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Casino Capitalism: Neoliberalism in Western countries

"When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done"

John Maynard Keynes

PseudoScience > Who Rules America > Neoliberalism

News Neoliberalism Recommended Links Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy Peak Cheap Energy and Oil Price Slump Regulatory Capture & Corruption of regulators Neocolonialism as Financial Imperialism
Ayn Rand and Objectivism Cult Energy returned on energy invested (EROEI) The Systemic Instability of Financial Institutions In Goldman Sachs we trust Number racket GDP as a false measure of a country economic output Neoliberalism as a Cause of Structural Unemployment in the USA
Neoliberalism and rising inequality Secular Stagnation  Efficient Market Hypothesis Redistribution of wealth up as the essence of neoliberalism Supply side Voodoo Rational expectations scam Monetarism fiasco
Twelve apostles of deregulation Summers Greenspan Rubin Reagan Helicopter Ben: Arsonist Turned into Firefighter Bush II
Chicago school of deification of market Free Market Fundamentalism Free Market Newspeak as opium for regulators The Idea of Dynamic Stochastic General Equilibrium CDS -- weapons of mass financial destruction Phil Gramm Clinton
Zombie state of neoliberalism Insider Trading SEC corruption Fed corruption Systemic Fraud under Clinton-Bush Regime Wall Street Propaganda Machine American Exceptionalism
Pseudo Theories and Crooked and Bought Theorists Glass-Steagall repeal Pope Francis on danger of neoliberalism Fiat money, gold and petrodollar Neoliberalism as a Cause of Structural Unemployment in the USA Buyout Kleptocrats Republican Economic Policy
Principal-agent problem Quiet coup Pecora commission History of Casino Capitalism Casino Capitalism Dictionary :-) Humor Etc
Sine ira et studio

Tacitus, see Wikipedia


Alternatively, we could have spent more time studying the work of Hyman Minsky. We could also have considered the possibility that, just as Keynes’s ideas were tested to destruction in the 1950s, 1960s and 1970s, Milton Friedman’s ideas might suffer a similar fate in the 1980s, 1990s and 2000s. All gods fail, if one believes too much. Keynes said, of course, that "practical men … are usually the slaves of some defunct economist". So, of course, are economists, even if the defunct economists are sometimes still alive.

Martin Wolf

Speculation and gambling were always a part of Wall Street but since the 1930’s they were just a side-show, now they are the show.

comment to Matt Taibbi article Fannie, Freddie, and the New Red and Blue t

Introduction

History

The concept of Quite Coup

Stages of transformation

Casino Capitalism as a result of stagnation of industrial manufacturing

Casino Capitalism and Financial Instability

The Ideology of Casino Capitalism

Early Researchers of Casino Capitalism

Conclusions: From Animal Farm To Animal House


Introduction

“The sense of responsibility in the financial community
for the community as a whole is not small. It is nearly nil.”

-- John Kenneth Galbraith, The Great Crash of 1929

The term Casino Capitalism as a specific phase of neoliberal transformation of capitalism. Politically it was slow motion corporate coup d'état, which started in 70th and is now accomplished in the USA and other Western countries which buries social-democratic (New Deal style) model of capitalism.  It hypertrophied police functions of state (in the form of national-security state)  while completely avoiding economic sphere in ways other then enforcement of laws (with a notable exclusion from this top 1% -- Masters of the Universe). In this sense it is the opposite of communism (i.e. an entirely state-planned economy) and presupposed a deregulated economy (in a sense of the "law of jungle" as a business environment) , but with extremely strong militarized state, suppressing all the attempts to challenge the new "nomenklatura" (much like was the case in the USSR).  It is also called economic liberalism or neoliberalism

“Liberalism” can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right wing. Economic liberalism is different. Conservative politicians who say they hate “liberals” — meaning the political type — have no real problem with economic liberalism, including neoliberalism.

In other words this is a variant of neoliberal model of corporatism used in wealthy Western countries during the period of "cheap hydrocarbons".  The period that is probably near the end and which by some estimate can last only another 50 years or so.  The major crisis of casino capitalism in 2008 was connected both with financial excesses (caused by moving to semi-criminal ways of extracting return on capital, typical for casino capitalism),  but also with the rise of the price of oil and decrease of  Energy returned on energy invested (EROEI)In this sense the current low oil price period that started in late 2014 can be viewed as the "last hurrah" of the casino capitalism.

The term itself was coined by Susan Strange who used it as a title of her book Casino Capitalism published in 1986. She was one of the first who realized that

  1. "The roots of the world's economic disorder are monetary and financial";
  2. "The disorder has not come about by accident, but has in fact been nurtured and encouraged by a series of government decisions." (p. 60). In other words its was a counter-revolution of the part of ruling elite which lost its influence in 30th (dismantling New Deal from above in the USA (Reaganomics) or Thatcherism in the GB).

According to Susan Strange transformation of industrial capitalism into neoliberal capitalism ("casino capitalism") involved five trends. All of them increased the systemic instability of the system and the level of political corruption:

  1. Innovations in the way in which financial markets work due to introduction of computers;
  2. The sheer size of markets;
  3. Commercial banks turned into investment banks;
  4. The emergence of Asian nations as large players;
  5. The shift to self-regulation by banks (pp.9-10).

Now it is pretty much established fact that the conversion from "industrial capitalism" to neoliberal "casino capitalism" is the natural logic of development of capitalism. In early and incomplete matter this trend was noticed at early 1990th by many thinkers. This is just the second iteration of the same trend which was interrupted by the Great Depression and subsequent WWII. So, in a way, replacement of industrial capitalism with financial capitalism in a natural tendency within the capitalism itself and corruption was contributing, but not decisive factor.  The same is true about globalization, especially about globalization of financial flows, typical for casino capitalism.

Also this conversion did not happen due to lack of oversight or as a folly. It was a couscous choice made by the US and GB elite, both of which faced deterioration of rates of return on capital. Also unlike "industrial capitalism" which was more-or-less stable system, able to outcompete the neo-theocratic system of the USSR, the financial capitalism is unstable in the same sense as radioactive elements are unstable.  And this instability tend to increase with time. So there is probably natural half-life period for neoliberalism as a social system. It might be already reached in 2008.  In we assume that global victory of neoliberalism happened in 1990. It is just 18 years.  If we think that it happened in late 60th, then it is closer to 50 years.

The global crisis of neoliberal capitalism which started from bursting the USA subprime housing bubble in 2008 undermined ideological legitimacy of its central claim that "free markets" lead to faster and more uniform economic development of all countries. While the peak of its "ideological" power might be over (much like the peak of attractiveness of "command socialism" was over after WWII), it will exist in a zombie state for a long time due to economic and military power of the USA and G7.  And as we know from Hollywood films, zombies can be especially bloodthirsty. It probably will remain the dominant force for at least the next two decades pursuing the same policy of "forceful" opening of energy rich  and resource countries for western multinationals intact using color revolutions and local wars.  But as Napoleon quipped "You can do anything with bayonets, you just can't sit on them".

Conversion to neoliberal capitalism was a reaction on stagnation of industrial production and as such it was nurtured and encouraged by a series of government decisions for the last 50 years. Stagnation of industrial production made expansion of financial sector of paramount importance for the ruling elite and by extension for Congress which represents this elite. House vote 377:4 for Commodity Futures Modernization Act of 2000 is pretty telling in this respect.

There were also at least two important parallel developments.

Most respectable authors like Henry Giroux in his article in Counterpunch generally consider the term "casino capitalism" to be an equivalent to the term Neoliberalism. Here is a relevant quote from Henry Giroux's Authoritarian Politics in the Age of Casino Capitalism :

There is more at work here than simply a ramped up version of social Darwinism with its savagely cruel ethic of “reward the rich, penalize the poor, [and] let everyone fend for themselves,” [ii] there is also a full scale attack on the social contract, the welfare state, economic equality, and any viable vestige of moral and social responsibility. The Romney-Ryan appropriation of Ayn Rand’s ode to selfishness and self-interest is of particular importance because it offers a glimpse of a ruthless form of extreme capitalism in which the poor are considered “moochers,” viewed with contempt, and singled out to be punished. But this theocratic economic fundamentalist ideology does more. It destroys any viable notion of the and civic virtue in which the social contract and common good provide the basis for creating meaningful social bonds and instilling in citizens a sense of social and civic responsibility. The idea of public service is viewed with disdain just as the work of individuals, social groups, and institutions that benefit the citizenry at large are held in contempt.

As George Lakoff and Glenn W. Smith point out, casino capitalism creates a culture of cruelty: “its horrific effects on individuals-death, illness, suffering, greater poverty, and loss of opportunity, productive lives, and money.”[iii]

But it does more by crushing any viable notion of the common good and public life by destroying “the bonds that hold us together.”[iv] Under casino capitalism, the spaces, institutions, and values that constitute the public are now surrendered to powerful financial forces and viewed simply as another market to be commodified, privatized and surrendered to the demands of capital. With religious and market-driven zealots in charge, politics becomes an extension of war; greed and self-interest trump any concern for the well-being of others; reason is trumped by emotions rooted in absolutist certainty and militaristic aggression; and skepticism and dissent are viewed as the work of Satan.

If the Republican candidacy race of 2012 is any indication, then political discourse in the United States has not only moved to the right—it has been introducing totalitarian values and ideals into the mainstream of public life. Religious fanaticism, consumer culture, and the warfare state work in tandem with neoliberal economic forces to encourage privatization, corporate tax breaks, growing income and wealth inequality, and the further merging of the financial and military spheres in ways that diminish the authority and power of democratic governance.[v] Neoliberal interests in freeing markets from social constraints, fueling competitiveness, destroying education systems, producing atomized subjects, and loosening individuals from any sense of social responsibility prepare the populace for a slow embrace of social Darwinism, state terrorism, and the mentality of war — not least of all by destroying communal bonds, dehumanizing the other, and pitting individuals against the communities they inhabit.

Totalitarian temptations now saturate the media and larger culture in the language of austerity as political and economic orthodoxy. What we are witnessing in the United States is the normalization of a politics that exterminates not only the welfare state, and the truth, but all those others who bear the sins of the Enlightenment — that is, those who refuse a life free from doubt. Reason and freedom have become enemies not merely to be mocked, but to be destroyed. And this is a war whose totalitarian tendencies are evident in the assault on science, immigrants, women, the elderly, the poor, people of color, and youth.

What too often goes unsaid, particularly with the media’s focus on inflammatory rhetoric, is that those who dominate politics and policymaking, whether Democrats or Republicans, do so largely because of their disproportionate control of the nation’s income and wealth. Increasingly, it appears these political elite choose to act in ways that sustain their dominance through the systemic reproduction of an iniquitous social order. In other words, big money and corporate power rule while electoral politics are rigged. The secrecy of the voting booth becomes the ultimate expression of democracy, reducing politics to an individualized purchase—a crude form of economic action. Any form of politics willing to invest in such ritualistic pageantry only adds to the current dysfunctional nature of our social order, while reinforcing a profound failure of political imagination. The issue should no longer be how to work within the current electoral system, but how to dismantle it and construct a new political landscape that is capable of making a claim on equity, justice, and democracy for all of its inhabitants. Obama’s once inspiring call for hope has degenerated into a flight from responsibility.

The Obama administration has worked to extend the policies of the George W. Bush administration by legitimating a range of foreign and domestic policies that have shredded civil liberties, expanded the permanent warfare state, and increased the domestic reach of the punitive surveillance state. And if Romney and his ideological cohorts, now viewed as the most extremists faction of the Republican Party, come to power, surely the existing totalitarian and anti-democratic tendencies at work in the United States will be dangerously intensified.

History

Casino capitalism can probably be more properly called financial corporatism. While the key idea of corporatism: that political actors are not individual people, but some associations and first of all corporations (which are officially considered to be "persons" and have rights) and trade unions, remains intact, financial corporatism is different from classic corporatism in several major ways:

Historically corporatism in various modifications became dominant social system after WWII and defeated "command socialism" as was implemented in the USSR. Here is an instructive review of corporatism history (The Economic System of Corporatism):

In the last half of the 19th century people of the working class in Europe were beginning to show interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly the Catholic intelligentsia, decided to formulate an alternative to socialism which would emphasize social justice without the radical solution of the abolition of private property. The result was called Corporatism. The name had nothing to do with the notion of a business corporation except that both words are derived from the Latin word for body, corpus.

The basic idea of corporatism is that the society and economy of a country should be organized into major interest groups (sometimes called corporations) and representatives of those interest groups settle any problems through negotiation and joint agreement. In contrast to a market economy which operates through competition a corporate economic works through collective bargaining. The American president Lyndon Johnson had a favorite phrase that reflected the spirit of corporatism. He would gather the parties to some dispute and say, "Let us reason together."

Under corporatism the labor force and management in an industry belong to an industrial organization. The representatives of labor and management settle wage issues through collective negotiation. While this was the theory in practice the corporatist states were largely ruled according to the dictates of the supreme leader.

One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin dangers of the egalitarianism of the French Revolution and the laissez faire economics of Adam Smith. In Germany and elsewhere there was a distinct aversion among rulers to allow markets to function without direction or control by the state. The general culture heritage of Europe from the medieval era was opposed to individual self-interest and the free operation of markets. Markets and private property were acceptable only as long as social regulation took precedence over such sinful motivations as greed.

Coupled with the anti-market sentiments of the medieval culture there was the notion that the rulers of the state had a vital role in promoting social justice. Thus corporatism was formulated as a system that emphasized the positive role of the state in guaranteeing social justice and suppressing the moral and social chaos of the population pursuing their own individual self-interests. And above all else, as a political economic philosophy corporatism was flexible. It could tolerate private enterprise within limits and justify major projects of the state. Corporatism has sometimes been labeled as a Third Way or a mixed economy, a synthesis of capitalism and socialism, but it is in fact a separate, distinctive political economic system.

Although rulers have probably operated according to the principles of corporatism from time immemorial it was only in the early twentieth century that regimes began to identify themselves as corporatist. The table below gives some of those explicitly corporatist regimes.

Corporatist Regimes of the Early Twentieth Century
System Name Country Period Leader
National Corporatism Italy 1922-1945 Benito Mussolini
Country, Religion, Monarchy Spain 1923-1930 Miguel Primo de Rivera
National Socialism Germany 1933-1945 Adolph Hitler
National Syndicalism Spain 1936-1973 Francisco Franco
New State Portugal 1932-1968 Antonio Salazar
New State Brazil 1933-1945 Getulio Vargas
New Deal United States 1933-1945 Franklin Roosevelt
Third Hellenic Civilization Greece 1936-1941 Ioannis Metaxas
Justice Party Argentina 1943-1955 Juan Peron

In the above table several of the regimes were brutal, totalitarian dictatorships, usually labeled fascist, but not all the regimes that had a corporatist foundation were fascist. In particular, the Roosevelt New Deal despite its many faults could not be described as fascist. But definitely the New Deal was corporatist. The architect for the initial New Deal program was General Hugh Johnson. Johnson had been the administrator of the military mobilization program for the U.S. under Woodrow Wilson during World War I. It was felt that he did a good job of managing the economy during that period and that is why he was given major responsibility for formulating an economic program to deal with the severe problems of the Depression. But between the end of World War I and 1933 Hugh Johnson had become an admirer of Mussolini's National Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal.

It should be noted that many elements of the early New Deal were later declared unconstitutional and abandoned, but some elements such as the National Labor Relations Act which promoted unionization of the American labor force are still in effect. One part of the New Deal was the development of the Tennessee River Valley under the public corporation called the Tennessee Valley Authority (TVA). Some of the New Dealer saw TVA as more than a public power enterprise. They hoped to make TVA a model for the creation of regional political units which would replace state governments. Their goal was not realized. The model for TVA was the river development schemes carried out in Spain in the 1920's under the government of Miguel Primo de Rivera. Jose Antonio Primo de Rivera, the son of Miguel Primo de Rivera, was the founder of Franco's National Syndicalism.

Corporatist regime typically promote large governmental projects such as TVA on the basis that they are too large to be funded by private enterprise. In Brazil the Vargas regime created many public enterprises such as in iron and steel production which it felt were needed but private enterprise declined to create. It also created an organized labor movement that came to control those public enterprises and turned them into overstaffed, inefficient drains on the public budget.

Although the above locates the origin of corporatism in 19th century France it roots can be traced much further back in time. Sylvia Ann Hewlett in her book, The Cruel Dilemmas of Development: Twentieth Century Brazil, says,

Corporatism is based on a body of ideas that can be traced through Aristotle, Roman law, medieval social and legal structures, and into contemporary Catholic social philosophy. These ideas are based on the premise that man's nature can only be fulfilled within a political community.
..........
The central core of the corporatist vision is thus not the individual but the political community whose perfection allows the individual members to fulfill themselves and find happiness.
...............
The state in the corporatist tradition is thus clearly interventionist and powerful.

Corporatism is collectivist; it is a different version of collectivism than socialism but it is definitely collectivist. It places some importance on the fact that private property is not nationalized, but the control through regulation is just as real. It is de facto nationalization without being de jure nationalization.

Although Corporatism is not a familiar concept to the general public, most of the economies of the world are corporatist in nature. The categories of socialist and pure market economy are virtually empty. There are only corporatist economies of various flavors.

These flavors of corporatism include the social democratic regimes of Europe and the Americas, but also the East Asian and Islamic fundamentalist regimes such as Taiwan, Singapore and Iran. The Islamic socialist states such as Syria, Libya and Algeria are more corporatist than socialist, as was Iraq under Saddam Hussain. The formerly communist regimes such as Russia and China are now clearly corporatist in economic philosophy although not in name.

The concept of Quite Coup

The term "Quiet coup" which means the hijacking of the political power in the USA by financial oligarchy was introduced by Simon H. Johnson, a British-American economist, who currently is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. From March 2007 through the end of August 2008, he was Chief Economist of the International Monetary Fund. The term was introduced in his article in Atlantic magazine, published in May 2009(The Quiet Coup - Simon Johnson - The Atlantic). Which opens with a revealing paragraph:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government

The wealth of financial sector gave it unprecedented opportunities of simply buying the political power iether directly or indirectly (via revolving door mechanism):

Becoming a Banana Republic

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.

But these various policies — lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits — such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.

The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.

Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The great wealth that the financial sector created and concentrated gave bankers enormous political weight — a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.

He further researched this theme in his book 2010 book 13 Bankers The Wall Street Takeover and the Next Financial Meltdown  (ISBN 978-0307379054), coauthored with James Kwak. They also founded and regularly contributes to the economics blog The Baseline Scenario. See also History of Casino Capitalism

The net effect of the ideological counter-revolution based on market fundamentalism ideology was that it restored the power of financial oligarchy typical for Gilded Age. As Simon Johnson argues that was partially done by subverting regulators and that oversize institutions always disproportionately influence public policy:

The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail. Nationalization and re-privatization would not change that; while the replacement of the bank executives who got us into this crisis would be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.

Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.

This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual institutions in a sector that is essential to the economy as a whole. Of course, some people will complain about the "efficiency costs" of a more fragmented banking system, and these costs are real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.

To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths, we also need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat industrial monopolies were not designed to address the problem we now face. The problem in the financial sector today is not that a given firm might have enough market share to influence prices; it is that one firm or a small set of interconnected firms, by failing, can bring down the economy. The Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s trust-busting.

Caps on executive compensation, while redolent of populism, might help restore the political balance of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to the people who work there and to the government officials who were only too happy to bask in its reflected glory—has been the astounding amount of money that could be made. Limiting that money would reduce the allure of the financial sector and make it more like any other industry.

Still, outright pay caps are clumsy, especially in the long run. And most money is now made in largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated. Regulation and taxation should be part of the solution. Over time, though, the largest part may involve more transparency and competition, which would bring financial-industry fees down. To those who say this would drive financial activities to other countries, we can now safely say: fine.

Two Paths

To paraphrase Joseph Schumpeter, the early-20th-century economist, everyone has elites; the important thing is to change them from time to time. If the U.S. were just another country, coming to the IMF with hat in hand, I might be fairly optimistic about its future. Most of the emerging-market crises that I’ve mentioned ended relatively quickly, and gave way, for the most part, to relatively strong recoveries. But this, alas, brings us to the limit of the analogy between the U.S. and emerging markets.

Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When they get into trouble, they quite literally run out of money—or at least out of foreign currency, without which they cannot survive. They must make difficult decisions; ultimately, aggressive action is baked into the cake. But the U.S., of course, is the world’s most powerful nation, rich beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own currency, which it can print. As a result, it could very well stumble along for years—as Japan did during its lost decade—never summoning the courage to do what it needs to do, and never really recovering. A clean break with the past—involving the takeover and cleanup of major banks—hardly looks like a sure thing right now. Certainly no one at the IMF can force it.

In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.

Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity. When inflation is high, who can say what a piece of property is really worth? When the credit system is supported by byzantine government arrangements and backroom deals, how do you know that you aren’t being fleeced?

Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.

The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy "stress scenario" that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.

The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression." This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

It is pretty interesting to see how financial oligarchy filters information provided to the population to fit their biases. For example, the key facts about repeal of Glass-Steagall law  (BTW Joe Biden voted for it) mostly hidden from the public: 

Commodity Futures Trading Commission — under the leadership of Mr. Gramm’s wife, Wendy — had approved rules in 1989 and 1993 exempting some swaps and derivatives from regulation. In December 2000, the Commodity Futures Modernization Act was passed as part of a larger bill by unanimous consent after Senator Gramm dominated the Senate debate...

"He was the architect, advocate and the most knowledgeable person in Congress on these topics," Mr. Donovan said. "To me, Phil Gramm is the single most important reason for the current financial crisis."

"The virtually unregulated over-the-counter market in credit-default swaps has played a significant role in the credit crisis, including the now $167 billion taxpayer rescue of A.I.G.," Christopher Cox, the chairman of the S.E.C. and a former congressman, said Friday.

But you will never find discussion of flaws and adverse consequences Phil Gram (or Greenspan for a change) initiatives in Heritage Foundation and other right-wing think tanks publications.

Stages of transformation

So what we are experiencing is a the completion of the transformation of one phase of capitalism to another. It happened in stages:

  1. Manufacturing stagnated and can't provide the "decent" rate of growth. Competition from re-built Europe and Asian markets severely stressed the US manufacturing. due to competition return of capital dropped and in several industries became negative.
     

  2. Computers brought innovations into financial markets. They make possible real time trading of induces like S&P500, complex financial instruments like derivatives, etc. Later they enables superfast trading (HFT). All those instruments dramatically increased the possibilities of extracting the rent by financial institutions from the society.
     

  3. Globalization kicked in due to new opportunities offered by high speed global communications (Internet). And that is not limited to outsourcing. Due to globalization the sheer size of the financial markets increased to the extent that they started to represent a different, new transnational phenomena allowing new types of redistribution of wealth to be practiced. Integration of Russian elite (oligarchs) is just one example of this process. In case of pro-western oligarchs (fifth column) West went to significant length to protect them and their racket (Mikhail Khodorkovsky - Wikipedia,)
     

  4. Commercial banks turned into investment banks to exploit this opportunity.
     

  5. Financial sector completely corrupted academic science converting most economists to pay prostitutes which serve their interests.
     

  6. Collapse of the USSR provided the financial sector major shoot in the arm and a golden, once in century opportunity to finance new half-billion consumers and stole for a penny on a dollar huge industrial assets and natural resources as well as put most of those countries in the debt (Latin-Americanization of xUSSR space). Harvard Mafia (with some support from London) did the bidding of western banks in xUSSR space. As more becomes known about the laundering of Russian money in Western banks, many in the United States will likely try to hide behind stories of faraway organized crime. But U.S. policy toward Russia has contributed to that country's sorry conditions--with the Harvard Institute for International Development's Russia project (HIID) playing a major role (Harvard's 'Best and Brightest' Aided Russia's Economic Ruin ). Professor Jeffery Sacks provided a bogus idea of "shock therapy" to achieve spectacular for Western banks result. As a result all xUSSR space became new Latin America with typical for Latin America problems like huge level of inequality, prostitution, child poverty, and prominent role of organized crime.
     

  7. Banks became dominant political force on western societies with no real counterbalance from other parts of the elite. The first president completely subservient to banking elite was elected in the USA in 1992. Bill Clinton regime lasted eight years and along with economic rape of xUSSR space in best colonial powers tradition, it removed what was left of financial regulations after the flurry of deregulation of the early 1980s. And they behaved as an occupying force not only in xUSSR space but in the USA as well. They deprived workers out of their jobs, they abolished the US pension system as it impede playing with population money and replaced in with widely inadequate 401K plans. They deprived municipalities out of their revenues and assets, while municipalities became just a den of bond traders looking for then next mark which give them the ability to put municipalities deeper in debt.

  8. Newly acquired political power of financial elite speeded the shift to bank "self-regulation" created huge shadow banking system which dwarf "official" under the smoke screen of "free-market" propaganda and PR from a coterie of corrupts academics (Chicago Scholl, Harvard Mafia, etc) . It engaged in pursuit of short term profits and self-enrichment of top brass which became new elite by-and-large displacing not only the old one, but also the newly minted IT elite of dot-com boom. Using newly acquired power financial elite remove all regulations that hamper their interests. Glass-Steagall was repealed at the last days of Clinton presidency, financial derivatives became unregulated.

  9. Deindustrialization kicked in. As financial speculation proved to be much more profitable to other activities deindustrialization kicked in the USA as the financial center of the world. Outsourcing which first was limited to manufacturing jobs now extent its reach on IT and decimate previously profitable sector and its export potential.

  10. Externalities can no longer be suppressed and economics became unstable. Growth of inequality, job insecurity, as well as frequency of financial crises were natural consequences of financialization of the economy. They create huge imbalances, like bubble in residential real estate which was blown with the help and full support of the USA government as a way to overcome dot-com crisis consequences.

  11. Debt crisis strikes. Growth of debt became unsustainable and produces the financial crisis of enormous proportions. By their reckless policies and greed financial sector caused huge financial crisis of 2008 and now they are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in fire sales at prices rigged by twenty-something largest banks, the most corrupt institutions the world has ever known.

  12. Devastating "local" wars became "new normal". Due to financial crisis, the overconsumption in western economies came under threat. Debt expansion which led to overconsumption within the western economies affected (or infected) by financialization. To sustain the current standard of living financial expansion became the necessity. It took the form of a competition for spheres of influence in the area of energy supplies, which we see in post USSR space, Iraq, Libya and elsewhere. And central banks play critical role in financing wars. After all Banks of England was created with this exact purpose.

I think by 2008 when the second major financial crisis hit the USA, the transformation on the USA economy into casino capitalism, which is essentially implementation of neoliberal doctrine (or more correctly the US brand of corporatism) was by-and-large complete.

In short we are living in a new politico-economic system in which financial capital won victory over both labor and industrial capital. We might not like what we got, but financial elite is now a new ruling class and this fact is difficult to dispute. As a result. instead of the robber barons of the early 20th century (some of whom actually created/consolidated new industries), we have the top executives from investment banks, insurers and mortgage industry who represent a new Rentier class, much like old aristocracy.

They are living off parasitic monopolization of access to any (physical, financial, intellectual, etc.) kind of property and gaining significant amount of profit without contribution to society (see Rentier capitalism which is a very fuzzy term for neoliberal model of capitalism).

Casino Capitalism as a result of stagnation of industrial manufacturing

Stagnation of industrial manufacturing droved up financial speculation as the method to compensate for falling rate on return on capital. This stagnation became prominent during Reagan administration (which started the major shift toward neoliberalism), although signs of it were present from early 60th.

For example Chicago which was a manufacturing center since 1969 lost approximately 400K manufacturing jobs which were replaced mainly by FIRE-related jobs, In 1995 over 22% of those employed by FIRE industries (66K people) were working in executive and managerial positions. Another 17% are in marketing, sales and processional specialty occupations (computer system analysts, PR specialists, writer and editors).

Those changes in the structure of employment had several consequences:

  1. The stagnation of the underlying economy meant that capitalists were increasingly dependent on the growth of finance to preserve and enlarge their money capital.
  2. The financial superstructure of the capitalist economy could not expand independently of its base -- underlying productive economy — hence the bursting of speculative bubbles became a recurrent and growing problem.
  3. Financialization could never overcome stagnation of industrial production. It is just an opium for rich, not a structural adjustment of the stagnation-prone economy. But like addition to narcotics does to human body it does tremendous damage to real economy.
  4. Rapid increase in inequality is necessary to sustain the appetites of the elite in the system with fixed size of the pie. Politico-economic conditions might became even more unfavorable for labor. Stagnation of industrial production mean shrinking pie, which necessitates redistribution of wealth in favor of a new, all-powerful financial Rentier class. This redistribution resulted in partial wipe-out of large swats of middle class. For the past three decades, America has steadily converted itself into a nation of haves (as Bush II quipped "This is an impressive crowd -- the haves and the have mores! Some people call you the elite -- I call you my base". ) and have-nots. The cost of a college education rises rapidly at a time when wages for skilled labor stagnate, so access to college became against discriminated in favor of upper class of the society. Repressive apparatus and ideological brainwashing are too strong to mount effective resistance.

The key to understanding of Casino Capitalism is that it was a series of government decisions (or rather non-decisions) that converted the state into neoliberal model. In other words casino capitalism has distinct "Government property" mark. It was the USA elite, which refused to act responsibly in the face of changing economic conditions resulting from its own actions, and instead chose to try to perpetuate, by whatever means it had at its disposal, the institutional advantages of dollar as a reserve currency which it had vis-à-vis its main economic rivals and grab as large part of the world economic pie as it can. And this power grab was supported first of all by the role of dollar as currency in which oil is traded.

There might be some geo-strategically motives as well as the US elite in late 80th perceived that competitiveness is slipping out of the USA and the danger of deindustrialization is real. Many accuse Reagan with the desire to ride dollar status as a world reserve currency (exorbitant privilege) until the horse is dead. That's what real cowboys do in Hollywood movies... But the collapse of the main rival, the USSR vindicated this strategy and give a strong short in the arm to financialization of the economy. Actually for the next ten years can be called a triumphal ascend of financialization in the USA.

