It’s a combo vid, Tim Pool starts out, and it ends with Carlson. My interest is the latter segment, since the segment with Pool is weak as hell.
Carlson: “…Neither party wants to talk about this. … Any economy based on interest payments isn’t really an economy, it’s a scam. … Healthy countries make things… they don’t worship finance. In a healthy country bankers aren’t heroes. Private equity is not the highest paid profession. Nobody brags about working at a Hedge Fund. In America right now we have the opposite unfortunately. And that’s why AOC has a consistency. Not because she’s impressive, she’s not. But because she’s one of the very few people who will say the obvious about the growing corporate tyranny… She’s right about the financialization part.”
My comment: AOC hasn’t really accomplished anything, except winning against a white man democrat, who largely outspent her campaign. As for winning against a republican, Pelosi said it best: “this glass of water would win NY against a republican.” It’s very telling that a “socialist” like AOC puts “renting phones” next to interest payments as to why the economy isn’t working, apparently cartelized markups and patents and land rents deserve the 3rd spot in her hierarchy, which would be fine, if she ever bothered to mention them, which she doesn’t. The leftards are just awful.
The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss the state of the Russian economy under Vladimir Putin, five years after the first sanctions were imposed on Russia for the accession of Crimea to the Russian Federation. Its monetary policy is discussed and contrasted with the negative rates in Western countries.
My comment: The Russian Central Bank is not immune from the same fallacious economic thinking we see in the West. Conventional wisdom says that high interest rates combat inflation, while low interest rates fuel it. Obviously, this mantra falls short when you apply it to our current reality. One country leader who gets it is Turkey’s president, who, like Trump, is pressing his own Central Bank head to relax borrowing costs. Higher interest rates are good for people who save in Treasury bonds, but what percentage of the population holds assets in the form of Russian Treasuries? Pension funds do require Government debt instruments in order to protect themselves against inflation; and Government debt is far safer than [private] commercial paper. Being cut off from foreign capital markets, there’s no reason to keep interest rates high, even with a banking sector left largely unregulated on the asset side.
As for the West, the fact investors are buying bonds which have negative yields means that the outlook on inflation is dismal and they still see this Government-issued instrument of saving as worthwhile. True, negative interest rates are a tax on the reserve accounts banks hold at the central bank. It’s a tax on bank liquidity. But there is no liquidity crisis in countries like Germany, the UK, and the US, and indeed there can’t be such a crisis, as long as their banking sectors meet their capital requirements. When bank assets shrink in value relative to bank liabilities, which are stable in value, this erodes their equity and makes it harder for them to borrow and can even lead to bankruptcy – unless the institutions in question are well-connected to the ruling class, in which case, the Central Bank and Treasury intervene with all sorts of bailout schemes. One reason as to why the Fed, the BoE, and the ECB adopted QE and near zero interest rate policy was in the logic that flooding the banks with reserves will revive lending. This move only makes sense in the fantasy world of mainstream economic thought – which preaches the fiction that banks lend out reserves to customers when they make loans. In reality, however, that doesn’t happen. Loans create deposits, while reserves are shuffled back and forth [as necessary] for legal accounting and settlement purposes only.
In July I wrote a piece on Russia’s macro picture, and pointed out why its budget surplus doesn’t put drag on the domestic private sector, due to the foreign sector’s large deficit against Russia [7 percent of Russia’s GDP in 2018]. With a budget surplus of 2.7 percent of GDP last year, that left Russia’s domestic private sector in a net financial surplus of 4.3 percent of GDP. The same situation is projected for this year.
On the question of affordable Government investment in public infrastructure and public services… it’s not about accruing financial savings before the Government can invest. After all, we’re talking about balance sheet statements [the Sovereign keeping a ledger in his own unit of account], not savings in actual physical materials. Russia has the technology, the skilled labor, and necessary materials to expand public services and physical infrastructure; and it doesn’t require foreign currency for any of this. For a country like Russia, a country with monetary sovereignty, there is never a “lack of its own money.” The challenge, or art of public finance, however, is to conduct fiscal policy in such a manner to accommodate investment, job creation, and income growth while keeping prices in check. So long as wages and profits are rising faster than prices, you achieve real growth, and that’s what matters.
Historian and economist Michael Hudson in a seminar from two years ago on real estate & financial speculation. Well worth the listen. Can’t recommend it enough.
Some Key Takeaways
Land is the most important thing in economics, the largest resource, and that’s why it’s the least talked about in the economics profession, hostage and or ally to the vested interests.
Thorstein Veblen observed that finance capital is real estate. The object of real estate developers is to tax the population via rent and interest, to inflate the price of property and then find “a sucker to buy.”
In the US, 80 percent of loans are mortgage loans. And 80 percent of capital gains are comprised of land.
