagreement over the NEED FOR STATE CAPITALISM - is when "Things Fall Apart".
  Deployment of State Capitalism often takes different shapes and templates.
  Thatcher Reagan era euphoria perhaps responsible for the premature epitaph.
  Lord Keynes genius grasped the NEED FOR STATE CAPITALISM as the backbone.
  Private Capitalism is simply flesh on the bone, never the bone itself.
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- Mike Holly Apr 6, 2016
  
  I do not share your enthusiasm for state capitalism for the reasons that I stated. I do agree there are a few challenges that need to be undertaken by the government as last resort. However, I wouldn't necessarily agree with your examples, the space program (now undertaken by private companies), education (a big mess) and especially housing. Even long before the 2007 housing crisis, the Fannie and Freddie government monopoly caused unnecessarily larger homes for the middle class, urban sprawl, shortages of affordable housing for lower income people and slums.
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- jagjeet sinha Apr 6, 2016
  
  @MikeHolly
  
  The epitaph for State Capitalism within the US perhaps premature - because Private Capitalism does not undertake many challenges.
  US State Capitalism perhaps best remembered for Apollo and the Space Program - creating many technology consequences.
  US State Capitalism perhaps best remembered for ensuring US Universities remain unparalleled in the World.
  US State Capitalism perhaps best remembered for SOE that credit enhanced household debt, thereby channeling Trillions into Housing.
  (Of course, the excesses ultimately surfaced via the mortgage meltdown) - but doesn't take away the capacity created by those Trillions.
  Time to reinvent faith in US State Capitalism - to confront challenges of today that remain outside the realm of Private Capitalism.
  To dismiss all output from State Capitalism as "Socialized sputum" takes away credit from Institutional Platforms that CAN.
  Yes, China perhaps a good example where State Capitalism delivers Sovereign Economic Objectives.
  Yes, America too was and can again become a good example where State Capitalism delivers Sovereign Economic Objectives.
  The sectors and challenges where State Capitalism interventions are most effective - differs in America from China or India.
  Because the stage of development differs.
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- Mike Holly Apr 4, 2016
  
  All economic systems end in tears due to political corruption. But the US has operated without state capitalism (i.e., the state maintains majority ownership in key sectors of the economy). China is one of the few countries that has succeeded with state capitalism. Yet even there state giants soak up capital and talent that can be used better by private companies, lack and steal innovation, and promote cronyism and inequality. Moreover, the West is losing patience with those that rig the system in favor of their own companies.
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David Neunuebel Apr 4, 2016

"And President Richard Nixon’s impeachment had turned Western democracy into a laughing stock." Hardly! If anything, because it was a bi-partisan impeachment process this was a true victory for Western democracy because it worked, it found the bastard and threw him out. Hardly a laughing stock.

"Moreover, politicians must reconsider much of the ideological super-structure erected on market fundamentalist assumptions. This includes not only financial deregulation, but also central bank independence, the separation of monetary and fiscal policies, and the assumption that competitive markets require no government intervention to produce an acceptable income distribution, drive innovation, provide necessary infrastructure, and deliver public goods." One might do well to read the book offered in this email issue of Project Syndicate, "Governing Access to Essential Resources" By Katharina Pistor and Olivier De Schutter.

"But deploying such radical policies would mean rejecting the theories that have dominated economics since the 1980s, together with the institutional arrangements based upon them....". Ahhh, the point. It is the status quo that is killing us, is our greatest risk.

"The message of today’s populist revolts is that politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking. If responsible politicians refuse, “some rough beast, its hour come at last” will do it for them." AMEN

Bernie Sanders for President of the United States ... before it's too late.

If the Apartheid South Africa can be defeated, if the Soviet Union and its Iron Curtain can fall along with the Berlin Wall, then certainly some of the ideas Bernie Sanders is espousing can also come true.

Read the book too". "Governing Access to Essential Resources"
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Frank Manheim Apr 4, 2016

In my book in 2009 (Manheim The Conflict over Environmental Regulation….] a chapter section is headed “The Emerging Post-Environmental Societies”. These refer to Sweden and Finland, former bastions of (democratic) socialism in which love of nature and the environment was embedded in the national consciousness. In the 1980s they and other Nordic nations discovered market principles. They subsequently can be considered to have embraced the new paradigm that Kaletsky talks about, becoming world leaders in environmental performance along with maintenance of robust industrial productivity.

In a chapter entitled “Trust as Capital”, the Finnish social analysts, Risto Harisalo and J. Stenvall observed that where there was mutual trust environmental management could become as efficient as business management (Huotari and Livone, Eds. Trust in Knowledge Management ….., 2004). This contrasts with the battle to the death over environmental and energy policy that has come to characterize the U.S. since the 1970s – to which I trace the true origin of the U.S.’s current political polarization.

There is a tendency among intellectuals to require formal theoretical categorization of policy changes (e.g. the term “capitalism”). I suggest that this is a bad thing because it diverts people from the fact that what’s needed may really simply amount to rational thinking and ethics (that builds trust). It may be relevant that the Scandinavian nations appear to write less about policy than any other comparably advanced society – especially the U.S. where a deluge of articles and books is studiously ignored by decision makers and the literate public. By rational thinking I mean self-critical and open-minded analysis that does not ignore facts that conflict with strongly held opinions, takes account of historical experience, the perspectives of “opponents” or critics, and advances and insights gained from other nations. The Japanese undertook a comprehensive global assessment after their debacle in World War II. It helped propel Japan temporarily past the U.S. as No. 1 in the world in GNP/capita in 1986. Japan subsequently fell into a decades – long recession when the usual subjective factors took over banking/leadership sectors of society.
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Erwin Sorensen Apr 4, 2016

The problem may be deeper. During the Keynsian period, Homo Sapien was viewed as a social animal. Friedman and his accolytes morphed our species into a preditor species, based upon the ideas of Social Darwinism. The 1983 film "The Big Chill" aptley described the transition in progress. With the resulting narcissistic culture self importance, there is a much more difficult psychological barrier to overcome.
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de Lafayette Apr 4, 2016

Things started "falling apart" in the 1980s when Congress passed Reagan's legislation reducing tax-rate from 70 to below 30%. (LBJ, of all people, had already lowered them from 90 to 70%.)

This one fact is the prime reason why America is badly impacted by Income Disparity today - where 10% of households garner almost half of all the income generated by the American economy. (Piketty's research tell us so.)

And if Prof. Domhoff's (U of Cal, Santa Cruz) research is taken into account, all that income "gushes up" to Net Worth (Wealth - Debt) whereupon 20% of households possess 89% of total Net Worth in America.

