Here Come the Commies: Marxism Goes on the Attack
Feb 26th, 2009 | By Dan Denning | Category: Featured, Macro Economics
A quote that’s often ascribed to Karl Marx has been popping up a lot lately:
“Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism.”
- Karl Marx, 1867, Das Kapital
That quote is almost assuredly bogus. We haven’t tormented ourselves by re-reading sections of Das Kapital. Once in college was enough. This quote, though, has been making the rounds on the Internet, as if Marx and his minions somehow knew all this was coming.
Whether the analysis is accurate is a separate question from whether Marx ever wrote it. German is a torturous language to read in translation, full of compound sentences and words. And it’s highly unlikely, writing in the late 19th century, that Marx would have referred to the working class buying houses and technology. The horseless carriage hadn’t even been invented yet, much less the iPod, the BlueRay, or the George Foreman grill.
Nope. This is a clever bit of revisionism by some unemployed Marxist student or tenured professor trying to discredit the free market while rehabilitating the Marxist playbook. Marx did indeed say capitalism would eventually evolve into socialism and finally communism. He claimed it was riddled by contradictions which made the system inherently unstable.
But his theory was evolutionary, based on his views of human nature and a rational “homo economicus.” Like Adam Smith, Marx was a materialist who defined wealth in terms of physical goods. Thus, his view of human nature is rather material too, which explains his atheism.
In any event, the Austrians (especially Rothbard) would point out that the boom-bust feature of capitalist economies is not inherent in the system, but is actually a product of the government’s manipulation of interest rates. This changes the price of money and causes risk-taking entrepreneurs to miscalculate the underlying demand for their production.
Thus, you get a massive, credit-induced production bubble, global in scale with resources devoted to supplying a fictional demand. It happened with residential real estate in the U.S. and Europe. It’s happened with commercial real estate in China. And it probably happened all along the commodity supply chain, as raw material demand increased for the production of finished goods made in China for Americans who bought on credit.
That isn’t to say you wouldn’t have normal cycles of growth and recession in an economy with natural interest rates. But in an economy with natural interest rates, the cost of capital would go up during a recession. Bankers would get more prudent with their lending as the market place sorted out which lending resulted in productive new enterprise and which businesses failed.
The bad investments would be written down and eventually new demand for capital from entrepreneurs would resume. At least, that’s how the Austrians drew it up. Today, of course, we are engaged in the great global project of trying to prop up investments gone bad, whether they be in residential American real estate or the collateralised bonds based on that real estate that currently reside like dead weight on balance sheets all over the globe.
No amount of rearranging is going to improve the quality of those debts. But that won’t keep political busy bodies from trying—and wasting even more time and capital.
Stocks in the U.S. were up overnight. Here in Australia, the blind are following where the deaf boldly lead. But is anyone listening? Or is everyone too busy hoping?
What we’re talking about are Ben Bernanke’s comments. The news headlines read that he predicted the recession will end later this year and the American economy will recover in 2010. But that’s not exactly what he said.
Here exactly is what he said, “If actions taken by the Administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stabilityand only if that is the case, in my viewthere is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.”
If you wanted to put it another way, it might go like this: If our plan is successful to solve all the problems, then all the problems will have been successfully solved according to the plan.
How inspiring is that? Does it give you confidence that these guys have any idea what they’re doing?
What the system needs is more instability, not less. That is, prices and asset values need to fall to their real level to restore confidence. In this sense, a proper recession is the cure for uncertainty and instability.
Yes, we know this is in direct contradiction to what elected officials are telling you. But think for a moment of a man who’s done nothing but eat greasy and fatty foods for a year. He’s on his deathbed. His arteries are clogged with fat and cholesterol.
Now you couldn’t improve the man’s health by telling him to feel better about himself. “C’mon big fella. Buck up! Have another cheeseburger. With bacon. And avocado. This whole being morbidly obese and killing yourself thing is all in your head. You gotta get your mind right!”
You could tell him all that. But it would be bad medical advice. In the same way, our financial mal-practitioners have mis-diagnosed the economy. Confidence is not the problem. Bad credits and loans are the problem.
