Posted by: graemebird | October 12, 2008

When Will They Get It? The Denialism Of The Court Economists.

Here is the new thread by Jason Soon at Catallaxy. And its not as if we haven’t gone over and over and over these subjects before:

Emergency socialism?

without comments

At the ALS blog, Pommygranate has a round-up of all the latest measures to shore up the financial sector across the world including the recently announced decision to guarantee Australian savings. Pommygranate titles his post ‘Socialism is back’. The interesting question is whether such socialism or as its supporters might prefer to call it, emergency measures, are inevitable because some institutions such as those in the financial sector are simply seen as too big to fail because of the substantial transition costs of letting them fail (even if things eventually settle down in the end).

But if governments ultimately have no ability to commit to letting ‘adjustments’ happen in this sector and moral hazard cannot be avoided, then is the inevitable quid pro quo a substantial level of regulation that will never go away?”

Look Jason. If you are going to allow the special priviledge of people selling counterfeit shares over the internet….. right? Well you are either going to come clean and disallow this practice or you are going to have to regulate, protect, and priviledge the people going forth with this practice RIGHT? Yes you are. And there will be problems and distortions involved with this practice.

If you are going to allow the special priviledge of people selling gold-that-they do not own over the internet….. right? Selling ponzi-gold. Selling make-believe gold, selling counterfeit gold…..right…. Well you are either going to come clean and disallow this practice or you are going to have to regulate, protect, and priviledge the people going forth with this practice RIGHT? Yes you are. And there will be problems and distortions involved with this practice.

Now take people who buy, sell and store SILVER. Take SILVER. If you are going to allow the special priviledge of such people to sell silver-that-they do not own over the internet….. right? If you are going to allow them to sell ponzi-silver. Sell make-believe silver, sell counterfeit silver…..right…. Well you are either going to come clean and disallow this practice or you are going to have to regulate, protect, and priviledge the people going forth with this practice RIGHT? Yes you are. And there will be problems and distortions involved with this practice.


Banks store, buy and sell CASH. And if it was the free market this cash would be commodities. If you extend to them the priviledge of buying, selling, and loaning PONZI-CASH you are either going to have to come clean and make everyone equal before the law and disallow this priviledge….. or you are going to have to bail them out, regulate them, subsidize them and they are effectively in the process of socialisation.

And it is this that causes recessions and obviously so.

I don’t know what it takes for lickball court economists to click to the bloody bleeding obvious. But WHAT CAN BE MORE OBVIOUS THEN THIS?

And now we have derivatives and the absolute disaster of fractional-reserve-EVERYTHING. Which means our price system has been totally ravaged by these special priviledges and millions will die because of it.

What is all this talk of EMERGENCY socialism? The socialism was always there and it is the thing that caused the emergency. The banks always had this special priviledge. They always got to pocket the value of money-creation. They got to buy and sell and take a margin on any issuance of government debt. They had 77000 pages of regulations for any startup competitor to be bogged down by. They got to borrow off the public tit at wholesale prices.

Thats not emergency socialism. Thats socialism that must lead to a debauch of the price system and sooner or later an emergency. It was the same when the banking priviledge was through neglect rather than over-regulation. There was always these emergencies. There was always the price distortion. Medieval Florence suffered from bouts of unemployment that no-one understood, though there was not a trade union in sight. No minimum wages to speak of.

So we have just got to stop letting lickball, court-economists be dishonest, idiotic and negligent about these realities.

And we have to trash these banks. Trashing them means simply stopping to subsidize them in any way, releasing more cash, increasing the reserve asset ratio as the cash arrives, and letting all our banks fail. With plenty of cash around, in a non-priviledged environments, failing banks, would simply sell of branches to new competitors or to the general market.

Our banks would have to increase their margins, stop creating new money, learn to live as honest traders….. OR DIE.

Whats wrong with that?

There is nothing wrong with it and we would have a better investment market and price system for it. Now we are going to be in very bad shape for decades. This bank bailout is a far worse mistake then not pulling ground-troops out quickly from these wars.  Its not even a mistake. It was the banks controlling both houses and gypping the President. Its the banks in charge since there never was an argument for bank subsidies.

If anyone had wanted to spend a lazy couple of trillion on something that two trillion could have spent on building nuclear reactors. We have real problems to worry about. And real problems aren’t the multi-million dollar salaries of these banking welfare queens. A lot of these real problems are in fact the banking systems doing. Like our trade deficit, and the coming energy crisis that isn’t being handled at all. And won’t be handled by the current debauched version of capitalism with its socialist money.

Consider what else this money could have been spent on. The debt retirement. And then hang your head in shame if you ever advocated subsidising the bankers.

The debt retirement I said. But remember. The court economists told us that debt doesn’t matter. Thats sophistication in lickball economists circles. So if debt doesn’t matter why bail out the banks? Why not let them deal with their own debts?



  1. JC. Says:
    October 13th, 2008 at 11:39 am

    The ” living in debt” schtik is simple moralizing.

    The fact is that the vast number of people always pay back their debts.”

    So what Cambria? Whats your point? You don’t have a point do you moron?

    But the banks don’t pay back their debts. The banks never pay back their debts. Rather we have to subsidize them or pay back their debts for them.

    If debt does not come from savings and is not used for wealth creation it just makes things more expensive and forces more debt on people.

  2. “Nanuestalker Says:
    October 13th, 2008 at 11:55 am
    My solution is/My words of wisdom are….stop panicking.”