One must be blind to not see the unfairness that Reckless Ronny imposed upon the American people. The country needs a major change of national ambition and a clear reduction Income Disparity.

Will that happen? Unlikely, given the manner in which the Replicants have gone crazy over a millionaire enriched by the very mechanism that should be undone. So, it wont - and his inheritors will benefit from the "trickle-down" of inherited and undeserved fortune for which they did not work one minute of one day.

The Dems can complain to high-heaven, but nothing likely will change in the US. Which is a shame that Americans can remain so blind to the rip-off that is happening that will pass down to their children ...
- Mike Holly Apr 4, 2016
  
  Things started "falling apart" as soon as the nation was founded. Politicians have been granting regulations creating monopolies and wealth disparity with it. High taxes don't solve the problem.
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J.B. Borne Apr 4, 2016

People "sensing that leaders have powerful economic tools" are waiting for these other people to give a damn and lead. Not one of the four leading presidential candidates is desirable. Sanders comes closest to knowing who he is, but what economic tools does he offer? Look around the world and see the sorry yields of socialistic governments. No thanks. Sanders' message resonates with people who haven't had a lot of responsibility in their lives. Cruz is the most intelligent of the lot, but he has an Obama-like ego that makes him unfit. Clinton and Trump are the same person. She is more politically astute and plays the game better but not in the accomplished manner one would expect. Who could vote for someone who allowed her husband to serially humiliate her for decades? She wants to be president "because." Where is her vision for bettering her country?
We can't talk seriously about economic or social solutions until someone emerges who is willing to lead because he/she wants to do what it takes - minus political correctness and allegiances to dying political parties and their stale platforms.
- Mike Holly Apr 4, 2016
  
  I agree with you on Sanders and the ultimate conclusion on the three others, but for different reasons. Obama and Clinton are left wing corporatists, while Cruz and Kasich are right wing corporatists (the first stage of fascism). Trump is a proto-fascist. The US needs free market advocates.
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- Edward C D Ingram Apr 4, 2016
  
  You want better economic tools Mr / Ms Borne?
  
  You got them - here:
  
  http://ingram-dropbox.blogspot.co.za/p/a-short-tact-on-financial-stability.html
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Gerry Hofman Apr 4, 2016

If there were no law dictating economic turmoil and collapse every fifty or sixty years, than where would this pattern come from? You can see it, it's right in front of you, and yet claim it cannot exist? Better informed thinkers pay attention to these cycles and the ways and reasons they occur and draw dramatically different conclusions.
Global capitalism as capitalism 4.0 can only exist as a totalitarian regime that is diguised as a managed democracy, but stays in control through surveillance of all individuals. This is clearly on the blocks already and in an advanced stage of construction. In this scheme we will continue to believe that we are free while every detail of information about our existence is acquired in the global database and acted upon, if necessary.
This would result in a middle class entirely dominated by corporations who'se rules are in fact the law, servicing an ageless elite with a holiday house on mars. The alternative to this all becomes clearer with every cycle of economic crisis and collapse. It is to let go of this whole fiction called "money" and advance to a society based on the distribution of physical resources freed from financial speculation. There is a road to servitude and slavery and a road to be free. We can not walk both at the same time.
- Mike Holly Apr 5, 2016
  
  Political corruption is a much more significant cause of economic crises than disruptive technlogies. The 1929 crash was caused by corrupt regulations promoting monopolization of major industries, the resulting wealth disparity, collapse of demand and slow economic growth and finally efforts to promote growth based on debt through the manipulation of interest rates. I can see the next crisis coming because these same conditions exist today.
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- Gerry Hofman Apr 5, 2016
  
  It's not political corruption drivng Kondratieff but disruptive new technlogies followed by investment, changing legislation and societal adjustments. The Kondratieff cycle is reviled by short term prophets but essential to understand the crises that just nobody can see coming. Compare Varoufakis who also argues that capitalism has already fallen, with the reason we cannot see the change being that a new system has not yet arrived, a bit like the previous cycle ending in 1929 but a new order did not rise until after WWII. So we live in a transition period, the crash has already occurred and may have to repeat before the lesson is learned; the disruptive technologies are here but are held back because society can not manage the consequences; the existing order believes the status quo is intact and carries on as they are uesed to. The cycle is real and so are the consequences.
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- Mike Holly Apr 4, 2016
  
  The Kondratieff cycle is deeply flawed because future political corruption is not predictable by severity or year. According to the Economist, the worst US economic crisis by far was in 1929. That means nothing comparable occurred between 1776 and 1929 (or 153 years) and 1929 to 2016 (or 87 years). The second and third worst crises occurred in 1973 and 2008 (or a difference of 44 years from 1929 and 35 years from 1973). Moreover, I believe a severe crisis comparable to 1929 will occur soon due to a similar accumulation of debt at low interest rates, not some theoretical cycle.
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- Gerry Hofman Apr 4, 2016
  
  Little crises come and go but the 50 - 60 year Kondratieff cycle is a beast of a different nature. The reason for studying the long cycles is because they happen so predictably while the short term view just cannot predict anything that lies ahead.
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- Mike Holly Apr 4, 2016
  
  Crises occur every 20 years or so, but the economy always favors the wealthy, because politicians always exchange favored regulations for monopolies. The only period in US history with a decent economy was the post-war boom and that was a perfect storm of dismantling war-time regulations and global rebuilding.
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Ronald Abate Apr 4, 2016

I love the recommendation to just print money. I guess what he means, since we are already printing money, is to print it and give it to the poor to equalize their income with those in the upper middle class. Since the pricing of money in our modern age uses no resources and is instantaneous, it's a great was to start new world of income equality without raising taxes. Why didn't we think about this sooner?
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Matthew Guenther Apr 4, 2016

I was expecting the fourth phase to be defined as governments and markets working harmoniously together to achieve social and economic objectives. I would argue that the third phase never really existed with no government intervention in the market. Rather the distribution of government largesse was more focused on businesses than towards citizens. In this way the third phase wasn't a reverse, but an inverse of the economic system from the second phase. Perhaps what we actually do need is a reverse and give people more power to create markets. We can already see some of this trying to occur in the sharing economy. With the internet's ability to connect people and distribute resources more efficiently, perhaps what we need is less government involvement to secure economic interests of politicians' benefactors. What we need in government are unbiased regulators to ensure markets are fair. Call me naive since humans aren't angels, but I'd like to believe...
- Mike Holly Apr 11, 2016
  
  Of course, I checked everything:
  https://mises.org/blog/how-government-regulations-made-healthcare-so-expensive
  Again, government meddling caused the US Health Care Crisis.
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- Jose araujo Apr 11, 2016
  
  In your extensive studies of this sectors didn't you check the US spending on health and education vs. most of the European countries?
  