You restore confidence when you directly address the problem. Investors get out of cash and back into shares or property when they have demonstrable proof that the banks aren’t hiding/lying any longer.
Or, as Murray Rothbard puts it in America’s Great Depression, “The completion of liquidation removes the uncertainties of impending bankruptcy and ends the borrowers’ scramble for cash. A rapid unhampered fall in prices, both in general, and in particularly in goods of higher orders (adjusting to the mal-investments of the boom) will speedily end the realignment processes and remove expectations of further declines.”
But instead of realigning with economic reality, our policy makers are acting as if it is possible to sustain all the bad investments made during the credit boom. They want to save homeowners, shareholders, bondholders, and pretty much anyone who stands to lose from the risks gone bad.
That is not possible. Someone has to pay for the bad bets made in subprime loans, Eastern Europe, or the developing world. That someone is probably a) the guy who took out the mortgage he can’t repay, b) the bank who made the loan to the guy who took out the mortgage he can’t repay, c) the investor who bought the bond sold by the bank who made the loan to the guy who took out the mortgage he can’t repay.
Evading responsibility for one’s actions doesn’t solve anything. Making other people pay for them doesn’t help much either. Of course we’re all going to pay for it one way or another, through more bailouts or the general contraction in credit and growth that has to come during the “realignment process.”
But those appear to be the two choices: allow failure, which allocates resources from the bad debts and losers to those who can produce real wealth. Or, try to “stabilise” any inherently unstable situation (perpetuating asset values after the credit spigot has been turned off).
Not that we’re absolving market institutions for getting us into the problem. The credit ratings agencies essentially sold investment grade ratings on issues they didn’t or couldn’t understand. AIG sold default insurance on CDOs to make an easy buck. It’s now become a black hole for taxpayer capital.
But that is fictitious financial capitalism at work, or at waste if you prefer. That kind of financial capitalism is dead, and good riddance. But don’t mistake that episode of mismanagement and theft for conclusive proof that “capitalism” has failed. That would be a big mistake.
But the commies are feeling their oats these days. Yes, the commies are back in the DR mailbox. They’re in the paper. They’re even on TV. We saw a report on them last night and how their explanation of the financial crisis validates what they’ve been saying all along.
Regards,
Dan Denning
February 26, 2009
You inquired as to who is prepping so I thought I’d throw my 2c in. I have a can of beans, a box of band-aids, and some bullets and bullion. Everyone should have some in quantities of which they can afford. Dehydrated food in #10 cans, water, fuel ( vehicles, heating, cooking, illumination), local network of dependable friends, a vegetable garden and some chickens in the back yard. Guns and ammo. Popcorn to nibble on while watching the slow motion train wrectk. Not that I have any, I’m just saying.
People get ready, there’s a train a comin’
For Liberty,
Phil
“Here Come the Commies”? Oh please, spare me. Anyone talking about what’s happening now being the result of some Marxist conspiracy or mindset of any more than 1 or 2 people are living in the 50s.
I wonder if they also call their mommies at night to check under their beds for the boogieman.
heheeheee ……..Gotta have a sense of humor when Bevis Obama and the turbo tax frat boys are drilling our economy into the ground in a misguided attempt to produce utopia. We separated church and state but didn’t think of the separation of political zealotry from our right to eat meat once a year. Right on all the above. Hard to find ammo tho.I think theres some futures trading going on with ammo used as the new currency.or used as the “firework show” following the last step in the three step program !. Deflation 2.Hyperinflation #3The Big Bang…….. and what about the 30,000,000 unemployed, combat tested, angry insurgents, (former farmers and war vetrans) riding on that train……….. GARDENING>> The new golf!! Cliff
Dearest citizens,
The Pixie here, and yes she has her soap and her gin stored away and popcorn is a good
idea, will we have heat in this dystopia?Better get the 18th century cast iron pans ready for the fireplace and where does one get a popcorn popper of that vintage?