    But what on earth is this supposed to mean Nanu? Does it mean stop panicking and keep subsidising the banks and let them ruin our price system? Or does it mean stop panicking and let the banks fail and get to a free market for the first time?

    What was your point Nanu? This is the problem with Catallaxy now. People always saying things and no point to them.

  3. Graeme,

    It’s amazing that I agree with you on some of this stuff.

    I had to cut your comment from my other thread because I am trying to maintain a discussion on global warming there. I am sorry about that.

    You ask above What can be more obvious than this. I might have one for you, how about the IPCC being formed before evidence of man made climate change with the sole purpose of determining if there is man made climate change and what can we do about it.

    What the hell to people expect. Some massive government organization would recommend its own dissolution because it can’t find evidence to support its charter. It is a political mechanism to impart socialism nothing more.

  4. Right. Thats what happenned alright.

  5. Keep reading Jeff. I’ve got a lot of science stuff here.

    Look I had to slam you down pretty hard on the special relativity stuff. Simply because all the snideness in the world is wrapped up in that one.

    Its like people keep telling the professors that it makes no sense and they just act like these guys ought to be arrested. So the reaction to anyone being too precious about the paradigm has to be pretty brutal.

    Keep reading and you’ll see where I’m coming from.

  6. If debt does not come from savings and is not used for wealth creation it just makes things more expensive and forces more debt on people.

    yes that was exactly my point when I said the adjustment would be painful but in the long run we would be better off. Of course the banks want us in debt, it makes them richer. Then they fuck up and put their hand out. These great free enterprises that for decades have advocated an open market then put their hand out. The bloody stupid hypocrites.

    The current situation demonstrates the intellectual bankruptcy of so many economists. En mass they should have seen this coming and been screaming from the rooftops. That they didn’t is an indictment on modern economic thinking. If a discipline is so lacking in predictive power it needs to undergo a revolution in thinking. Their current stance is little better, if any, then the debate surrounding Global Warming, of which many of them have been trenchant critics. The bloody stupid hypocrites.

  7. Yeah JC is just being a jerk. He’s up to his eyeballs in this errant banking behaviour.

    Look every prick is making this big deal about the banks not making loans. Oh the horror the horror, oh the humanity. That folks have to live within their means. So thats no problem at all. Firms simply have to rely on their own earnings. And people simply have to be able live within their own income.

    But the problem is that the banks debt is our money. Thats how perverse the system is. Our money ought to be stored gasoline, stored liquified-coal, gold silver in coined or stored (digitalized) form and so forth. So there is the POSSIBILITY BUT NOT THE NEED for debt.

    Then when we borrow we borrow for smoothing out the production process or to create wealth.

    But our system means we have to keep borrowing lest the money supply collapses….. BUT WE DON’T.

    Because we can smoothly phase out the ponzi-scheme by adding cash and slowly increasing the reserve asset ratio. When the reserve asset ratio is 100% the banks cannot create new money so they have to live within their interest rate spread. Hence they won’t be stealing off us and wrecking our investment system anymore. Hence there will be a tendency for them to either go broke or make wealth-creating loans.

    Looking at it from a convergent tangent if they have to keep an honest book then they cannot rely on asset appreciation to back their loan. They’ll take collateral but they cannot rely on it and be lazy. The upshot is that their main criterian will be the speed at which the loan is paid back. This will wind up restricting loans to the type of gear that comes back in two paydays or to investments to improve cash-flow. The latter is a wealth-producing loan.

    Banks will be a lot smaller. They will do a lot less. But what they do that will be wealth-creation.

  8. if they have to keep an honest book the …

    A few months ago I read a text which stated that “the books” are so parlous as to be effectively open to manipulation at their leisure of the owners of any given entity. The problem we have now is that all these financial instruments have become smoke screens to hide the true situation of various companies. Wealth creation has become too dependent on asset value not production value, by increasing debt asset value can be increased but it is all an illusion, it is value created by debt, which is absurd.

    The incredibly irony is that since you were banned from Cat the forum has taken a huge nosedive. They even kept referencing your blog. The reason for this is obvious: those at the Cat are so ideologically blinkered they are now largely incapable of generating an original idea. You do, though in my opinion you need to tighten up your epistemology by a few degrees. However I prefer people who make mistakes, even stupid ones, to those who are so gutless they are terrified of taking an intellectual gamble. Science is often a gamble. You start with hunch, most will be wrong, but if you don’t take a chance you are just a technician. I heard a Russian physicist says this about Hawking: he makes some blunders but he comes up with interesting ideas. Every intellectual discipline needs souls like Hawking. As Einstein once quipped: The physicists most important tool is the waste paper basket. Someone added: Philosophers don’t even need that.

    I’m done with the Cat, why bother with a forum where it is just the endless parade of the same old ideas? As the poet Eliot once stated

    And the wisdom of age? Had they deceived us,
    Or deceived themselves, the quiet-voiced elders,
    Bequeathing us merely a receipt for deceit?
    The serenity only a deliberate hebetude,
    The wisdom only the knowledge of dead secrets
    Useless in the darkness into which they peered

    East Coker.

  9. Well you see they have to keep an honest book if they aren’t allowed to create new money and aren’t subject to subsidies or bailouts. Or else they will be out of business very quickly and the next guy who buys up their assets will have to keep an honest book.

  10. I am reminded here of how I was way too harsh of Jeff Id. I was pre-emptively abusing him on account of prior nasty behaviour by relativity-supporters. He seems like a good fellow.

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