  US spends almost double on health and education and gets half the results, which is consistent to the nature of the industry and the efficient markets theory.
  
  And its not just the US, that is a common denominator in every public vs private comparison of the production of public goods.
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- Mike Holly Apr 7, 2016
  
  @Jose
  It is clearly just your pro-government opinion that Health Care, Education and Electricity Utilities "are clearly areas where government is much more efficient than markets" because I have studied all three industries extensively and I know no such proof exists either in theory or practice. My learned opinion is markets perform much better in all three.
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- Jose araujo Apr 7, 2016
  
  @Mike, I'm also pro-market, but because of this I know of market limitations.
  
  The cases you mentioned are clearly areas were government is much more efficient then markets, Education, Health and Utilities, not only in theory but in practice to.
  
  You could have similar efficiency (although I doubt it because of the profit need) with good regulation and regulators, but I think its much harder to find a good regulator than it is to find a good manager.
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- Mike Holly Apr 4, 2016
  
  I agree with pro-free market Matthew, not pro-government Jose. The problem is politicians exchange preferential regulations to monopolies in exchange for political support. Absent this favoritism, most markets would operate competitively. For example, the US government limits the supply of doctors, hospitals, drugs and insurance. The government could leave K-12 education and private companies could replace them efficiently (just look at the success of home schooling). The electricity utility was competitive until the US government awarded vertically-integrated territorial monopolies. Technology is working just fine as a mostly competitive market.
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- Jose araujo Apr 4, 2016
  
  The problem is that only a small share of the markets have the conditions to be efficient.
  
  Most of the markets have a monopolistic, olygopolistic or monopolistic competition structure, they don't fulfill the condition for perfect competitions.
  
  If we take, Health, Education, Security & Justice, natural monopolies like utilities and highly differentiated products like technology, then perfect competition markets would be less then 20% of all, rendering a non regulated economy an impossibility.
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Zsolt Hermann Apr 4, 2016

The author and many of the comments nicely describe the recurring vicious cycles humanity has been going through during history.
Basically we enthusiastically start with some new ideology, political, economic system and we run into crisis, dead end and then some form of "explosion", revolution, war, economic collapse or all of them together "resolve" the situation and we start building on the ruins of the previous system.

This last cycle must be the most disappointing one since we have been trying with the most optimal, perfect looking systems: democracy and free market economy. Still we clearly failed and now we are sleepwalking into the next explosion, global meltdown.

And whatever we think we can try next before or after the next explosion, will also fail unless we finally realize the root problem. Our failure is not a result of the political, social or economic systems we have been trying. The root cause is in our inherently self-serving, self-justifying and greedy human nature. And this nature does not affect only a few people, certain professions, social layers but we all have the same nature. The only difference in between people is in the size of the selfish desire, in the "hunger" and readiness to sacrifice for profit, possession, dominion. This hunger renders humanity into a pyramid

Unless we work out how to change, adjust our nature first we will keep running these vicious cycles until we will finish ourselves off like cancer. We can't change the world unless we change ourselves first.
- Mike Holly Apr 4, 2016
  
  Your concerns about self-interest, which I agree with, should lead you to support capitalism over authoritarianism. Adam Smith described self-interest and competition in a market economy as the "invisible hand" that guides the economy. There has never been a free market economy. Authoritarianism assumes a benevolent dictator, which is naive because it is against human nature. Politicians have ruined every economic system with corrupt regulations that monopolize industries.
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Farid Novin Apr 3, 2016

Anatole Kaletsky writes: “If the world is too complex and unpredictable for either markets or governments to achieve social objectives, then new systems of checks and balances must be designed so that political decision-making can constrain economic incentives and vice versa. If the world is characterized by ambiguity and unpredictability, then the economic theories of the pre-crisis period – rational expectations, efficient markets, and the neutrality of money – must be revised.”
I tend to agree with that writes: “In making his interesting argument, Mr. Kaletsky seems to _assume_ that there is a fixed set of "social objectives" at hand that are so clearly understood and excepted by everyone that they need no further discussion.”
The wise Scott who thought of “invisible hand” told us that market can allocate resources most efficiently, while every individual can maximize its utility, and ever entrepreneur can increase the economic welfare by free pursuit of profit. We have seen the triumph of his theory. We know the conditions for markets to move to Efficient Production Frontier, No price setter, complete transparency, Free Information, etc. The world has always been too complex. One can argue that the availability of personal digital devices have reduced the complexity of say price discovery – the most complicated role the markets. The market tell us that the world is not ambiguous and it is quite predictable. If you try to break the market’s fundamental laws you as in the 2001-2009 you will be punished, and if you try to scape that punishment you will be in the present situation. This was the message that Gustav Cassel, the great Swedish economist, tried to convey, in the Brussel conference of 1937, his message fell on deaf ears and the result was WWII. The history is repeating itself again, and most politicians and many economists again want to reinvent the wheel. We have astronomical amount of toxic assets, the balance sheets of central banks have become a dumping site for garbage. Too-Big-to-Fail banks are giant zombies. One can go on, but I have written about these issues http://fn-post.blogspot.ca/2016/03/central-bankers-weekend-at-bernies.html and http://fn-post.blogspot.ca/2016/02/what-will-trigger-next-global-bust.html . To sum up, we need to respect market laws, if not, market will force us to do so.
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Robbie Jena Apr 3, 2016

ABYSS...any one?

Perhaps it is BAD GOVERNANCE that is causing abyss...please think...
- Robbie Jena Apr 4, 2016
  
  Follow up: https://www.youtube.com/watch?v=yHcSWPZmpCw
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- Robbie Jena Apr 4, 2016
  
  Just an addition. USA needs about 50,000 issues while India needs about 70,000 issues to get out of Bad Governance. Europe is between the two. The catch is, no one replying it means, abyss is on the way. Thank you and Good Luck.
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Robert Billyard Apr 3, 2016

Excellent analysis. We are suffering a political leadership crisis. Politicians must be willing tear up the and also offer real leadership. The new direction must be both socialist and multilateral. The present unipolar world is a very big part of the problem.
- Mike Holly Apr 3, 2016
  
  We need politicians like Winston Churchill who said "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery."
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harry wilkinson Apr 3, 2016

As I believe was said by a Russian philosopher "History does not teach. History punishes those who do not learn her lessons" How many more times do humans have to be punished for allowing the capitalist system , the best mankind has yet come up with for organizing and operating an economy, to function without strict regulation to control the avarice and greed that dominates the system.
- Mike Holly Apr 3, 2016
  
  There has never been a free market economy. All attempts have been defiled by government meddling.
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Edward C D Ingram Apr 3, 2016

As I wrote earlier in different words, I look forward to the day when economists read my short tract on financial stability and realise exactly why all their theories are failing apart in a financially unstable economic framework - quite unnecessary - it can be stable.

