Joseph E. Stiglitz on Capitalism…

… or the absence thereof.

I am going through one of my phases of despondency. Can’t get to write anything as our leaders are still spewing the same old swill over and over again. A leveraged EFSF?!

Anyway. What got me going today was this piece gleaned on the pages of Jesse’s Cross Roads Cafe written by Stiglitz, Nobel laureate that he is.

http://jessescrossroadscafe.blogspot.com/2011/10/reprise-causes-of-financial-crisis.html

The online version of the article cannot be read in full but somehow Jesse’s got the entirety of the text. So, give it a read. The article is factual and rather good. But then at the end of the article Stiglitz drops the ball with this pearl:

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal.”

How a Noble laureate in economics cannot see or admit that government has been anything but grossly interventionist over the past thirty years beggars belief. The willful, arbitrary and unilateral manipulation of interest rates constitutes the greatest degree of intervention by the authorities – without mentioning that interest rates have largely always been manipulated in a manner contrary to market signals. The $700 Billion TARP was gross, blatant and deliberate intervention. All bailouts of banks, industry and sundry IS GROSS, BLATANT, DELIBERATE and very likely illegal intervention. The $1 Billion plowed into LTCM was then staggering intervention. Subsidies to industry and economic entities are intervention particularly if said subsidies never end. Government allowing regulators to unilaterally decide that banks can disregard accounting rules that apply to everyone else IS GROSS INTERVENTION. The Presidnet of the United States appointing to high office members of entities that have had a hand in bringing about the crisis IS GROSS INTERVENTION. Government taking on the risk of Fannie Mae and Freddy Mac IS GROSS INTERVENTION.

I’ve got to get me one of them Noble prizes at some point!

And through it all, the one thing that even Stiglitz does not, does not want to or cannot touch upon… is the monetary system… and so he loiters about in an environment of proximate causes blind (willfully?) to the ultimate driver of this current debacle.

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5 Responses to “Joseph E. Stiglitz on Capitalism…”

  1. Jim Says:

    Stiglitz remains beyond my comprehension. The banking industry is the least laissez-faire industry in the world, more regulated even than health care.

    The authority to manipulate the banking industry and therefore the macro economy is all concentrated in the cartel of the Fed and a few supposedly well-meaning politicians.

    These are not opinions of irrational free marketers. These are the facts and they are the result of conscious decision making.

    Further, Stiglitz seems to ignore the very real fact that even under such a contrived system, the market did attempt to ‘self-adjust,” BUT IT WAS PREVENTED FROM DOING SO.

    I would love to interview this man. I wonder what he makes of the fact hat the most authoritarian industry in the world, regulated to the extreme, is also he industry that has the most recurring failure with the most debilitating result. Does he view those two facts as unrelated?

    Here is how I view people like Stiglitz. He is like the scientist on Bones, who everyone calls a genius. Really a very educated specialist with no common sense whatsoever. We have all met folks like that, especially professors. It is more accurate to call them idiot savants than geniuses. Take their advice on anything outside their narrow field of research? Not on your life.

    • guidoamm Says:

      Indeed, that is the purpose of DBFM and fractional reserve banking; to enable the monetary authority to short circuit the natural tendency of the system to reset. By postponing the logical conclusion of DBFM the monetary authority can financialize greater swathes of the economy thereby absorbing more productive capital than could otherwise be possible. Hence the forced expansion of public debt despite overwhelming empirical evidence that doing so is detrimental to the stability of societies and countries….

  2. Pat Donnelly Says:

    There are very few heroes out there! What good will the truth do for the common man? Better to prepare for the next feast of cheap credit, as soon as possible…. not my thinking, but a rationale of why Joe S has changed sides. He gets more $ from the new Joe S! After all, he did win a Nobel and has to put bread on the table ….

  3. Pat Donnelly Says:

    The explanation is being spun! Banks and governments are victims, not criminal parties!

    • guidoamm Says:

      That certainly seems to be the case. Then again, it is no different than how the notion of “capital” has been subverted over the past 40 years. Therefore we cannot and should not expect a sudden change towards fiduciary duty and truth.

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