Where’S The Gloom And Doom These Days?

[tio]

Where’S The Gloom And Doom These Days?

How much do you want?

http://www.oftwominds.com/blogjune14/profit-wages6-14.html

Bad old capitalism trumps new good capitalism if the soaring profits are basically wages diverted to the few who own most of the financial capital. In Marx's analysis, this gradual impoverishment of labor eventually erodes capital's ability to sell products, undermining capital's ability to reap profits.

The endgame of this is obvious: once capital can no longer make profits selling goods and services and wage-earners can no longer afford to buy goods and services, the system disintegrates.

The magic "solution" of the past 40 years is to enable labor's continuing consumption with debt. And when labor is over-indebted and can no longer service more debt, then the central state (government) borrows and spends trillions of dollars to replace sagging private consumption.

This reliance on debt doesn't void Marx's endgame, it simply give it another twist: the system collapses in a credit/currency crisis rather than a labor/capital confrontation.

http://dollarcollapse.com/credit-bubble-2/the-bubble-is-back/

It was just six years ago that soaring consumer spending, massive trade deficits and generally excessive debt caused the biggest crisis since the Great Depression, and here we are back at it. The details are slightly different but the net effect is the same: inflated asset prices, growing instability and rising risk of a systemic failure capable of pulling down pretty much the whole show.

All of which creates a fascinating economic landscape in which families are making no more money than they did last year but are borrowing to buy things they don’t need, while corporations sell bonds to pump up their stock prices and by implication their executives’ year-end bonuses. It is, in short, another debt-fueled orgy in which the most vulnerable individuals are being suckered by governments and corporations into mortgaging their futures in order to transfer wealth to the “smart money.” Recall the Z.1 Report finding that household holdings of financial assets have surged by $22 trillion in just four years.

This is sad in one sense because the people being hurt are, as always, not the architects of this latest bubble. But it’s also exasperating because the same thing happened JUST SIX YEARS AGO and should still be fresh in the memories of the adults doing the borrowing and spending. Unless all those food additives and pesticides are impairing the average person’s cognitive functioning (which is a subject for another day) the people using credit cards to buy Chinese-made junk really have no excuse.

For now, the bubble is the story, and the fact that it’s hitting its stride with stocks and bonds already at record levels is a new twist. Just about the only thing that can be said with near-certainty is that the next few years will be more volatile than the last few.

http://davidstockmanscontracorner.com/say-law-keynesian-central-banks-and-irrational-exuberance/

The more I read, the clearer it becomes that the world’s Central Banks have become caught in a “liquidity trap” which is entirely based on circular logic. Central banks must create asset bubbles in the hopes of stimulating economic activity. When the bubble eventually pops the economic activity evaporates which requires the creation of another asset bubble.

Isn’t that the very definition of “insanity?” Repeating actions which have had historically negative consequences but hoping for a different outcome?

http://www.zerohedge.com/news/2014-06-07/madness-crowds-and-great-insanity

The masses are being plundered on a scale which is inconceivable and unmatched in history; it is the source of the middle classes dying in the developed world. The developed world has become a well-disguised plantation of serfs and slaves. They are given nothing to store and save their labor in as the currency they hold are printed endlessly and have no reserves to back them and are redeemable in NOTHING, contrary to every sound currency in history. Modern day money is nothing less than a wealth confiscation scheme run by morally and fiscally bankrupt central banks and governments against their own citizens.

[Bloo Loo]

when labour is no longer useful, then the same thing applies to capital...it is no longer of use...

[Venger]

The masses are being plundered on a scale which is inconceivable and unmatched in history; it is the source of the middle classes dying in the developed world. The developed world has become a well-disguised plantation of serfs and slaves. They are given nothing to store and save their labor in as the currency they hold are printed endlessly and have no reserves to back them and are redeemable in NOTHING, contrary to every sound currency in history. Modern day money is nothing less than a wealth confiscation scheme run by morally and fiscally bankrupt central banks and governments against their own citizens.