The purpose of a city is to ensure that people can live, work, and do business there. But finance capitalism [as opposed to the industrial capitalism envisioned by the classical economists] is all about turning the city into an investment good – which means eroding the aforementioned activities [living, working, and (wealth creative) business].
Hong Kong’s budget [which includes all the expenses of running the public infrastructure] is based on taxing the rental value of property. The tax scheme it employs is not the Georgist single tax system. Even though the HK Government taxes the rental value of property, it’s still facing rising property prices. That’s because HK doesn’t capture anywhere near the full value of land.
Australian Governments have been content to neglect the manufacturing sector and encourage private debt growth and asset price inflation, relying instead on the resource exports sector – with China being their biggest customer.
The Chicago Boys, the first thing they did in Chile after bringing down Allende, in addition to assassinating every land reformer and labor union leader, closed every economics school in the country. They realized that you can’t have a [pseudo] free market without having a totalitarian state [complete control over the curriculum]. The Chicago School controls all of the major referee economic journals in North America – hence the lack of criticism of unearned income [like interest, rent, and patents].
Breaking with the tradition of Classical Economics, the modern ‘free market totalitarians’ insist that there is no economic rent, that there is no free lunch.
Big lenders to developing countries [Hudson cites Argentina as an example] try to assess the growth in the balance of payments of the debtor nation in question, in order to pocket all that growth for themselves.
The FIRE sector [finance, insurance, and real estate] effectively imposes a private land value tax on the country. Would-be debtors outbid themselves, who will pledge more of the rental value to the bank.
Foreign oligarchs wish to place their money outside, in case their Governments will try and confiscate their illicit wealth. Instead of putting their money in the stock and bond markets, they prefer to put it into real estate. This leads to asset price inflation, making it harder for households, workers, and SMEs to live, earn, and operate.
To the ‘rich people create jobs’ myth, Hudson argues that many in fact are job destroyers. He gives the example of a corporate raider, who borrows money at 1 or 2 percent from a bank, with which he acquires a company whose stock yields 6 or 7 percent, he doesn’t want to hire more people; he wants to lay off workers, to cut corners, to use the pension fund to pay the bank, and to threaten workers with company default if they don’t give up their current pension plans and other benefits.
The way to make money fastest is in an economy that’s being looted. Adam Smith said the rate of interest [referring to the interest payments the population had to make to the creditors] is often highest in countries going fastest to ruin.
Hudson says that the one identity that’s left out in Identity Politics is the identity of the person who has to work for a living.
The dream of finance capitalism / rentier markets is neofeudalism: that all income above subsistence be pledged to the rent-seekers, to the usurers, to the monopolists, to the plutocracy.
The practice of a Government borrowing in foreign currency [swiss franks and euros for instance] to finance domestic projects, which will require domestic currency to be printed anyway is ‘fake economics.’ Instead of being stuck with paying principal plus interest in a foreign currency [to fatten bankers], it’s much better for the Government to simply print its own interest-free currency.
High population levels don’t inflate property prices. Hudson gives India and China as examples and contrasts them with Western countries. It’s how much the banks are able to squeeze from the population that determines property prices, not the population level itself.
John Stuart Mill said that economic rent is what landlords make in their sleep.
There’s agreement among all the mainstream parties that the top 10 percent wealthiest in society should benefit at the expense of the bottom 90 percent.
Why do politicians allow financiers to dictate to them economic policy? Bribery, campaign contributions, blackmail, and crime.
For old people and retirees, who can’t afford to pay land value tax, the Government can freeze the money obligation on them for a given time period. However, the back tax [the arrears] will be collected from the sale of the property when the owner dies or moves out. Nobody has to be kicked out in the streets.
My enumeration ceases here. But there are many other important points Hudson makes. I encourage readers to make time and watch the whole seminar. To me, the notion of seizing the Natural Commons for the people is not only economically sound, but morally just, whether one’s of a particular faith or no faith. Treating land as capital, as a commodity, an instrument for speculation – to me – is not only economically unsound and false, but a sin against Man and an affront to God. In spite of my atheist brain, that is how my heart perceives it.
Kyle Bass interviews infamous Chinese businessman Guo Wengui, also known as Miles Kwok, to hear a series of ‘shocking’ accusations against the Chinese Government and Party. Kwok talks about the workings behind several recent high-profile news items and touches on the CCP’s management of the economy. He also makes an alarming forecast about Alibaba co-founder Jack Ma. Filmed on October 5, 2018 at an undisclosed location.