Quite simply, it is because they made a wrong choice with Keynes in 1923. Keynes pointed out that things such as fixed interest bonds do not and cannot adjust to the falling value of money, yet he also said that if everything did adjust to that then there would be financial stability. He wrote that people wold be basically unaffected by the falling value of money.

Adam Smith pointed out that managing interest rates is a very wrong thing to do...but not doing that when everything is unstable would be dangerous.

And in currencies we allow one kind of activity to interfere with the pricing of the other kind.

I gave a url to some of my book in my first comment. To repeat that would be pushing it a bit too hard.
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markets aurelius Apr 3, 2016

Continuing the previous thought: Always and everywhere we observe the disintegration of stable societies when laws and contracts are no longer enforced by a disinterested judiciary. Contracts are no longer binding, and the government becomes the servant of moneyed interests, that are able to completely capture the legislative, regulatory and legal systems of their respective societies.

When that happens, markets no longer perform the creative destruction required to disincentivize wasteful resource allocations, courts no longer enforce contracts, and the legal system no longer delivers justice. Then societies devolve into spoils systems -- plutocracies, in a word -- in which powerful cartels use government, courts and markets to retain their power and wealth. The U.S. arrived at that point in the late 1990s -- it took the Financial Crisis to shine a bright light on it.

What's left are the entrenched interests -- the people that actually crashed the global economy -- for whom government, the courts and markets are nothing but handmaidens, helping to nurture that "rough beast, its hour come round at last."

Every spoils system ultimately collapses upon itself. Its venality is its undoing.
- Mike Holly Apr 3, 2016
  
  Now that is what I am talking about.
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markets aurelius Apr 3, 2016

This essay is brilliant. It traces an oft-repeated historical arc in re the "disintegration of previously stable societies." It correctly identifies the "deep foreboding" in modern states. Alas, it misses the mark in its conclusion, when it states, "politicians must reconsider much of the ideological super-structure erected on market fundamentalist assumptions."

There is no more efficient way of allocating scare resources than via a market-based system. Likewise, there is no more certain way of ensuring markets perform this critical function than via a disinterested judiciary, which is able to command the full force of its society -- including the monopoly on the use of power -- to enforce legal, binding laws and contracts. The world has, despite all of its turmoils over the past 1,000 or so years, continued to evolve better market structures and more clearly defined ideas of what constitutes legal and binding contracts between individuals within their respective societies, between the governors of societies and their people and between societies.

These things are plainly obvious, beginning with the Constitutions of Clarendon, the Great Charter (Magna Carta), and the founding documents of the U.S. -- it's Declaration of Independence and Constitution, which most consider that country's founding charters.
- Mike Holly Apr 3, 2016
  
  Politicians have distorted markets with regulations including granting monopolies, licensing, guarantees, mandates, subsidies, bargain sales and zoning.
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- Edward C D Ingram Apr 3, 2016
  
  It is not the politics which is wrong. It is a lack of fiancial stability in the economic framework - which is entiely avoidable. See my other comments.
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Curtis Carpenter Apr 3, 2016

In making his interesting argument, Mr. Kaletsky seems to _assume_ that there is a fixed set of "social objectives" at hand that are so clearly understood and excepted by everyone that they need no further discussion. He writes "If the world is too complex and unpredictable for either markets or governments to achieve social objectives, then new systems of checks and balances must be designed so that political decision-making can constrain economic incentives and vice versa."

But I'm inclined to believe the root of the problem may lie in that assumption about our "social objectives." Perhaps we have simply fallen into the trap of framing the entirety of our social objectives in economic and political terms.
- Matthew Guenther Apr 4, 2016
  
  Good point that perhaps social objectives are not so clearly understood, and that our language of a social good is too narrow. However, I think it's not the social objectives that are unclear, but rather the method to achieve them is so politicized that people forget or don't understand what they are actually trying to achieve. Would any politician object to a social objective of 100% employment, clean environment, universal access to education and health care, assistance to the disabled or those in need, etc? Rather what we keep arguing about is the method for how we are going to achieve these outcomes. Maybe we should stop bickering about methods and work towards bringing the market directly to the citizen to let them choose how to best achieve these outcomes to meet their personal preferences. Governments shouldn't care how we achieve the social outcome. They should just make sure that the process to achieve it is fair.
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Neil Gundel Apr 3, 2016

Any new regime that doesn't recognize the need to radically change our energy infrastructure, it will have sown the seeds of its own destruction.

We've already locked in enough climate change to destabilize countless coastal economies. Also, by turning a blind eye to the ever more urgent charts depicting our vanishing carbon budget, we are inviting a very rude awakening when we realize that we need to change course with a scope and urgency that makes the 2015-2016 oil "adventure" look like a picnic.
- Mike Holly Apr 3, 2016
  
  In the US, climate change will not be solved with regulations favoring energy monopolies (Big Oil & Gas, and utility monopolies) as well as energy sources (oil and gas with preferential environmental exemptions, and intermittent wind and solar with mandates, grants and subsidies to cronies). Only after abolishing these regulations should a carbon tax be considered.
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Mark St. Angelo Apr 3, 2016

If, as Kaletsky concludes, the solution to our current crisis and the basis for the creation of what he calls "Capitalism 4.0" is that "politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking," then we in the United States most likely are doomed because few, if any, of our leading politicians have a sufficient grasp of economics to understand our current situation , much less encourage a revolution in economic thought.