Dominance of FIRE industries clustered up and in recent years reached in the USA quite dramatic proportions. The old Bolsheviks saying "When we say Lenin we mean the Party and when we say the Party we mean Lenin" now can be reworded: "Now it we say US banks, we mean the US government and vise versa if we say US government we mean US banks".

According to the Center for Responsive Politics, the FIRE sector was and is the biggest contributor to federal candidates in Washington. Companies cannot give directly, so they leave it to bundlers to solicit maximum contributions from employees and families. They might have been brought down to earth this year, but they’ve given like Gods: Goldman Sachs, $4.8 million; Citigroup, $3.7 million; J.P. Morgan Chase & Co., $3.6 million; Merrill Lynch, $2.3 million; Lehman Brothers, $2.1 million; Bank of America, $2.1 million. Some think the long-term effect of such contributions to individual candidates was clear in the roll-call votes for the bailout.

Take the controversial first House vote on bailout of major banks on Sept. 29, 2008. According to CRP, the "ayes" had received 53 percent more contributions from FIRE since 1989 than those who voted against the bill, which ultimately failed 228 to 205. The 140 House Democrats who voted for the bill got an average of $188,572 in this election cycle, while the 65 Republicans backing it got an average of $185,461 from FIRE—about 23 percent more than the bill’s opponents received. A tinkered bill was passed four days later, 263 to 171.

According to the article Fire Sale (The American Conservative) half of Obama’s top ten contributors, together giving him nearly $2.2 million, are FIREmen. The $13 million contributed by FIRE executives to Obama campaign is probably an undercount. Democratic committee leaders are also dependent of FIRE contributions. The list includes Sen. Dodd ( please look at Senator Dodd's top donors for 2007-8 on openSecrets.org ) and Sen. Chuck Schumer ($12 million from FIRE since 1989), Rep. Barney Frank ($2.5 million), and Rep. Charlie Rangel ($4 million, the top recipient in the House). All of them have been accused of taking truckloads of contributions while failing to act on the looming mortgage crisis. Dodd finally pushed mortgage reform last year but by then as his hometown paper, The Hartford Courant stated, "the damage was done."

Casino Capitalism and Financial Instability

At the same time rise of financial capital dramatically increased instability. An oversized financial sector produces instability due to multiple positive feedback loops. In this sense we can talk about Financial Sector Induced Systemic Instability of Economy. The whole society became "House of cards", "Giant Enron" and "extension of Las Vegas". Reckless management, greed and out-right stupidity in playing derivatives games was natural consequence of the oversized financial sector, not just a human folly. In a way it was dramatic manifestation of the oversized financial sector negative influence of the economy. And in 2008 it did brought out economy to the brink of destruction. Peak oil added to suffocating effect on the economy of reckless gambling (and related debts) of financial sector producing the economic calamity that rivals Great Depression. Also, like Socialism, Casino Capitalism demands too much of its elite. And in reality, the financial elite much like Bolsheviks elite, is having its own interests above the interests of the society.

As Kevin Phillips noted "In the United States, political correctness, religious fundamentalism, and other inhibitions sometimes dumb down national debate". And the same statement is true for financial elite that became the center of power under the Casino Capitalism. Due to avalanche of greed the society became one giant Enron as money that are made from value addition in the form of manufacturing fade in significance to the volume of the money that is made from shuffling money around. In other was the Wall Street's locked USA in the situation from which there is no easy exit.

Self-reinforcing ‘positive’ feedback loops prevalent in Casino Capitalism trigger an accelerating creation of various debt instruments, interest of which at some point overwhelm the system carrying capacity. Ability to lend against good collateral is quickly exhausted. At some point apparently there is no good collateral against which lending freely was possible, even at high rates. This means that each new stage of financial innovation involves scam and fraud, on increasing scale. In other words Ponzi economy of "saving and loans" is replaced with Madoff economy.

Whether you shift the resulting huge private debt to public to increase confidence or not, the net result is of this development of events is a crisis and a huge debt that society needs to take. Actually the debt bubble in 2008 can only be compared to the debt bubble of 1933. The liquidation of Bear Sterns and Lehman was only a start of consolidation of finances and we need to find something that replace financial sector dominance in the national economy. It would be nice is some technological breakthrough happened which would lift the country out of this deep hole.

See Financial Sector Induced Systemic Instability of Economy for more details.

Neoliberalism as the Ideology of Casino Capitalism

Like Bolshevism was marked by deification of teaching of Marx and Lenin, converting them into pseudo-religious doctrine, the Casino Capitalism has its own deified ideological doctrine. It is the ideology of Neoliberalism. The latter as an ideology and an agenda seeks to topple democratic capitalism and replace it with a de facto unaccountable autocratic government which serves as channel of a wealth transfer from the public to a rentier elite. In a way it is a spectacular example of a successful (in a very negative sense) pseudo-religious doctrine.

Addiction of the societies to disastrous politico-economical doctrines are similar to addictions to alcohol and drugs in individuals. It is not easy to recover and it takes a long, long time and a lot of misery. As dissolution of the USSR aptly demonstrated not all societies can make it. In this case the USSR elite (nomenklatura) simply shed the old ideology as it understood that it will be better off adopting ideology of neoliberal capitalism; so it was revolution from above.  this abrupt switch created chaos in economics (which was applauded by Washington which under Clinton administration adopted the stance the Carnage needs to be destroyed and facilitated the process), criminal privatization of major industries, and pushed into object poverty the 99% of population of those countries. For some period under "drunk Yeltsyn" Russia sees to exist as an independent country and became a vassal of Washington.

This also means that "society at large" did not had effective brakes to the assent of financial plutocracy (aka financial oligarchy).  I would add to this the computer revolution and internet that made many financial transaction qualitatively different and often dramatically cheaper that in previous history. Computers also enabled creation of new financial players like mutual funds (which created a shadow banking system with their bond funds) , hedge funds, exchange-traded funds (ETFs), as well as high-frequency trading and derivatives.

From the historical view Reaganomics also can be considered to be the US flavor of Lysenkoism with economics instead of genetics as a target. Here is how Reaganomics is defined in Wikipedia

Reaganomics (a portmanteau of "Reagan" and "economics") refers to the economic policies promoted by United States President Ronald Reagan. The four pillars of Reagan's economic policy were to:[1]
  1. reduce the growth of government spending,
  2. reduce marginal tax rates on income from labor and capital,
  3. reduce government regulation of the economy,
  4. control the money supply to reduce inflation.

In attempting to cut back on domestic spending while lowering taxes, Reagan's approach was a departure from his immediate predecessors.

Reagan became president during a period of high inflation and unemployment (commonly referred to as stagflation), which had largely abated by the time he left office.

Please not that the Number 1 idea ("reduce government spending") was essentially a scam, a smoke screen designed to attract Rednecks as a powerful voting block. In a way this was a trick similar to one played by Bolsheviks in Russia with its "worker and peasants rule" smokescreen which covered brutal dictatorship. In reality all administrations which preached Reagonomics (including Clinton's) expanded the role of state and government spending. The number two was applied by-and-large to top 1%. The number three means deregulation in the interests of financial oligarchy and dismantling all social program that hamper profit of the latter (including privatizing of Social Security). The number fours is a scam, in the same sense as number one. As soon as financial institutions get in trouble, money are printed as if there is no tomorrow.

While the essence of Reagonomics was financial deregulation, the other important element was restoring the Gilded Age level of power of financial oligarchy which influence was diminished by FDR reforms. In this sense we can say that Reagan revolution was essentially a counter-revolution: an attempt to reverse the New Deal restrictions on financial sector and restore its dominance in the society.

Like it was the case in Bolshevism the ideology was developed and forced upon the society by a very small group of players. The key ideas of Casino Capitalism were formulated and implemented by Reagan administration with some contribution by Nixon (the role of rednecks aka "moral majority", "silent majority" as an important part of republican political base, which can be attracted to detrimental to its economic position policies by the smoke screen of false "moral" promises).

It was supported by each president after Reagan (paradoxically with Clinton having the most accomplished record -- he was the best Republican President in a very perverted way). Like in case of Lysenkoism opponents were purged and economic departments of the country were captured by principless careerists ready to tow the party line for personal enrichment. Like in case of Bolshevism, many of those special breed of careerists rotated from Republican Party into Fed and other government structures. A classic example of compulsive careerists that were used by finance sector to promote its interests was Alan Greenspan.

One of the key ideas of Reaganomics was the rejection of the sound approach that there should be a balance between too much government regulation and too little and that government role is important for smooth functioning of the market. In this area Reagan and its followers can be called Anarchists and their idea of 'free market" is a misnomer that masks the idea of "anarchic market" (corporate welfare to be exact -- as it was implemented). Emergence of corporate welfare Queens such as GS, Citi, AIG, are quite natural consequence of Reaganomics.

Reaganomics was a the US flavor of Lysenkoism with economics instead of generics as a target... It can and should be called Economic Lysenkoism.

The most interesting part of Reaganomics was that the power of this ideology made it possible to conditioned "working class" and middle class to act against their own economic interests. It helped to ensure the stagnation of wages during the whole 25 years period, which is close to what Soviets managed to achieve with working class of the USSR, but with much more resentment. This makes it in many ways very similar to Bolshevism as a whole, not just Lysenkoism (extremes meet or in less flattering way: "history repeats, first as a tragedy, then as farce).

Along with the term Reaganimics which implicitly stresses the deregulation, the other close term "market fundamentalism" is often used. Here is how market fundamentalism is defined (Longview Institute):

Market Fundamentalism is the exaggerated faith that when markets are left to operate on their own, they can solve all economic and social problems. Market Fundamentalism has dominated public policy debates in the United States since the 1980's, serving to justify huge Federal tax cuts, dramatic reductions in government regulatory activity, and continued efforts to downsize the government’s civilian programs.

Some level of government coercion (explicit or implicit ) is necessary for proper labeling of any pseudo-scientific theory with the term Lysenkoism. This holds true for both Market Fundamentalism (after all Reagan revolution was "revolution from above" by financial oligarchy and for financial oligarchy and hired guns from academia just do what powers that be expected) and, especially, Supply side economic. The political genius of those ideas is evident. Supply-side economics transformed Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?

In this sense the Republican Party played the role very similar to the Communist Party of the USSR.

For example supply side economics was too bizarre and would never survive without explicit government support. This notion is supported by many influential observers. For example, in the following comment for Krugman article (Was the Great Depression a monetary phenomenon):

Market fundamentalism (neoclassical counter-revolution — to be more academic) was more of a political construct than based on sound economic theory. However, it would take a while before its toxic legacy is purged from the economics departments. Indeed, in some universities this might never happen.

Extreme deregulation and extreme regulation (Brezhnev socialism) logically meets and both represent a variant of extremely corrupt society that cannot be sustained for long (using bayonets as in the case of USSR or using reserve currency and increasing leverage as is the case of the USA). In both cases the societies were economically and ideologically bankrupt at the end.

Actually, elements of market fundamentalism looks more like religious doctrine than political philosophy — and that bonds its even closer to Lysenkoism. In both cases critics were silenced with the help of the state. It is interesting to note that Reaganomics was wiped into frenzy after the dissolution of the USSR, the country which gave birth to the term of Lysenkoism. In a way the last act of the USSR was to stick a knife in the back of the USA. As a side note I would like to stress that contrary to critics the USSR was more of a neo-feudal society with elements of slavery under Stalin. Gulag population were essentially state slaves; paradoxically a somewhat similar status is typical for illegal immigrants in industrialized countries. From this point of view this category of "state slaves" is generally more numerous that gulag inmates. Prison population also can be counted along those lines.

It look like either implicitly or explicitly Reagan's bet was on restoration of gilded Age with its dominance of financial oligarchy, an attempt to convert the USA into new Switzerland on the "exorbitant privilege" of dollar status as the global fiat currency.

Casino Capitalism is characterized by political dominance of FIRE industries (finance, insurance, and real estate) and diminished role of other and first of all manufacturing industries. It was also accompanied by the drastic growth of inequality (New Gilded Age). Its defining feature is "the triumph of the trader in assets over the long-term producer" in Martin Wolf's words.

Voodoo economic theories

Attempts of theoretical justification of Economic Lysenkoism fall into several major categories:

Those can be called pillars, cornerstones of Economic Lysenkoism. Each of the deserves as separate article (see links above).

Historically especially important was Chicago school of market fundamentalism promoted pseudo-scientific theories of Milton Freedman (Chicago School) as well as supply side economics.

Collapse of the USSR as ideological justification of Casino Capitalism superiority

The huge boost of Casino Capitalism was given by the collapse of the USSR in 1991. That gave a second life to Reagan era. Collapse of the USSR was used as a vindication of market fundamentalism. After it New Deal regulations were systematically destroyed. Dumped down variants of Nietzsche philosophy like bastardatized variant promoted by Russian emigrant became fashionable with an individual "creative" entrepreneur as a new Übermensch, which stands above morality.

"The word Übermensch [designates] a type of supreme achievement, as opposed to 'modern' men, 'good' men, Christians, and other nihilists ... When I whispered into the ears of some people that they were better off looking for a Cesare Borgia than a Parsifal, they did not believe their ears."[9] Safranski argues that the combination of ruthless warrior pride and artistic brilliance that defined the Italian Renaissance embodied the sense of the Übermensch for Nietzsche. According to Safranski, Nietzsche intended the ultra-aristocratic figure of the Übermensch to serve as a Machiavellian bogeyman of the modern Western middle class and its pseudo-Christian egalitarian value system.[10]

Brainwashing

The instability and volatility of active markets can devalue the economic base of real lives, or in more macro-scenarios can lead to the collapse of national and regional economies. In a very interesting and grotesque way it also incorporates the key element of Brezhnev Socialism in everyday life: huge manipulation of reality by mass media to the extend that Pravda and the USSR First TV Channel look pretty objective in comparison with Fox news and Fox controlled newspapers. Complete poisoning of public discourse and relying on the most ignorant part of the population as the political base (pretty much reminiscent of how Bolsheviks played "Working Class Dictatorship" anti-intellectualism card; it can be called "Rednecks Dictatorship").

The "heroes" or transformation of US economy to casino capitalism model

While transformation to casino capitalism was an objective development, there were specific individuals who were instrumental in killing New Deal regulations. We would single out the following twelve figures:

  1. Ronald Reagan (although first steps toward casino capitalism were made under Carter).
  2. Milton Friedman
  3. Alan Greenspan
  4. Phil Gramm
  5. Robert Rubin
  6. Larry Summers
  7. Helicopter Ben
  8. Bush II
  9. Bill Clinton
  10. Sandy Weill
  11. Jeffrey Sachs with his "shock therapy" racket
  12. Martin Feldstein

There is no question that Reagan and most of his followers (Greenspan, Rubin, Phil Gramm, etc) were rabid radicals blinded by ideology. But they were radicals of quite different color then FDR with disastrous consequences for society. Here again the analogy with Bolsheviks looms strong. In a way, they can be called financial terrorists inflicting huge damage on the nation and I wonder if RICO can be use to prosecute at least some of them.

In Bailout Nation (Chapter 19) Barry Ritholtz tried to rank major players that led country into the current abyss:

1. Federal Reserve Chairman Alan Greenspan
2. The Federal Reserve (in its role of setting monetary policy)
3. Senator Phil Gramm
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
10. Congress
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley, and Goldman Sachs) and their CEOs
18. President George W. Bush
19. President Bill Clinton
20. President Ronald Reagan
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries Robert Rubin and Lawrence Summers
25. FOMC Chief Ben Bernanke
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk)
29. Institutional investors (pensions, insurance firms, banks, etc.) for
buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
Supervision (OTS)
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk

Early Researchers of Casino Capitalism

Hyman Minsky

Hyman Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt. He identified 3 types of borrowers that contribute to the accumulation of insolvent debt: Hedge Borrowers; Speculative Borrowers; and Ponzi Borrowers. That corresponds to three stages of Casino Capitalism of increasing fragility:

After the collapse of the USSR there were a lot of chest thumping of the status of America as a hyper power (American exceptionalism) and "end of history" where capitalism was supposed to reign supreme followed. But in 2000 the first moment to pay the piper arrives. It was postponed by Iraq war and housing bubble but reappeared in much more menacing form in 2008. It looks like in 2009 the USA arrived to the a classic Minsky moment with high unemployment rate and economy suppressed by (and taken hostage) by Ponzi finance institutions which threaten the very survival of our system and way of life.

The shift from speculative toward Ponzi finance was speed up by increased corruption of major players.

"As Minsky observed, capitalism is inherently unstable. As each crisis is successfully contained, it encourages greater speculation and risk taking in borrowing and lending. Financial innovation makes it easier to finance various schemes. To a large extent, borrowers and lenders operate on the basis of trial and error. If a behavior is rewarded, it will be repeated. Thus stable periods naturally lead to optimism, to booms, and to increasing fragility.

A financial crisis can lead to asset price deflation and repudiation of debt. A debt deflation, once started, is very difficult to stop. It may not end until balance sheets are largely purged of bad debts, at great loss in financial wealth to the creditors as well as the economy at large."

Susan Strange

For Strange the speed at which computerized financial markets work combined with new much larger size and their now, near-universal pervasiveness is an important qualitative change. One of the side effects of this change is that volatility extends globally. Approximately $1.5 trillion dollars are invested daily as foreign transactions. It is estimated that 98 per cent of these transactions are speculative. In comparison with this casino Las Vegas looks like a aborigine village in comparison with Manhattan.

Notes:

Susan Strange (June 9, 1923 - October 25, 1998) was a British academic who was influential in the field of international political economy. Her most important publications include Casino Capitalism, Mad Money, States and Markets and The retreat of the State: The Diffusion of Power in the World Economy.

For a quarter of a century, Susan Strange was the most influential figure in British international studies. She held a number of key academic posts in Britain, Italy and Japan. From 1978 to 1988, she was Montague Burton Professor of International Relations at the London School of Economics and Political Science (LSE), the first woman to hold this chair and a professorial position in international relations at the LSE. She was a major figure in the professional associations of both Britain and the US: she was an instrumental founding member and first Treasurer of the British International Studies Association (BISA) [1] and the first female President of the International Studies Association (ISA) in 1995.

It was predominantly as a creative scholar and a forceful personality that she exercised her influence. She was almost single-handedly responsible for creating ‘international political economy’ and turning it into one of the two or three central fields within international studies in Britain, and she defended her creation with such robustness, and made such strong claims on its behalf, that her influence was felt—albeit not always welcomed—in most other areas of the discipline. She was one of the earliest and most influential campaigners for the closer integration of the study of international politics and international economics in the English language scholarship.

In the later period of her career, alongside the financial analyses offered in Casino Capitalism (the analysis in which she felt was vindicated by the South-East Asian financial crisis) and Mad Money, Strange's contributions to the field include her characterisation of the four different areas (production, security, finance and knowledge) through which power might be exercised in International Relations. This understanding of what she termed "structural power", formed the basis of her argument against the theory of American Hegemonic Decline in the early eighties.

Her analysis particularly in States and Markets focused on what she called the ‘market-authority nexus’, the see-saw of power between the market and political authority. The overall argument of her work suggested that the global market had gained significant power relative to states since the 1970s. This led her to dub the Westphalia system Westfailure. She argued that a ‘dangerous gap’ was emerging between territorially-bound nation states and weak or partial intergovernmental cooperation in which markets had a free hand which could be constructive or destructive.

John K. Galbraith

Among early critiques of casino capitalism was John K. Galbraith. He promoted a pretty novel idea that the major economic function of Governments is to strengthen countervailing powers to achieve some kind of balance between capital and labor. While unions are far from being perfect and his prediction did not materialize in view of sliding to corporatism it may well be that the renewed support of unions right efforts to organize could make a big contribution to a revised, post subprime/derivatives/shadow_banking crisis stage of capitalism.

His critique of Milton Freedman pseudoscience still has its value today.

As Joseph Stiglitz noted (CSMonitor, Dec 28, 2006):

...In many ways, Galbraith was a more critical observer of economic reality.

Driven to understand market realities

Galbraith's vivid depictions of the good, bad, and ugly of American capitalism remain a sorely needed reminder that all is not quite as perfect as the perfect market models – with their perfect competition, perfect information, and perfectly rational consumers – upon which so much of Friedman's analysis depended.

Galbraith, who cut his teeth studying agricultural economics, strove to understand the world as it was, with all the problems of unemployment and market power that simplistic models of competitive markets ignore. In those models, unemployment didn't exist. Galbraith knew that made them fatally flawed

... ... ...

In his early research, Galbraith attempted to explain what had brought on the Great Crash of 1929 – including the role of the stock market's speculative greed fed by (what would today be called) irrational exuberance. Friedman ignored speculation and the failure of the labor market as he focused on the failures of the Federal Reserve. To Friedman, government was the problem, not the solution.

What Galbraith understood, and what later researchers (including this author) have proved, is that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered markets often produce too much of some things, such as pollution, and too little of other things, such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect – that is, always – markets are inefficient; hence the need for government action.

Galbraith reminded us that what made the economy work so well was not an invisible hand but countervailing powers. He had the misfortune of articulating these ideas before the mathematical models of game theory were sufficiently developed to give them expression. The good news is that today, more attention is being devoted to developing models of these bargaining relationships, and to complex, dynamic models of economic fluctuations in which speculation may play a central role.

Government's role

While Friedman never really appreciated the limitations of the market, he was a forceful critic of government. Yet history shows that in every successful country, the government had played an important role. Yes, governments sometimes fail, but unfettered markets are a certain prescription for failure. Galbraith made this case better than most.

Galbraith knew, too, that people aren't just rational economic actors, but consumers, contending with advertising, political persuasion, and social pressures. It was because of his close touch with reality that he had such influence on economic policymaking, especially during the Kennedy-Johnson years.

Galbraith's penetrating insights into the nature of capitalism – as it is lived, not as it is theorized in simplistic models – has enhanced our understanding of the market economy. He has left an intellectual legacy for generations to come. And he has left a gap in our intellectual life: Who will stand up against the economics establishment to articulate an economic vision that is both in touch with reality and comprehensible to ordinary citizens?

Galbraith was vindicated in his belief that the only economics possible is political economics and as government is always an agent of dominant class it always mixed with politics. Krugman and Stiglitz both have eaten humble pie, because according to neoclassical economics the crises should not have happened. Both should now reread Galbraith's The Great Crash: 1929 (see also extracts). BTW it is interesting that in 1996 Paul Krugman criticized limitations of Galbright vision in the following way:

To be both a liberal and a good economist you must have a certain sense of the tragic--that is, you must understand that not all goals can be attained, that life is a matter of painful tradeoffs. You must want to help the poor, but understand that welfare can encourage dependency. You must want to protect those who lose their jobs, but admit that generous unemployment benefits can raise the long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but accept that too high a rate of taxation can discourage investment and innovation.

To the free-market conservative, these are all arguments for government to do nothing, to accept whatever level of poverty and insecurity the market happens to produce. A serious liberal does not reply to such conservatives by denying that there are any trade-offs at all; he insists, rather, that some trade-offs are worth making, that helping the poor and protecting the unlucky may have costs but will ultimately make for a better society.

The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation of the complexity of the human condition than a mere technical economist would -- lacks this tragic sense. Galbraith's vision of the economy is one without shadows, in which what is good for social justice always turns out to have no unfavorable side effects. If this vision is typical of liberal intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness to face up to uncomfortable reality.

Similar limited understanding of Galbright is demonstrated in London Times (cited from comment to Economist's View blog) :

Some motifs of Galbraith’s work have entered popular consciousness. Galbraith wrote of private opulence amid public squalor, illustrating it with a memorable metaphor of a family that travels by extravagant private car to picnic by a polluted river.

Yet while arguing for increased public expenditure on welfare, Galbraith gave scant attention to the limits of that approach. His writings perpetuate a debilitating weakness of modern liberalism: a reluctance to acknowledge that resources are scarce. In Galbraith’s scheme, said Herbert Stein, the former chairman of the Council of Economic Advisers: “The American people were only asked whether they wanted cleaner air and water . . . The answers to such questions seemed obvious — but they were not the right questions.”

Soros contribution to the understanding of growth of financial sector as source of new, global economic instability

This idea of "casino capitalism" as a driver of financial instability was developed further in the book The Crisis of Global Capitalism by George Soros (1998), who highlights the potential for disequilibrium in the financial system, and the inability of non-market sectors to regulate markets.

Although the insights of the Soros critique of global capitalism are scarcely new, they were articulated with such candor and accuracy that the book made a significant impact. The following is a sampling of Soros' insights.
  1. Unregulated financial markets are inherently unstable. Soros observes that, contrary to conventional economic theory, financial markets are not driven toward a relatively stable and rational price by the objective value assessment of such things as the soundness of a company's management, products, or record of profitability. Rather they are constantly driven away from equilibrium by the momentum of self-fulfilling expectations -- a rising stock price attracts buyers who further raise the price-to the point of collapse. The recent massive inflation and subsequent collapse in the price of the shares of unprofitable dot-com companies illustrates Soros' point.

    Bank lending also contributes to the instability, because the price of real and financial assets is set in part by their collateral value. The higher their market price rises the larger the loans banks are willing to make to their buyers to bid up prices. When the bubble bursts, the value of the assets plummets below the amount of the money borrowed against them. This forces banks to call their loans and cut back on the lending, which depresses asset prices and dries up the money supply. The economy then tanks-until credit worthiness is restored and a new boom phase begins.

  2. Financial markets are amoral by definition. Following Napoleon Bonaparte, Soros stressed that there is no meaningful place for individual moral behavior in the context of financial markets, because such behavior has no consequence other than to reduce the financial return to the ethical actor.

    When I bought shares in Lockheed and Northrop after the managements were indicted for bribery, I helped sustain the price of their stocks. When I sold sterling short in 1992, the Bank of England was on the other side of my transactions, and I was in effect taking money out of the pockets of British taxpayers. But if I had tried to take social consequences into account, it would have thrown off my risk-reward calculation, and my profits would have been reduced.

    Soros argues that if he had not bought Lockheed and Northrop, then somebody else would have, and Britain would have devalued sterling no matter what he did. "Bringing my social conscience into the decision-making process would make no difference in the real world; but it may adversely affect my own results." One can challenge the Soros claim that such behavior is amoral rather than immoral, but his basic argument is accurate. His understanding that it is futile to look to individual morality as the solution to the excesses of financial markets is all too accurate.

  3. Corporate employees are duty-bound to serve only corporate financial interests. Soros writes:

    Publicly owned companies are single-purpose organizations-their purpose is to make money. The tougher the competition, the less they can afford to deviate. Those in charge may be well-intentioned and upright citizens, but their room for maneuver is strictly circumscribed by the position they occupy. They are duty-bound to uphold the interests of the company. If they think that cigarettes are unhealthy or that fostering civil war to obtain mining concessions is unconscionable, they ought to quit their jobs. Their place will be taken by people who are willing to carry on.

    Though not specifically mentioned by Soros, this is why corporations were in the past (at least partially) excluded from the political processes (although it was never complete and it is well known fact that Crusades and Siege of Constantinople (1204) were financed by Genoese bankers upset by lack of access to the Byzantium markets). But at least formally other parts of the society can define their goals and the rules of the marketplace. They are incapable of distinguishing between private corporate interests and broader public interests. But that changed with the global dominance of corporatism.

  4. Financial markets are oblivious to externalities and are infected by "short-termism". Specifically the fact that a strategy or policy produces economic returns in the short-term does not mean the long-term results will be beneficial. The focus of financial markets is on short-term individual gain to the exclusion of both social and longer-term consequences. The fact that particular policies and strategies are effective in producing short-term financial returns does not mean they are more generally beneficial or desirable. Soros offers the example that running up a budget or trade deficit "feels good while it lasts, but there can be hell to pay later."

  5. The relationship between the center and the periphery of the capitalist system is profoundly unequal. The powerful countries at the center of the capitalist system are both wealthier and more stable than countries at the periphery because control of the financial system and ownership of productive assets allows them to shape economic and political affairs to their benefit.

    "Foreign ownership of capital deprives peripheral countries of autonomy and often hinders the development of democratic institutions. The international flow of capital is subject to catastrophic interruptions."

    In times of uncertainty financial capital tends to return to its country of origin, thus depriving countries at the periphery of the financial liquidity necessary to the function of monetized economies. "The center's most important feature is that it controls its own economic policies and holds in its hands the economic destinies of periphery countries."

  6. In the capitalist system greed (aka "monetary values") tend to displace social values in sectors where this is destructive of important public interests. Soros writes:

    Monetary values have usurped the role of intrinsic values, and markets have come to dominate spheres of existence where they do not properly belong. Law and medicine, politics, education, science, the arts, even personal relations-achievements or qualities that ought to be valued for their own sake are converted into monetary terms; they are judged by the money they fetch rather than their intrinsic value."

    Because financial "capital is free to go where most rewarded, countries vie to attract and retain capital, and if they are to succeed they must give precedence to the requirements of international capital over other social objectives.

Ha-Joon Chang

One notable later researcher of casino capitalism, especially "free market" fundamentalism propaganda Cambridge University researcher Ha-Joon Chang. In 2011 he published a fascinating book 23 Things They Don't Tell You About Capitalism. Here are two Amazon reviews that shed some light at the key ideas of the book:

William Podmore

Ha-Joon Chang, Reader in the Political Economy of Development at Cambridge University, has written a fascinating book on capitalism's failings. He also wrote the brilliant Bad Samaritans. Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalization'.

Chang takes on the free-marketers' dogmas and proposes ideas like

He notes that the USA does not have the world's highest living standard. Norway, Luxemburg, Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland, Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the highest industrial output per person.

Free-market politicians, economists and media have pushed policies of de-regulation and pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more frequent crises. Britain's growth rate in income per person per year was 2.4 per cent in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009, and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.

So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'. Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment as a share of national output, in all the G7 countries.

Chang shows how free trade is not the way to grow and points out that the USA was the world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s, and that Britain was one of world's the most protectionist countries during its rise, from the 1720s to the 1850s.