In my beloved Washington they just gave the library of congress award to Stevie Wonder a
fabulous rockin out party, I support it as art is all we make here anymore grand and televised for the first time I think….. Tony Bennett and Paul Simon attended and have recieved the Gershwin Awards in previous years. Trouble is…there is a wind outside and no one is doing anything, Looking great, is that DOING? We all look so good in Washington even the
POOR AREN’T MINDING….cue the fog machine Dah-ling….. I support fashion, rockin out in formal attire of course, and a good gin…but shouldn’t the congress be sleeping on the cots
and working nights a bit more often and doing a bit more overtime
to get bills passed alittle faster? Here they are wondering what next? Can’t they even get the to do list in order…not a good sign…. CSPAN carries it daily.
Keeo the popcorn handy and live free~The Pixie aka Dream Girl of the New Age
The reader asked for details… I’ll give a few recommendations for preparedness:
Currency:
Junk Silver 1/2 bag per adult … or Bullion in rounds or coins
Gold
No safe deposit boxes… FEMA will raid them and remove cash, guns, and bullion
Food
1 years supply
Mountain House food (freeze dried) good for 30 years
Staples that you can vacuum pack yourself. Beans, rice, flour, sugar, crackers, cereal, etc. Very easy to pull 30″ of vacuum with a hand vacuum pump in a Mason jar. Increases the life by 5x. See “Pump n Seal” for an inexpensive yet effective pump
Honey (never goes bad)
Tang for vitamin C
Canned food:
You have to rotate this within a year before quality drops.
Water:
Access to a well or independent water source – City water is a “no no” Quality will drop in bad times
Water Filter
Freezer:
I have a freezer but it is relegated to bulk foods that soften the economic impact of rising prices, not long term storage.
Medicines:
1 year on all important meds you take.
Multi vitamins
Household staples:
Soap, toothpaste, mouthwash, toilet paper, etc should be stored as well.
Generator:
Big enough to run your primary household systems (8Kw ??)… and enough fuel for a weeks usage (you shouldn’t need to run it constantly)
Personal Protection (stay with common guns and ammo)
Shotgun: 870 Remington Express Synthetic 18″
Hand Gun: any 9 mm
Concealed Carry: Ruger LCP .380
Rifle: Ruger Mini 14 Range Rifle .223 (reliable and easy to clean) Synthetic Stock
Practice Guns: Ruger 10-22 Rifle, any 22 auto handgun (SIG Mosquito is my personal choice)
Both take 22LR and the shells are very inexpensive to learn with.
Ammo: Guns are useless without ammo. Plenty – Buy enough. Prices are climbing as fears rise about government restrictions coming.
Ammo magazines: Get them while you can.
Obama is planning to limit them very soon now.
See http://abcnews.go.com/Politics.....amp;page=1
I believe that the safest position today is to be prepared to live the way people lived in the 1800s. Grow some food out back, fish, hunt , a few chickens a cow. In other words throw all of the technology and material gains of the past century in the garbage can and start over.
Big oil made more money in the last 12 months than ever before in history
while the price of oil dropped from $159 to $30 but they’re hiding it in
future tax liabilities and potential depreciation write-downs and retained
earnings.
Why? They shorted bank stocks with their earnings from the previous 12
months $45 to $150 rise.
Wake up – you, me, gov and the girl next door have not to say about any
thing in the economy or in elections. The free market is controlled by the
biggest of business, don’t kid y’sf Best we can do is torque out the most
from our local markets if we’re smart. The rest of them f-off.
I’m thinking about to go under ground if the taxes and regs keep going up.
I’ll get involved with both feet happily or shut the fucker down if the
taxes and regs get too deep. Gov for the people needs to learn that it
really is big bus thats calling the shots. Uluminatae. I’d love to get in
one one of those meetings.
Some friends & I started stockpiling non-perishable foods last summer. We’re talking enough for our families to ride out a year with no local grocery store. As it turns out, converting short-term cash to food has paid rather well… about 18% net gain so far.
Next on the list to bulk up on is energy items: batteries & fuel in different forms (propane, kerosene, diesel, etc.)