As H.L. Mencken once observed, democracy as it is practiced in the United States is a belief in the "collective wisdom of individual ignorance." As long as the voting populace lacks an understanding of economics, those whom they elect to political office are highly likely to have a similar lack of understanding. As a result, we in the United States do not have a Congress populated by people who understand economics, and for political reasons it is doubtful that we ever will have a Congress with even a sizable minority who understand economics and are willing to try to change the economic "thinking" of their colleagues or the American public.
- Mike Holly Apr 3, 2016
  
  In the US, the problem is corruption and misrepresentation, not ignorance. Politicians are misinforming the voters because they are bought and paid for by the special interests who understand economics all too well. Even Bernie Sanders is supported by small contributors that benefit from more government control. Economists are kowtowing politicians and special interests. The media is kowtowing advertisers and uninformed viewers.
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Stefan S Apr 3, 2016

Voters are up in arms because of the failure of accountability. Try writing down the recipe for failure. The ingredients are well known.
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Allan Bleiken Apr 3, 2016

UNFORTUNATELY, NO ONE KNOWS THE FUTURE

Since the future has not happened, no one knows for sure what will happen. Therefore, everything is speculation. While trend analysys and historical events provide some indication of what may happen, the unexpected all too often happens. And, the unexpected all too often leads to anxiety and war.

While war in the past was in a non-globalized world, it again, is difficult to know what war will be like in a globalized society. It may well become a war of globalized terrorism and a war of stealth, using drones and robotic weapons. Dehumanizing war will not make it any any less destructive, but may in fact bring war to every household in every country.

The world had best be very careful in terms of how it addresses the future. The unknown, could well become the apocalypse.
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Arun Motianey Apr 3, 2016

I am very surprised to read this piece by Anatole Kaletsky. I went back and read all his recent PS articles and the tone in those writings was one of optimism, steady-as-she-goes, business-as-usual, stabilization policy measures are working just as they should, etc, etc.

And now this! It is as if he taken a leave of absence from analyzing the tools that policymakers use and entered a political realm. And he is disturbed by what he is seeing.

Even so, he needs to reconcile the two. How can he claim--as he has done for a while now--that policymakers have the full measure of the situation and then conclude that our societies are at a breaking point? It doesn't add up.
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jracforr jracforr Apr 3, 2016

Greed and fraud will destroy any system of governance regardless of the name or title attached to it .We may choose to say our particular preferrence is a market driven system rather than a government controlled one, but neither will succeed if human greed is not seen as the cancer in any economic system.The most recent economic crash was caused by excess capital being used /abused in the real-estate market, yet the solution proposed by those individuals who caused this crash,was to reduce taxes and slash wages.The result being that companies are now, awash in excess capital, seeking to repeat the previous disaster.
- Mike Holly Apr 3, 2016
  
  Greed is best controlled by competition and the criminal justice system.
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slightly optimistic Apr 3, 2016

Fine, but how do we put this into practice?
"New systems of checks and balances must be designed so that political decision-making can constrain economic incentives and vice versa."
Regularity capture means we can't even get national checks and balances on finance performed at present.
Yesterday the UK's PM pleaded with China's president to hear his complaints about the 'creative destruction' of Britain's steel industry. However, if granted, the venue is likely to be in five months time at the G20 Summit in Hangzou. Can't the EU be involved too in this crucial social issue?
- Mike Holly Apr 3, 2016
  
  I am far more worried about regulatory capture.
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- slightly optimistic Apr 3, 2016
  
  Thanks for your comment. Unfortunately regularity capture is a long-standing complaint of the audit profession - who are responsible for ensuring that checks and balances on finance, to safeguard the public, are operational. Studies, including by the G20 into the financial crisis in 2008, have insisted that this protection needs to be ensured nationally before being implemented more widely.
  But no appetite, even in the UK.
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- Mike Holly Apr 3, 2016
  
  Regulatory capture is the reason we need free markets to force self-interested companies to serve consumers and the nation. However, I do agree free trade will require agreements that levelize environmental regulation for industries like steel.
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Peter Belmont Apr 3, 2016

Though not "new", the power of Oligarchy (big-money in near-total control of government), especially in the USA, is so overwhelming -- and so obviously damaging to any observer not deluded by membership in the 1% or 0.1% -- that the Sanders candidacy is a timely reaction, and the appeal of his candidacy a sign of the seriousness of the disease and the clarity among the 99% as to its causes.

Not often spoken of in the USA's corporatist media is the fact that the lack of any sense at all of urgency (in government) about curbing climate change -- over the years 1990-today (and no sign at all of change) -- is a consequence of oligarchic refusal to act to curb climate change. Anyone who doubts that the neoliberal economic system is an unsuitable system for world-governance need =look no farther than USA's paralysis on climate change.
- Mike Holly Apr 3, 2016
  
  Government is not the solution, it is the problem, specifically regulations favoring monopolization.
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David Bevington Apr 3, 2016

In the world economy today we do not have a supply problem, we have a demand problem. The best way to fix this demand problem is to print money. Because printing money is such anathema to conventional economists the key questions of how much money should be printed and how it should be injected have not been seriously researched. We know from experience that too much money can cause hyperinflation, and we also know from recent QE that printing money does not necessarily cause hyperinflation.

The key questions are how much money should be injected, and how it should be injected, in order to fix our demand problem. For Britain the answer is straight forward. Money should be injected to finance the government deficit and reduce government borrowing, and the Monetary Policy Committee (MPC) should decide how much money should be created this way.
- Edward C D Ingram Apr 3, 2016
  
  David read my tract - it does say how monetary policy should be conducted. But before you can conduct it properly you need to create a market for credit and a price for credit. Interest rates should not be managed. The stock of money (printed) and not printed - both kinds needs to be managed to keep spending patterns in balance.
  
  Yes you need two kinds of credit - printed money in savings for lending is one. The other is the usual kind which vanishes when repaid leaving a potential shortage of liquidity and a slowdown. That is why printed money is so important.
  
  In my tract I explain how NOT to distribute printed money because no one else seems to know.
  
  http://ingram-dropbox.blogspot.co.za/p/a-short-tact-on-financial-stability.html
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- Mike Holly Apr 3, 2016
  
  (In the USA at least) the demand problem can best be addressed by abolishing regulations that favor monopolies and thus cause income inequality. Printing money will bring more debt, risky investments, inflated asset prices, even more wealth inequality, etc.
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Angel Gavieiro Apr 3, 2016

I think there is a common bottom line among the author's thesis and most of fellow commentators arguments, which I also share: undoubtedly the world currently is approaching a vortex, a point of inflexion that only can be analysed in a multigenerational context as the author attempts.

A) From an economic perspective the vortex is reached because Monetary and Fiscal policies are in a catch-22: Monetary policy could scarcely be more stretched as it is right now, extremely reducing its marginal impact; Fiscal policy is as well mostly stretched for most economies due to the hangover of debt vs GDP (public and private), and the "corset" from both (1) the democratic game (i.e. very limited room for tax/expense austerity without political penalty) and (2) the markets game (i.e. very limited room for non-austerity without market penalty).
Thus, in my view, under the "old paradigm" (i.e. monetary and fiscal policies at country level, or mini-block level like Eurozone for monetary policy), it is a catch-22.