The masses here are mostly the big mortgaged home-owners with the money printing help to bail them out - low rates.

The ones who have been stuffed are the renters/non-owners. Your "middle-classes" masses complaining here about dying out - they need to experienced a hard HPC.

[Venger]

Quite. I was going to go on to add, that Sceppies Law of Money is that money will experience a 'Heat Death'. i.e. it will lose its energy as represented by an interest rate/returns on capital.

Given that Labour's input to the productive process is really a part of capital then wages will tend to zero too. That is not to say that 'Labour's' other role of having needs and wants to be served is redundant though.

What do we have then...'wealth' and 'tokens' of exchange...no longer 'Labour' and 'Capital'.

But in the realm of possibilities, what we are considering is a tendency towards 'abundance' and that even limitless exchange tokens become pointless. On the way though is a fight for scarce resources (aka 'wealth'). Whilst traded markets can be served by this abundance...they're not making any more 'space'.

I can accept it for low returns on savings accounts, but now having no use?

Renter-savers aren't there to go "look at this world of massively over-valued houses and now strain on incomes".

"I want to do my part to keep labour/jobs paying great so as to keep house prices up in value - and spend all my capital away pre-crash."

If you've got no money, you've got few friends.

Best thing any non-homeowner can do is save just a little against all this debt. Every £1 helps, for the crash ahead. And then labour will pay again; people getting something for their money. Homes at much better value for one thing.

Edited June 10, 2014 by Venger

[warpig]

2020 according to many wave theorists, is the bottom of this financial crisis. October 1st 2015 is the start of the decline according to Martin Armstrong which includes social unrest, but I guess it depends on your definition of a collapse. IMO 2008/9 was heading towards one, but it was averted and whilst they've bought time, the eventual collapse will now be magnitudes worse.

Interesting graph. But it doesn't show collapse - just cycles. Cycles are merely a continuation of normality. To plan for that graph, I just need to make sure I've got a bit of cash in 2002, 2011, and 2020 as divis will be a bit thin for a while - but nil desperandum as it all returns to pay-out heaven within 4 years. It's long term buy and hold nirvana - what I'd optimistically like to be the case.

However, I'm hedging for actual L shaped collapse (economic not EOTWOAWKI) - hence my veg garden, orchard and woodburners.

[Venger]

Interesting graph. But it doesn't show collapse - just cycles. Cycles are merely a continuation of normality. To plan for that graph, I just need to make sure I've got a bit of cash in 2002, 2011, and 2020 as divis will be a bit thin for a while - but nil desperandum as it all returns to pay-out heaven within 4 years. It's long term buy and hold nirvana - what I'd optimistically like to be the case.

However, I'm hedging for actual L shaped collapse (economic not EOTWOAWKI) - hence my veg garden, orchard and woodburners.

Someone warned me the HPC might be a drunken M, with the second leg going all the way down and down.

Hopefully we're entering that stage soon.

[wonderpup]

But in the realm of possibilities, what we are considering is a tendency towards 'abundance' and that even limitless exchange tokens become pointless. On the way though is a fight for scarce resources (aka 'wealth'). Whilst traded markets can be served by this abundance...they're not making any more 'space'.

In the context of capitalism abundance is entropy-because it's a scarcity based system. The fabled 'search for yield' is in reality a search for new forms of scarcity that can be arbitraged.

The strange thing is the more productive our technology gets the less 'economic value' it creates- which seems counter intuitive but is really quite obvious, since the trade value of a thing is related to it's scarcity which is related- in the case of manufactured goods- to the cost of it's production.

The more we succeed in eliminating expensive human labor from the productive process the less economic value will be created by that processes. This is why a handmade suit has more value than a mass produced suit- the value is the embedded human labor it contains.