He shows how immigration controls keep First World wages up; they determine wages more than any other factor. Weakening those controls, as the EU demands, lowers wages.

He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead, we need controls capital, on mergers and acquisitions, and on financial products. We need the welfare state, industrial policy, and huge investment in industry, infrastructure, worker training and R&D.

As Chang points out, "Even though financial investments can drive growth for a while, such growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term investments in real sector activities, as so vividly shown by the 2008 financial crisis."

This book is a commonsense, evidence-based approach to economic life, which we should urge all our friends and colleagues to read.

Loyd E. Eskildson

The 2008 'Great Recession' demands re-examination of prevailing economic thought - the dominant paradigm (post 1970's conservative free-market capitalism) not only failed to predict the crisis, but also said it couldn't occur in today's free markets, thanks to Adam Smith's 'invisible hand.' Ha-Joon Chang provides that re-examination in his "23 Things They Don't Tell You About Capitalism." Turns out that the reason Adam Smith's hand was not visible is that it wasn't there. Chang, economics professor at the University of Cambridge, is no enemy of capitalism, though he contends its current conservative version should be made better. Conventional wisdom tells us that left alone, markets produce the most efficient and just outcomes - 'efficient' because businesses and individuals know best how to utilize their resources, and 'just' because they are rewarded according to their productivity. Following this advice, countries have deregulated businesses, reduced taxes and welfare, and adopted free trade. The results, per Chang, has been the opposite of what was promised - slower growth and rising inequality, often masked by rising credit expansion and increased working hours. Alternatively, developing Asian countries that grew fast did so following a different version of capitalism, though to be fair China's version to-date has also produced much greater inequality. The following summarizes some of Chang's points:

  1. "There is no such thing as a free market" - we already have hygiene standards in restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008, the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by President Bush on the grounds that it was a necessary state intervention consistent with free-market capitalism. Chang's conclusion - free-marketers contending that a certain regulation should not be introduced because it would restrict market freedom are simply expressing political opinions, not economic facts or laws.
  2. "Companies should not be run in the interest of their owners." Shareholders are the most mobile of corporate stakeholders, often holding ownership for but a fraction of a second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate strategies that maximize short-term profits and dividends, usually at the cost of long-term investments. (This often also includes added leverage and risk, and reliance on socializing risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate limited liability, while a boon to capital accumulation and technological progress, when combined with professional managers instead of entrepreneurs owning a large chunk (e.g.. Ford, Edison, Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional managers to maximize their own prestige via sales growth and prestige projects instead of maximizing profits. Another negative long-term outcome driven by shareholders is increased share buybacks (less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale layoffs from off-shoring. Governments of other countries encourage longer-term thinking by holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater worker representation (Germany's supervisory boards), and cross-shareholding among friendly companies (Japan's Toyota and its suppliers).
  3. "Free-market policies rarely make poor countries rich." With a few exceptions, all of today's rich countries, including Britain and the U.S., reached that status through protectionism, subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite, not because of, protectionism. The problem with that explanation is the number of other nations paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany, Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong, Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang believes the 'official historians' of capitalism have been very successful re-writing its history, akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He also points out that developing nations that stick to their Ricardian 'comparative advantage,' per the conservatives prescription, condemn themselves to their economic status quo.
  4. "We do not live in a post-industrial age." Most of the fall in manufacturing's share of total output is not due to a fall in the quantity of manufactured goods, but due to the fall in their prices relative to those for services, caused by their faster productivity growth. A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities that used to be provided in-house - e.g.. catering and cleaning. Those advising the newly developing nations to skip manufacturing and go directly to providing services forget that many services mainly serve manufacturing firms (finance, R&D, design), and that since services are harder to export, such an approach will create balance-of-payment problems. (Chang's preceding points directly contradict David Ricardo's law of comparative advantage - a fundamental free market precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite lacking experienced managers and natural resources, is another.)
  5. "The U.S. does not have the highest living standard in the world." True, the average U.S. citizen has greater command over goods and services than his counterpart in almost any other country, but this is due to higher immigration, poorer employment conditions, and working longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S. in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides the best economic model. (This is already occurring - the World Bank's chief economist, Justin Lin, comes from China.)
  6. "Governments can pick winners." Chang cites examples of how the Korean government built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG), despite lacking raw materials or experience for those sectors. True, major government failures have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed - e.g.. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland, France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite well with government-picked winners. Another problem is that business and national interests sometimes clash - e.g.. American firms' massive outsourcing has undermined the national interest of maintaining full employment. (However, greater unbiased U.S. government involvement would be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations - $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve at the beginning of the Great Recession. Government planning allows minimizing excess capacity, maximizing learning-curve economies and economies of scale and scope; operational performance is enhanced by also forcing government-owned or supported firms into international competition. Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials, building infrastructure) are necessary for emerging economies to move into more sophisticated sectors.
  7. "Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics is based on the belief that the poor maximize current consumption, while the rich, left to themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3% in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
  8. "U.S. managers are over-priced." First, relative to their predecessors (about 10X those in the 1960s; now 300-400X the average worker), despite the latter having run companies more successfully, in relative terms. Second, compared to counterparts in other rich countries - up to 20X. (Third, compared to counterparts in developing nations - e.g.. JPMorgan Chase, world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial and Commercial Bank of China, the world's largest, being paid $234,700. Read more ›

Willem Buiter and the idea of long term after crisis stagnation

Willem Buiter in his FT article After the Crisis Macro Imbalance, Credibility and Reserve-Currency suggested that after financial crisis of 2008 there might be very long a painful deleveraging period aka secular stagnation. In short each financial crisis make recovery longer and longer. That's why the US will most likely face a long period of stagnation: the digestion of huge excessive debt of the private sector might well take a decade:

Since the excess of debt is relative to income and GDP, the lower the rate of growth, the longer the required period of digestion. This explains for the paradox of trying to stimulate consumption when the economy faces a monumental crisis provoked exactly by excessive debt and excessive consumption. A cartoon line best captured the spirit of it: "country addicted to speculative bubbles desperately searches a new bubble to invest in. "

... ... ...

The roots of the crisis are major international macroeconomic imbalances. Despite the fact that the excesses of the financial system were instrumental to lead these imbalances further than otherwise possible, insufficient regulation should not be viewed as the main factor behind the crisis. The expenditure of central countries, spinned by all sort of financial innovations created by a globalized financial system, was the engine of world growth. When debt became clearly excessive in central countries and the debt-financed expenditure cycle came to an end, the ensuing crisis paralyzed the world economy. With the lesson of 1929 well assimilated, American monetary policy became aggressively expansionist. The Fed inundated the economy with money and credit, in the attempt to avoid a deep depression. Even if successful, the economies of the US and the other central countries, given the burden of excessive debt, are likely to remain stagnant under the threat of deflation for the coming years. The assumption of troubled assets by the public sector, in order to avoid the collapse of the financial system, might succeed, but at the cost of a major increase in public debt. Fiscal policy is not efficient to restart the economy when the private sector remains paralyzed by excessive debt. Even if a coordinated effort to increase public expenditure is successful, the central economies will remain stagnant for as long as the excessive indebtedness of the private sector persists. The period of digestion of excess debt will be longer than the usual recessive cycle. Since imports represent a drain in the effort to reanimate domestic demand through public expenditure, while exports, on the contrary, contribute to the recovery of internal demand, the temptation to central economies to also adopt a protectionist stance will be strong.

Willem Buiter also defined ‘cognitive regulatory capture’ which existed during the Greenspan years and when the Fed were just an arm of Wall Street.

This regulatory capture has resulted in an excess sensitivity of the Fed to financial market and financial sector concerns and fears and in an overestimation of the strength of the link between financial market turmoil and financial sector deleveraging and capital losses on the one hand, and the stability and prosperity of the wider economy on the other hand. The paper gives five examples of recent behavior by the Fed that are most readily rationalized with the assumption of regulatory capture. The abstract of the paper follows next. The latest version of the entire enchilada can be found here. Future revisions will also be found there.

Joseph Stiglitz on 5 steps to Casino Capitalism

In his 2008 Vanity Fair article Capitalist Fools Stiglitz identifies five key steps in transformation of American capitalism to Casino Capitalism (moments of failure as he called them):

No. 1: Reagan Fires Fed Chairman Volcker and Replaces Him With Greenspan in 1987:

Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.

snip

If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.

Greenspan presided over not one but two financial bubbles.

  1. Congress repealed the Glass-Steagall Act in 1999 under Bill Clinton (Glass-Steagall was a depression-era reform that separated commercial and investment banks)

I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest—toward short-term self-interest, at any rate, rather than Tocqueville’s "self interest rightly understood."

Stiglitz also refers to a 2004 decision by the SEC "to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process."

Once more, it was deregulation run amuck, and few even noticed.

  1. The Bush tax cuts, both on income and capital gains

The Bush administration was providing an open invitation to excessive borrowing and lending—not that American consumers needed any more encouragement.

  1. Faking the Numbers

Here he refers to bad accounting, the failure to address problems with stock options, and the incentive structures of ratings agencies like Moodys that led them to give high ratings to toxic assets.

  1. Paulson and the Flawed Bailout

Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.

Stiglitz concludes:

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. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

The flawed economic philosophy brought by Reagan, and embraced by so many, brought us to this day. Ideas have consequences, especially when we stop empirically testing them. Republican economics have created great pain to America and harmed our national interest.

The flaw that Greenspan found was always there: self-regulation does not work. As Stiglitz said:

As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest — toward short-term self-interest

Yes, for all their claims to science, the premise conflicts with tendencies of people.

This is the real legacy of Ronald Reagan and Alan Greenspan:

The whole scheme was kick-started under Ronald Reagan. Between his tax cuts for the rich and the Greenspan Commission’s orchestrated Social Security heist, working Americans lost out in a generational wealth transfer shift now exceeding $1 trillion annually from 90 million working class households to for-profit corporations and the richest 1% of the population. It created an unprecedented wealth disparity that continues to grow, shames the nation and is destroying the bedrock middle class without which democracy can’t survive.

Greenspan helped orchestrate it with economist Ravi Batra calling his economics "Greenomics" in his 2005 book "Greenspan’s Fraud." It "turns out to be Greedomics" advocating anti-trust laws, regulations and social services be ended so "nothing....interfere(s) with business greed and the pursuit of profits."

 Conclusions: From Animal Farm To Animal House

Instead of conclusion I will reproduce the post from Sudden Debt (March 17, 2008):

In Orwell's Animal Farm all animals are equal - except that some are more equal than others. All in the spirit of law, order and the proper functioning of society, of course. Fittingly, the animals that have chosen this role by themselves and for themselves, are the pigs.

Cut to US financial markets today. After years of swinish behavior more reminiscent of Animal House than anything else, the pigs are threatening to destroy the entire farm. As if it wasn't enough that they devoured all the "free market" food available and inundated the world with their excreta, they now wish to be put on the public trough. Truly, some businessmen believe they are more equal than others.

But do not blame the pigs; they are expected to act as swine nature dictates. The fault lies entirely with the farmers, those authorities entrusted by the people to oversee the farm because they supposedly knew better. While the pigs were rampaging and tearing the place apart, they were assuring us all that farms function best when animals are free to do as they please, guided solely by invisible hooves. No regulation, no oversight, no common sense. Oh yes, and pigs fly..

So what is to be done now? Two things:

In other words, the focus from now on should be on adding value by means of work and savings (capital formation), instead of inflating assets and borrowing.

Furthermore, we should realize that in a world already inhabited by close to 7 billion people and beset by resource depletion and environmental degradation, defending growth for growth's sake is a losing proposition. The wheels are already wobbling on the Permagrowth model; pumping harder on the accelerator is not going to make it go any faster and will likely result in a fatal crash.

Debt, and finance in general, should be left to re-size downwards to a level that better reflects the carrying capacity of our world. The Fed's current actions are shortsighted and "conservative" in the worst interpretation of the words: they are designed to artificially maintain debt at levels that myopically projects growth as far as the eye can see.

What level of resizing may be necessary? I hope not as much as at Bear Stearns, which got itself bought by Morgan at buzz-saw prices: $2 per share represents a 98% discount from its $84 book value. What scares me, though, is the statement by Morgan's CFO, who said the price reflected the risk the firm was taking, even though he was comfortable with the valuation of assets in Bear's books. It "...gives us the flexibility and margin of error that's appropriate given the speed at which the transaction came together", he said.

If it takes a 98% discount and the explicit guarantee of the Fed for a large portion of assets to buy one of the largest investment banks in the world, where should all other financial firms be trading at? ....Hello? Anyone? Is that a great big silence I hear, or the sound of credit imploding into a vacuum?


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[Jun 21, 2016] Depressing Similarities Between 1938 And The Present

www.benzinga.com

Benzinga

By the late 1930s, the worst of the Depression had passed after the U.S. President Franklin Roosevelt jolted the economy through the "New Deal," which focused on the "three Rs" - relief, recovery and reform.

At the same time, private investment was at poor levels, as individuals chose to pay down their debts rather than spend. Inflation was also on the low side, and the government started to back off its fiscal stimulus programs and implement a tightening of financial policy.

Sounds a bit like 2016 doesn't it?

Business Insider, citing a research report by analysts at Morgan Stanley, made the case that 2016 is no different from 1938.

"The critical similarity between the 1930s and the 2008 cycle is that the financial shock and the relatively high levels of indebtedness changed the risk attitudes of the private sector and triggered them to repair their balance sheets," Business Insider quoted the analysts as saying. "During the deleveraging process, the private sector becomes risk-averse and shifts its attention towards restoring health to its balance sheets."

[Jun 19, 2016] I find it interesting that the U.S. Energy Sector now has twice as much debt as it did ten years ago at $370 billion as production declines.

Notable quotes:
"... Furthermore, the U.S. Energy Sector is paying at least 50% of its operating profit now to just pay the interest on the debt. Q1 2016, it was 86% of their operation income just to pay the interest on the debt. ..."
"... Unless Uncle Sam comes in and BAILS OUT the U.S. Energy Sector, it's in serious trouble. ..."
peakoilbarrel.com
SRSrocco , 06/15/2016 at 2:37 pm
I tried to post this graph in a prior comment, but it did not work. So, here is a link:

https://srsroccoreport.com/wp-content/uploads/2016/05/U.S.-Energy-Sector-Interest-Payments-On-Debt-.png

I find it interesting that the U.S. Energy Sector now has twice as much debt as it did ten years ago at $370 billion… as production declines.

Furthermore, the U.S. Energy Sector is paying at least 50% of its operating profit now to just pay the interest on the debt. Q1 2016, it was 86% of their operation income just to pay the interest on the debt.

Unless Uncle Sam comes in and BAILS OUT the U.S. Energy Sector, it's in serious trouble.

steve

[Jun 19, 2016] Without close to hundred dollar per barrel oil prices US is doomed

Notable quotes:
"... Slight aside, but just a comment on the public understanding of energy issues- I engaged with a senate candidate recently regarding a comment she made at a public debate. She exclaimed that one way the USA should work to contain Putin was to export energy to Europe so they are not hostage to Russian energy supply. I later pointed put to her that she ought to study up on energy some more, since we are big importers of energy. She said she had been hearing that we are approaching independence on energy. I was very surprised by her lack of understanding of this critical issue, since in other respects I found her to be very smart and well studied. Goes to show that people generally hear what they want to hear, or they simply swallow the most convenient truth. And this includes our policy makers, our voters, and ourselves. ..."
"... Look at the second to last slide "Resilience of the three American gas plays (UFDsim)" decline around 15% during the first four years for shale gas. We live in interesting times. ..."
peakoilbarrel.com
Hickory , 06/16/2016 at 9:54 am
Slight aside, but just a comment on the public understanding of energy issues- I engaged with a senate candidate recently regarding a comment she made at a public debate. She exclaimed that one way the USA should work to contain Putin was to export energy to Europe so they are not hostage to Russian energy supply. I later pointed put to her that she ought to study up on energy some more, since we are big importers of energy. She said she had been hearing that we are approaching independence on energy. I was very surprised by her lack of understanding of this critical issue, since in other respects I found her to be very smart and well studied.

Goes to show that people generally hear what they want to hear, or they simply swallow the most convenient truth. And this includes our policy makers, our voters, and ourselves.

[Hi Petro- this also explains my wooden nickel vote, wrong though it may be]

Dennis Coyne , 06/16/2016 at 3:15 pm
Hi Petro,

When 180 new wells per month were being added output was increasing, when new wells added fell the output flattened. New well EUR has been going up in 2014 and 2015, the current wells have been performing better over the first 12 months of output than earlier wells so fewer wells are needed to increase output. With current average wells about 105 new wells per month is enough to increase output.

Dennis Coyne , 06/16/2016 at 10:47 am
Hi Petro,

The EUR of the average well increased from 2013 to 2015, especially over the first 24 months of output, the well profile was adjusted upwards to reflect this (and to get the model to match actual output), it had been running "low" for several months. A steady 150 new wells per month using the 400 kb well profile I had constructed would result in 1300 kb/d.

The well profile could be too high, an alternative scenario uses a 366 kb well profile (which matches pretty well the 12 month increase in output we see with recent wells compared to the 2008 to 2015 average well with EUR of 350 kb). That alternative is up thread. When oil prices go up, financing will be available.

Dennis Coyne , 06/16/2016 at 12:00 pm
Hi Petro,

The model is very simple see

http://oilpeakclimate.blogspot.com/2014/06/oil-field-models-decline-rates-and.html

The data one would need to develop the model is in the spreadsheet below:

https://drive.google.com/file/d/0B4nArV09d398VzAydU0zN0VKeTg/view?usp=sharing

In a wider spot below I will explain further.

Dennis Coyne , 06/16/2016 at 3:10 pm
Hi Petro,

The average 12 month completion rate was 177 new wells per month (centered average) in Dec 2014 when ND Bakken/TF output peaked at 1163 kb/d. This was enough to raise output by 300 kb/d from Dec 2013 to Dec 2014, if fewer wells had been completed (for example and average of 150 new wells per month), the rate of increase in output would have been smaller. By July 2015 the centered 12 month average completion rate had fallen to 148 new wells per month, but output had only fallen by 13 kb/d (1150 kb/d).

Only 105 new wells per month after July 2015 would have been enough to keep output rising. A scenario with 105 wells added after 2017 shown below. You won't believe this, but only 105 wells per month are needed to increase output, at least for a time.

Sweet spots run out and EUR falls after mid 2018.

Dennis Coyne , 06/17/2016 at 2:37 pm
Hi Petro,

The difference is simply the number of wells added per month. There is no a priori reason that the number of new wells will be limited to 105 new wells per month, perhaps there will be no financing available, but I doubt this would be a problem for Statoil or Exxon Mobil, they can do this out of cash flow if needed.

I also doubt that oil prices will remain under $80/b long term (more than 5 years). I expect by 2021, oil at $80/b(2016$) will be considered cheap.

George Kaplan , 06/16/2016 at 6:37 am
A different view from a Total engineer, looks to be using proprietary modeling software. Seems to capture the possibility of a fatter tail than the logistic curve does, but has already missed the flat peak area:

http://aspofrance.viabloga.com/files/PCharlez%20_ResilienceNon-conv.pdf

Martin , 06/16/2016 at 9:50 am
Look at the second to last slide "Resilience of the three American gas plays (UFDsim)" decline around 15% during the first four years for shale gas. We live in interesting times.
Verwimp , 06/16/2016 at 2:57 pm
Thanks George.

I am afraid those flat tails are engineered according to the engineer's wishful thinking.

[Jun 19, 2016] Lysenkoism and climate change

Notable quotes:
"... Science and scientists are now heavily politicized. A lot of them are just political charlatans spreading nonsense for money and abusing mathematics, using it as smoke screen to hide their disgraceful actions. Take for example neoclassical economists. ..."
"... Many scientists now have connections and receive funding from military industrial complex or other industrial lobbies which also affects objectivity. ..."
"... Scientists with integrity of Rutherford are extinct. Now this is "He who pays the piper calls the tune" all over the science. ..."
"... That does not exclude objectivity, but it now can never be taken for granted. Scientific schools struggles can now well be the struggles of influence groups standing behind particular groups of scientists. The attitude should be like in the Russian proverb that Reagan used to love so much: "Trust but verify" ..."
"... IMHO you can view neoclassical economics as a cancer or a modern version of Lysenkoism (and a very successful, dominant one), if you wish (with due apologies to "strict" supply-demand equilibrium believers; of course, in a long run everything comes to equilibrium, but in a long run we all are dead ;-). ..."
"... How the existence and success of Lysenkoism ( let's say in the form of neoclassical economics ) correlates with your optimism about modern science and scientists ? That is the question to be answered. ..."
peakoilbarrel.com

texas tea , 06/18/2016 at 5:30 pm

Fred from way up thread.
"Sorry Tea, this is the 21st century and while that might have been true even a century ago, we now have a very extensive and solid body of scientific knowledge to work with and therefore all scientists do not in any way shape or form get it wrong ALL THE TIME! That isn't how science works today."

I will not shove words into you mouth and I will ask that you don't try it with me. No one said all scientist get it wrong all the time. What was said is that most scientists have ideas that will later be proven wrong. In the field of climate science the models developed and played up in the media that were used to promote all kinds of false assumptions and alarming predictions have been frequently and objectively proven to be wrong. Most intellectually honest scientists would agree that we do not have the information needed for the models to fully understand all the variables that influence earths climate. Which of course includes sun cycles and the natural earth processes such ocean cycles, tectonics (volcanoes) ect (not to ramble on). To take one possible influence, the increase or decrease of CO2 and make predictions as to what the climate will be in 50 years is not science, it is at best guess work, it is one part of a jigsaw puzzle and it is dishonest to present in any other way.
It does not matter what field of science one works in, but to chose one for an example, medical science and drug development. Billions of $$$ are spent on drug development, more times than not the drugs and the research behind them are thrown into the trash because they do not work. The "science" relating to human diets and the epidemic of obesity and diabetes, another great example where they just flat got it wrong for over 30 years. I could ramble on but the point is made, good people often get it wrong, bad people do not care and evil people profit from it. :-)

Nick G , 06/18/2016 at 5:50 pm
most scientists have ideas that will later be proven wrong.

And…that's misleading to the point of just being wrong.

Yes, almost all scientists are working with concepts that can be improved in some way. But are they just flat out wrong? No.

Why is this important? Because your argument above uses this idea to frame climate science improperly: climate science can certainly be improved, in many, many ways. But it's good enough to identify serious risks in what we're doing now, and tell us that we need to take some action to mitigate those risks.

Of course, climate science mostly tells us what we already know for other reasons: fossil fuels are expensive, risky and polluting, and we should move away from them as fast as we can.

And, of course, that's why the Koch brothers and Exxon want to throw doubt on climate science: it's bad for their business.

texas tea , 06/19/2016 at 5:57 am
Nick,

"But it's good enough to identify serious risks in what we're doing now, and tell us that we need to take some action to mitigate those risks."

this is a statement i can agree with as it attempts to understand the limitations we are struggling with but also why further study and research is needed. Now include that idea with a cost benefit analysis of our current energy mix and all of a sudden we have someone who at least correctly frames the issues.

Tell the Chinese and Indians I doubt that any of them have ever heard of the Koch brothers. It isn't about doubt created by Exxon or Koch brothers, those doubt exist on the merits of the science itself it is about maintaining civil order in their own countries.

GoneFishing , 06/19/2016 at 6:28 am
Yes, the layman looks on scientific results as indeterminate and without confidence, couched in error limits and probabilities, and subject to correction or change. Of course the reality is far different, just look around you.
The very simple statements of the non-scientific populous seem so confident, so definite. Mostly they are wrong or misleading but they are not couched in terms of the reality of the situation and are generally one-sided and agenda based. We call that propaganda, I call it deceit.
The scientist understands the limitations of his investigations and puts them honestly out front for public viewing, being heavily checked by his peers. Probably about as honest as you can get in this world.
Again, if you think science is wrong and does not work, look around you, even as you type or read on the electronic inventions derived from all the "wrong" science. You sound like you have no idea how knowledge is gained or grows. Nor do you know how to interpret scientific results. Best to leave that to others.
And if you are thinking about global warming, the physics are rock solid, the details of climate change are fuzzy, mostly because of lack of funding for enough research teams and sensors. But it is only fuzzy, not wrong. If some of those rich businessmen and their puppet governments would actually spend enough money and effort on the science effort, we might know with greater certainty the details of climate change.
But they do not want to know, because it will force inconvenient action and change. Throughout history, the search for knowledge has been directed and throttled by the powers that be. We are still medieval in many ways.
But I guess today's profit and power are far more important than the world or our future generations.
likbez , 06/19/2016 at 11:50 am
Nick,

You are way too quick to dismiss TT concerns. He has some strong points.

Moreover I think you never heard about Lysenkoism, right ?

Science and scientists are now heavily politicized. A lot of them are just political charlatans spreading nonsense for money and abusing mathematics, using it as smoke screen to hide their disgraceful actions. Take for example neoclassical economists.

Many scientists now have connections and receive funding from military industrial complex or other industrial lobbies which also affects objectivity.

Scientists with integrity of Rutherford are extinct. Now this is "He who pays the piper calls the tune" all over the science.

As such most of them (outside few fields yet not politicized enough, like pure mathematics ) became the same prostitutes for the elite as journalists.

That does not exclude objectivity, but it now can never be taken for granted. Scientific schools struggles can now well be the struggles of influence groups standing behind particular groups of scientists. The attitude should be like in the Russian proverb that Reagan used to love so much: "Trust but verify"

Fred Magyar , 06/18/2016 at 8:29 pm
TT, I apologize for giving the impression that I was quoting you verbatim.

However when you say this:
What was said is that most scientists have ideas that will later be proven wrong.

I have to agree with Nick below. That statement is flat out wrong! Science does not operate in a vacuum and most scientists today build on a very solid scientific foundation of accepted scientific theories. They don't just pull ideas out of their asses!

It does not matter what field of science one works in, but to chose one for an example, medical science and drug development. Billions of $$$ are spent on drug development, more times than not the drugs and the research behind them are thrown into the trash because they do not work.

Ok I'll run with that! While a particular drug may not work as expected the scientific research they engage in does not overturn germ theory or the theory of evolution!

texas tea , 06/18/2016 at 5:46 pm
Fred Magyar , 06/19/2016 at 9:28 am
LOL! You really should read the rationalwiki link you posted! From that link:

When people thought the earth was flat, they were wrong. When people thought the earth was spherical, they were wrong. But if you think that thinking the earth is spherical is just as wrong as thinking the earth is flat, then your view is wronger than both of them put together.

As for the Wired link, Meh! And for the Guardian link I suggest you watch this to at least dispel some common myths about Einstein.

https://origins.asu.edu/panel-einsteins-legacy-100-years-general-relativity

Warning it will take up about two hours of your time. Well worth it in my opinion…

likbez , 06/19/2016 at 12:03 pm
How about such thing as Lysenkoism? Is not this a cancer for science, from which there is essentially cures are as difficult to obtain and are as destructive as for regular cancer.

IMHO you can view neoclassical economics as a cancer or a modern version of Lysenkoism (and a very successful, dominant one), if you wish (with due apologies to "strict" supply-demand equilibrium believers; of course, in a long run everything comes to equilibrium, but in a long run we all are dead ;-).

How the existence and success of Lysenkoism ( let's say in the form of neoclassical economics ) correlates with your optimism about modern science and scientists ? That is the question to be answered.

See also the post above
http://peakoilbarrel.com/north-dakota-down-over-70000-bpd-in-april/#comment-573372

[Jun 19, 2016] Higher borrowing costs and tighter lending standards will act to restrain growth in the Bakken going forward

Notable quotes:
"... Prices however can go substantially higher before restraining U.S. growth than they could in 2008 since the economy has changed. ..."
"... New vehicle efficiency alone increased 25 percent: ..."
peakoilbarrel.com
Higher borrowing costs and tighter lending standards will act to restrain growth in the Bakken going forward and along with continued advances in alternatives may well make it unlikely to peak higher. Prices however can go substantially higher before restraining U.S. growth than they could in 2008 since the economy has changed.

New vehicle efficiency alone increased 25 percent: http://www.umich.edu/~umtriswt/img/EDI_mpg_May-2016.png

[Jun 19, 2016] Where we are in the cycle

peakoilbarrel.com
texas tea , 06/16/2016 at 10:59 am
I found this article to be a reasoned and balanced view of where we are in the cycle.

hang in there SS.

http://oilprice.com/Energy/Energy-General/Expect-Much-Higher-Oil-Prices-As-The-Cycle-Comes-To-An-End.html

[Jun 19, 2016] There will the first significant stock draw of natural gas this summer, which for sure will have an impact on prices.

Notable quotes:
"... the growing market share for wind and solar triggered massively demand for natural gas which reached an all time high market share of 35%. ..."
"... If there is a hot summer this year, power burn could go over 40 bcf/d and maybe even reach 50bcf/d for some days. ..."
"... The consequence would be the first significant stock draw over the summer, which for sure will have an impact on prices. ..."
peakoilbarrel.com
Heinrich Leopold, 06/18/2016 at 4:16 am

Natural gas continued to soar last week, up 30% over the last four weeks, despite the shoulder season and doubts about a further recovery:
http://www.investing.com/analysis/it%E2%80%99s-not-the-time-to-be-bullish-natural-gas-200136703

Power burn stands at an all time high and up over 20% from last year. In addition, huge write downs of the industry of 40 Tcf for 2015, which – including oil – brought overall impairments to over 10 bn boe (or USD 500 bn loss for investors in 2015) reduced investors appetite for new investments. How many investors are left ready to lose another 500 bn on write downs alone?

http://www.naturalgasintel.com/articles/106753-staggering-us-ep-reserve-revisions-in-2015-eliminated-40-tcf-41-billion-bbl

The third force driving up prices is a significant change of electricity generation mix in the US.

In below chart, the market share for coal in electricity generation fell below 25% in March 2016.
http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_1_1

On the other hand, the growing market share for wind and solar triggered massively demand for natural gas which reached an all time high market share of 35%.