B) From a demographic & equality perspective the vortex is reached via global record of population, sharing the increasingly more scarce resources (despite technological improvement), and that currently enjoys a global record state of awareness (thanks to technological improvement) about how unjust and unequal currently is the distribution of those resources. Thus, populism, coups, regime changes, revolutions, conflict, terrorism, mass migrations, outright wars are a natural consequence.

3) From a ecological perspective, the vortex is reached because human race is facing the largest threat it has ever generated (out of its own hand)... Climate Change, which threatens with negative impacts of a much larger scale than the impacts from the economic & financial crises of the 20/30s, 50/60s, or nowadays... potentially affecting virtually everyone in the planet. This one is the "biggie".

Thus, from an historical perspective, I would claim, we are facing not a vortex, we are facing "The Vortex".
The complexity is so vast and the legacy of power decision-making mechanisms so rigid to change that I can only conclude that the probability of happy ending is really slim (I do not dare to call it zero, because we must have hope!).

So, in an attempt for hope, the wisdom quote of A.Einstein (of his many) comes handy: "we can not solve our problems with the same thinking we used when we created them".
My starter-for-10 to that attempt goes towards Global Governance (in the lines of some of the your comments), but oriented to tackle as a priority 1 goal: effectively curving the Climate Change challenge worldwide ("The Purpose").

Leaders worldwide need a common purpose to effect the drastic changes required, I think The Purpose is what they need.

Then they need money. Here, I would advocate QE; now, I would be advocating a global coordinated QE effort of sizable amount to tackle The Purpose, and using a different transmission mechanism: not to lend to each country banking system, but rather to lend to a globally recognized, and re-newly governed and empowered institution, the IMF/WB, which would issue 20/30 years bonds, with 10-year grace of coupons and notional, and amortizing schedule thereafter [perhaps the maturities and grace should be longer].
IMF/WB would redistribute that enormous amount of newly printed resources across worldwide countries Directly investing in projects (public/private) for tackling The Purpose, considering 2 key criteria: a) impact on Climate Change and b) impact on Unemployment.
Finally, each country, for the amounts allocated would undertake a contingent commitment in their Budgets to set up a future Climate Change Tax, starting on year 10 onwards, to pay back IMF/WB investments; these Taxes would fall both on Individuals (seeking a heavy redistributive effect to curve inequality) and Companies (following their record of past & future negative impact on Climate Change).
Through this mechanism, we would win at minimum 10 years time to generate an unprecedented globally synchronized investment effort that should hopefully result on enough economic recovery to make public & private balance-sheets effective delevered, unemployment substantially reduced and, finger-crossed, The Purpose achieved.
The solution would give a 10-year window of opportunity for the catch-22 on the Economic side, while the hope for Demographic & Equality aspirational improvement, and fully direct the resources to tackle our main enemy (by size of negative impact): Climate Change
I would argue we "owe" a solution to future generations, which are already liable for what are currently leaving them to confront (so in that regard, the solution would partially offset this negative legacy that WE have already incur for them).
Now, the crux to capture humankind imagination:...only if we had some leaders with enough statesmanship to elevate themselves to The Purpose.
- Mike Holly Apr 4, 2016
  
  In the US, banking markets have never been close to free. Regulation of banking blocked competition and led to financial panics and depressions commencing under a national bank in 1792 and 1819, and state-regulated banks in 1837 and 1857 (so called free banking is a misnomer). Both railroad monopolies and banking, including both national and state regulated banks, were implicated in the severe financial panics that started in 1873 and 1893, and another panic in 1901. Banking regulation led to the panic in 1907.
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- Angel Gavieiro Apr 4, 2016
  
  Mike, just a small precision: obviously I was not addressing the causes of 2008 crisis (where, I think, free markets is 1 among several driving factors -I found "After the Music Stop" by Alan Blinder, yes ex-Fed, the best book about this topic-). The other way around, I was just referring to 2008 crisis as a proof (as it was that of the 20s as well) of the need for (fit-for-purpose) regulatory framework to rein in free market excesses. I understand your point about Fed monopoly, but one argument does not contradict the other (e.g. before the Fed creation in 1913, a time where markets reigned quite free, and still there were quite a few financial crises in the US, in which free markets, again non-exclusive, driving role to play).
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- Angel Gavieiro Apr 4, 2016
  
  Edward thank you for your comment. I went to your link and had a first read (I have to confess, surely due to my limitations, I will need to re-read it to fully internalize all it says). I find the core idea a very appealing one to explore (i.e. substituting money for value in contracts, so to allow prices adjust to, usually, falling values), and effectively tackles the problem of financial instability in the world at a higher metalevel (to your point about the diagnosis in problem solving).
  Now, as you well recognize, this is a quantum leap change for the global financial system, that requires extremely complex changes and adjustments in practical terms. Assuming for a second that this would be the ideal solution to the foundation of the system, as you well point in the article (and using your metaphor), an economy is that bus in movement (with all the sick passengers) and we need to find the right point in the road to stop to change the wheels (ie. squared to round)... I have the feeling this bus is right now in the middle of a very dangerous curve (with cliff included) on its path (ie. The Vortex in my comment), where at this point unfortunately we can not stop to change the wheels, so we need to make the best out of our bus "as we have it" to successfully make this curve; the most we can do it is to figure out fixes from inside (ie. as a modest starter-for-10, I suggested a practical potential solution, even if effectively desperate).
  Once we pass that curve (hopefully), then it could be the right moment to revamp the system from its foundation (e.g. like Bretton Woods tried after WWII, but notice that this did not happen in 1940, but only when it was clear that WWII was to be over soon). Let's face it... there is not much room for manoeuvre at this point... but that is only my opinion.
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- Mike Holly Apr 3, 2016
  
  @ Angel, I am glad you see your QE as desperation. But it is wrong to blame the 2008 Financial crisis on free markets. In the US, the Federal Reserve is a banking monopoly that regulates the banks and manipulates interest rates.
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- Edward C D Ingram Apr 3, 2016
  
  Angel, the economies of the world are all inter-linked and the whole system is very complicated. Result: comments like yours - there are many many things to re-balance when the system is not working as it should. You mentioned some. There are plenty more.
  
  In my tract on financial stability I explain what to do when such things happen. It is well understood by investigative engineers, doctors, sociologists and so forth.
  
  You find out what is not going by the book and you put that right. Then a whole set of things start to work properly.
  Here is a short silly story from my tract to illustrate the point:
  
  There is a fictitious story of the bus full of experts in everything from space shuttles to biology, including medicine, and economics.
  