So human labor occupies a really curious place in this scheme- it's both the source of cost and therefore the source of value. (In the economic not utilitarian sense of that term.)

A thing that can be produced near effortlessly by a machine- or-like software that can be replicated and distributed at near zero cost- will have an economic value approaching zero. This is why the average app on a tablet computer costs about the same as a latte- even if it is capable of far more sophisticated things than the average glass of warm milky coffee.

So the erstwhile capitalist who fondly imagines that by automating his production he will be creating more economic value from which he can benefit is in the long run mistaken- because once he and his competitors have the field to themselves they will destroy each others margins in a race to the bottom for market share- and their technology will simply accelerate the speed with which they arrive at their destination.

[PricedOutNative]

In the context of capitalism abundance is entropy-because it's a scarcity based system. The fabled 'search for yield' is in reality a search for new forms of scarcity that can be arbitraged.

The strange thing is the more productive our technology gets the less 'economic value' it creates- which seems counter intuitive but is really quite obvious, since the trade value of a thing is related to it's scarcity which is related- in the case of manufactured goods- to the cost of it's production.

The more we succeed in eliminating expensive human labor from the productive process the less economic value will be created by that processes. This is why a handmade suit has more value than a mass produced suit- the value is the embedded human labor it contains.

So human labor occupies a really curious place in this scheme- it's both the source of cost and therefore the source of value. (In the economic not utilitarian sense of that term.)

A thing that can be produced near effortlessly by a machine- or-like software that can be replicated and distributed at near zero cost- will have an economic value approaching zero. This is why the average app on a tablet computer costs about the same as a latte- even if it is capable of far more sophisticated things than the average glass of warm milky coffee.

So the erstwhile capitalist who fondly imagines that by automating his production he will be creating more economic value from which he can benefit is in the long run mistaken- because once he and his competitors have the field to themselves they will destroy each others margins in a race to the bottom for market share- and their technology will simply accelerate the speed with which they arrive at their destination.

Good style; you should write a book!

[cybernoid]

Good style; you should write a book!

If it stops this repeated bull on here I'm all for it

[Bloo Loo]

In the context of capitalism abundance is entropy-because it's a scarcity based system. The fabled 'search for yield' is in reality a search for new forms of scarcity that can be arbitraged.

The strange thing is the more productive our technology gets the less 'economic value' it creates- which seems counter intuitive but is really quite obvious, since the trade value of a thing is related to it's scarcity which is related- in the case of manufactured goods- to the cost of it's production.

The more we succeed in eliminating expensive human labor from the productive process the less economic value will be created by that processes. This is why a handmade suit has more value than a mass produced suit- the value is the embedded human labor it contains.

So human labor occupies a really curious place in this scheme- it's both the source of cost and therefore the source of value. (In the economic not utilitarian sense of that term.)

A thing that can be produced near effortlessly by a machine- or-like software that can be replicated and distributed at near zero cost- will have an economic value approaching zero. This is why the average app on a tablet computer costs about the same as a latte- even if it is capable of far more sophisticated things than the average glass of warm milky coffee.

So the erstwhile capitalist who fondly imagines that by automating his production he will be creating more economic value from which he can benefit is in the long run mistaken- because once he and his competitors have the field to themselves they will destroy each others margins in a race to the bottom for market share- and their technology will simply accelerate the speed with which they arrive at their destination.

no, because the market needs customers, and people who overfish will stop trading. There will still be a demand, but not for all the overfishers.

Demand ONLY comes from human beings.

They therefore cannot be removed from the system without the system self destructing...and as human beings are the driver, the system will never be gone as demand will have to be satisfied.

What will happen is change. change is something that many people cant cope with...my council is in fact advertising for "change managers" because systems and "culture" are the hardest things to change when there is 100% control and micromanagement of said culture and systems.

These are what will die as people will just reject them.