If there is a hot summer this year, power burn could go over 40 bcf/d and maybe even reach 50bcf/d for some days.

The consequence would be the first significant stock draw over the summer, which for sure will have an impact on prices.

[Jun 19, 2016] I was rather surprised by the modest declines those last two months.

peakoilbarrel.com
Verwimp , 06/15/2016 at 2:21 pm
This is only a little surprise. This decline takes away the surplus that was built up during the last two months (Fabruari and March) compared to the Season Effect Model. I was rather surprised by the modest declines those last two months.

I try to attach the graph once more to this comment (or I will ask Ron for support).

You can clearly see the dataset crosses the modelled line for the sixth time now. The first derivative of the model and the change of the data are still within the same error range as prior to the moment the model was built.

Difference between the model and the data is -2.4% now. The age of the model is 29 months now.

 photo Bruno 1_zpsqwt0dc5p.jpg

SRSrocco , 06/15/2016 at 2:47 pm
Verwimp,

Excellent chart. Just wanted to let you know that you were one of the few who presented the CORRECT Bakken chart in this blog. There may have been others, but well done. Jean Laherrere and Tad Patzek both have the same Bakken production profile as yours.

By 2025, the United States will be pumping 75% less oil than it is today. It will be interesting to see how we run the LEECH & SPEND SERVICE ECONOMY on that little amount of oil. Americans who think we will be able to exchange worthless paper dollars or Treasuries for oil at that time, better stop sniffing the glue.

[Jun 19, 2016] Catch 22 in oil production: only a fraction of current oil reserves will ever be recovered and the true amount will never matrialize

Notable quotes:
"... Some commentators have asserted that the 2008 financial crises was due to high fuel costs, and not necessarily due to the cascading collapse of Wall Street financial legerdemain (although this undoubtedly helped fan the flames). ..."
"... Social Security is a big part of the "unfunded liabilities". That's a transfer. It's not available to the working person who gets it deducted from their paycheck, but it's available to the retiree who gets it. And, the retiree is more likely to spend it. ..."
peakoilbarrel.com
Mike Sutherland , 06/17/2016 at 12:40 am
Hi Dennis

Thank you for your excellent reply, and as Cracker says the extensive work you've done provide a constructive counter to the less optimistic among us, of which I am one.

I am with Cracker in that I think your charts are chronically optimistically lopsided, but held my opinion on this for a long time until now.

The resources amounting to URR 8-9.2GB of oil as you surmise may indeed be there, however I remain highly skeptical of this reported volume for a variety of reasons.

At the end of the day, whether the URR of 8-9.2GB is there or not, I am of the opinion that only a fraction of it will ever be recovered and the true amount never realized. The reason is that the condition of the world economy won't support anything higher than $50 based on what I've seen this year. To wit;

1. Student and consumer debt is at an all-time high, compounded with the problem that most highly paid jobs are disappearing for the middle class . The June 2016 jobs report was pretty lackluster, with a +38,000 nonfarm payroll jobs increase reported. It is to be noted that the civilian long term unemployed has changed little at about 7.4 million.

2. Most driving is of itself for non-productive activities, and includes travel to jobs that are generally non-productive. If fuel gets more expensive, I expect that much of this non-essential travel will drop off. Some commentators have asserted that the 2008 financial crises was due to high fuel costs, and not necessarily due to the cascading collapse of Wall Street financial legerdemain (although this undoubtedly helped fan the flames).

3. The FED has pumped over $4 trillion of cash into the US economy, but the net benefit is estimated to be less than $1 trillion to GDP. It is unknown how the FED is going to unload this pure dreck on its books, and I suspect that it will not comport with higher oil prices in the cogs and wheels of the economy;

4. US debt is at a fantastic level of $19.3 trillion, with another $67 trillion of unfunded liabilities on the books. It's hard to see how this debt will be reduced to manageable levels with higher oil prices.

5. An Internet 2.0, or some other economically transformative technology, doesn't appear to be on the horizon. Currently, all we know how to do is burn fuel, heat a working fluid, and use it to drive a piston or turbine. The alternatives, such as solar and wind, will only come on as oil heads into it's retirement party.

6. Related to point #1; if the current trend to transfer jobs over to automation continues, it's hard to see how there will be people driving to their (former) employment, and for that matter afford things that are (of course) produced by petroleum;

7. For what it's worth, I think that the 2008 crises hasn't gone away despite massive money printing efforts. They're trying to keep demand artificially supported with easy money and the incurring of unrepayable debt, which is terrifyingly criminal as it is simply passed unto the very young and the unborn. How can we expect them to pay our debts and then go out and buy fuel, when their jobs have been outsourced and/or automated? The whole thing has gone far over the top and is way beyond the point of no return. As mentioned previously, I see no significant industrial (i.e inventive) development or for that matter, improvements in demographics that will turn this around.

So at the end of all this, I think that baring hyperinflation the prospects for oil over $50-$55 for the next couple of years is looking fairly dim. Hence, that claimed 8-9.2 GB UR is not going to be realized in real production.

Dennis Coyne , 06/17/2016 at 7:38 am
Hi Mike,

There are many that are very pessimistic about the economy. Unfunded liabilities are not the same as debt, so I don't count those.

The retirement age can be raised and eventually the US will follow the rest of the advanced economies and reform the health care system to control costs.

(First we need to exhaust all other possibilities, before doing the right thing.)

Note that my scenario has oil prices rising very gradually. Also oil prices were over $100/b for 3 years with the World economy continuing to grow.

All that money printing has had very little positive or negative effect, mostly the velocity of money has slowed because most of that money is just sitting in bank accounts. Inflation is not high, if it were the Fed would simply reduce the money supply.

A debt of $19 trillion for an economy with an income of $18.2 trillion is not really a problem. A debt free consumer with a good credit rating and a 20% down payment in savings can typically borrow up to 3 times their income for a mortgage. The US government debt is at 104% based on fred data.

According to BIS for the US total non-financial sector debt is about 250% of GDP.

For all counties that report to the Bank for International Settlements (BIS) the total non-financial sector debt to GDP was 235% in the fourth quarter of 2015 (most recent data point) at market weighted exchange rates. (220% using PPP weighted exchange rates.) See

https://www.bis.org/statistics/totcredit.htm

Hickory , 06/17/2016 at 9:40 am
Dennis- you say that

"Unfunded liabilities are not the same as debt, so I don't count those."

I'd like to point out that both of these things act as a dead weight on a chain that must be carried by those who are working and generating income, as we go forward in time.

And income, or savings derived from it, must then be used to service the debt and pay for the liabilities/entitlements.

This is money that then cannot go towards buying fuel, or funding innovation and transition- things like EV, solar, etc.

A dead weight is a dead weight.

And going into a crisis you have a better chance of surviving it if you are lean and mean, not if you have this ugly balance sheet. It doesn't help that most of the worlds countries are in poor shape in this regard as well.

I have to agree with Mike Sutherlands view that these factors could very well decrease the URR significantly.

On the other hand, the other 7 Billion people of the world will keep increasing their demand and, along with depletion, this will leave less cheap oil for the USA to import. This will tend to raise the price here.

These are conflicting forces, and I think we will end up with a scenario with both lower URR of these domestic sources, and yet also higher prices. Good for solar/wind I suppose- if we can afford it.

Very tough on the average family and local businesses.

Nick G , 06/17/2016 at 10:33 am
Hickory,

Social Security is a big part of the "unfunded liabilities". That's a transfer. It's not available to the working person who gets it deducted from their paycheck, but it's available to the retiree who gets it. And, the retiree is more likely to spend it.

So, SS doesn't slow down the economy, it helps it.

Hickory , 06/17/2016 at 1:26 pm
Nick,

Transferring money from a working family to a retired one doesn't help the economy, it helps the elderly person, and hurts the working family (in the here and now).
Its overall pretty neutral, but it surely takes resources that could go towards energy infrastructure and development and shifts it towards the pharma industry, for example.
I'm not trying to make a value judgement here, just pointing out that in the scope of our prior discussion, this is fairly neutral and doesn't change the conclusions.

Nick G , 06/17/2016 at 3:20 pm
Currently, all we know how to do is burn fuel, heat a working fluid, and use it to drive a piston or turbine. The alternatives, such as solar and wind, will only come on as oil heads into it's retirement party.

Well, no, we know a lot more than that. We have superior alternatives for most of the uses for oil, and adequate ones for the rest.

The single biggest use is personal transportation, and EVs will work fine for that. We don't need turbines for that, electric motors will do just fine.

And…we don't need wind or solar to get rid off oil. Not at the moment. All we need is electricity, and we have plenty of that, right now.

Cracker , 06/16/2016 at 11:50 am
Mike S and Dennis,

Hilarious! Coynecopian really fits.

My humble apologies, Dennis, just too funny, and appropriate. I do appreciate your charts, but I wish you would occasionally plug is some other values to provide a contrast to your ever-optimistic assumptions. My reaction to your chart was the same as Ron's.

Make your chart reflect lower and fluctuating oil prices, instead of coynecopian, steady-state high prices and it might make more sense. Add a factor for debt restraining new wells at higher oil prices (see SS's comment about $75 without debt below). Your assumptions just seem too optimistic to be realistic. Maybe I just underestimate BAU's ability to fund stupidity and you don't:-)

It will be interesting to see what really happens.

Thanks to all for your comments. Always educational.

Jim

[Jun 19, 2016] The Disgraceful Episode Of Lysenkoism Brings Us Global Warming Theory

Apr 28, 2013 | Forbes

Trofim Lysenko became the Director of the Soviet Lenin All-Union Academy of Agricultural Sciences in the 1930s under Josef Stalin. He was an advocate of the theory that characteristics acquired by plants during their lives could be inherited by later generations stemming from the changed plants, which sharply contradicted Mendelian genetics. As a result, Lysenko became a fierce critic of theories of the then rising modern genetics.

Under Lysenko's view, for example, grafting branches of one plant species onto another could create new plant hybrids that would be perpetuated by the descendants of the grafted plant. Or modifications made to seeds would be inherited by later generations stemming from that seed. Or that plucking all the leaves off of a plant would cause descendants of the plant to be leafless.

Lysenkoism was "politically correct" (a term invented by Lenin) because it was consistent with certain broader Marxist doctrines. Marxists wanted to believe that heredity had a limited role even among humans, and that human characteristics changed by living under socialism would be inherited by subsequent generations of humans. Thus would be created the selfless new Soviet man.

Also Lysenko himself arose from a peasant background and developed his theories from practical applications rather than controlled scientific experiments. This fit the Marxist propaganda of the time holding that brilliant industrial innovations would arise from the working classes through practical applications. Lysenko's theories also seemed to address in a quick and timely manner the widespread Soviet famines of the time arising from the forced collectivization of agriculture, rather than the much slower changes from scientific experimentation and genetic heredity.

Lysenko was consequently embraced and lionized by the Soviet media propaganda machine. Scientists who promoted Lysenkoism with faked data and destroyed counterevidence were favored with government funding and official recognition and award. Lysenko and his followers and media acolytes responded to critics by impugning their motives, and denouncing them as bourgeois fascists resisting the advance of the new modern Marxism.

The V.I. Lenin Academy of Agricultural Sciences announced on August 7, 1948 that thenceforth Lysenkoism would be taught as the only correct theory. All Soviet scientists were required to denounce any work that contradicted Lysenkoism. Ultimately, Soviet geneticists resisting Lysenkoism were imprisoned and even executed. Lysenkoism was abandoned for the correct modern science of Mendelian genetics only as late as 1964.

The Theory of Man Caused Catastrophic Global Warming

This same practice of Lysenkoism has long been under way in western science in regard to the politically correct theory of man caused, catastrophic, global warming. That theory serves the political fashions of the day in promoting vastly increased government powers and control over the private economy. Advocates of the theory are lionized in the dominant Democrat party controlled media in the U.S., and in leftist controlled media in other countries. Critics of the theory are denounced as "deniers," and even still bourgeois fascists, with their motives impugned.

Those who promote the theory are favored with billions from government grants and neo-Marxist environmentalist largesse, and official recognition and award. Faked and tampered data and evidence has arisen in favor of the politically correct theory. Is not man-caused, catastrophic global warming now the only theory allowed to be taught in schools in the West?

Those in positions of scientific authority in the West who have collaborated with this new Lysenkoism because they felt they must be politically correct, and/or because of the money, publicity, and recognition to be gained, have disgraced themselves and the integrity of their institutions, organizations and publications.

The United States Global Change Research Program (USGCRP) is supposed to represent the best science of the U.S. government on the issue of global warming. In January, the USGCRP released the draft of its Third National Climate Assessment Report. The first duty of the government scientists at the USGCRP is to produce a complete picture of the science of the issue of global warming, which is what the taxpayers are paying them for. But it didn't take long for the Cato Institute to do the job of the USGCRP with a devastating line by line rebuttal, The Missing Science from the Draft National Assessment on Climate Change, Center for the Study of Science, Cato Institute, Washington, DC, 2012, by Patrick J. Michaels, Paul C. Knappenberger, Robert C. Balling, Mary J. Hutzler & Craig D. Idso.

Check it out for yourself if you dare. Both publications are written to be accessible by intelligent laymen. See which one involves climate science and which one involves political science.

All the climate alarmist organizations simply rubber stamp the irregular Assessment Reports of the United Nations Intergovernmental Panel on Climate Change (IPCC). None of them do any original science on the theory of anthropogenic catastrophic global warming. But the United Nations is a proven, corrupt, power grabbing institution. The science of their Assessment Reports has been thoroughly rebutted by the hundreds of pages of science in Climate Change Reconsidered, and Climate Change Reconsidered: 2011 Interim Report, both written by dozens of scientists with the Nongovernmental International Panel on Climate Change, and published by the Heartland Institute, the international headquarters of the skeptics of the theory of anthropogenic catastrophic global warming.

Again, check it out for yourself. You don't have to read every one of the well over a thousand pages of careful science in both volumes to see at least that there is a real scientific debate.

The editors of the once respected journals of Science and Nature have abandoned science for Lysenkoism on this issue as well. They have become as political as the editorial pages of the New York Times. They claim their published papers are peer reviewed, but those reviews are conducted on the friends and family plan when it comes to the subject of anthropogenic catastrophic global warming. There can be no peer review at all when authors refuse to release their data and computer codes for public inspection and attempted reconstruction of reported results by other scientists. They have been forced to backtrack on recent publications relying on novel, dubious, statistical methodologies not in accordance with established methodologies of complex statistical analysis.

Formerly respected scientific bodies in the U.S. and other western countries have been commandeered by political activist Lysenkoists seizing leadership positions. They then proceed with politically correct pronouncements on the issue of anthropogenic catastrophic global warming heedless of the views of the membership of actual scientists. Most of what you see and hear from alarmists regarding global warming can be most accurately described as play acting on the meme of settled science. The above noted publications demonstrate beyond the point where reasonable people can differ that no actual scientist can claim that the science of anthropogenic catastrophic global warming has been settled or that there is a settled "consensus" that rules out reasonable dissent.

Indeed, 31,487 U.S. scientists (including 9,000 Ph.Ds) with degrees in atmospheric Earth sciences, physics, chemistry, biology and computer science have signed a statement that reads: "There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gases is causing, or will in the foreseeable future, cause catastrophic heating of the Earth's atmosphere and disruption of the Earth's climate." See here. Some consensus.

Real science, of course, is not a matter of "consensus," but of reason, with skepticism at its core.

The Decline and Fall of the Theory of Anthropogenic Catastrophic Global Warming

The alarmist claims of the UN's IPCC are ultimately based not on scientific observations, but on unvalidated climate models and their projections of future global temperatures on assumptions of continued increases in carbon dioxide emissions resulting from the burning and use of fossil fuels. The alarmists are increasingly in panic because the past projections of the models are increasingly divergent from the accumulating actual temperature records. Those models are not real science, but made up science. And no way we are abandoning the industrial revolution as the Sierra Club is hoping based on model fantasies and fairy tales.

The Economist magazine, formerly in lockstep with the Lysenkoists, shocked them with a skeptical article in March that began with this lede:

"OVER the past 15 years air temperatures at the Earth's surface have been flat while greenhouse-gas emissions have continued to soar. The world added roughly 100 billion tonnes of carbon to the atmosphere between 2000 and 2010. That is about a quarter of all the CO2 put there by humanity since 1750. And yet, as James Hansen, the head of NASA's Goddard Institute for Space Studies, observes, 'the five-year mean global temperature has been flat for a decade. . . .'"

Reality is not complying with the alarmism of the UN's global warming models, just as it refused to do for Trofim Lysenko. Remember all that hysteria about melting polar ice caps and the disappearing ice floes for the cute polar bears? As of the end of March, the Antarctic ice cap was nearly one fourth larger than the average for the last 30 years. The Arctic ice cap had grown back to within 3% of its 30 year average. (The formerly declining Arctic ice was due to cyclically warm ocean currents). Global sea ice was greater than in March, 1980, more than 30 years ago, and also above the average since then.

Remember the alarm about the rising sea level? Yeah, that has been rising, as it has been since the end of the last ice age more than 10,000 years ago. Just exactly as it has been, at the same rate. And anyone you know that has been scared by this alarmist propaganda has been successfully played by whatever media the fool has been relying on.

Murderous recent winters in Europe are killing as well belief in alarmist global warming on the continent. University of Oklahoma Professor and geophysicist David Deming reported in a recent column,

"The United Kingdom had the coldest March weather in 50 years, and there were more than a thousand record low temperatures in the United States. The Irish meteorological office reported that March "temperatures were the lowest on record nearly everywhere." Spring snowfall in Europe was also high. In Moscow, the snow depth was the highest in 134 years of observation. In Kiev, authorities had to bring in military vehicles to clear snow from the streets."

In the Northern Hemisphere, Deming adds, "Snow cover last December was the greatest since satellite monitoring began in 1966." That reflects similarly bitter cold winters in North America as well. Despite claims by global warming Lysenkoists that soon children "won't know what snow is," on February 6, 2010, a blizzard covered the northeastern U.S. with 20 to 35 inches of snow. Three days later another 10 to 20 inches were added.

These developments should have been expected from known indisputable facts. Carbon dioxide is a natural substance essential to the survival of all life on the planet. It is effectively oxygen for plants, and without plants there would be no food for animals to survive. Because of the increased atmospheric CO2 agricultural output is already increasing.

CO2 is also a trace gas in the atmosphere, representing only 0.038% of the total atmosphere, up only 0.008% since 1945. That tiny proportion of the atmosphere is supposed to produce catastrophic global warming that will end all life on the planet? The historical proxy record shows CO2 concentrations in the distant history of the earth much, much greater than today. Yet life survived, and flourished. Moreover, the basic science of global warming is that the temperature increasing effect of increased CO2 concentrations declines as those concentrations increase. So stop worrying and enjoy the agricultural abundance in your grocery store.

A tip off regarding reality should have been apparent from the dodgy propaganda involved in changing the labeling of the problem from "global warming" to "climate change." Of course, Earth has been experiencing climate change since the first sunrise on the planet. We are not going to abandon the workers' paradise of capitalism because climate change will continue.

Another tip off should have been the effective admission by global warming alarmists that they cannot defend their position in public debate. The day the theory of anthropogenic catastrophic global warming died can be dated from the time that one leading alarmist was foolish enough to debate James Taylor of the Heartland Institute, a video of which can be found on the Heartland website at Heartland.org.

Still another tip off should have been the practice of the alarmist new Lysenkoists to respond to dissenting science with ad hominem attacks. That apparently reflects poor public schooling that never taught that an ad hominem attack is a logical fallacy, as Aristotle taught more than 2,000 years ago. My how western science has fallen.

The basic science shows that global temperatures are just not very sensitive to CO2 itself. Even alarmists will concede that. Where they get their alarm is with the modeling assumption that the CO2 induced temperature increases will produce positive feedbacks that will sharply increase the overall resulting warming. The better recent science indicates, however, that instead of positive feedbacks, the naturally stable Earth would enjoy negative feedbacks restoring long term equilibrium and stability to global temperatures.

Then there is the man caused, global warming, fingerprint that the U.N.'s models all showed would result in a hot spot of particularly large temperature increases in the upper troposphere above the tropics. But the incorruptible, satellite monitored, atmospheric temperature record shows no hot spot. That is further confirmed by modern weather balloons measuring atmospheric temperatures above the tropics. No hotspot. No fingerprint. No catastrophic, man caused global warming. QED.

The revival of western science requires that the new Lysenkoism be discredited. That is going to require quite some work, given the extent of the infestation.

I am Director of Entitlement and Budget Policy for the Heartland Institute, Senior Advisor for Entitlement Reform and Budget Policy at the National Tax Limitation Foundation, General Counsel for the American Civil Rights Union, and Senior Fellow at the National Center for Policy Analysis. I served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush. I am a graduate of Harvard College and Harvard Law School, and the author most recently of America's Ticking Bankruptcy Bomb (New York: Harper Collins, 2011). I write about new, cutting edge ideas regarding public policy, particularly concerning economics.

The author is a Forbes contributor. The opinions expressed are those of the writer.

[Jun 19, 2016] US economy just 'doesn't want to grow up' BofA's Contopoulos

www.cnbc.com

The United States, along with the European Central Bank and Bank of Japan , are stuck overseeing 'Peter Pan' economies that refuse to wean themselves off cheap money policies.

... ... ...

"A Peter Pan economy is an economy that just doesn't want to grow up," Michael Contopoulos recently told " Futures Now ." The central bankers of the U.S., Japan and Europe "are like three nannies managing the economies. And, that's what they're supposed to be doing.

[Jun 19, 2016] The Bakken was down 69,420 barrels per day in April

Notable quotes:
"... Producing Wells ..."
"... March 13,052 ..."
"... April 13,050 (preliminary)(all-time high was Oct 2015 13,190) ..."
"... March 56 drilling and 4 seismic ..."
"... April 66 drilling and 0 seismic ..."
"... May 42 drilling and 0 seismic (all time high was 370 in 10/2012) ..."
"... ND Sweet Crude Price ..."
"... March $26.62/barrel ..."
"... April $30.75/barrel ..."
"... May $33.74/barrel ..."
"... Today $38.25/barrel (all-time high was $136.29 7/3/2008) ..."
"... Today's rig count is 28 (lowest since July 2005 when it was 27)(all-time high was 218 on 5/29/2012) ..."
"... The drilling rig count fell 3 from March to April, 2 from April to May, and increased 1 from May to today. Operators remain committed to running the minimum number of rigs while oil prices remain below $60/barrel WTI. The number of well completions fell from 66 (final) in March to 41 (preliminary) in April. Oil price weakness is the primary reason for the slow-down and is now anticipated to last into at least the third quarter of this year and perhaps into the second quarter of 2017. There was 1 significant precipitation event, 15 days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F. ..."
"... Over 98% of drilling now targets the Bakken and Three Forks formations. ..."
"... Estimated wells waiting on completion services is 892, down 28 from the end of March to the end of April. Estimated inactive well count is 1,590, up 67 from the end of March to the end of April. ..."
"... Crude oil take away capacity remains dependent on rail deliveries to coastal refineries to remain adequate. ..."
"... Low oil price associated with lifting of sanctions on Iran and a weaker economy in China are expected to lead to continued low drilling rig count. Utilization rate for rigs capable of 20,000+ feet is 25-30% and for shallow well rigs (7,000 feet or less) 15-20%. ..."
"... Drilling permit activity increased from March to April then fell back in May as operators continue to position themselves for low 2016 price scenarios. Operators have a significant permit inventory should a return to the drilling price point occur in the next 12 months. ..."
peakoilbarrel.com

by Ron Patterson Posted on 06/15/2016 The Bakken and North Dakota production data is out. Big surprise. The Bakken was down 69,420 barrels per day in April while all North Dakota was down 70,414 bpd.

Largest drop ever in North Dakota production. The Bakken is now under one million barrels per day.

Bakken Change

This gives you some idea of the erratic nature of North Dakota production. But as you can see, the decline is accelerating.

The EIA's Drilling Productivity Report gives past Bakken production numbers, which includes the Montana portion, and future estimates for the next couple of months. The average difference between North Dakota production and total Bakken production has been about 27,500 bpd. However for April the difference is almost 63,000 barrels. So it looks like for once the DPR estimate is way too conservative. The DPR estimate is through July while the north Dakota data is only through April.

In April Bakken barrels per day per well fell by 7 to 94, North Dakota bpd per well fell by 5 to 82.

From the Director's Cut

Producing Wells

March 13,052
April 13,050 (preliminary)(all-time high was Oct 2015 13,190)

Permitting

March 56 drilling and 4 seismic
April 66 drilling and 0 seismic
May 42 drilling and 0 seismic (all time high was 370 in 10/2012)

ND Sweet Crude Price

March $26.62/barrel
April $30.75/barrel
May $33.74/barrel
Today $38.25/barrel (all-time high was $136.29 7/3/2008)

Rig Count

March 32
April 29
May 27
Today's rig count is 28 (lowest since July 2005 when it was 27)(all-time high was 218 on 5/29/2012)

Comments:

The drilling rig count fell 3 from March to April, 2 from April to May, and increased 1 from May to today. Operators remain committed to running the minimum number of rigs while oil prices remain below $60/barrel WTI. The number of well completions fell from 66 (final) in March to 41 (preliminary) in April. Oil price weakness is the primary reason for the slow-down and is now anticipated to last into at least the third quarter of this year and perhaps into the second quarter of 2017. There was 1 significant precipitation event, 15 days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F.
Over 98% of drilling now targets the Bakken and Three Forks formations.

Estimated wells waiting on completion services is 892, down 28 from the end of March to the end of April. Estimated inactive well count is 1,590, up 67 from the end of March to the end of April.
Crude oil take away capacity remains dependent on rail deliveries to coastal refineries to remain adequate.
Low oil price associated with lifting of sanctions on Iran and a weaker economy in China are expected to lead to continued low drilling rig count. Utilization rate for rigs capable of 20,000+ feet is 25-30% and for shallow well rigs (7,000 feet or less) 15-20%.
Drilling permit activity increased from March to April then fell back in May as operators continue to position themselves for low 2016 price scenarios. Operators have a significant permit inventory should a return to the drilling price point occur in the next 12 months.

... ... ...

New wells added in the Bakken/Three Forks are assumed to drop to 25 new wells in April and remain at that level until Jan 2017. Last month about 64 new wells were added.

[Jun 19, 2016] Global oil industry's retrenchment tops a staggering one trillion

www.cnbc.com
by John W. Schoen

Depletion never sleeps, so I wonder how much cocaine analysts at IHS snorted before cutting cut their price forecast,

The collapse in crude prices is turning into a trillion-dollar retrenchment for the global oil industry.


That's the latest tally from energy researchers at Wood MacKenzie, which tracks capital investment by oil and gas producers around the world.

... ... ...

Lower prices and spending cuts have naturally trimmed worldwide production. Wood Mackenzie forecasts that global crude oil output thorough the rest of the decade will be some seven billion barrels lower than was expected before the oil price drop, or about 3 percent lower this year and 4 percent lower next year.

... ... ...

In a separate report, analysts at IHS recently cut their price forecast, noting that U.S. production has held up better than expected despite the drilling cuts. They also cited continued high OPEC production and weakening growth in global demand.


IHS expects U.S. oil and gas producers to continue to cut investment by another 35 percent this year, with those cuts bottoming later this year. But any recovery will be "long and drawn out," they said, with spending by the end of the decade still 28 percent below the 2014 peak.

[Jun 18, 2016] The current cycle lasts roughly two times longer than the cycle in 2008/9

Notable quotes:
"... The current cycle lasts roughly two times longer than the cycle in 2008/9. As the oil price recovers much slower this time (green line in below chart), drilling (red line in below chart) responds accordingly much slower. ..."
"... This article suggests in a review of the main US producers a reduction of natgas (-40 Tcf) and oil (-4 bn barrels) reserves at a gigantic proportion. Reserve replacement stands at up to – 200% which results in a significant reserve reduction and reserve life stands at a little bit more than 10 years for gas and oil. As companies have reduced drilling furthermore this year, more reserve and production reductions are likely in 2016. ..."
"... The good news is that in mid 2017 oil prices are very likely to increase substantially. So, if investors are patient, this patience will be rewarded. ..."
peakoilbarrel.com

Heinrich Leopold , 06/15/2016 at 12:39 pm

FED total US production data for May are out, basically confirming the trend for Bakken.

The current cycle lasts roughly two times longer than the cycle in 2008/9. As the oil price recovers much slower this time (green line in below chart), drilling (red line in below chart) responds accordingly much slower. As a consequence the production decline is much steeper than in previous cycles (blue line in below chart) and stands currently at – 8% year over year and -2% per month. Given the slow drilling and price recovery, US total production will very likely not recover until mid 2017. At a monthly decline rate of – 2%, my goal of -30% US total oil production decline looks more and more realistic.

My view is also supported by a recent article:

http://www.naturalgasintel.com/articles/106753-staggering-us-ep-reserve-revisions-in-2015-eliminated-40-tcf-41-billion-bbl

This article suggests in a review of the main US producers a reduction of natgas (-40 Tcf) and oil (-4 bn barrels) reserves at a gigantic proportion. Reserve replacement stands at up to – 200% which results in a significant reserve reduction and reserve life stands at a little bit more than 10 years for gas and oil. As companies have reduced drilling furthermore this year, more reserve and production reductions are likely in 2016.

The good news is that in mid 2017 oil prices are very likely to increase substantially. So, if investors are patient, this patience will be rewarded.

SRSrocco , 06/15/2016 at 2:31 pm
Heinrich Leopold,

Nice chart. However, here is my forecast for U.S. oil production:

2020 = Down 30-40% from PEAK
2025 = Down 70-75% from PEAK

steve

Heinrich Leopold , 06/15/2016 at 11:25 pm
steve,

Thanks for your reply.

US oil production in 2020 to 2025 will depend in my opinion on how much oil prices will recover in 2017/2018. Lower US production in 2016/2017 will result in a lower US dollar and speed up oil demand. This is a catapult effect which can drive oil prices and the USD to extreme levels in 2018.