  All of the passengers were sick, were jolted around, and they had backache and headaches. Some were dizzy. None enjoyed the journey. All kinds of treatments were prescribed by the medics. Others provided interventionist theories about how to redesign the bus so as to smooth the ride. Then the driver got out and saw that the wheels were square instead of round. As soon as new wheels were fitted all of the symptoms vanished. The experts on board were shocked. Why had they not thought of this?
  
  I will tell you what is wrong later.
  The first task of an investigator is not to administer medicines or to intervene or to redesign everything, but to find out what it is that is not 'going by the book.' The writer was told to adopt this approach when investigating a high level of rejected products coming off a production line. It worked.
  
  Every reform which goes 'by the book' removes dozens of knock-on effects which are sometimes major and highly destructive symptoms like high rates of home repossessions, unstable currencies, banks which are too big to fail, and high levels of unemployment. To the casual observer, and to politicians, these symptoms are like the sickness of the people in the bus. They are easily confused with the source problem. New legislation gets passed (a knock-on effect), and subsidies are granted (a knock-on effect). Tax levels rise (a knock-on effect). More regulations are added (a knock-on effect). Each knock-on effect has a price and it generates more costs and more knock-on effects. You listed a few more.
  
  So what is going wrong?
  
  JM Keynes almost spotted it in his tract on monetary reform. But he missed. Instead of creating an economic framework based upon what Adam Smith taught, one in which the price of everything is allowed to adjust to changes in the supply and demand equation, including the increased demand as money falls in value, he, Keynes, decided to try to manage the rate at which money falls in value.
  
  He should have first attended to what was wrong with pricing and then designed his new management system. That way it would have been a simpler and more powerful management system.
  
  It is the same with passenger jets - first design a framework which will more or less adjust itself to fly in wind from changing directions, and then design the controls. They will be so much simpler.
  
  It is the same with economies - my tract examines all this in huge detail. In the words of one professor, "It simplifies everything" - well he was only looking at some o the tract. But it applies to all of it.
  
  I have given my url in other comments here.
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- Angel Gavieiro Apr 3, 2016
  
  Mike thanks for your point, appreciated. I share with you a high dislike for QE as has been done so far. The QE suggested above is of a different nature (perhaps would deserve a different name to make it justice): 1) does not go to the banking system (goes to IMF/WB and ultimately to Direct finance Climate Change projects; 2) does not generate country government debt (it generates Supranational entity debt); 3) more importantly, it has a clear exit mechanism for its elimination (i.e. via real money from future taxes). So, I agree it is desperate measures for desperate times, but probably designed with more sound fundamentals than the QE we have experienced so far.
  Now regarding "unleashing free markets through the removal of government regulations", I think I fundamentally disagree: I believe 2008 has clearly demonstrated that free markets is like a nuclear reaction, you need graphite bars (i.e. government regulation) to keep it under control. A different matter altogether is what are the right regulatory policies? (as I agree the re-regulatory reaction post-2008 has been quite far from ideal from my viewpoints).
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- Mike Holly Apr 3, 2016
  
  Please, no more monetary manipulations. It may buy time, but just makes the situation worse in the end (more debt, more risky investments, etc). It is time to finally grow the global economy by unleashing free markets through removal of government regulations favoring monopolization.
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Mike Holly Apr 3, 2016

This article is based on the false assumption that there has ever been a free market economy. Politicians have always created monopolies in exchange for political support. In the US, the stages are better defined as Mercantilistic Monopolization (1783-1870), Regulated Monopolization (1870-1933), Socialistic Monopolization (1933-1975), Deregulated Monopolization (1975-2000) and Fascist Monopolization (2000-today). Details can be found in my article "The Long History of Government Meddling in the American Marketplace."
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Enrique Woll Battistini Apr 3, 2016

Dear Anatole, you are right; this is what I see:

https://www.academia.edu/23094646/OFA_At_the_Brink_of_Recovery_or_Conflagration_The_World_at_a_Tipping_Point_2011111506
https://www.academia.edu/21950018/Facebook_-_Staving_off_the_impending_effects_of_unemployment_through_increased_consumption_-_2013031903
https://www.academia.edu/18040396/Living_in_Peru_-_Uses_and_Limitations_of_Michael_Greene_s_Social_Progress_Index_SPI_for_Development_-_2015102202
https://www.academia.edu/13062623/Informal_Proof_of_Thomas_Pikettys_Thesis-2014060802
https://www.academia.edu/12823841/Mathematical_Model_and_Simulation_for_A_Partnership_for_Development_with_the_United_States_of_America_-_December_1999
- Enrique Woll Battistini Apr 3, 2016
  
  Item 1: https://www.academia.edu/23094646/OFA_At_the_Brink_of_Recovery_or_Conflagration_The_World_at_a_Tipping_Point_2011111506
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Oliver Denker Apr 3, 2016

Anatole is a big spender.
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Miriam Campanella Apr 3, 2016

Excellent: thoroughgoing fallibility as an empowering factor.
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Eric Livny Apr 3, 2016

The analysis is great as far as the past is concerned. It is quite a bit weaker concerning the future of democratic capitalism. I doubt this future is about any great new insights about the interrelation between politics and economics. If anything, it may be about the boundaries of economic and political systems. Some of the key challenges we are facing today in global economics and politics are related to the incompatibility of these two sets of boundaries. While business and economics are already quite global, politics remains surprisingly parochial. Capital - financial and physical - can almost freely move around the globe. Taxes are paid wherever and corporation and wealthy individuals please (or not paid at all). Yet, the vast majority of people outside Europe are still inhibited from free movement by political boundaries. Change is up in the air. Yet, because of institutional inertia, vested parochial interests and complacency, it is most likely to come about through another major calamity - mass migration, an energy crisis, an ecological catastrophe, nuclear or biological terrorism, drone terrorism or any other threat of truly global proportions.
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Edward C D Ingram Apr 3, 2016

It is not what we need to do which is unconventional. It is what we are already doing which is unconventional

If you want something conventional then read my Short Tract on Financial Stability.

http://ingram-dropbox.blogspot.co.za/p/a-short-tact-on-financial-stability.html
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Robert Bruce Apr 3, 2016

The clearest analysis I have seen yet on why we are where we are. I would only offer that the Keynesian model 2.0 failed because it became dominated by the power of labour, while deregulated markets 3.0 ended in the absolute supremacy of Global capital. Both models ultimately led to crisis because they failed to find a sustainable balance between the power of labour and the power of capital.