My comment: China’s foreign currency reserves DO NOT sit within China, but in special accounts at the ledgers of foreign central banks. US dollars owned by the Chinese [in reserves and treasuries] sit on the Federal Reserve’s ledger! These accounts can be frozen or deleted outright, if there’s sufficient political will for such an action, just like the US and the UK did with Venezuela’s foreign assets. China’s economic model rests on being a huge net importer of aggregate demand. China’s physical output capacity is unquestionable, it’s a fact. To say that the Chinese economy is fake is nonsense. As for the amount of bad loans Chinese banks make, what’s so surprising? Look at all the bad debt, at all the derivatives in Western countries. China isn’t in danger of insolvency. The Government spends and taxes in its own fiat currency. It can operate with negative equity, denominated in its own currency, indefinitely. The CCP makes an assassination look like an accident. The US-Israel Deep State makes an assassination look like a suicide [if Epstein’s death wasn’t faked]. His prediction that the CCP is going to collapse in two years time is pure fantasy.
I find it amusing that rich businessmen associated with governments unloved by the Western Establishment are called oligarchs, but if these oligarchs are critical of their own governments and friendly toward the Western Establishment, they are deemed as honest merchants, honest entrepreneurs, and even whistle blowers. It doesn’t matter that the Saudi regime violates human rights and liberties, that it tortures and kills people – it doesn’t matter because the Saudis treat oligarchs well. And that’s what matters in the eyes of the West. We don’t have a problem with your methods, with your crimes, so long as you show respect to our trans-national ‘business community.’
Kyle Bass, even though expressing doubt over some of Kwok’s claims [in some cases pure slander, like the reference to Hu Jintao] didn’t ask for any type of proof. It’s no secret that corruption and violent score-settling exists among and between China’s elites within the political sphere and the bureaucracy [the party-created and state-created oligarchs]. But why must we act so surprised, as if these things don’t happen in our own countries too, I don’t know?
Reply to Al Jazeera’s Megan Janetsky on ‘Xenophobia’
by Serban V.C. Enache
In this article, Megan Janetsky claims that “Venezuelans have faced increased xenophobic attacks and attitudes,” but doesn’t invoke a single example of such an attack. The fact that countries in Latin America have begun to take measures to stem immigration is not a sign of xenophobia, it’s the inevitable consequence of the reality on the ground. It’s simply impractical for these countries to accommodate higher and higher inflows of people from Venezuela. There’s only so much space, facilities, job offers, and money [foreign funds on which these countries are largely dependent] to go around. Instead of playing the xenophobia card, lecturing countries and governments about how bad they are for not being xenophiles, the author should lay the blame on Washington’s foreign policy, not just on Maduro’s Government. By the way, Megan Janetsky doesn’t mention the trade sanctions, doesn’t mention the West’s hostile policy toward the country at all. This fact alone betrays the article as being nothing more than propaganda, a liberal’s virtue signalling, false humanitarianism, and promotion of the ‘no-borders’ and ‘limitless immigration’ mentality.
Crippling Western sanctions and theft of Venezuelan assets held abroad, on top of efforts to foment civil unrest and treason within the country’s law enforcement and military, are the major factors – but Maduro’s Government certainly has its share of the blame, and it goes back to Chavez’s administration as well.
And, yes, it’s also a failure of Venezuelan type of socialism. Take Cuba, for instance. Cuba has lived under US trade sanctions for more than half a century [plus US-sponsored terrorism]; and despite the odds, living on the hegemon’s doorstep, it managed to retain socio-economic and political stability. Cuba doesn’t have a fraction of Venezuela’s natural wealth; but it does have 1/3 of Venezuela’s population. Since the 1960s, Venezuela’s birth rate, measured per 1000 people, has fallen dramatically as you can see in the graph below.
In order to move away from the ‘resource exporter’ model, a country requires an increase in population size in order to diversify production, without depriving its traditional sectors of manpower. Simply put, if you want to diversify without causing shortages elsewhere, you need a bigger labor force. Chavez and Maduro didn’t even try to diversify, nor would they have succeeded without promoting population growth. The fact that a country the size of Venezuela has only three times the population of Cuba is a statistic worthy of national shame. The same goes for my country of Romania, which has only two times Cuba’s population. The fact that there are stores, filled with produce while people face severe malnutrition, that gasoline basically has no price in Venezuela, but electricity is rationed and public transportation is curtailed or paralyzed, points to the fact that Bolivarianism, or more accurately Chavism, was carried out with a total disregard for true economic and geopolitical planning. While hostile state actors and domestic renegade forces do offer the ruling political class in Venezuela a degree of extenuating circumstances, such adversity doesn’t wash away the complacency and criminal incompetence of the country’s Left wing governing parties and leaders. All decision factors across the hierarchical chain, who place ideology or their own status above the Nation must be ejected and their designs carefully examined and purged of any ideological adventurism and self-seeking schemes. Maduro and his crew aren’t fit for office, and Guaido should be arrested and condemned for high treason.