This could increase US production again in a very short time. However, it will very likely not reach the level of last year.

AlexS , 06/16/2016 at 5:44 am
" This is a catapult effect which can drive oil prices and the USD to extreme levels in 2018″

Oil prices and the USD tend to be negatively correlated.
Oil prices at extremely high levels in 2018 are incompatible with the rise of the USD.

Heinrich Leopold , 06/16/2016 at 10:19 am
AlexS,

I did not say the dollar will be extremely high. Of course I did mean the dollar will be extremely low in about two years.

[Jun 18, 2016] Endgame for US shale

Notable quotes:
"... So, if one says such well's EUR is 750,000 BO, shouldn't they also be required to disclose that will take around 75 years to achieve? What is the PV10 of oil produced in years 20-75? ..."
"... Wonder how much reserves will have to be written down? This is such a joke. ..."
"... Dennis. You note that you guess the 10K estimates differ from the investor presentation estimates. Seems like if companies would provide us with the reserves reports themselves, it might help see if your guess is correct? Also seems claiming roughly double is a little too much to take care of with a mere disclaimer? I wish the SEC letters to companies requesting them to restate reserves would be made public immediately. We are just now finding out about many of these, after the companies have already BK. ..."
"... We do a regular chart showing gains in average cumulative production month by month benchmarked to 2010. It clearly shows steeper decline rates for wells with higher early production. 2013 wells were 10% or more above 2010's cumulative production in month 6 – by month 33 they are just 2.5% above 2010's cumulative production. 2015 wells were 31% above 2010's cumulative production in month 7 – they are now in month 17 and are 20% above, and falling. ..."
peakoilbarrel.com
shallow sand , 06/15/2016 at 11:17 pm
John Keller:

Just been looking over Enno's site

One example of steep decline.

I have a feeling from looking at Enno's data that 2015 wells will decline more quickly yet.

So more interesting information from April, 2016:

Wells with first production year average bopd:

2007: 20.5 bopd.
2008: 34.21
2009: 38.68
2010: 43.57
2011: 51.77

Wonder if the SEC should take this data and analyze company EUR projections?

It seems 2008 had strong wells. After 100 months, average well has produced 260,210 BO per Enno's data.

So, if one says such well's EUR is 750,000 BO, shouldn't they also be required to disclose that will take around 75 years to achieve? What is the PV10 of oil produced in years 20-75?

Wonder how much reserves will have to be written down? This is such a joke.

Dennis Coyne , 06/16/2016 at 7:29 am
Hi Shallow sand,

My guess is that the reserves in the 10K are very different from investor presentations where there are disclaimers that say, essentially, that they stretch the truth.

So a "typical well" in an investor presentation is not an "average well".

In North Dakota at the end of 2014 proved reserves were 6 Gb in the Bakken Three/Forks and 1.2 Gb of C+C had been produced to that date.

A very conservative URR projection would be 7.2 Gb, if probable reserves were included (another 3 Gb would be a conservative estimate), then URR might be as high as 10.2 Gb if oil prices rise to 2014 levels or higher in the future.

I use a well profile with 400 kb of C+C output, 266.6 kb are produced in the first 5 years, output falls to 10 b/d in 19.4 years. I also assume the sweet spots get saturated with wells by June 2018 and EUR starts to decrease. The rate of decrease in new well EUR gradually increases over 12 months reaching a maximum rate of 7% per year by June 2019, by June 2025 the new well EUR falls to 250 kb (166 kb at 5 years), and to 127 kb by August 2036 when wells are no longer added to the ND Bakken/TF (at a total of 36,250 wells). Thus model assumes oil prices rise to $154/b in 2016$ and remain at that level until 2033.

shallow sand , 06/16/2016 at 9:00 am
Dennis. You note that you guess the 10K estimates differ from the investor presentation estimates. Seems like if companies would provide us with the reserves reports themselves, it might help see if your guess is correct? Also seems claiming roughly double is a little too much to take care of with a mere disclaimer? I wish the SEC letters to companies requesting them to restate reserves would be made public immediately. We are just now finding out about many of these, after the companies have already BK.
Dennis Coyne , 06/17/2016 at 6:06 am
Hi Shallow Sands,

Aren't the reserves reported in the 10K checked by outside accounting firms? You are no doubt correct that some reserves will no longer be profitable to developed at current oil price levels.

I imagine this will change when oil prices increase.

The oil is there, but it requires higher prices.

Eventually the debt will be paid, or companies will go under.

gwalke , 06/17/2016 at 5:48 am
Hi shallow,

We do a regular chart showing gains in average cumulative production month by month benchmarked to 2010. It clearly shows steeper decline rates for wells with higher early production. 2013 wells were 10% or more above 2010's cumulative production in month 6 – by month 33 they are just 2.5% above 2010's cumulative production. 2015 wells were 31% above 2010's cumulative production in month 7 – they are now in month 17 and are 20% above, and falling.

I'd post the image but it refuses to work.

[Jun 18, 2016] It seems that we will see further declines in LTO output in the next several months due to delayed impact of low oil prices.

Notable quotes:
"... Rig count has also bottomed, but significant increase in drilling activity is unlikely until WTI reaches $60. ..."
"... Nonetheless, it seems that we will see further declines in LTO output in the next several months due to delayed impact of low oil prices. ..."
peakoilbarrel.com

AlexS, 06/15/2016 at 12:11 pm

I remember Lynn Helms predicting a sharp drop in production for March.
In fact, in March Bakken output declined only 8 kb/d, but was down 69 kb/d in April.

April number for ND Bakken is down 6.6% vs. March, 10.9% vs. April 2015 and 15.2% (176 kb/d) from the peak reached in December 2014.
Average output for January-April 2016 is 1044 kb/d, down 6.9% year-on-year.

As CLR's Harold Hamm and several other E&P CEOs are saying, $50 is a trigger for increased completion of the DUCs. Rig count has also bottomed, but significant increase in drilling activity is unlikely until WTI reaches $60.

Nonetheless, it seems that we will see further declines in LTO output in the next several months due to delayed impact of low oil prices.

[Jun 18, 2016] Global oil industry's retrenchment tops a staggering one trillion

www.cnbc.com

The collapse in crude prices is turning into a trillion-dollar retrenchment for the global oil industry.


That's the latest tally from energy researchers at Wood MacKenzie, which tracks capital investment by oil and gas producers around the world.

[Jun 18, 2016] What Goldman does with its forecasts should be illegal!

Notable quotes:
"... "The recent recovery in prices risks that non-Opec production declines less than we expect, especially in the US." ..."
Cblockquote%3Ehttp:
islandboy, 06/15/2016 at 2:34 pm
Goldman Sachs declares end to oil price recovery

Goldman Sachs has dismissed what's been described by some analysts as a recovery in the global oil markets.

The uber bear said it expects a "modest" deficit in the coming months due to current prices, before the market returns to surplus early next year.

Rising demand, falling US oil output as well as supply disruptions have helped the black stuff recover from below $28 per barrel in January to just under $50 today.

Read more: North Sea to warn MPs subsea sector risks losing world-leading position

But Damien Courvalin, an analyst at Goldman Sachs, said that this was, at best, the first signs of a turnaround.

"Canadian production is finally restarting, production from other Organisation of Petroleum Exporting Countries' members continues to beat our expectations."

Courvalin continued: "The recent recovery in prices risks that non-Opec production declines less than we expect, especially in the US."

What is it they say? A sucker is born every day? This should be illegal!

texas tea, 06/15/2016 at 3:16 pm

as to GS public statements relating to oil and gold, the money has been by taking the other side of the trade, I have little doubt that what their trading desk does.

[Jun 18, 2016] Whats Really Happening to the Humanities Under Neoliberalism?

What's happening is the same what happed with them in the USSR. Only Party (in case of neoliberalism replace the Party with "financial oligarchy") sanctioned content can be taught and the stress is on neoclassical economics as this is one of the foundation of neoliberalism (along with liberalism, Ann Rand, and similar psudo theories).
Notable quotes:
"... Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use ..."
www.truth-out.org

The number of college students majoring in English, according to some contested reports, has plummeted. In general, the humanities are taking a back seat to more "pragmatic" majors in college. Students, apparently, are thinking more about jobs than about general learning. Given this trend, should schools be scaling back on the humanities?

... ... ...

Some might say that since top universities like MIT have decided to focus on management, business analytics, finance and mathematical economics (or trading), secondary schools should follow suit. It would be a mistake, however, for secondary schools to cave to this argument and scale back on the humanities.

... ... ...

The Chronicle of Higher Education has noted the reason for this prevailing wisdom about the myth regarding the humanities plummet: It's largely due to mainstream publications. For instance, in 2013, The New York Times featured an essay titled "The Decline and Fall of the English Major." In 2009, The American Scholar featured an essay, titled "The Decline of the English Department." Authors cited spirals in the humanities. Even The Chronicle's Mark Bauerlein wrote, "English has gone from a major unit in the university to a minor one."

The piece goes on to explain how, back in 2010, MSNBC anchor Tamron Hall said, "Students wanting to take up majors like art history and literature are now making the jump to more-specialized fields like business and economics, and it's getting worse." This comment was juxtaposed with a chart that indicated a spiral. Prominent New York Times journalist David Brooks also jumped on the bandwagon when he remarked, "The humanities [have] turned from an inward to an outward focus." The "sky is falling" myth then led to serious underfunding, becoming a self-fulfilling prophecy.

Bérubé argues that mainstream accounts of the decline of the humanities in undergraduate education are "factually, stubbornly, determinedly wrong." He says there was a plummet, but it was between 1970 and 1980.

In reality, English isn't dying; it's just that at one time, it was unprecedentedly popular. English majors rose from 17,000 to 64,000 over a span of 30 years, from 1940 to 1970, and then declined to 34,000 by the 1990s. This does not mark a death to the humanities.

Are fields like art history and literature really "elite, niche-market affairs that will render students unemployable," as Bérubé argues? Are students abandoning the humanities because they are "callow, market-driven careerists?" No, this is not true. Bérubé states that "undergraduate enrollment in the humanities have held steady since 1980 (in relation to all degree holders, and in relation to the larger age cohort), and undergraduate enrollments in the arts and humanities combined are almost precisely where they were in 1970."

... ... ...

Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use by preservation seeking administrations and teachers.

... .,. ...

Dan Falcone has a master's degree in modern US history from LaSalle University in Philadelphia and currently teaches secondary education. He has interviewed Noam Chomsky, Edward Herman, Richard Falk, William Blum, Medea Benjamin and Lawrence Davidson. He resides in Washington, DC.

[Jun 18, 2016] North Dakota down over 70K bpd in April

Notable quotes:
"... The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on. If wells deplete, generally, new ones must be drilled to replacement them, ..."
"... The reality is that the only way this production comes back (or stops decreasing) is the application of massive amounts of new capital, the redeployment of tens of thousands of service workers laid off during the crash, and billions of dollars of equipment. This is even more true internationally. As large mature projects deplete, of which there are thousands in decline, new large projects must be developed to replace them. ..."
"... The typical approach would be to shut in low rate high water cut producers, and any other wells that have been experiencing high costs. When prices rise and wells have been shut in for months they will have built up some pressure. And some of them will come in at 100 % water due to self injection. It can be a real crap shoot. ..."
Peak Oil Barrel
Brad B , 06/15/2016 at 12:23 pm
Just a note to correct a popular misconception; production DID NOT drop in Bakken due to SHUT IN wells. The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on. If wells deplete, generally, new ones must be drilled to replacement them, implying radically different time, service intensity and capital requirements. The popular press is ate up with the concept that when prices rise, all this production will magically reappear, once again swamping the market with excess supplies.

The reality is that the only way this production comes back (or stops decreasing) is the application of massive amounts of new capital, the redeployment of tens of thousands of service workers laid off during the crash, and billions of dollars of equipment. This is even more true internationally. As large mature projects deplete, of which there are thousands in decline, new large projects must be developed to replace them.

Ves , 06/15/2016 at 12:54 pm
"The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on."

Brad,
Yes. So essentially oil price does not matter at this point at the end of the game for these marginal and high depletion plays. Price could go even higher but drop in production will just continue.

Fernando Leanme , 06/16/2016 at 7:38 am
I think it's a mix. I've been in these circumstances before. The typical approach would be to shut in low rate high water cut producers, and any other wells that have been experiencing high costs. When prices rise and wells have been shut in for months they will have built up some pressure. And some of them will come in at 100 % water due to self injection. It can be a real crap shoot.

[Jun 18, 2016] Greenspan Shocked Disbelief

Greenspan phony "Shocked disbelief" reminds classic "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca. Compare with "... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said. ..."
Notable quotes:
"... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," ..."
"... Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. ..."
"... Private greed, not public good, caused this catastrophe: "The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities. ..."
"... But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime." ..."
"... The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar. ..."
"... There are no free markets in America, any more than there is free lunch. ..."
"... So it wasn't the military-industrial complex that did us in after all . . . ..."
"... It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. ..."
"... If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly. ..."
"... it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. ..."
"... Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. ..."
"... Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse? ..."
"... Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway. ..."
"... Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues ..."
"... What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored? ..."
"... "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca ..."
October 24, 2008 | truthout.org

by: Robert Borosage, The Campaign for America's Future

On October 23, former Federal Reserve Chairman Alan Greenspan testified before a House Oversight and Government Reform Committee hearing on the role of federal regulators in the current financial crisis.

It marks the end of an era. Alan Greenspan, the maestro, defender of the market fundamentalist faith, champion of deregulation, celebrator of exotic banking inventions, admitted Thursday in a hearing before Rep. Henry Waxman's House Committee and Oversight and Government Reform that he got it wrong.

"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said.

As to the fantasy that banks could regulate themselves, that markets self-correct, that modern risk management enforced prudence: "The whole intellectual edifice, however, collapsed in the summer of last year."

Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. Greenspan dismissed that goofiness in response to a question from one of its right-wing purveyors, Rep. Todd Platts, R-Pa., noting that subprime loans grew to a crisis only as the unregulated shadow financial system securitized mortgages, marketed them across the world, and pressured brokers to lower standards to generate a larger supply to meet the demand. Private greed, not public good, caused this catastrophe:

"The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities.

But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime."

Now hung over from their bender, the banks could be depended upon to remain sober "for the indefinite future." Or until taxpayers' money relieves their headaches, and they are free to party once more.


IN ACCORDANCE WITH TITLE 17 U.S.C. SECTION 107, THIS MATERIAL IS DISTRIBUTED WITHOUT PROFIT TO THOSE WHO HAVE EXPRESSED A PRIOR INTEREST IN RECEIVING THE INCLUDED INFORMATION FOR RESEARCH AND EDUCATIONAL PURPOSES. TRUTHOUT HAS NO AFFILIATION WHATSOEVER WITH THE ORIGINATOR OF THIS ARTICLE NOR IS TRUTHOUT ENDORSED OR SPONSORED BY THE ORIGINATOR.

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Comments

This is a moderated forum. It may take a little while for comments to go live.

The only Guantanamo that the

Sun, 10/26/2008 - 23:37 - Captain America (not verified)

The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar.

What they did dwarfs the damage caused to this country by 911, (no disrespect for the many innocents who died). However, here, every single citizen is a victim of fraud and corruption on a scale that was heretofore inconceivable. Greenspan, Bush and now Paulson have done more than Bin Laden and his hordes could do in a 100 years.

By the way, if you protest YOU wind up locked up for being un-American. What happened America ?

There are no free markets in

Sun, 10/26/2008 - 19:27 - pink elephant (not verified)

There are no free markets in America, any more than there is free lunch. The game was always fixed and Greenspan was the ultimate shill for the fixers. The past thirty years have been an orgy of greed with common sense shoved aside for the sake of uncommon expediency. Americans became infatuated by arcane formulas and dense incomprehensible mathematics to the point that they forget simple arithmetic. America wake up it was only a dream, and a bad one at that.

So it wasn't the

Sun, 10/26/2008 - 19:07 - Anonymous (not verified)

So it wasn't the military-industrial complex that did us in after all . . .

It's clear from comments on

Sun, 10/26/2008 - 15:40 - afrothethics (not verified)

It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. The truth is as plain as the nose on your face: Greenspan, the Federal Reserve, the investment banks, the Bush administration and several members of Congress unobtrusively acted to consciously and knowingly to rob the national treasury for the sake of capitalism's sacred cow: capital accumulation on behalf of the nation's political and economic elite. If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly.

We have heard statements

Sun, 10/26/2008 - 10:11 - DJK (not verified)

We have heard statements like "the mathematical models used for knowing the behavior of derivatives based on subprime mortgages were too difficult to understand", etc. But it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. And this is why they turned a blind eye to many of the rating agencies giving many of these instruments AAA ratings. I am sure that a real investigation will reveal numerous instances of fraudulent activity in conjunction with this debacle. Those perpetrators must be identified and brought to justice. While this will not fix our current problem, it hopefully should serve as a deterrent to those who would in the future attempt to again engage in such activities.

Well here you have it a

Sun, 10/26/2008 - 08:13 - Robert Iserbyt (not verified)

Well here you have it a confessional lie from the biggest fraud perpetrator in the history of American finance Why the markets ever listened to this criminal in the first place is evidence that our entire nation should be required to take a full year of real unfettered economics just in case they don't understand what is going on now. All the pundits on MSNBC and all the talking heads should be removed from the airwaves. The Bailout what will that do? the answer lies before you.

Sounds like the "maestro"

Sun, 10/26/2008 - 02:02 - Anonymous (not verified)

Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. Come on, do you really think we are all so stupid to buy into the story that you couldn't predict a melt down knowing that those writing the subprimes held no responsibility for their actions? That's like giving a "get out of jail card" to someone who just created a felony! Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse?

I'm a former real estate

Sun, 10/26/2008 - 00:24 - two7five7one (not verified)

I'm a former real estate broker and my son is a mortgage broker. From about 2004 through the beginning of this "greatest financial crisis since '29", we frequently talked on the phone about the disaster which would ensue when the real estate value appreciation stopped, and people were no longer fueling the economy with money borrowed against their equity, and the sub-prime loan fiasco would end. We knew it would be disastrous, and both of us were astonished that neither the FED nor congress was willing to say or do anything about it. Anyone who has witnessed over the years the cycle of boom/bust/boom/bust in the real estate market knew that after eleven years of unprecedented "boom" -- '96 through '2007 -- the "bust" would be like an earthquake. Paulson and Greenspan and their ilk now denying that they suspected this is just is just their lying to protect the GOP which was benefitting from the booming economy. They should both end up in prison, with all of the GOP members of congress who have had their hands in the cash register.

Dance clown, dance. First

Sat, 10/25/2008 - 23:48 - mysterioso (not verified)

Dance clown, dance. First you were against the FED until you became head of the FED. Then you were for trickle down economics and letting the "system" regulate itself until you saw the inevitable destruction it caused. Dance clown, dance. You should be the first one sent to prison under the "Un-American activities act". The arrogance of your testimony before the committee was appalling. You honestly couldn't believe you were wrong !!!

Shocked disbelief, my foot.

Sat, 10/25/2008 - 23:35 - slw (not verified)

Shocked disbelief, my foot. Many of us predicted EXACTLY this outcome.

This is like telling the Fox

Sat, 10/25/2008 - 22:43 - topview (not verified)

This is like telling the Fox to watch the Hens and then walking away and trusting him to do the right thing. Government has to return to regulation and see that there is no hanky, Banky going on anymore. Monopolies have to be busted up, like the Communication industry's, the Drug industries and any other Corporations that control to much of the way the Country operates. No more Outsourcing any Government duties.

Shocked Disbelief is a ploy.

Sat, 10/25/2008 - 22:00 - radline9 (not verified)

Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway.

Where's Ayn Rand when you

Sat, 10/25/2008 - 20:53 - anglohistorian (not verified)

Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues. We can spend trillions on war and corporate bailouts, but we can't have a single payer health system? We can't rebuild our infrastructure? Say it again- give me a break!

What about the 1994 Act of

Sat, 10/25/2008 - 20:41 - Jtmonrow (not verified)

What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored?

"...I am shocked - shocked,

Sat, 10/25/2008 - 20:29 - Anonymous (not verified)

"...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca

This would be the same

Sat, 10/25/2008 - 19:50 - dtroutma (not verified)

This would be the same "shocked disbelief" expressed by Willie Sutton's mother?

shouldn't Greenspan give his

Sat, 10/25/2008 - 18:06 - Anonymous (not verified)

shouldn't Greenspan give his salary and bonus back to taxpayers?

[Jun 15, 2016] Production of oil increasing while exports stayed flat due to groqwing demand in oil importing coutries, which like the USA and Canada which are also oil producting countries

It appears that world oil exports has increased very little, if any, since 2005.
Notable quotes:
"... I can only guess that oil production in importing nations, which are generally capitalist countries, is more sensitive to oil price changes than exporters (whose systems of govt allows for maintaining production regardless of price). ..."
"... The largest increase in production, by far, came from the US which is an importing nation. And huge declines came from Norway, the UK and Mexico, all exporting nations. That is largely why we see production increasing while exports stayed flat. ..."
"... Exporting nations, the UK and Indonesia, became net importers during that period. There may have been others, I haven't looked that closely. ..."
"... I find Mexico to be an interesting case. I read somewhere that 30% of federal tax revenue is received from taxation of Pemex. Mexico exports are down 21% in 2015 compared to 2014. I'm not sure what is going to happen to Mexico when it becomes a net oil importer. ..."
peakoilbarrel.com
Ron,

This mostly means that importers have simply increased production right?

Gains in U.S. and Canadian production reduced imports, and allowed countries like China and India to import more even though net export availability remained flat.

I can only guess that oil production in importing nations, which are generally capitalist countries, is more sensitive to oil price changes than exporters (whose systems of govt allows for maintaining production regardless of price).

The next 12 months may see increasing prices even if net exports do not decline simply due to increased export demand from countries like the U.S. that flip from a multi-year decline in import demand.

Ron Patterson , 06/14/2016 at 5:11 pm
Yes, exactly. The largest increase in production, by far, came from the US which is an importing nation. And huge declines came from Norway, the UK and Mexico, all exporting nations. That is largely why we see production increasing while exports stayed flat.

Exporting nations, the UK and Indonesia, became net importers during that period. There may have been others, I haven't looked that closely.

Survivalist , 06/14/2016 at 5:35 pm
Hi Ron, according to the Energy Export Data Browser UK is an importer.

I find Mexico to be an interesting case. I read somewhere that 30% of federal tax revenue is received from taxation of Pemex. Mexico exports are down 21% in 2015 compared to 2014. I'm not sure what is going to happen to Mexico when it becomes a net oil importer. Whenever it is it won't be good. Perhaps Mexico will join their neighbors to the south (El Salvador, Guatemala and Honduras) in being failed states.

[Jun 15, 2016] Oil Industry to Cut $1 Trillion in Spending After Price Fall

Notable quotes:
"... Worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent, or $740 billion, lower than anticipated before prices plunged in 2014, with the deepest cuts in the U.S., Wood Mackenzie said in a statement Wednesday. A further $300 billion will be eliminated from exploration spending. Global production this year will be 3 percent lower than previously forecast, the consultant said. ..."
Bloomberg

The oil and gas industry will cut $1 trillion from planned spending on exploration and development because of the slump in prices, leading to slower growth in production, according to consultant Wood Mackenzie Ltd.

Worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent, or $740 billion, lower than anticipated before prices plunged in 2014, with the deepest cuts in the U.S., Wood Mackenzie said in a statement Wednesday. A further $300 billion will be eliminated from exploration spending. Global production this year will be 3 percent lower than previously forecast, the consultant said.

[Jun 11, 2016] Oil market is back in balance

peakoilbarrel.com
AlexS , 06/09/2016 at 5:39 am
John Kemp's new article in Reuters:

Oil market is back in balance
http://www.reuters.com/article/us-oil-global-kemp-idUSKCN0YU04Z

[Jun 08, 2016] Current cuts in capex will be felt 2-3 years from now.

peakoilbarrel.com
Eulenspiegel, 06/08/2016 at 3:07 am
The best thing here is:
Capex is slashed worldwide, hidden capex from 3rd world states I think even more since they are simply broke with the current oil prices.

And the production continues to increase – why this Capex frenzy the last years, if you can increase production simply on no money spending, rust and decline being no problem anymore.

Something smells fishy.

AlexS, 06/08/2016 at 3:35 am
Production is increasing in some countries or remains stable in others because of " this Capex frenzy the last years".

Current cuts in capex will be felt 2-3 years from now.

[Jun 08, 2016] Peak Oil Review - June 6 2016

Notable quotes:
"... The major factor pushing prices higher last week was the unplanned production outages in Alberta, Nigeria, and Venezuela. Although the fires are now well past the Alberta tar sands, it will be several weeks before the 1 million b/d of production that had to be shut down during the firestorms can return fully to production. In the meantime, the Alberta outage and the one in Nigeria have likely removed much or all of the production surplus that has overhung the markets and for now, there may be a rough balance of supply and demand. ..."
"... In recent years, these companies have seen a string of massive cost overruns such as in the Caspian and Bering Seas, and disasters such is Deepwater Horizon in the Gulf of Mexico. Last year the oil industry discovered only 12 billion barrels of new reserves, about a third of annual global consumption. ..."
"... Nearly all of the major oil companies reduced capital spending to less than half of what it as been in recent years. With decreasing oil production, supply is likely to start falling short of demand later this year, if it has not already, due to the various outages. ..."
www.resilience.org

1. Oil and the Global Economy

Oil prices hovered just below the $50 level last week with Brent closing just above $50 on Thursday before settling at $49.46 on Friday. As has been the case lately, there were numerous factors pressuring oil prices one way or another. The week opened with much enthusiasm that OPEC would agree to a production freeze, but this went away when the OPEC meeting failed to take any action. The major factor pushing prices higher last week was the unplanned production outages in Alberta, Nigeria, and Venezuela. Although the fires are now well past the Alberta tar sands, it will be several weeks before the 1 million b/d of production that had to be shut down during the firestorms can return fully to production. In the meantime, the Alberta outage and the one in Nigeria have likely removed much or all of the production surplus that has overhung the markets and for now, there may be a rough balance of supply and demand.

While production in Alberta is returning to normal, the political/economic situations in Nigeria and Venezuela continue to get worse with the likelihood that both countries will soon see a significant drop in oil production – possibly enough to offset surplus production elsewhere. There is no end in sight to the problems in either of these countries, and their situations seemed destined to get worse before they get better.

The US crude inventory saw a small drawdown last week, which is not surprising considering the outages in Alberta over the past month. The EIA continues to estimate that US production is still dropping. However, the US oil rig count climbed by nine units last week as drillers responded to oil prices approaching $50 a barrel coupled with a buyers' market for oil production services and oilfield workers. The meager increase in US employment last week has some worried about the outlook for US economic growth in the near future. At a minimum, the widely expected interest rate increase by the Federal Reserve is likely to go on hold for a while.

The problems of the oil industry continue, however, with US bank earnings down 2 percent in the first quarter largely due to delinquent loans to the oil industry where bankruptcies continue to be announced. Observers are starting to talk about the inevitable decline of the large international oil companies. These companies are finding it increasingly difficult to find new reserves to exploit and those that are available are mostly in deepwater projects where the costs of extraction are well above the current selling price of oil. In recent years, these companies have seen a string of massive cost overruns such as in the Caspian and Bering Seas, and disasters such is Deepwater Horizon in the Gulf of Mexico. Last year the oil industry discovered only 12 billion barrels of new reserves, about a third of annual global consumption.

Nearly all of the major oil companies reduced capital spending to less than half of what it as been in recent years. With decreasing oil production, supply is likely to start falling short of demand later this year, if it has not already, due to the various outages. Global crude reserves are still at record levels, so daily shortages of even a million b/d or two are unlikely to send prices into three figures right away.

By 2020, give or take a bit, prices are likely to start climbing into new territory as shortages become larger, and rationing-by-price again comes into effect.

[Jun 07, 2016] How close is the end of shale industry in the USA

Notable quotes:
"... My initial advice would be to see what the CEO, upper management, etc., are being paid and then compare that to the company's total production. Look at G & A per barrel, or per BOE. ..."
"... The problem with a lot of public companies in the E & P space, both shale and non-shale, is that they are ran primarily for management, and not for the shareholders. ..."
"... I see a lot of relatively small E & P's that are cash flow negative that are borrowing to pay the upper management big salaries. ..."
"... So, if you see a public company producing under 10K BOEPD, where top management are being paid in the hundreds of thousands of dollars (or millions) in salary, my general advice is to stay away. ..."
"... Most private conventional E & P in onshore lower 48 have been paying little to no distributions since the end of 2014. Management is taking just enough salary to pay their personal expenses, if that even. Things are still very dire, although there is considerable improvement since Q1 2016. ..."
"... Please note my comment regarding the revised OCC (Office of the Comptroller of the Currency) guidelines. I see there are not comments on this. Further, the MSM has totally missed the boat on this. ..."
"... Shallow, I wish to acknowledge your OCC findings and all of your analysis regarding the economics and finances of shale oil development. Your value here on this blog is immense. I agree with you, by the way, that the ramifications of these new banking requirements will potentially end any additional lending to the shale industry…until it find ways to worm around these new standards. Which we should expect, of course. I mean, after all, the lower the price of oil goes, the lower shale oil breakeven costs go, the higher EUR's go. Its a miracle ! ..."
"... Shale oil proponents have the unique ability to disassociate themselves completely from the business of producing hydrocarbons and, forgive me, are delusional about economics, profit, and where the money comes from to drill wells. They don't get it. They don't want to get it. ..."
"... For financing reasons, environmental and social reasons, for reasons of enormous, unmanageable debt, the shale oil industry in America will never again be what it was, not even close. ..."
"... Initially, OCC was going to include ALL junior debt. The OCC apparently found out (I wonder how they did not already know?) that including ALL junior debt would result in massive borrowing base cuts, and force many more E & P's into either BK, or into mezzanine financing (high interest/onerous terms). To quote Raw Energy, cause a mini-meltdown akin to the mortgage backed security financial crisis. ..."
"... I think this issue is critical here, where many readers and posters are closely following US production. Absent the ability to issue equity, or obtain mezzanine financing, I'd say shale is going to have to drill out of cash flow. Further, shale is now taking a big risk by not setting aside any money to pay down junior debt. So, what little cash flow there is may be needed to pay down junior debt, not drill new wells. ..."
"... I don't think we would want the LTO industry to be what it once was, a loss making enterprise (for most companies), there were a few well run companies such as EOG that were profitable before the crash in oil prices. ..."
"... I expect by 2020 (at least) oil prices will be at least $80/b (in 2016$). ..."
"... The EIA's AEO 2016 reference case has WTI at $71/b in 2020 and $97/b in 2030 (both in 2015$). ..."
peakoilbarrel.com
shallow sand , 06/06/2016 at 12:02 am
AlexS

I just learned of the revised OCC guidelines for US upstream E & P.