[Digsby]

So the erstwhile capitalist who fondly imagines that by automating his production he will be creating more economic value from which he can benefit is in the long run mistaken- because once he and his competitors have the field to themselves they will destroy each others margins in a race to the bottom for market share- and their technology will simply accelerate the speed with which they arrive at their destination.

The economic activity simply shifts from the production of the original product to the production and maintenance of the automating technology. It is natural that the margins will be eaten away because there is no longer the same economic value in the production of the original thing. Meanwhile though, said erstwhile capitalist has boosted his margins by getting ahead of the competition as an early adopter of the technology, and taken advantage of the spread while it is available.

[zugzwang]

The economic activity simply shifts from the production of the original product to the production and maintenance of the automating technology. It is natural that the margins will be eaten away because there is no longer the same economic value in the production of the original thing. Meanwhile though, said erstwhile capitalist has boosted his margins by getting ahead of the competition as an early adopter of the technology, and taken advantage of the spread while it is available.

Moreover, network technologies derive their value from abundance not scarcity. By getting ahead of the competition you're often eliminating the competition altogether, to reap the benefits that accrue from your quasi-monopoly status.

[Digsby]

..while, to reference another thread, the competition sits there dead in water whining like little girls attempting to label the innovator as a 'parasite'

[wonderpup]

If it stops this repeated bull on here I'm all for it

I will send you a signed copy anything for a fan.

[wonderpup]

The economic activity simply shifts from the production of the original product to the production and maintenance of the automating technology. It is natural that the margins will be eaten away because there is no longer the same economic value in the production of the original thing. Meanwhile though, said erstwhile capitalist has boosted his margins by getting ahead of the competition as an early adopter of the technology, and taken advantage of the spread while it is available.

My point was that the narrative that increasing productivity creates more economic value is not really true- despite the fact this is treated as some kind of absolute truth even by the same people who will praise the ability of Capitalism to erode pricing power- they seem not realize the flat contradiction in what they are saying.

After all pricing power is economic value- so anything at that erodes the former must inevitably erode the latter.

It's the mismatch between the stories we tell ourselves and the reality that I find interesting- especially as it's the stories-the narrative- that determines policy- which may explain why we are in such a huge mess.

[wonderpup]

I think under George's definition, greater productivity would create more 'real wealth'. As you say, economic value is via scarcity perhaps managed by monopoly, rentierism.

At the moment value is harnessed by the owners of scarcity. Labour still has some and it has also benefited by the process of falling 'value' of many manufactures but the value of labour seems to be declining yet capital holders are managing to increase their relative wealth. The membership of the upper group seems to be declining and the poles between the extremes widening.

The buying power and the markets are increasingly changing to serve those groups. Hence the prepoderence towards polarisation - especially the growth of luxury...but also the trend towards value and less in the middle. In terms of buying power in nominal £units, luxury has to be the way things are heading and the totals elsewhere (middle and lower together) declining.

+1 It's also interesting to note that the level of concern with counterfeit goods seems to rise in line with this polarization- mostly in regard to the luxury end. Apart from where health and safety issues arise it's the rich who worry about counterfeiting- your average pound shop connoisseur is unlikely to complain if his purchase bears a striking resemblance to a more expensive brand- wheres your Chinese billionaire may not be too happy if his wife's handbag is to be seen touted around town by the local chavs (or the Chinese version thereof)

What counterfeiting of luxury brands threatens in fact is the artificial scarcity the owners of those brands need to maintain in order to justify their prices.

But will they be able to hold the line as production becomes more automated and sophisticated? For example 3D printers will allow counterfeit goods to be made more cheaply and easily than ever- and by far smaller setups with less capital investment required.

So even the makers of many high end products might find that technology eventually starts to undermine their pricing power, as 'the means of production' grow more diffusely distributed and affordable to the great unwashed.

[Renewed Investor]

You see less doom and gloom because people are adjusting to the "new normal". This is what things are gonna be like from here on out sadly. Look to Japan to see our future.