This is the key challenge for future economic regulation, and is already being played out now in calls for increased minimum wage levels and redistributive policies. However, the one element overlooked is that the power of capital today derives from financial markets are now Global, whilst regulation remains limited to individual national governments. We will not bring about a workable 4.0 unless we establish a new "Global Economic Community" capable of creating a regulated Global market. This will not be easy in the current political climate, but that does not change the fact that meaningful reform is not possible without taking this critical step. Isolated national efforts to restrict the power of capital will simply be circumvented by businesses and the wealthy relocating their base of operations. The sooner we recognise this, the sooner we can start the really important debate - how to go about constructing a regulated Global market, that creates economic opportunities for all.
Robert P Bruce - author www.TheGlobalRace.net
- Jose araujo Apr 4, 2016
  
  Well, IMHO Keynesianism didn't fail, and the times where labor increased its power were the times of greatest progression of the western economies.
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Per Kurowski Apr 3, 2016

Getting rid of the risk weighted capital requirements for banks, which so distorts the allocation of bank credit to the real economy, which has the banks no longer financing the “riskier” future but only refinancing the “safer” past, is an absolute must.

http://subprimeregulations.blogspot.se/2015/06/the-basel-accord-was-important-turning.html
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j. von Hettlingen Apr 2, 2016

Anatole Kaletsky believes that "when things fall apart" in our economy, we have to see it as a "pattern of recurring crises" in "global capitalism" that tends to repeat itself "every 50 or 60 years." Despite calls for more economic opportunities, equalities and better distribution of resources, he insists that capitalism isn't dead. Crunch and recession have merely changed it yet again. In chronological order he illustrates the highlights and pitfalls of capitalism from its emergence in the "classical nineteenth-century" to the 2008 global financial crisis.
Capitalism 1.0 - in the late nineteenth century the fall in transportation costs created for the first time a "global economy." Up to the end of the first world war, economics and politics were separate "spheres." Politicians didn't meddle much in commercial business, and the government's role was "confined to the (necessary) raising of taxes for military adventures." However its "(harmful) protection of powerful vested interests" stoked widespread resentment among working-class people.
Capitalism 2.0 - the Great Depression "led to the Keynesian revolution in economics," which viewed markets "with suspicion." Following John Maynard Keynes's "version of capitalism" and FDR's New Deal, politicians were bound to get involved because only the government could provide the conditions for business recovery. Hence "government intervention was assumed to be correct."
Capitalism 3.0 - both Margaret Thatcher and Ronald Reagan reversed the direction and tried to convince the world that the "government was usually wrong and the market always right," leaving monetarism and market forces to do the job. So far so good, until things went bump overnight - the collapse of Lehman Brothers in 2008.
Capitalism 4.0 - may be more challenging than ever, as there is a risk that what governments and markets would do, could both be terribly wrong. This "fourth seismic change" requires us all to be more pragmatic and less wedded to theories that can't work, constantly watchful, mentally engaged etc. The smallest mischance could make people everywhere jittery and nervous.
Kaletsky approves of “responsible” politicians everywhere, who "warn citizens about a 'new normal' of stagnant growth," and chides voters, who are "up in arms." He says it's wrong that people demand their leaders to use their "powerful economic tools that could boost living standards. Money could be printed and distributed directly to citizens. Minimum wages could be raised to reduce inequality. Governments could invest much more in infrastructure and innovation at zero cost. Bank regulation could encourage lending, instead of restricting it." Therefore he approves austerity measures now, so that the curse of constant penury is lifted from future generation. He certainly warns politicians to heed the "message of today’s populist revolts" - to tear up their pre-crisis rulebooks and encourage a revolution in economic thinkin," as this would only "give way to even greater horrors."
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michael CROCKETT Apr 2, 2016

I would like to quote Erwin Schrodinger."A sort of general atavism has set in.Western man is in danger of relapsing to an earlier level of development which he has never properly overcome; crass, unfettered egoism is raising its grinning head, and its fist, drawing irresistible strength from primitive habits, is reaching for the abandoned helm of our ship" This for me states the present situation that the human race, abandoning the ethics of religion, finds itself in. I am much less optimistic than Anatole Kaletsky that the human race will find a good solution to this state of affairs.
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Patrick O'Malley Apr 2, 2016

This is one of the best articles I’ve read of late that provides perspective to the economic and political turmoil post Great Recession. It puts the Great Recession in historical perspective as a manic peak to the deregulated market orthodoxy initiated by Reagan, which in itself was a reaction to the government intervention orthodoxy of the Keynesian economics and New Deal politics originating from the Great Depression. Each new orthodoxy was born of a chaotic crisis. Kaletsky implies the next orthodoxy may be some combination of government and free market strategy with an institutionalized check and balance relationship. A balance is needed, since each on its own led to a suffocating extreme. We are in the muddled, confused phase where “The best lack conviction,” while the normally uninvolved have put down their beer, turned off the football game and rallied “full of passionate intensity.” It’s not clear any of the presidential candidates have an answer. Donald Trump appeals to the fears of job insecurity, loss of jobs to globalization and immigration, but he lacks clear plans. Bernie Sanders appeals to those looking for economic equality, but does not seem to answer the fundamental problems of the crisis. Hillary Clinton advocates the status quo. But status quo is not what is needed. Ted Cruz is Reagan’s deregulated market orthodoxy to the fundamentalist, ideologue extreme. This orthodoxy, according to the article, is the cause of the current crisis. Cruz is dangerous in advocating for more of the same. Yet there is hope. With the wealth, technology, and collective knowledge of today if properly harnessed can lead globally to a far more prosperous next generation. I can imagine that if we fail, the next “rough beast” could be released. That would be tragic. I would like to see some outlines of potential next orthodoxies.
- Andaleeb Qayyum Apr 4, 2016
  
  I agree, it's an excellent encapsulation, though a bit sobering, of the last century. I hope that the good Mr. Kaletsky, would diagnose some of the causes of the recent instability and provide a more fulsome economic analysis for the way forward.
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john werneken Apr 1, 2016

WHY should living standards be improved? If the people have earned that, let them buy it. Otherwise, F the people.
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Howard Johnson Apr 1, 2016

No, the actions of the past are not a progression, more like a pendulum. Econ 3.0 was a return to Econ 1.0. Here's the thing, it took WWII to complete the transition to Econ 2.0. What catastrophe will we see this time to usher in 4.0. Are we not waiting for the beast, do you really think the Pols are up to it; that the "elite" will go quietly into the night. If only Krugman's aliens would attach; . . . .wait, what's that outside my window?
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