They were released in late March, 2016.

I am embarrassed I am just learning of them. However, I am not aware of the US business media reporting on them either.

I believe these new guidelines directly resulted in the numerous May, 2016 BK, and effectively end much of the shale revolution. No longer will banks be permitted to ignore a company's junior debt.

Haynes and Boone has a good summary dated 3/28/16.

Lightsout , 06/06/2016 at 8:56 am
Reposted from up thread

Hi Shallow

Years ago I bought shares in a London listed company with producing assets in Russia. In 2012, Maxim Barskiy made a strategic investment in the Company. Shortly after doing so, he took over as CEO. They sold the field in Russia and bought leases in the Texas pan handle with active and non active stripper wells.
There have been various acquisitions and mergers, some wells are currently shut in but they are still drilling vertical wells ( but only 4 this year). The interesting point is that they are now fracturing these new wells in the old conventional fields.

I just wondered if you knew of any other operator that was re completing stripper well by fracturing them.

http://matrapetroleum.com/m/

shallow sand , 06/06/2016 at 12:24 pm
Lightsout.

I am not aware of the company you linked.

My initial advice would be to see what the CEO, upper management, etc., are being paid and then compare that to the company's total production. Look at G & A per barrel, or per BOE.

The problem with a lot of public companies in the E & P space, both shale and non-shale, is that they are ran primarily for management, and not for the shareholders.

I see a lot of relatively small E & P's that are cash flow negative that are borrowing to pay the upper management big salaries.

So, if you see a public company producing under 10K BOEPD, where top management are being paid in the hundreds of thousands of dollars (or millions) in salary, my general advice is to stay away.

Most private conventional E & P in onshore lower 48 have been paying little to no distributions since the end of 2014. Management is taking just enough salary to pay their personal expenses, if that even. Things are still very dire, although there is considerable improvement since Q1 2016.

Please note my comment regarding the revised OCC (Office of the Comptroller of the Currency) guidelines. I see there are not comments on this. Further, the MSM has totally missed the boat on this.

I think many more public E & P's will be forced into bankruptcy due to the tighter guidelines (which IMO should have been in place from the beginning – we would not be where we are today if they had been).

Again, Haynes and Boone has a client letter dated 3/28/16 which can easily be found by Google search. Maybe someone here can provide a link.

It is a big deal, IMO. Anyone who is trying to forecast US oil production needs to look at this issue. I think it is going to choke off the alleged, "Return of rigs at $50 WTI".

The only companies able to do much now are those Permian guys who raised cash through diluting the equity. I'd say the Bakken, EFS and Niobrara focused companies will not be able to do much absent the NYMEX strip jumping about $25+ as that is what will be needed, minimum, to get PV10 high enough for them to qualify for more reserve backed funds.

Mike , 06/06/2016 at 1:08 pm
Shallow, I wish to acknowledge your OCC findings and all of your analysis regarding the economics and finances of shale oil development. Your value here on this blog is immense. I agree with you, by the way, that the ramifications of these new banking requirements will potentially end any additional lending to the shale industry…until it find ways to worm around these new standards. Which we should expect, of course. I mean, after all, the lower the price of oil goes, the lower shale oil breakeven costs go, the higher EUR's go. Its a miracle !

This OCC matter will be of little interest to most people, however. Shale oil proponents have the unique ability to disassociate themselves completely from the business of producing hydrocarbons and, forgive me, are delusional about economics, profit, and where the money comes from to drill wells. They don't get it. They don't want to get it.

For financing reasons, environmental and social reasons, for reasons of enormous, unmanageable debt, the shale oil industry in America will never again be what it was, not even close.

Mike

shallow sand , 06/06/2016 at 1:40 pm
Mike: Thanks!

From what I have read, there are presently/will be a lot of energy loans examined under these new guidelines between now and the next borrowing base redeterminations coming this fall.

Initially, OCC was going to include ALL junior debt. The OCC apparently found out (I wonder how they did not already know?) that including ALL junior debt would result in massive borrowing base cuts, and force many more E & P's into either BK, or into mezzanine financing (high interest/onerous terms). To quote Raw Energy, cause a mini-meltdown akin to the mortgage backed security financial crisis.

So, for now OCC is only including any junior debt which COMES DUE prior to the first lien bank lines. Most of the bank lines are multi-year, so there could be a lot of junior debt which does come due prior.

Further, OCC is counting not just the drawn, but also the undrawn amounts on the bank lines. So, if Shale R Us brags they have a $2 billion line of credit, but only have $100 million drawn, there is still a problem as the whole line is included in the calculation. It actually becomes a detriment to have a large, undrawn, bank line.

Further, banks are now also being directed to use the NYMEX forward strip, rather than their own price decks. This is a problem, as I suspect many of the banks have been assuming much higher prices in 2018 and beyond, than is indicated by the futures strip.

Raw Energy, on Seeking Alpha, is much better versed on these matters than I am. Hopefully he will write an article there about the implications of the new OCC guidelines.

I think this issue is critical here, where many readers and posters are closely following US production. Absent the ability to issue equity, or obtain mezzanine financing, I'd say shale is going to have to drill out of cash flow. Further, shale is now taking a big risk by not setting aside any money to pay down junior debt. So, what little cash flow there is may be needed to pay down junior debt, not drill new wells.

AlexS , 06/06/2016 at 2:27 pm
Shallow sand,

Can you post the link to the OCC document?

Thanks!

Enno Peters , 06/06/2016 at 3:50 pm
here

Dennis Coyne , 06/07/2016 at 8:04 am
Hi Mike,

Consider the possibility that many LTO companies go bankrupt, that wipes out most of the debt. Oil output decreases in the US. What would you expect might happen to World oil prices?

I don't think we would want the LTO industry to be what it once was, a loss making enterprise (for most companies), there were a few well run companies such as EOG that were profitable before the crash in oil prices.

Based on EIA data on proved reserves at the end of 2014 there is still some LTO oil that can be produced. Higher oil prices ($80/b or more) will be needed for this oil to be produced profitably.

I expect by 2020 (at least) oil prices will be at least $80/b (in 2016$).

What is your expectation for future oil prices? Do you believe oil prices will be less than $70/b (2016$) in 2020?

Current futures strip is $56/b in Dec 2020, but futures do not predict future prices very well that far forward.

The EIA's AEO 2016 reference case has WTI at $71/b in 2020 and $97/b in 2030 (both in 2015$).

[Jun 07, 2016] Short-Term Energy Outlook June 2016

IEA is probably OK for use as historical data source, but any use of their forecasts is a sign of gross negligence, based on their track record. Their 'waterfall" style forecasts are just propaganda.
My feeling is that 80 dollars bbl are needs to increase production. Before that it will might be continue to decline. Saudis are a spent bullet. So chances of them coming into play again to suppress oil price are close to zero.
If so, the key question we need to answer is when oil will hit this magic price point.
U.S. Energy Information Administration (EIA)

U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015. Production is forecast to average 8.6 million b/d in 2016 and 8.2 million b/d in 2017, both unchanged from last month's STEO. EIA estimates that crude oil production for May 2016 averaged 8.7 million b/d, which is more than 0.2 million b/d below the April 2016 level, and approximately 1 million b/d below the 9.7 million b/d level reached in April 2015.

[Jun 06, 2016] To me Saudis recent posturing is about setting up excuses for post peak declines, without having to admit they dont have as much oil as theyve stated.

peakoilbarrel.com

George Kaplan , 06/04/2016 at 7:36 am
Here is an interesting post by Jean Laherrere on GoM and overall US production, apologies if it has been posted before.

http://aspofrance.org/files/JL_2016USoilultimate.pdf

Dennis – you asked at some previous post about discovered, undeveloped reserves. Overall I'd go with Jean Laherrere, he knows more about these things than most and definitely understands the politics behind some government forecasts, looks at things globally and probably still has access to some of the more confidential figures. My less informed view is as follows.

So far about 1350 billion barrels C&C have been produced. Current production is about 28 billion per year excluding extra heavy oil. Recently Rystad indicated mature filed decline rates at 5% per year, if that held through the complete depletion (unlikely but all I have to go on) that would mean another 540 billion, at 3% average decline it would be 900 billion. For 2200 billion total that could mean (say) another 100 billion to find, 50 billion which is developed but offline (in Libya, neutral zone, Abqaiq maybe, Syria etc.) and 150 billion discovered but undeveloped. If there is that amount (or more for higher URR or higher overall decline rates, maybe up to 900 billion by your figures) it must be in OPEC Middle East countries or Russia. A lot of the older undeveloped, mostly heavy oil, reserves elsewhere have been developed recently (e.g. in the North Sea) in response to high oil prices. Similarly deep sea in GoM and offshore Africa and Brazil (see the paper above – there isn't much left in the GoM and discoveries have dropped to near zero per year). The larger reserves that I know about are complicated and expensive to develop (e.g. Brazil pre salt, Kazakhstan high sulphur) or have some political issues (offshore Nigeria). I don't think these would total more than 50 billion though.

If the Middle East OPEC countries have significant known undeveloped reserves they don't act like it – i.e. why develop tight gas fields, or explore deep sea pre-salt, or double or more the number of exploration and in fill wells, or get IOCs to come in and redeveloped existing fields.

Somewhere I read that Saudi assume 75% recovery and develop their fields to deplete 2% of the field per year during plateau phase. That sounds about right for a URR of 250 billion (i.e. assuming they report total recoverable resources, not what is left) but would mean pretty much everything they have is on production with nothing much known but undeveloped. 75% may be high but I think probably achievable for huge onshore fields (not so much for heavy oil offshore like Safinayah; Abqaiq, which may be exhausted by now; or the neutral zone, which sounds like it needs steam flood to recover much more). To me Saudi's recent posturing is about setting up excuses for post peak declines, without having to admit they don't have as much oil as they've stated. Also Kuwait's initiative as described in terms of new exploration and debottlenecking existing facilities, not developing known fields.

IHS, Rystad and Wood Mackenzie probably know more, but their past performance at predicting anything makes you wonder (Rystad seems better than the others though).

For extra heavy oil I think the recovery factors are probably overstated and based on the early, and easiest to exploit developments. However this probably doesn't make much difference as the limiting factor is the surface production facilities, and will be for the next few decades. CAPP predict Canadian oil sands rising to about 3 to 4 mmbpd by 2030, but even this presupposes another two pipelines approved and built and a sustained, high oil price (i.e. above $100, and probably more if natural gas prices start to rise at the same time).

In Venezuela exploiting the extra heavy oil would be difficult even for a stable society. It needs a large amount of oil wells in areas without that great infrastructure (I think around 5 to 10,000 per mmbpd), additional pipelines (I guess piggybacked so the Naphtha diluent can be recycled), and a bunch of new upgraders – one for every new 200 to 300,000 bpd. The existing upgraders aren't in great shape, a lot of the skilled workforce from these actually left for USA when the industry was nationalised. There is a significant shrinkage (I think 15 to 30%) in the upgraders as they take out carbon to make the oil lighter (compared to hydrocrackers used in places in Canada which add hydrogen from natural gas). They produce highly toxic waste streams of coke, sulphur and heavy metals, which need to be safely stored for ever after (I wonder how that's going there at the moment). The three phases of the Carabobo development, which was supposed to get to 1.2 mmbpd by 2018 don't seem to be going anywhere – oil is still being trucked I think, the new upgraders are on permanent hold, the well services companies are pulling out, and the government can't afford to buy the diluent naphtha. That is a recipe for prolonged decline, not growth to 8 mmbpd, which was once proposed.

Ecuador has ultra heavy oil, discovered and undeveloped, of about 6 billion – but no-one has figured out how to develop it commercially. The upgrader required has really been proved technically. They were working with Ivanhoe on something that looked to me a bit like a CTL system, but Ivanhoe went bust so I don't think this is going anywhere. Overall anything more than about 5 or 6 mmbpd from extra heavy sources would be stretch over the next 20 to 30 years.

[Jun 06, 2016] The US prediction is for a gentle decline of about 15 percent overall to 2021, but if a lot of the smaller producers get shut down in the near term it might be a bit steeper.

peakoilbarrel.com

George Kaplan ,

06/04/2016 at 7:18 am
The recent UK production benefited mostly from Golden Eagle ramp up through 2015. Buzzard is by far the largest single producer at about 180,000 bpd. It is due for an extended turn around this year. It also more than doubled it's water cut over the last six months, so could be coming off plateau quickly (ramp up was through 2007). It will be a contest between it's decline against new production from Clair Ridge and Glen Lyon and 3 or 4 smaller projects over the next 2 years (about 300,000 bpd combined plateaus).

The government prediction is for a gentle decline of about 15% overall to 2021, but if a lot of the smaller producers get shut down in the near term it might be a bit steeper.

[Jun 06, 2016] Trends in oil supply and demand

econbrowser.com

Econbrowser

  1. Procyon Mukherjee May 29, 2016 at 8:09 pm

    The article should also account for the speculation that impacted prices as institutional investors, producers, consumers and the speculators embarked on hedging oil prices that led to some bizarre consequences. As these hedges expire, the futures market is yet again getting into new windows of opportunity for all of these four constituencies. Large consumers of oil like the airlines industry and the producers of oil hold the two opposite poles of the hedges, while the other two act as long term and short term investors in the game. This would have completed the otherwise deeply data driven article to its fruition.

    Reply
    1. John May 31, 2016 at 1:28 am

      Do not disappoint our Chicago-school supply/demand friend James !
      (factually you are right of course, the oil market is heavily rigged.)

      Reply
      1. Steven Kopits June 1, 2016 at 7:13 am

        The interesting question is, what is driving the oil price at any given moment in time? It's not always the same thing. From July last year until, say, a few weeks ago, spot was driving futures prices. Ordinarily, the medium term futures prices (say, 18-24 months out) should represent some notion of marginal cost, with oil prices tending to return to that level over time. The spot price would in turn be determined by the futures prices less the cost of storage and capital, in the case of onshore storage, perhaps $0.50 per month. Therefore, if we thought $65 was marginal cost, then the spot price should be about $12 less, so figure $50-55.

        However, this notion disintegrated last summer, because investors lost confidence in both marginal cost and the time necessary to achieve it (ie, how long it would take the market to clear). Further, supply-demand data was so unreliable (and remains so today), that market participants could not determine the actual state of play. How big was that oil supply glut? To this day, we're really not sure.

        Without data and confidence in the clearing interval. investors turned instead to the spot price for guidance. We can know with some certainty what oil traded for today. The futures prices thus became the spot price plus the cost of storage.

        But what determines the spot price in a glut? This price may be highly susceptible to news and sentiment. And I think it was, particularly sentiment related to China. Now, if you're using a fundamentals (ie, marginal cost-based) model, then the last year has been all but unintelligible. So the model you use has to change with prevailing market conditions. Prices are not always determined by the same driver, or to quote Scott Sumner, never reason from a price change.

        Reply
  2. Erik Poole May 30, 2016 at 5:49 pm

    I wonder to what extent did ethanol and other biofuels made up for flat oil production in the 2005-2013 period.

    I seem to recall an opinion from Francisco Blanch at Bank of America Merrill Lynch that oil would have to reach US$60/bbl before new wells were drilled in the USA. I tend to think that volatility will keep capital backers over in the cautious camp even if oil does temporarily lurch north of US$60/bbl.

    These recent supply interruptions, including the wild fire in the Fort McMurray area of northern Alberta were all unanticipated for the most part. Except Nigeria and Venezuela perhaps. Those two poster children for the Resource Curse were expected to fall apart at some point though getting the exact timing is always tough.

    Northern Alberta heavy oil production will recover quickly. Nigeria and Venezuela?

    Incidentally, oil consumption is growing again in Mexico. See John Kemp's article at reuters.com.

    Reply
  3. Jeffrey J. Brown May 31, 2016 at 6:53 am

    The EIA tracks two type of net US oil imports: (1) Net crude oil imports, which is the net volume of crude oil that US refiners import in order to supply their refineries with the mix of Crude + Condensate (C+C) that they need and (2) Net total liquids imports, which are basically gross exports less gross imports, inclusive of total liquids production, including biofuels and refinery gains.

    Both EIA metrics showed increasing US annual net oil imports from 2002 to 2005, and declining US annual net oil imports from 2005 to 2015. However, US net imports have shown a large year over year increase. Based on year to date weekly supply data through 5/20/16, US net crude oil imports increased from 6.8 million bpd last year to 7.4 million bpd this year (versus same time period last year). Net total liquids imports increased from 5.2 million bpd last year to 5.6 million bpd this year.

    Note that this is the first time since the 2002 to 2005 time period that both the US and the Chindia region are showing increasing net oil imports. Circa 2002 to 2005, annual Brent crude oil prices approximately doubled from $25 in 2002 to $55 in 2005, a rate of increase of 26%/year. It's important to remember that what I call Global Net Exports of oil (GNE*) increased strongly from 2002 to 2005, but the available data suggest that GNE have been below the 2005 rate for probably 10 straight years, through 2015.

    So, the last time that the Chindia region + the US showed increasing net oil imports, annual Brent crude oil prices increased at 26%/year from 2002 to 2005–versus an increasing supply of GNE.

    But this time the Chindia region + the US are showing increasing net oil imports–versus an almost certain ongoing post-2005 decline in GNE.

    And again, when analysts discuss "Crude oil," they generally mean Crude + Condensate (C+C), and in my opinion, we are probably in the early stages of a very sharp decline in actual global crude oil production (45 API Gravity and lower crude oil)–my premise being that only trillions of dollars in post-2005 upstream global capex has heretofore staved off a collapse in actual global crude oil production, and that very upstream global capex is now collapsing (see link below).

    Incidentally, gross US C+C exports have declined year over year, down from 0.5 million bpd last year to 0.4 million bpd this year (year to date data comparisons), even as US export restrictions were eliminated. I suspect that US shale players have borrowed billions of dollars in order to build up a huge surplus of a commodity for which there is little incremental demand, to-wit, condensate.

    *Combined net exports from (2005) Top 33 net exporters (total petroleum liquids + other liquids production less total liquids consumption, EIA)

    Estimates Of Post-2005 US, OPEC & Global Condensate Production Vs. Actual Crude Oil Production
    http://oilpro.com/post/22276/estimates-post-2005-us-opec-global-condensate-production-vs-actua

    Net Exports Summary:
    http://peakoilbarrel.com/texas-oil-production-still-on-a-plateau/#comment-561436

    Reply
    1. Jeffrey J. Brown June 1, 2016 at 6:49 am

      Re: Rates of decline in US Oil & Gas Production

      In regard to the volumetric decline from existing wells, US operators are facing two challenges, even apart from the economic issues: (1) As production increases, the volumetric decline from existing wells increases (at a given decline rate) and (2) as the percentage of total production that comes from high decline rate tight/shale plays increases, the rate of decline from existing wells increases.

      For example, US Crude + Condensate (C+C) production averaged 5.0 million bpd in 2008 and 9.4 million bpd in 2015.

      If we assume a 5%/year rate of decline from existing wells in 2008, US operators only needed to add 0.25 million bpd of new production in 2009 to offset declines from existing wells.

      If we assume a 15%/year rate of decline from existing wells in 2015, US operators would need to add 1.4 million bpd of new production in 2016 to offset declines from existing wells, which is clearly not happening.

      The math is similar for both oil and gas, although the rate of decline from existing wells appears to be higher for gas. I frequently cite a Citi Research estimate that the rate of decline in existing US gas production is about 24%/year. As support of this estimate, Louisiana's net rate of decline in marketed gas production from 2012 to 2014 was 20%/year (this was the net rate of decline, after new wells were added; of course, the decline followed the collapse in the Haynesville Shale Gas Play rig count).

      In any case, a reasonable estimate is that the US currently needs about 17 BCF/day of new gas production per year, just to offset declines from existing wells. 17 BCF/day matches or exceeds the 2014 dry gas production rate of every country in the world, except for the US & Russia (BP data).

      Of course, with continued low rig counts, hyperbolic decline rates will moderate the rates of declines in existing production, but for both oil and gas US operators are facing much higher volumetric rates of decline in existing production–versus what they faced prior to the tight/shale boom.

      Following are the monthly marketed gas production numbers for Louisiana for March (from both conventional and tight/shale gas), for 2012 to 2016, along with the year over year net exponential rates of decline in monthly production (of course gross rates of decline from existing wells would be even higher):

      3/12: 252 BCF/month

      3/13: 219 (14%/year)

      3/14: 173 (24%/year)

      3/15: 167 (4%/year)

      3/16: 154 (8%/year)

      Link to a graph showing total Haynesville Shale Gas Play gas production (presumably from both Texas and Louisiana) versus the rig count:

      http://i1095.photobucket.com/albums/i475/westexas/Haynesville-rig-count-and-natural-gas-production1_zpsb1n95tiz.jpg

      Reply
  4. Jeffrey J. Brown May 31, 2016 at 7:01 am

    Re: Saudi Arabia

    I have a lengthy comment on Saudi Arabia, which can be found at the bottom of the article at the following link:

    http://oilpro.com/announcement/3418/saudi-series-part-5-junction-road

    I estimate that Saudi net exports (total petroleum liquids + other liquids, EIA) fell from 9.5 million bpd in 2005 to around 8.7 million bpd in 2015, and since all available data indicate that Saudi net exports were below their 2005 net export rate of 9.5 million bpd in the intervening years, Saudi net exports have almost certainly been below their 2005 rate for 10 straight years.

    And:

    Saudi Aramco CEO (January, 2015): "The math will tell you that our exports are gradually declining."

    http://www.reuters.com/article/2015/01/27/saudi-oil-aramco-idUSL6N0V60Z320150127

    And:

    A Note on what I call "Cowboy Integration"

    In order to get a rough estimate of post-export peak CNE (Cumulative Net Exports) I take the rate of decline in what I call the ECI Ratio (ratio of production to consumption) and then estimate when the ECI Ratio would approach 1.0 and thus zero net exports (production = consumption). I then multiply annual net exports at peak times the number of years to estimated zero net exports, divided by 2 (to get the area under a triangle), and I then subtract annual net exports at peak, to get estimated post-export peak CNE.

    The Six Country Case History consists of the major net exporters that hit or approached zero net oil exports from 1980 to 2010 (excluding China)–Indonesia, UK, Egypt, Argentina, Malaysia, Vietnam. Their combined net exports peaked in 1995, but their combined production did not fall below the 1995 rate until the year 2000.

    Based on the 1995 to 2002 rate of decline in the Six Country ECI Ratio, they would approach zero net exports around the year 2015. Their annual net exports in 1995 were 1.0 Gb/year. So, estimated post-1995 CNE, based on the initial seven year (1995 to 2002) rate of decline in the ECI Ratio, were as follows:

    (1.0 Gb/year X 20 years X 0.5) less 1.0 Gb = 9.0 Gb

    Actual Six Country post-1995 CNE were 7.3 Gb, and they hit zero net exports in the year 2007. Note that in only four years (from 1995 to 1999), as the Six Countries showed increasing production, they had already shipped 54% of post-1995 CNE.

    If we do a similar exercise for Saudi Arabia, using estimated numbers for 2015, it suggests that post-2005 Saudi CNE will be on the order of about 60 Gb, with 2006 to 2015 inclusive CNE of about 30 Gb, suggesting that Saudi Arabia may have already shipped about 50% of their total post-2005 supply of CNE.

    Note that by definition, it's not whether, but to what degree, that Saudi Arabia has depleted their remaining volume of post-2005 CNE.

    A link to a summary of Net Export Math:
    http://peakoilbarrel.com/texas-oil-production-still-on-a-plateau/#comment-561436

[Jun 04, 2016] The Baker Hughes Rig Counr is out. Oil rig count up 9, gas rig count down 5

peakoilbarrel.com

Ron Patterson , 06/03/2016 at 3:11 pm

The Baker Hughes Rig Counr is out. Oil rig count up 9, gas rig count down 5.

[Jun 03, 2016] Oil prices crush lures US drivers back into gas guzzlers

peakoilbarrel.com
AlexS , 06/02/2016 at 6:40 pm
Interesting trends in transportation fuel demand:

OPEC's Cheap Oil Strategy Lures Drivers Back Into Gas Guzzlers

http://www.bloomberg.com/news/articles/2016-05-30/opec-s-cheap-oil-strategy-lures-drivers-back-into-gas-guzzlers

• Decade-long improvement in fuel efficiency in U.S. seen ending
• Light trucks, vans, SUVs account for 60% of U.S. vehicle sales

Last year, SUVs outsold any other type of passenger vehicle in Europe for the first time, according to auto industry consultants JATO Dynamics. The trend has continued in 2016, with demand for SUVs … accounting for a quarter of sales in the biggest European countries.
Europe is a mirror of what's happening across the world. From China to the U.S., drivers are buying bigger vehicles, while sales of fuel-efficient hybrids struggle.

[In the U.S.] the average car sold in April achieved a fuel economy of 25.2 miles per gallon, down from a peak of 25.8 set in August 2014, just before oil prices crashed, according to data from the Transportation Research Institute at the University of Michigan. At current trends, this year will mark the first drop in average U.S. fuel economy since at least 2007, the data show.

"Fuel-economy improvement is really flatlining," said Sam Ori, executive director of theEnergy Policy Institute at the University of Chicago. "The gains completely stopped right at the same time that oil prices started to decline."
Today in the U.S., light trucks, vans and SUVs account for 60 percent of total vehicle sales - a level only reached briefly in 2005, when Brent crude, the global oil benchmark, averaged $55 a barrel. It's now around $50. The International Energy Agency said in May that less-efficient vehicles, including four-wheel drives, "remain very much in vogue, a consequence of persistently lower retail pump prices."

In 2008, when oil prices averaged $100 a barrel, the share of gas guzzlers in U.S. total vehicles sales dropped at one point to just 43 percent.

With larger vehicles hitting the roads and Americans driving longer distances as the economy recovers, U.S. gasoline consumption is set to rise to a record in 2016, according to the Energy Information Administration. U.S. gasoline demand will average 9.3 million barrels a day this year, surpassing the peak set in 2007, the EIA said in its most recent monthly report.

The EIA forecast U.S. drivers will enjoy the cheapest gasoline this driving season in 12 years.

In China, the world's second-biggest oil consumer, drivers are also opting for larger vehicles as never before. While cheaper gasoline and diesel helps, analysts said it's higher incomes - and a desire to impress relatives and friends - that's driving the purchases. According to official data, vehicles such as light trucks and SUVs accounted for almost 35 percent of total Chinese passenger sales in April, up from 10 percent in 2010 and less than 5 percent a decade ago.

U.S. average sales-weighted fuel-economy rating

AlexS , 06/02/2016 at 6:44 pm
chart 2

GoneFishing , 06/02/2016 at 7:03 pm
You are right AlexS, Americans need to be more frugal and forward thinking.

My town wants to allow a gas station to be put in near the highway, there is a gas station a short drive away. Not only will the gas station be mere feet from a Category 1 trout stream, it will be almost at the level of the stream. The three large tanks will be actually buried in the aquifer for the town and have to be held down from floating. Everything runs off wells here, so contamination will effect much of the town and wreck the aquifer.

To top it all off, the land is now a ride-sharing lot, something that reduces fuel use and pollution as well as reduces the wear and tear on cars (slowing down the need for vehicle replacement and all the energy/pollution that involves).

There are gas stations just a few miles in either direction along the highway.

Sound dumb to you?

Lightsout , 06/02/2016 at 10:26 pm
I think the market share argument was always a smoke screen and this was always the Saudi's real intent.

[Jun 03, 2016] A 'tsunami' is about to overwhelm the debt market

Notable quotes:
"... Increased regulation, the holding of high-yield debt by "less stable" investors such as mutual funds, which are likely to unload the bonds quickly in the event of a drop, and the increased size of the low-quality leveraged loan market could all make the tidal wave even worse than in the past. ..."
finance.yahoo.com

Boys crouch behind a wall as they play in the massive surf at Sydney's Narrabeen Beach in February 2004.

A tidal wave may be coming to the bond market, and it's not going to be pretty.

At least that's the view of Matthew Mish, credit strategist at UBS. To Mish, the elevated rates of default in the commodity sector and high risk bonds are a harbinger of things to come for the broader debt market.

"First, our quantitative framework is signaling a broader deterioration in the default outlook, with our model projecting default rates of 4.3% over the next 12 months (versus 2.6% one year prior)," Mish wrote in a note to clients on Thursday.

Mish's research asks whether the recent uptick in default rates is simply a "rogue wave" that will dissipate or the "start of a tsunami" that will bring the rate of defaults much higher over the long term.

Mish is in the latter camp. He cites three short-term reasons for a coming increase in the number of firms unable to pay back their debt. They are:

  1. Decreasing profits: Mish notes that corporate profits fell 7.6% in the first quarter against the same period a year ago. In order to pay back loans, companies need to continue to make more, and with less cash coming in, there will be less to allocate to debt.
  2. Lending standards are getting tighter: Firms also have the ability to pay down debt that is coming to maturity by issuing new debt, effectively kicking the can down the road. Lending conditions for new debt, however, are getting tighter as banks focus on higher quality borrowers. In turn, this makes it tougher for companies to pay for debt with more debt.
  3. Debt is getting more expensive: Loan spreads, or the difference between what banks have to pay to borrow money and what they charge companies in interest on loans they then give out, are starting to widen. In other words, new debt is getting more expensive.