We’ve been adequately provisioned in the area of self defense & self preservation for quite a while. All I’ll say on this issue is don’t give up your 2nd Amendment rights, no matter how “sensible” & “sane” the coming arguments may sound. An unarmed populace is will always be subjected; history has proved it time & again. If you want to keep what you’ve earned & protect the freedom others earned for us, don’t ignore the attempts to ease this right out from under us. We’ve been forewarned… the next part is up to us.
Wow! I am glad to see other people are more worried about this than I am! Hahaha! Good points on stock-piling food stuffs. Can’t decide where to build my deep cellar/ Mugambo bunker! For many of you, that would be your wine cellar.
Must buy a gas well, if I can. There are plenty of them around me… just cost tons of money! With a gas well, I can run a generator for all needs except transportation. The gas well will provide for that, too. CNG is the way to go there! You can buy a pump and fuel your car from your own home. Currently, it avoids almost all transportation taxes that kill the price of gas & diesel.
In my spare time I build raised bed gardens and MAKE HOOCH! Wiskey and wine, I expect, will make for good barter when the time comes.
props to all the future plans to hunker down and ride out this vicious storm…
it is in my estimation that while watching mass media manipulate news on a daily basis into this ideology of socialist pride that we’re in for something much deeper than we first anticipated. As for the comment against the communist uprising citing, (”Anyone talking about what’s happening now being the result of some Marxist conspiracy or mindset of any more than 1 or 2 people are living in the 50s.” ) I could not disagree with you more. I can’t even turn on Fox News these days and get a straight answer… and as for the obama clan, we can only hope that he gets over his celebrity status and realizes that the track were on is so blatantly socialism at work it makes me depressed on a daily basis. So what do we do?…
As most of you already alluded to stockpile the shit out of what you can before your taking a wheelbarrel over to the local market for a loaf of bread and scratch tickets. But more depressingly, coming off a hunting season in where the state spent the smallest portion of its money on the supply of wild game to my area, I have a new purpose for my 12 and 20 guage:
no longer are these guns for a small portion of food on the side and a hell of a time in the woods with my fam and friends, its personal protection time!
“Fear a government that fears your gun” cuz soon enough theyll control it all. ( We can only hope overwise!)
agreed
excuse my first post. i had writen a novel response on the above posts and it didnt submit, so heres an abridged version:
the post that claims, “Anyone talking about what’s happening now being the result of some Marxist conspiracy or mindset of any more than 1 or 2 people are living in the 50s.” Is complete ludicrious. I cant even turn on FOX news these days to get a straight answer. The manipulation of mass media is stifling to me!
excuse my first post. i had writen a novel response on the above posts and it didnt submit, so heres an abridged version:
the post that claims, “Anyone talking about what’s happening now being the result of some Marxist conspiracy or mindset of any more than 1 or 2 people are living in the 50s.” Is complete ludicrious. I cant even turn on FOX news these days to get a straight answer. The manipulation of mass media is stifling to me!
the post that claims, “Anyone talking about what’s happening now being the result of some Marxist conspiracy or mindset of any more than 1 or 2 people are living in the 50s.” Is complete ludicrious. I cant even turn on FOX news these days to get a straight answer.
As for Obama and his clan, I can only hope he gets off his celebrity pedistool for a few minutes/aka the next 4 years and uses that “fine” ivy league degree. His ideology is so socialist at its roots that it hurts my head on a daily basis and makes waking up in the morning a sad affair. And for all of you who already alluded to stockpiling and creating a bunker hopefully some 100 feet below the surface, I cant agree more. I can see the light at the end of the tunnel that shows you and me taking a wheelbarrel down to the local market to get a loaf of wheat bread and some lottery tickets!Finally, I just came off a hunting season in my state where there was the least amount of money the state has ever spent on game and wildlife, it made for quite the climactic season. But I new have a new alternative to my hunting hobbies with my 12 and 20 guage remingtons. Protect my Civil Liberties! “Fear a Government that fears your Gun!” before they control it all! ( lets pray we dont see the day)
with every american’s best interest in mind,
Pat