This trouble is not just limited to the commodity space. Mish estimates that the default rate for nonenergy firms will creep up to 3.5% in 2016, up from 1.5% currently.

"Higher frequency data suggest default stress is rising specifically in the media/entertainment, consumer/service, retail and aerospace/industrial sectors (as well as the non-bank financials)," Mish wrote.

As these defaults start to pile up, Mish said, long-term shifts in the credit markets could snowball and make the situation even worse.

Increased regulation, the holding of high-yield debt by "less stable" investors such as mutual funds, which are likely to unload the bonds quickly in the event of a drop, and the increased size of the low-quality leveraged loan market could all make the tidal wave even worse than in the past.

More


Michael

Soon the US government will start bailing out states like California and Illinois. The precedent has already been set with the bailing out of GM and others. Their excuse will be the States are too big to fail. Taxpayers and the heirs across the nation will be footing the bill for corruption, mismanagement and just plain stupidity of these states and others that will soon follow. Of course, eventually the financial strain will overpower the producers who fund the non producers and all hell will break loose. One just has to witness current events like Venezuela's economic collapse to see our future. Maybe not today or tomorrow, but someday.

Kim

No surprise, the economy has been creeping on borrowed money without interest. The Fed kept pumping money to keep the economy afloat while Obama borrowed $10 trillion to put into the economy and regulated into the economic collapse. That borrowed money will have to be paid. When the interest goes up, we will have to pay the interest and less money for anything else. Obama has been destroying our economy without consequences just like Bill Clinton did in 1996 with the expansion of the subprime lending rate, except it is gravely worse now with our massive debt.

[Jun 03, 2016] US gains just 38K jobs, fewest in 5 years; rate at 4.7 pct.

Notable quotes:
"... Nearly a half-million jobless Americans stopped looking for work and so were no longer officially counted as unemployed. ..."
finance.yahoo.com

At the same time, the unemployment rate tumbled to 4.7 percent from 5 percent, the Labor Department said Friday, its lowest point since November 2007. The rate fell for a problematic reason: Nearly a half-million jobless Americans stopped looking for work and so were no longer officially counted as unemployed.

Susan

The unemployment rate is just a bunch of #$%$. The only jobs avail are low paying PT with no benefits. I spent so much time and money on my education and now finding it's worthless. I use to make $50k a year with benefits and another $20k freelancing from home. I've been unemployed now for a while and even went back and got my masters degree. Still no work. So now I'm suppose to work for min wage? This is my reality. This is the reality for many people. Do they really expect us to pretend everything is sunshine and smiles. Our economy is collapsing people. Don't be fooled.

[Jun 03, 2016] Jamie Dimon just sounded the alarm on auto loans

Notable quotes:
"... At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record. ..."
www.cnbc.com
In May, the total amount of auto loans cracked the $1 trillion mark for the first time, marking a 10 percent increase. It comes as auto sales have hovered around record highs.

At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record.

The Experian research also noted that more subprime borrowers are borrowing for new auto purchases.

"The continued rise in new vehicle costs have kept many consumers exploring options to keep their monthly payments affordable," said Melinda Zabritski, Experian's senior director of automotive finance, in a statement that accompanied Thursday's research. "As long as vehicle prices continue to rise, we can expect leasing rates to grow along with them. However, consumers need to understand the nuances of their lease agreements and make sure that leasing fits their lifestyle."

Read More Auto loans roar to trillion-dollar level

[Jun 03, 2016] Bill Gross Get ready for an entirely different market

www.cnbc.com

Bill Gross has some bad news for investors.

In his June investment outlook released Thursday, the widely followed bond fund manager contended that bond and stock returns realized in the last 40 years are "a grey if not black swan event that cannot be repeated." Investors should not expect 7 percent returns on bonds or returns in the high single digits or double digits on stocks, Gross told CNBC on Thursday.

"The markets are entirely different and it would pay to travel to Mars as opposed to stay on Earth, because the returns here are very, very low," the manager of the Janus Capital Unconstrained Bond Fund, said on CNBC's "Power Lunch".
Gross said easy central bank policy could hold down bond returns. Central banks in Europe and Japan have adopted negative interest rates, while the U.S. Federal Reserve's target rate is at 0.25 to 0.50 percent.

German and Japanese 10-year bonds currently have negative yields, while their 30-year bonds yield less than 1 percent. The U.S. 10-year Treasury note yield sat around 1.8 percent Thursday.

Gross contended those rate trends can hurt not only savers but also the broader economy. He said Fed policymakers, who have signaled they could hike rates at least once this year, realize they need to normalize policy.

"Ultimately, they have to move back up and I think a certain number of Fed governors realize that the normalization process is necessary in order to save business models and to save capitalism basically because capitalism doesn't work at 0 percent and it doesn't work at negative interest rates," he said.

Gross added that investors should "basically go the other way" by holding liquid cash. He said they should not buy corporate bonds and resist buying high-yield bonds or riskier stocks.

See also

Here's why oil will move higher: Energy analyst

'Sizable' stock market sell-off may lie ahead, warns oil bear

Marc 'Dr. Doom' Faber: Why stocks are 'very vulnerable'

Philips Lighting shares rise as CEO hails 'historic' market debut


[Jun 03, 2016] US crude oil production is now in full scale retreat

peakoilbarrel.com
Ron Patterson , 06/02/2016 at 7:39 pm
US Weekly Petroleum Status Report has US C+C production down 32,000 bpd for the last full week in May to 8,735,000 bpd. No surprises here, this is exactly what I had predicted. US lower 48 production was down 40,000 bpd for the week, Alaska was up 8,000 bpd.

This is important people, US crude oil production is now in full scale retreat.

If you doubt these doubt these falling production numbers then explain the climbing net import numbers. US weekly net petroleum products imports, 3 month average and 6 month average reached a two year high this week.

When production is falling, and consumption is not falling, then the only solution is import more, a lot more.

We are importing, on average, almost one million barrels per day more than we were just last November.

[Jun 02, 2016] The shameful roles played by Americas torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nations public school system

Notable quotes:
"... we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe. ..."
"... The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist. ..."
"... Selected Skeptical Comments ..."
"... seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nation's public school system.* ..."
"... And as I suspect seanseymour would agree, when a nation loses public education, it loses everything. ..."
"... accountable ..."
"... And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final. ..."
www.nakedcapitalism.com
Posted on June 2, 2016 by Yves Smith Yves here. The first comment came in on a post that had gone cold, and I thought it was so revealing that it needed to be seen widely. The second is a synchronistic complement.

As much as I carry on about the isolation of the Acela-riding classes from the acute distress in much of the US, I only have a very distant feel for it. For instance, I grew up moving through many small towns where a paper mill was a major, and in some cases, the biggest local employer. Those mill jobs were well paid and the workers could buy houses, cars, and had pensions. One of my brothers works for a paper mill that should have been world competitive through his retirement, but it's been wrecked by a series of private equity owners, starting with Cerberus, and in now in bankruptcy. The town in which he lives, Escanaba, Michigan, has lost over 20% of its population since the mid 1980s. Similarly, my uncle lived below the poverty line in Maine, lobstering until his knees gave out. But he had a fully paid for house he had inherited, and access to VA hospitals and doctors, so it could have been a lot worse. But Maine is a poor state, so even visiting there as a tourist in the summers, it's not hard to see the signs of struggle even in those who are getting by.

The first comment gives a window into the hidden desperation in America that is showing up in statistics like increasing opioid addiction and suicides, rather than in accounts of how and why so many people are suffering. I hope readers will add their own observations in comments.

seanseamour, June 1, 2016 at 3:26 am

We recently took three months to travel the southern US from coast to coast. As an expat for the past twenty years, beyond the eye opening experience it left us in a state of shock. From a homeless man convulsing in the last throes of hypothermia (been there) behind a fuel station in Houston (the couldn't care less attendant's only preoccupation getting our RV off his premises), to the general squalor of near-homelessness such as the emergence of "American favelas" a block away from gated communities or affluent ran areas, to transformation of RV parks into permanent residencies for the foreclosed who have but their trailer or RV left, to social study one can engage while queuing at the cash registers of a Walmart before beneficiaries of SNAP.

Stopping to take the time to talk and attempt to understand their predicament and their beliefs as to the cause of their plight is a dizzying experience in and of itself. For a moment I felt transposed to the times of the Cold War, when the Iron Curtain dialectics fuzzed the perception of that other world to the west with a structured set of beliefs designed to blacken that horizon as well as establish a righteous belief in their own existential paradigm.

What does that have to do with education? Everything if one considers the elitist trend that is slowly setting the framework of tomorrow's society. For years I have felt there is a silent "un-avowed conspiracy", why the seeming redundancy, because it is empirically driven as a by-product of capitalism's surge and like a self-redeeming discount on a store shelf crystalizes a group identity of think-alike know-little or nothing frustrated citizens easily corralled by a Fox or Trump piper. We have re-rcreated the conditions or rather the reality of "Poverty In America" barely half a century after its first diagnostic with one major difference : we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe.

Praedor, June 1, 2016 at 5:37 pm

So Richard Cohen now fears American voters because of Trump. Well, on Diane Reem today (NPR) was a discussion on why fascist parties are growing in Europe. Both Cohen and the clowns on NPR missed the forest for the trees. The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist.

In the US we don't have the refugees, but the neoliberalism is further along and more damaging. There's no mystery here or in Europe, just the natural effects of governments failing to represent real people in favor of useless eater rich.

Make the people into commodities, endanger their washes and job security, impose austerity, and tale in floods of refugees. Of COURSE Europeans stay leaning fascist.

Selected Skeptical Comments
Steve Sewall , June 2, 2016 at 12:07 pm

What a comment from seanseamour. And the "hoisting" of it to high visibility at the site is a testament to the worth of Naked Capitalism.

seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nation's public school system.*

And as I suspect seanseymour would agree, when a nation loses public education, it loses everything.

But I don't want to spend all morning doing that because I'm convinced that it's not too late for America to rescue itself from maelstrom in which it finds itself today. (Poe's "Maelstrom" story, cherished by Marshall McLuhan, is supremely relevant today.)

To turn America around, I don't look to education – that system is too far gone to save itself, let alone the rest of the country – but rather to the nation's media: to the all-powerful public communication system that certainly has the interactive technical capabilities to put citizens and governments in touch with each other on the government decisions that shape the futures of communities large and small.

For this to happen, however, people like the us – readers of Naked Capitalism – need to stop moaning and groaning about the damage done by the neoliberals and start building an issue-centered, citizen-participatory, non-partisan, prime-time Civic Media strong enough to give all Americans an informed voice in the government decisions that affect their lives. This Civic media would exist to make citizens and governments responsive and accountable to each other in shaping futures of all three communities – local, state and national – of which every one of us is a member.

Pie in the sky? Not when you think hard about it. A huge majority of Americans would welcome this Civic Media. Many yearn for it. This means that a market exists for it: a Market of the Whole of all members of any community, local, state and national. This audience is large enough to rival those generated by media coverage of pro sports teams, and believe it or not much of the growth of this Civic media could be productively modeled on the growth of media coverage of pro sports teams. This Civic Media would attract the interest of major advertisers, especially those who see value in non-partisan programming dedicated to getting America moving forward again. Dynamic, issue-centered, problem-solving public forums, some modeled on voter-driven reality TV contests like The Voice or Dancing with the Stars, could be underwritten by a "rainbow" spectrum of funders, commercial, public, personal and even government sources.

So people take hope! Be positive! Love is all we need, etc. The need for for a saving alternative to the money-driven personality contests into which our politics has descended this election year is literally staring us all in the face from our TV, cellphone and computer screens. This is no time to sit back and complain, it's a time to start working to build a new way of connecting ourselves so we can reverse America's rapid decline.

OK, so I hear some of you saying, corporate America will never let this Civic Media get off the ground. My short answer to this is that corporations do what makes money for them, and in today's despairing political climate there's money to be made in sponsoring something truly positive, patriotic and constructive. And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final.

seanseymour, thanks for your insights and thanks, Yves, for putting them where we can see them.

* For any Yalies out there, I documented these roles in this 30-page historical memorial to my dad.

[Jun 02, 2016] The only way shale companies can resume mass drilling is paying for it with MasterCard, on installments

Notable quotes:
"... Well, all I can say is the 'plan' did not work out so well. The US LTO industry is 250 billion in debt and dead broke. It will have to hoc it's fleet of G-4 600's and all of it's copying machines just to frac it's DUC wells. The only way it can drill another shale well is paying for it with MasterCard, on installments. Its at a dead stop alright. ..."
"... Lots of roads got tore up, then they got fixed, sort of, with all those "taxes" paid. Nobody got too drunk and save for a few earthquakes out in the parking lot, everybody had a grand time. Now pay the bill ! The band, the hall, the beer distributor, everybody wants to get paid. Can't throw a party and not pay the bills. Its un-Texas like not to. ..."
"... Again the shale boom has made my normal business life a much difficult environment to conduct business. However, it seems to me, taking Texas as an example, where Rick Perry used to run around telling people that 99% of NEW jobs in the US were generated in Texas, was a direct result of the boom even though it made my life more difficult. From a government point of view, compared to the alternatives, was/is the shale boom more efficient at increasing the velocity of money compared to let us say "cash for clunkers" or all those "shovel ready jobs" where government at all levels, union bosses etc take their cut of the money before it is ever spent at digging the hole. ..."
"... I have hammered and hammered on this, but apparently future net cash flows do not matter to shale. That is a big problem. Future net cash flow are the most important metric for any business. If those cannot retire the debt, over the long term, the business cannot survive. ..."
"... PXD says they need $50 WTI and they will add rigs. Per their own 10K, if the price stays at $50 WTI, they have almost no PUD value. So which are we supposed to believe? Why would they add rigs when the net future cash flows from those rigs will not pay back their cost? ..."
"... Then, we have the issue of CEO pay. Of course, CEO pay is akin to the oil lease promoter, who gets paid whether the well succeeds or fails. Management is still getting paid high salaries, despite that the companies cannot afford to pay them. ..."
"... Was looking at a shale gas company, Eclipse Resources, over on Seeking Alpha. They lost .58 per share in 2013, 1.27 in 2014 and 4.46 in 2015. PV10 all categories is $212 million, long term debt $527 million. The top three in management are still tapping the company for $500-$700K in salaries. And, this company is talking about making a profit on $30 million (yes, that is the cost) Utica wells with record length laterals. At $2.00 gas. The company is OPERATING at a loss, and always have. ..."
"... Sorry if this kind of nonsense makes me a little emotional. ..."
"... My model keeps saying the oil price average will be $65 (more or less) over the next three years. I guess I need to update the input data, and it may be a little bit different. ..."
"... The shale companies have posted losses every quarter in the last five. The upper management keeps making the big bucks. ..."
"... Now that Is Over report from Pew Research Center reveals that between the third quarter of 2000 and the same period of last year, wages across the U.S. rose by an impressive 7.4 percent in real terms, driven largely by the oil and gas industry. ..."
"... Wages in energy-dependent communities rose by the most, in some cases more than twofold, such as in Texas. This shouldn't be surprising as the period reviewed coincides with the peak of the shale boom in the country, even though it also covers two periods of recession. ..."
"... Before we tout all the amazing benefits that the shale oil revolution has given society, we should first see who actually pays for those benefits, right? I mean if it ends up being society that pays for it, soon, or down the road with the other 19 trillion dollars of debt we are leaving our kids, then it really isn't the shale oil industry we should be thanking, is it? ..."
peakoilbarrel.com
Mike , 05/31/2016 at 8:07 pm
Junk, not crap.

"Shale oil offers a predictable, manufacturing-like business model around which companies can plan. And it can be stopped and started on a dime depending on oil prices."

Well, all I can say is the 'plan' did not work out so well. The US LTO industry is 250 billion in debt and dead broke. It will have to hoc it's fleet of G-4 600's and all of it's copying machines just to frac it's DUC wells. The only way it can drill another shale well is paying for it with MasterCard, on installments. Its at a dead stop alright.

Mike , 05/31/2016 at 9:06 pm
Yes, Mr. Tea; it was a great party the shale industry threw. It was really fun for less than 1/100th of 1% of American's who got free royalty income, not so good for the hundreds of thousands of men and women that got hired, then fired. Shareholder equity had an OK time; most I'll bet wish they'd never come.

Lots of roads got tore up, then they got fixed, sort of, with all those "taxes" paid. Nobody got too drunk and save for a few earthquakes out in the parking lot, everybody had a grand time. Now pay the bill ! The band, the hall, the beer distributor, everybody wants to get paid. Can't throw a party and not pay the bills. Its un-Texas like not to.

shallow sand , 05/31/2016 at 9:56 pm
Texas tea. If you are equating shale to the US government borrowing money to give everyone $600 to stimulate the economy, I think you are making Mike's point.
texas tea , 06/01/2016 at 6:59 am
SS, I am trying to understand the why and hows. I try to leave emotion at the doorstep and see things from a bigger picture.

Again the shale boom has made my normal business life a much difficult environment to conduct business. However, it seems to me, taking Texas as an example, where Rick Perry used to run around telling people that 99% of NEW jobs in the US were generated in Texas, was a direct result of the boom even though it made my life more difficult. From a government point of view, compared to the alternatives, was/is the shale boom more efficient at increasing the velocity of money compared to let us say "cash for clunkers" or all those "shovel ready jobs" where government at all levels, union bosses etc take their cut of the money before it is ever spent at digging the hole.

The answer to that question give us great insight to the future in terms of where we may make investments decisions today. Lastly, irrespective of the economics, not compared to yesteryear, but the alternatives of today, based on the article cited and the actual decisions being in corporate boardrooms it appears LTO is here to stay.

shallow sand , 06/01/2016 at 7:50 am
I start with reading 10K and 10Q, and with actual production data. Facts.

The emotion comes from reading the facts, and then matching them to the claims. The claims appear to be at best, misleading, at worst, false.

Over a year ago, when 2014 10K came out, I noted here that almost every shale player would have PDP PV10 less than long term debt at $50 WTI.

As it turns out, in looking at the 2015 10K, many have PV10 ALL CATEGORIES less than long term debt. Further, most took great liberties with estimates of future production costs in even arriving at the 2015 PV10 numbers.

I have hammered and hammered on this, but apparently future net cash flows do not matter to shale. That is a big problem. Future net cash flow are the most important metric for any business. If those cannot retire the debt, over the long term, the business cannot survive.

PXD says they need $50 WTI and they will add rigs. Per their own 10K, if the price stays at $50 WTI, they have almost no PUD value. So which are we supposed to believe? Why would they add rigs when the net future cash flows from those rigs will not pay back their cost?

I'd be glad if you could explain how any of these companies are going to make it at the current WTI and HH strips.

Heck, I would be happy if you can explain how CLR was able to reduce estimated future production costs by 60% year over year, but yet only reduce reserves 9%. I continue to be astonished that no one has noticed stuff like this.

Then, we have the issue of CEO pay. Of course, CEO pay is akin to the oil lease promoter, who gets paid whether the well succeeds or fails. Management is still getting paid high salaries, despite that the companies cannot afford to pay them.

Was looking at a shale gas company, Eclipse Resources, over on Seeking Alpha. They lost .58 per share in 2013, 1.27 in 2014 and 4.46 in 2015. PV10 all categories is $212 million, long term debt $527 million. The top three in management are still tapping the company for $500-$700K in salaries. And, this company is talking about making a profit on $30 million (yes, that is the cost) Utica wells with record length laterals. At $2.00 gas. The company is OPERATING at a loss, and always have.

Sorry if this kind of nonsense makes me a little emotional.

Shale is here to stay, and I hope it can someday pay for itself, because that will mean long term $100+ oil.

Fernando Leanme , 06/01/2016 at 8:25 am
Most companies set up budgets and plans on a price forecast which may be higher or lower than current prices. They take that price forecast and use it to estimate project economics. Therefore, this company is using a higher price forecast.

My model keeps saying the oil price average will be $65 (more or less) over the next three years. I guess I need to update the input data, and it may be a little bit different.

Reno Hightower , 06/01/2016 at 8:44 am
Saw your reply in that article SS. Well said. Somebody needs to bring bondvigilante over here. H might be Mike's long lost brother.
shallow sand , 06/01/2016 at 9:05 am
Agreed.

The shale companies have posted losses every quarter in the last five. The upper management keeps making the big bucks.

Dennis Coyne , 06/01/2016 at 11:13 am
Hi Shallow Sand,

Any opinion on EOG, they were GAAP profitable up to 2014, but lost money in 2015, seems like they are well run.

texas tea , 06/01/2016 at 1:22 pm
SS,

you say "Shale is here to stay, and I hope it can someday pay for itself, because that will mean long term $100+ oil."

I think the odd favor that scenario. To your larger question question, I don't think any body on shore US thinks they will make money on any drilling prospect, be they conventional or unconventional with the prices we have seen over the last 6 months. Here is the question, where do you feel the most comfortable buying production, when oil is at $110 or $28, and why. That is the same calculation that is being made industry wide.

The article I cited above make some very good points, drilling and marketing risk are greatly reduced, the mix of product (gor) is also known. The one, and it is a big unknown variable, is price, but price is and has always been the unknown. The energy is there, the amount is know (within certain parameters) and it is my professional life experience that the industry will find a way to produce it, to make it "economic" that assumes a higher price, better efficiencies and do not discount the possibility of certain tax incentives, we have seen them before.

Mike , 06/01/2016 at 8:25 pm
Shallow, you need not explain the emotional component to your shale oil economic analysis to anyone, sir. Thank you for being gracious, but certainly not to me you do not need to explain. You, like thousands of other operators in America, stripper or otherwise, have been devastated by the price collapse recently, caused entirely by overleveraged LTO oversupply. You have your OWN money, and likely a good part of your life, invested in your production and in caring for your employees. Its hard not to be emotional when you are getting run over by a freight train. A freight train, I might add, that drilled 41,000 shale wells with finding costs way less than the even the KSA's finding costs…because the shale oil industry has essentially not paid for it's wells yet. It probably won't ever be able to pay for them. Yet, you are correct, upper management in every public shale oil company in the country is still making tons of money, with little regard for shareholder equity and the probability of bankruptcy. If it doesn't seem fair, it's not fair. Anybody cheerleading for the shale oil industry needs to carefully re-examine their own values.

Hold your head up high, buddy. You were here before the shale oil industry fell on the floor, you'll be here long after they are gone.

Mike

texas tea , 06/01/2016 at 4:43 pm
Oil Industry Drove US Wage Growth.

Now that Is Over report from Pew Research Center reveals that between the third quarter of 2000 and the same period of last year, wages across the U.S. rose by an impressive 7.4 percent in real terms, driven largely by the oil and gas industry.

Wages in energy-dependent communities rose by the most, in some cases more than twofold, such as in Texas. This shouldn't be surprising as the period reviewed coincides with the peak of the shale boom in the country, even though it also covers two periods of recession.

http://oilprice.com/Energy/Energy-General/Oil-Industry-Drove-US-Wage-Growth-Now-that-Is-Over.html

Mike , 06/01/2016 at 8:57 pm
Respectfully, Mr. Tea, the oil industry did not drive wage growth, a Federal monetary policy that allowed limitless, low interest loans to the oil industry, particularly the shale oil industry, is what drove wage growth. It was just another form of economic stimulus.

Before we tout all the amazing benefits that the shale oil revolution has given society, we should first see who actually pays for those benefits, right? I mean if it ends up being society that pays for it, soon, or down the road with the other 19 trillion dollars of debt we are leaving our kids, then it really isn't the shale oil industry we should be thanking, is it?

[Jun 02, 2016] Iranian Oil Is Disguising A Significant Decline In Global Production

Notable quotes:
"... But… the decline has only just begun. The price collapse caused the plateau in world oil production that begun about March 2015. However, the decline did not actually begin until January 2016. The dramatic rise in production from Iran has kept the decline from becoming obvious to everyone. However when the May production numbers come in, I think it will then become obvious to everyone. ..."
OilPrice.com

In conclusion, In spite of the recent increase in Russian production, as well as the slight increase from the North Sea, and in spite of the dramatic production increase from Iran due to the lifting of sanctions, world crude oil production is in decline. And while it is true that most of this decline is due to the price crash, it remains to be seen just how much production will recover when the price returns to… to… wherever it returns to before it stops.

But… the decline has only just begun. The price collapse caused the plateau in world oil production that begun about March 2015. However, the decline did not actually begin until January 2016. The dramatic rise in production from Iran has kept the decline from becoming obvious to everyone. However when the May production numbers come in, I think it will then become obvious to everyone.

[Jun 02, 2016] Hoisted From Comments: Neoliberalism Tearing Societies Apart

Notable quotes:
"... we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe. ..."
"... The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist. ..."
"... Selected Skeptical Comments ..."
"... All problems caused by the same cause … American predatory behavior. And our great political choice … iron fist without velvet glove. ..."
"... Germany, Belgium, France, Poland, Hungary, Romania, Turkey, Israel, Australia come to mind (if one is allowed to participate in a European song contest, one is supposed to be part of Europe :) They all have more or less fascist governments. ..."
"... Once you realize that the ECB creates something like 60 billion euros a month, and gives nothing to its citizens nor its nation-states, that means the money goes to corporations, which means that the ECB, and by extension the whole EU, is a fascist construct (fascism being defined as a government running on behalf of the corporations). ..."
"... That's a fallacy. Corporatism is a feature of fascism, not the other way around. None of the governments you mention, with the possible exception of Israel and Turkey, can be called fascist in any meaningful sense. ..."
"... Even the anti-immigration parties in the Western European countries you mention – AfD, Front National, Vlaams Belang – only share their nationalism with fascist movements. And they are decidedly anti-corporatist. ..."
"... Another key feature of fascism is territorial expansionism. As far as I am aware, none of the nationalist parties advocate invading other countries or retaking former colonies. Once again, contemporary neoliberalism is far closer to fascism. But you are correct about both Israel and Turkey – our allies. They are much closer to the genuine article. But you won't hear those complaining about the rise of fascism in Europe complaining too much about them. ..."
"... Sheldon Wolin introduced us to inverted totalitarism. While it is no longer the government that decides what must be done, the private 'owners' just buy the government, the judiciary, the press, or whatever is needed to achieve their means. ..."
"... Inverted totalitarianism is the mirror image of fascism, which is why so many are confused. Fascism is just a easier term to use and more understandable by all. There is not a strict adherence to fascism going on, but it's still totalitarian just the same. ..."
"... "…the gutters and cutters of neoliberalism" ..."
"... an authentically popular fascism in the United States would be pious and anti-Black; in Western Europe, secular and antisemitic, or more probably, these days anti-Islamic; in Russia and Eastern Europe, religious, antisemitic, and slavophile. ..."
"... that eternal enemy: the conservative manipulators of privilege who damn as 'dangerous agitators' any man who menaces their fortunes" (maybe 'power and celebrity' should be added to fortunes ..."
"... Globalization helps the rich here way more than the poor there. The elites get more money for nothing (see QE before you respond, if you do, that's where the money for globalization came from) the workers get the husk. ..."
"... Also the elite gets to say "you made your choices" and other moralistic crap. The funny(?) thing is they generally claim to be atheists, which I translate into "I am God, there doesn't need to be any other" ..."
"... Wait, you mean we don't all enjoy living in Pottersville? For anyone missing the reference, you clearly haven't been subjected to It's a Wonderful Life enough times. ..."
"... seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators ..."
"... And as I suspect seanseymour would agree, when a nation loses public education, it loses everything. ..."
"... accountable ..."
"... And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final. ..."
www.nakedcapitalism.com
Posted on June 2, 2016 by Yves Smith Yves here. The first comment came in on a post that had gone cold, and I thought it was so revealing that it needed to be seen widely. The second is a synchronistic complement.

As much as I carry on about the isolation of the Acela-riding classes from the acute distress in much of the US, I only have a very distant feel for it. For instance, I grew up moving through many small towns where a paper mill was a major, and in some cases, the biggest local employer. Those mill jobs were well paid and the workers could buy houses, cars, and had pensions. One of my brothers works for a paper mill that should have been world competitive through his retirement, but it's been wrecked by a series of private equity owners, starting with Cerberus, and in now in bankruptcy. The town in which he lives, Escanaba, Michigan, has lost over 20% of its population since the mid 1980s. Similarly, my uncle lived below the poverty line in Maine, lobstering until his knees gave out. But he had a fully paid for house he had inherited, and access to VA hospitals and doctors, so it could have been a lot worse. But Maine is a poor state, so even visiting there as a tourist in the summers, it's not hard to see the signs of struggle even in those who are getting by.

The first comment gives a window into the hidden desperation in America that is showing up in statistics like increasing opioid addiction and suicides, rather than in accounts of how and why so many people are suffering. I hope readers will add their own observations in comments.

seanseamour, June 1, 2016 at 3:26 am

We recently took three months to travel the southern US from coast to coast. As an expat for the past twenty years, beyond the eye opening experience it left us in a state of shock. From a homeless man convulsing in the last throes of hypothermia (been there) behind a fuel station in Houston (the couldn't care less attendant's only preoccupation getting our RV off his premises), to the general squalor of near-homelessness such as the emergence of "American favelas" a block away from gated communities or affluent ran areas, to transformation of RV parks into permanent residencies for the foreclosed who have but their trailer or RV left, to social study one can engage while queuing at the cash registers of a Walmart before beneficiaries of SNAP.

Stopping to take the time to talk and attempt to understand their predicament and their beliefs as to the cause of their plight is a dizzying experience in and of itself. For a moment I felt transposed to the times of the Cold War, when the Iron Curtain dialectics fuzzed the perception of that other world to the west with a structured set of beliefs designed to blacken that horizon as well as establish a righteous belief in their own existential paradigm.

What does that have to do with education? Everything if one considers the elitist trend that is slowly setting the framework of tomorrow's society. For years I have felt there is a silent "un-avowed conspiracy", why the seeming redundancy, because it is empirically driven as a by-product of capitalism's surge and like a self-redeeming discount on a store shelf crystalizes a group identity of think-alike know-little or nothing frustrated citizens easily corralled by a Fox or Trump piper. We have re-rcreated the conditions or rather the reality of "Poverty In America" barely half a century after its first diagnostic with one major difference : we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe.

Praedor, June 1, 2016 at 5:37 pm

So Richard Cohen now fears American voters because of Trump. Well, on Diane Reem today (NPR) was a discussion on why fascist parties are growing in Europe. Both Cohen and the clowns on NPR missed the forest for the trees. The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist.

In the US we don't have the refugees, but the neoliberalism is further along and more damaging. There's no mystery here or in Europe, just the natural effects of governments failing to represent real people in favor of useless eater rich.

Make the people into commodities, endanger their washes and job security, impose austerity, and tale in floods of refugees. Of COURSE Europeans stay leaning fascist.

Selected Skeptical Comments

Disturbed Voter , June 2, 2016 at 6:49 am

First they came for the blue collar workers …

America has plenty of refugees, from Latin America …

Neo-liberal goes back to the Monroe Doctrine. We used to tame our native workers with immigrants, and we still do, but we also tame them by globalism in trade. So many rationalizations for this, based on political and economic propaganda. All problems caused by the same cause … American predatory behavior. And our great political choice … iron fist without velvet glove.

Jeff , June 2, 2016 at 7:58 am

Germany, Belgium, France, Poland, Hungary, Romania, Turkey, Israel, Australia come to mind (if one is allowed to participate in a European song contest, one is supposed to be part of Europe :) They all have more or less fascist governments.

Once you realize that the ECB creates something like 60 billion euros a month, and gives nothing to its citizens nor its nation-states, that means the money goes to corporations, which means that the ECB, and by extension the whole EU, is a fascist construct (fascism being defined as a government running on behalf of the corporations).

Seb , June 2, 2016 at 8:07 am

That's a fallacy. Corporatism is a feature of fascism, not the other way around. None of the governments you mention, with the possible exception of Israel and Turkey, can be called fascist in any meaningful sense.

Even the anti-immigration parties in the Western European countries you mention – AfD, Front National, Vlaams Belang – only share their nationalism with fascist movements. And they are decidedly anti-corporatist.

jsn , June 2, 2016 at 8:35 am

From today's links, Poland for instance:
http://www.euronews.com/2016/06/01/eu-warns-poland-on-rule-of-law/

It's easy to overstate the case for fascism, until its too late…

tgs , June 2, 2016 at 9:46 am

True, I posted a few minutes ago saying roughly the same thing – but it seems to have gone to moderation.

Another key feature of fascism is territorial expansionism. As far as I am aware, none of the nationalist parties advocate invading other countries or retaking former colonies. Once again, contemporary neoliberalism is far closer to fascism. But you are correct about both Israel and Turkey – our allies. They are much closer to the genuine article. But you won't hear those complaining about the rise of fascism in Europe complaining too much about them.

Jeff , June 2, 2016 at 10:05 am

When I was young, there were 4 divisions:

If it is a 'public entity' (aka government or regime) that decides what is built, we have a totalitarian state, which can be 'communist' (if the means also belong the public entities like the government or regional fractions of it) or 'fascist' (if the factories are still in private hands).

If it is the private owner of the production capacity who decides what is built, you get capitalism. I don't recall any examples of private entities deciding what to do with public means of production (mafia perhaps).

Sheldon Wolin introduced us to inverted totalitarism. While it is no longer the government that decides what must be done, the private 'owners' just buy the government, the judiciary, the press, or whatever is needed to achieve their means.

When I cite Germany, it is not so much AfD, but the 2€/hour jobs I am worried about. When I cite Belgium, it is not the fools of Vlaams Belang, but rather the un-taxing of corporations and the tear-down of social justice that worries me.

TedWa , June 2, 2016 at 10:19 am

Inverted totalitarianism is the mirror image of fascism, which is why so many are confused. Fascism is just a easier term to use and more understandable by all. There is not a strict adherence to fascism going on, but it's still totalitarian just the same.

jan , June 2, 2016 at 10:54 am

Hi
I live in Europe as well, and what to think of Germany's AfD, Greece's Golden Dawn, the Wilder's party in the Netherlands etc. Most of them subscribe to the freeloading, sorry free trading economic policies of neoliberalism.

myshkin , June 2, 2016 at 11:28 am

Searched 'current fascist movements europe' and got these active groups from wiki.

National Bolshevik Party-Belarus
Parti Communautaire National-Européen Belgium
Bulgarian National Alliance Bulgaria
Nova Hrvatska Desnica Croatia
Ustaše Croatia
National Socialist Movement of Denmark
La Cagoule France
National Democratic Party of Germany
Fascism and Freedom Movement – Italy
Fiamma Tricolore Italy
Forza Nuova Italy
Fronte Sociale Nazionale Italy
Movimento Fascismo e Libertà Italy
Pērkonkrusts Latvia
Norges Nasjonalsosialistiske Bevegelse Norway
National Radical Camp (ONR) Poland
National Revival of Poland (NOP)
Polish National Community-Polish National Party (PWN-PSN)
Noua Dreaptă Romania
Russian National Socialist Party(formerly Russian National Union)
Barkashov's Guards Russia
National Socialist Society Russia
Nacionalni stroj Serbia
Otačastveni pokret Obraz Serbia
Slovenska Pospolitost Slovakia
España 2000 Spain
Falange Española Spain
Nordic Realm Party Sweden
National Alliance Sweden
Swedish Resistance Movement Sweden
National Youth Sweden
Legion Wasa Sweden
SPAS Ukraine
Blood and Honour UK
British National Front UK
Combat 18 UK
League of St. George UK
National Socialist Movement UK
Nationalist Alliance UK
November 9th Society UK
Racial Volunteer Force UK

Kokuanani , June 2, 2016 at 7:10 am

There's an excellent book, "Methland," about the scourge of meth across middle America. https://www.goodreads.com/book/show/6215979-methland

As one of the commenters noted, it's not an "expose" or sensational "Breaking Bad," but rather a discouraging portrait of the conditions that prompt and sustain meth use. Apparently it's being made into a movie. I believe Clint Eastwood is involved, so that should give it some traction.

Roger Smith , June 2, 2016 at 7:13 am

"…the gutters and cutters of neoliberalism"

This phrase is pure gold.

allan , June 2, 2016 at 7:44 am

The neoliberals are all too aware that the clock is ticking. In this morning's NYT, yet more talk of ramming TPP through in the lame duck.

sleepy , June 2, 2016 at 7:56 am

I moved to a small city/town in Iowa almost 20 years ago. Then, it still had something of a Norman Rockwell quality to it, particularly in a sense of egalitarianism, and also some small factory jobs which still paid something beyond a bare existence.

Since 2000, many of those jobs have left, and the population of the county has declined by about 10%. Kmart, Penney's, and Sears have left as payday/title loan outfits, pawnshops, smoke shops, and used car dealers have all proliferated.

Parts of the town now resemble a combination of Appalachia and Detroit. Sanders easily won the caucuses here and, no, his supporters were hardly the latte sippers of someone's imagination, but blue collar folks of all ages.

weinerdog43 , June 2, 2016 at 8:25 am

My tale is similar to yours. About 2 years ago, I accepted a transfer from Chicagoland to north central Wisconsin. JC Penney left a year and a half ago, and Sears is leaving in about 3-4 months. Kmart is long gone.

I was back at the old homestead over Memorial Day, and it's as if time has stood still. Home prices still going up; people out for dinner like crazy; new & expensive automobiles everywhere. But driving out of Chicagoland, and back through rural Wisconsin it is unmistakeable.

2 things that are new: The roads here are deteriorating FAST. In Price County, the road commissioner said last night that their budget allows for resurfacing all the roads on a 200 year basis. (Yes, that means there is only enough money to resurface all the county roads if spread out over 200 years.) 2nd, there are dead deer everywhere on the side of the road. In years past, they were promptly cleaned up by the highway department. Not any more. Gross, but somebody has to do the dead animal clean up. (Or not. Don't tell Snotty Walker though.)

Anyway, not everything is gloom and doom. People seem outwardly happy. But if you're paying attention, signs of stress and deterioration are certainly out there.

ChiGal , June 2, 2016 at 9:14 am

Depends where you are in Chicago – in some parts the potholes, boarded up structures, homeless and addicted folks begging on every corner tell the same story. It is a tale of two cities.

equote , June 2, 2016 at 10:43 am

Fascism is a system of political and social order intended to reinforce the unity, energy and purity of communities in which liberal democracy stand(s) accused of producing division and decline. . . . George Orwell reminded us, clad in the mainstream patriotic dress of their own place and time, . . . an authentically popular fascism in the United States would be pious and anti-Black; in Western Europe, secular and antisemitic, or more probably, these days anti-Islamic; in Russia and Eastern Europe, religious, antisemitic, and slavophile.

Robert O. Paxton, In The Five Stages of Faschism

"… that eternal enemy: the conservative manipulators of privilege who damn as 'dangerous agitators' any man who menaces their fortunes" (maybe 'power and celebrity' should be added to fortunes)

Sinclair Lewis It Can't Happen Here page 141

rfam , June 2, 2016 at 11:59 am

From the comment, I agree with the problems, not the cause. We've increased the size and scope of the safety net over the last decade. We've increased government spending versus GDP. I'm not blaming government but its not neoliberal/capitalist policy either.

1. Globalization clearly helps the poor in other countries at the expense of workers in the U.S. But at the same time it brings down the cost of goods domestically. So jobs are not great but Walmart/Amazon can sell cheap needs.

2. Inequality started rising the day after Bretton Woods – the rich got richer everyday after "Nixon Shock"

https://www.google.com/search?q=gini+coefficient+usa+chart&client=safari&rls=en&biw=1371&bih=793&tbm=isch&imgil=tRkxcVEo17ID8M%253A%253B-Lt3-YscSzdOaM%253Bhttp%25253A%25252F%25252Fwww.the-crises.com%25252Fincome-inequality-in-the-us-1%25252F&source=iu&pf=m&fir=tRkxcVEo17ID8M%253A%252C-Lt3-YscSzdOaM%252C_&usg=__bipTqXhWx0tXxke6Xcj5MUAcn-o%3D&ved=0ahUKEwjY18rm2onNAhUPeFIKHREjAS4QyjcILw&ei=nFdQV9iZCo_wyQKRxoTwAg#imgrc=tRkxcVEo17ID8M%3A

TedWa , June 2, 2016 at 12:30 pm

Hi rfam : To point 1 : Why is there a need to bring down the cost of goods? Is it because of past outsourcing and trade agreements and FR policies? I think there's a chicken and egg thing going on, ie.. which came first. Globalization is a way to bring down wages while supplying Americans with less and less quality goods supplied at the hand of global corporations like Walmart that need welfare in the form of food stamps and the ACA for their workers for them to stay viable (?).

Viable in this case means ridiculously wealthy CEO's and the conglomerate growing bigger constantly. Now they have to get rid of COOL's because the WTO says it violates trade agreements so we can't trace where our food comes from in case of an epidemic. It's all downhill. Wages should have risen with costs so we could afford high quality American goods, but haven't for a long, long time.

tegnost , June 2, 2016 at 12:35 pm

Globalization helps the rich here way more than the poor there. The elites get more money for nothing (see QE before you respond, if you do, that's where the money for globalization came from) the workers get the husk.

Also the elite gets to say "you made your choices" and other moralistic crap. The funny(?) thing is they generally claim to be atheists, which I translate into "I am God, there doesn't need to be any other"

Amazon sells cheap stuff by cheating on taxes, and barely makes money, mostly just driving people out of business. WalMart has cheap stuff because they subsidise their workers with food stamps and medicaid. Bringing up bretton woods means you don't know much about money creation, so google "randy wray/bananas/naked capitalism" and you'll find a quick primer.

Anonymous Coward , June 2, 2016 at 12:04 pm

Wait, you mean we don't all enjoy living in Pottersville? For anyone missing the reference, you clearly haven't been subjected to It's a Wonderful Life enough times.

Steve Sewall , June 2, 2016 at 12:07 pm

What a comment from seanseamour. And the "hoisting" of it to high visibility at the site is a testament to the worth of Naked Capitalism.

seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nation's public school system.*

And as I suspect seanseymour would agree, when a nation loses public education, it loses everything.

But I don't want to spend all morning doing that because I'm convinced that it's not too late for America to rescue itself from maelstrom in which it finds itself today. (Poe's "Maelstrom" story, cherished by Marshall McLuhan, is supremely relevant today.)

To turn America around, I don't look to education – that system is too far gone to save itself, let alone the rest of the country – but rather to the nation's media: to the all-powerful public communication system that certainly has the interactive technical capabilities to put citizens and governments in touch with each other on the government decisions that shape the futures of communities large and small.

For this to happen, however, people like the us – readers of Naked Capitalism – need to stop moaning and groaning about the damage done by the neoliberals and start building an issue-centered, citizen-participatory, non-partisan, prime-time Civic Media strong enough to give all Americans an informed voice in the government decisions that affect their lives. This Civic media would exist to make citizens and governments responsive and accountable to each other in shaping futures of all three communities – local, state and national – of which every one of us is a member.

Pie in the sky? Not when you think hard about it. A huge majority of Americans would welcome this Civic Media. Many yearn for it. This means that a market exists for it: a Market of the Whole of all members of any community, local, state and national. This audience is large enough to rival those generated by media coverage of pro sports teams, and believe it or not much of the growth of this Civic media could be productively modeled on the growth of media coverage of pro sports teams. This Civic Media would attract the interest of major advertisers, especially those who see value in non-partisan programming dedicated to getting America moving forward again. Dynamic, issue-centered, problem-solving public forums, some modeled on voter-driven reality TV contests like The Voice or Dancing with the Stars, could be underwritten by a "rainbow" spectrum of funders, commercial, public, personal and even government sources.

So people take hope! Be positive! Love is all we need, etc. The need for for a saving alternative to the money-driven personality contests into which our politics has descended this election year is literally staring us all in the face from our TV, cellphone and computer screens. This is no time to sit back and complain, it's a time to start working to build a new way of connecting ourselves so we can reverse America's rapid decline.

OK, so I hear some of you saying, corporate America will never let this Civic Media get off the ground. My short answer to this is that corporations do what makes money for them, and in today's despairing political climate there's money to be made in sponsoring something truly positive, patriotic and constructive. And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final.

seanseymour, thanks for your insights and thanks, Yves, for putting them where we can see them.

* For any Yalies out there, I documented these roles in this 30-page historical memorial to my dad.

[Jun 02, 2016] Offshore decline rate can reach 30 percent per yar and that mean that the sudden halt to offshore development will result in big offshore production declines

Notable quotes:
"... It is hard to pinpoint these decline rates exactly since each field is unique unto itself. What the industry generally believes is that offshore production declines at twice the rateof conventional onshore. ..."
"... That would put the offshore decline rate somewhere between 15-20% per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines. ..."
"... Off a 22 million barrel per day production base-15-20%= 3.3-4.4 million barrels a day-gone. That is substantially more than the spare capacity of OPEC right now. That means that in just one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore exploration and development stagnate. ..."
peakoilbarrel.com

andy hamilton , 06/01/2016 at 10:32 pm

A cracking read – offshore contraction:

http://www.oilvoice.com/n/This-Wipes-Out-Any-Spare-Capacity-OPEC-Has/33091bb719f9.aspx

"Offshore production has lower decline rates than shale does, but considerably higher decline rates than onshore vertical developments.

It is hard to pinpoint these decline rates exactly since each field is unique unto itself. What the industry generally believes is that offshore production declines at twice the rateof conventional onshore.

That would put the offshore decline rate somewhere between 15-20% per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines.

Off a 22 million barrel per day production base-15-20%= 3.3-4.4 million barrels a day-gone. That is substantially more than the spare capacity of OPEC right now. That means that in just one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore exploration and development stagnate.

[Jun 02, 2016] Trump University playbooks offer glimpse of ruthless business practices

Notable quotes:
"... In the USA, those at the bottom collaborate based on the 'promise' that the American Dream offers them a shot at the top, if they hold the party line. ..."
"... What they do not realize is that the "party" counts on the weight of their mass to hold that line for THEMSELVES ALONE. The people who back it all are thrown under the bus with great regularity. They never see it until the wheel roll over them and by that time they have sucked millions of others into the illusion that they are the "one" special one who will make it from the bottom and be welcomed as a peer into the 1%. ..."
"... It is not so surprising. Hope is a hard thing to kill and an easy thing to exploit. ..."
"... He is being sued for "deceptive business practices" which is to do with the content of his so-called University courses. You can be a snake oil salesman and pressure people into buying more expensive stuff, but you can't sell them lemons. There are consumer protection laws to prevent that, and that's what these lawsuits are doing. ..."
"... 'Just following orders', which is basically what you are trying to justify, in a business context, has been discredited as a modus operandi and is not a legal defence (hence the lawsuit, with which I wish them the very best of luck). ..."
"... Meanwhile, the more one learns about the judge and the more this judge is in conflict of interest (IMO). This judge is for open borders and illegal immigration, is a strong advocate for La Raza (yes, that anti-White and pro-illegal Mexican hate group), has links to the Clintons (Hillary) and appointed two prosecutors to the case who are extremely generous donators towards Hillary, including paying her significant $ for speeches. ..."
"... Though, I think, not everybody who attends boarding school becomes a sociopath. But sociopathy runs in families. And sociopathic parents tend to put kids into boarding school or reformatory for that matter. Just to get rid off them. ..."
"... In such a naked, dog-eat-dog society, there should also be no personal bankruptcy protection or ring-fencing for those who fail in business. All their assets siezed to pay off creditors. Not sure Trump would be so keen on that. ..."
"... Shamelessness is not a crime in the USA, but crime (fraud) is still a crime. ..."
"... Nothing will come out of this, that will effect the election. The practices documented in the papers released is a high pressure sales tactic which are used by many. The focus should be on what Trump stands for and bring the fight to him. Hillary Clinton is the wrong person in the wrong year to be able to take on Trump. She is flawed beyond repair, and is fighting not to lose, so careful with her words that they don't resonate. ..."
"... He's being sued, so it's a civil case. Documents can be made public if it's in the public interest to know about them. And when it looks very much like a con man is on his way to the Whitehouse, I'd call that a big yes for public interest. ..."
"... Killary attacks the MANY women who accuse her husband of rape, lies to the grand jury over White Water, to congress and the people about Benghazi, runs guns to ISIS, takes money from Saudi Arabia the worst women's rights violator, lies about being shot at landing in Bosnia, approves uranium mining deal to Russian concerns while SOS and receives millions to her foundation at the same time, starts an unregistered hedge find in Columbia of all places, takes millions from banks and you fault Trump for greed and making his own way without influence peddling while in public office. ..."
"... A snake oil salesman, a 'boiler room' operator, a phishing scammer, that's all Trump is. Honestly, is there any lie this sociopath could not tell? Is there any con game too crooked and despicable for even him? ..."
"... Sounds like a third world country with no social contract other than the "opportunity" to exploit one another. ..."
"... HRC was paid $385,000 for 3 speeches given to Goldman Sachs, nearly 10 times what the Trump 3 day course costs per person. Based on the speeches we hear from HRC, what could have been in these speeches that made them so valuable? Afterward there may have been the same buyer's remorse felt by Trump-course attendees. The comments that say that the U.S. is full of scams like this are on target, starting with the $1 lottery ticket. It is the dream that brought and brings people to the U.S., and if it turns out to be an expensive nightmare, the answer is "caveat emptor." ..."
www.theguardian.com

More than 400 pages of released Trump University files describe how staff should target financial weaknesses to sell high-priced real estate courses

A federal judge has given the world an unprecedented glimpse into the ruthless business practices Donald Trump used to build his business empire.


US district court judge Gonzalo Curiel on Tuesday made public more than 400 pages of Trump University "playbooks" describing how Trump staff should target prospective students' weaknesses to encourage them to sign up for a $34,995 Gold Elite three-day package.

Trump University staff were instructed to get people to pile on credit card debt and to target their financial weaknesses in an attempt to sell them the high-priced real estate courses.

The documents contained an undated "personal message" from Trump to new enrollees at the school: "Only doers get rich. I know that in these three packed days, you will learn everything to make a million dollars within the next 12 months."

The courses are now subject to legal proceedings from unhappy clients.

This shows someone who was absolutely shameless in his willingness to lie to people - Eric Schneiderman

Judge Curiel released the documents, which are central to a class-action lawsuit against Trump University in California, despite sustaining repeated public attacks from Trump, who had fought to keep the details secret.

Curiel ruled that the documents were in the public interest now that Trump is "the front-runner in the Republican nomination in the 2016 presidential race, and has placed the integrity of these court proceedings at issue".

... ... ...

The playbook contains long sections telling Trump U team members how to identify buyers and push them to sign up for the most expensive package, and to put the cost on their credit cards.

"If they can afford the gold elite don't allow them to think about doing anything besides the gold elite," the document states.

If potential students hesitate, teachers are told to read this script.

As one of your mentors for the last three days, it's time for me to push you out of your comfort zone. It's time for you to be 100% honest with yourself. You've had your entire adult life to accomplish your financial goals. I'm looking at your profile and you're not even close to where you need to be, much less where you want to be. It's time you fix your broken plan, bring in Mr. Trump's top instructors and certified millionaire mentors and allow us to put you and keep you on the right track. Your plan is BROKEN and WE WILL help you fix it. Remember you have to be 100% honest with yourself!

Trump University staff are instructed in how to persuade students to put the cost of the course on their credit cards, even if they have just battled to pay off debts.

Do you like living paycheck to paycheck? ... Do you enjoy seeing everyone else but yourself in their dream houses and driving their dreams cars with huge checking accounts? Those people saw an opportunity, and didn't make excuses, like what you're doing now.

Trump staff are told to spend lunch breaks in sign-up seminars "planting seeds" in potential students minds about how their lives won't improve unless they join the programme. They are also told to ask students personal questions to discover weaknesses that could be exploited to help seal the deal.

Collect personalized information that you can utilize during closing time. (For example: are they a single parent of three children that may need money for food? Or are they a middle-aged commuter that is tired of traveling for 2 hours to work each day?)

New York attorney general Eric Schneiderman, who has also sued Trump University , renewed his attacks on Trump on Tuesday. "You are not allowed to protect the trade secrets of a three-card Monte game," Schneiderman said ahead of the document's release. "If you look at the facts of this case, this shows someone who was absolutely shameless in his willingness to lie to people, to say whatever it took to induce them into his phony seminars," Schneiderman said.

Urban2 -> Karlyn Isaak Lotney 1 Jun 2016 09:17

This is no more of a fraud then lotion for baldness or pills for losing weight. Or anything else being sold for that matter. And it's district attorney that is using terms like shamelessness and lying. Those are defamatory terms, not legal.
Jonathan Shearer -> Susan Victoria 1 Jun 2016 09:14
Could you please name the prosecutors, giving dates and amounts of these donations? Can I have verified quote from Curiel where he expresses his STRONG support for La Raza? Exactly what are these "links" to Hillary?

No judge is in favor of illegal immigration, though he may be in favor of changes to law to change the status of illegal immigrant and/or to make legal immigration easier. Judges are not in favor of illegal activity.

Let's make America honest and verifiable (again).

Urban2 -> CaptainRogers 1 Jun 2016 09:13
If it were a civil case, they wouldn't have been in possession of Trump's internal documents. Besides nothing would stop the plaintiffs from disclosing documents themselves. Public interest would therefor not even be an issue. Now of course I'm not aware of all the intricacies, but it does look sinister. At least to me.
Sanibel -> Paul Freeman 1 Jun 2016 09:10
"And I think that they want a president who is not afraid of making tough, ruthless decisions (in America's interests)." The US already does that with poor defenseless countries. Problem is if Trump tries that with powerful countries( with nukes like China) it may not end so well...
SakkiSelznick Susan Victoria 1 Jun 2016 09:10
"Collect personalized information that you can utilize during closing time. (For example: are they a single parent of three children that may need money for food?" The judge didn't write that. Mr. Trump's university did.
Debra Smith -> J Nagarya 1 Jun 2016 09:10
In the USA, those at the bottom collaborate based on the 'promise' that the American Dream offers them a shot at the top, if they hold the party line.

What they do not realize is that the "party" counts on the weight of their mass to hold that line for THEMSELVES ALONE. The people who back it all are thrown under the bus with great regularity. They never see it until the wheel roll over them and by that time they have sucked millions of others into the illusion that they are the "one" special one who will make it from the bottom and be welcomed as a peer into the 1%.

It is not so surprising. Hope is a hard thing to kill and an easy thing to exploit.

SakkiSelznick -> RogerColin 1 Jun 2016 09:07
A sales playbook that teaches seeking out "a single parent with three kids who struggles to buy food" and targeting them for credit card debt" is not only cruel but illegal. And it's far from buying low and selling high.
tonichicago -> Wordblind 1 Jun 2016 09:07
He appeals to those who hate "big government". Ironically, they don't seem to realise that his threats to curtail the "nasty and dishonest" press simply mean that we will end up with unfettered government. There will be no accounting to anyone.
tonichicago -> Aaron Rosier 1 Jun 2016 09:04
He is being sued for "deceptive business practices" which is to do with the content of his so-called University courses. You can be a snake oil salesman and pressure people into buying more expensive stuff, but you can't sell them lemons. There are consumer protection laws to prevent that, and that's what these lawsuits are doing. He sold them all a bill of goods.
Debra Smith -> downhillracer117 1 Jun 2016 09:01
You have hit at the crux of the matter.

This is TEAM BASED. Americans are indoctrinated to TEAM from very early in life. Every sport event, the high school team, the prom and everything in college life is TEAM BASED. You are "in" or you are "out" (meaning human or not human) by the colour of your jersey. Truth, justice, facts, are all dismissed based on what team you belong to.

ID446302 1 Jun 2016 09:00
An American success story? Exceptionalism to its core. Hidden in the shadows of our IRS and our exceptional judicial, until you threaten the political establishment by running for president.
J Nagarya -> bobkolker 1 Jun 2016 09:00
He is being sued NOW, and he is attacking the judge because he KNOWS he is being exposed for the crook he is.

Stop defending criminality: he is being sued for his tactics because they are NOT legal.

Pay attention to the news reports on his methods, as exposed in the Trump "University" materials he DIDN'T WANT released, but which now the court has released as result of his baseless slanders against the judge presiding over the case because HE KNOWS they expose his criminality.

keepsmiling -> Echocell 1 Jun 2016 09:00
Hate to tell you this, but what was written in the playbook is called "sales techniques." It's used by every company on the planet that has a product to sell. Don't hate the player, hate the game (capitalism).
'Just following orders', which is basically what you are trying to justify, in a business context, has been discredited as a modus operandi and is not a legal defence (hence the lawsuit, with which I wish them the very best of luck).

You have to fight the players - 'capitalism' is too nebulous a concept to 'fight', so you end up not seeing the wood for the trees. Exposing them one at a time is fine - it's all part of the big picture and is educational. There's a lot of educating to be done with regard to Trump's followers.

Susan Victoria 1 Jun 2016 08:56
Here we go again... the public will be fed a series of quotes, almost all taken out of context, designed to bash Trump and spread even more hate.

Meanwhile, the more one learns about the judge and the more this judge is in conflict of interest (IMO). This judge is for open borders and illegal immigration, is a strong advocate for La Raza (yes, that anti-White and pro-illegal Mexican hate group), has links to the Clintons (Hillary) and appointed two prosecutors to the case who are extremely generous donators towards Hillary, including paying her significant $ for speeches.

Very interesting testimony coming out of Clinton's deposed staff re her email server, including she didn't have a password... the mysterious fire... and more. But who cares? Trump-bashing is the order of the day.

youssou -> Ortho 1 Jun 2016 08:53
Lol interesting theory ... ;-)

I had to google it ... and yes: http://www.businessinsider.com/new-york-military-academy-closes-2015-9?IR=T

Though, I think, not everybody who attends boarding school becomes a sociopath. But sociopathy runs in families. And sociopathic parents tend to put kids into boarding school or reformatory for that matter. Just to get rid off them.

Guthrum -> MartinMckay 1 Jun 2016 08:49
In such a naked, dog-eat-dog society, there should also be no personal bankruptcy protection or ring-fencing for those who fail in business. All their assets siezed to pay off creditors. Not sure Trump would be so keen on that.

To do otherwise would be rewarding failure, using the state to prop up losers.

AntonZ1 -> BiggyZ 1 Jun 2016 08:49
Donald Trump University is not a religion. Drumpf is more cult leader than religious scholar.
Karlyn Isaak Lotney Urban2 1 Jun 2016 08:47
Shamelessness is not a crime in the USA, but crime (fraud) is still a crime.
ClearItUp 1 Jun 2016 08:45
Nothing will come out of this, that will effect the election. The practices documented in the papers released is a high pressure sales tactic which are used by many. The focus should be on what Trump stands for and bring the fight to him. Hillary Clinton is the wrong person in the wrong year to be able to take on Trump. She is flawed beyond repair, and is fighting not to lose, so careful with her words that they don't resonate.
CaptainRogers -> Urban2 1 Jun 2016 08:44
He's being sued, so it's a civil case. Documents can be made public if it's in the public interest to know about them. And when it looks very much like a con man is on his way to the Whitehouse, I'd call that a big yes for public interest.
Tom Voloshen 1 Jun 2016 08:42
Killary attacks the MANY women who accuse her husband of rape, lies to the grand jury over White Water, to congress and the people about Benghazi, runs guns to ISIS, takes money from Saudi Arabia the worst women's rights violator, lies about being shot at landing in Bosnia, approves uranium mining deal to Russian concerns while SOS and receives millions to her foundation at the same time, starts an unregistered hedge find in Columbia of all places, takes millions from banks and you fault Trump for greed and making his own way without influence peddling while in public office.
OpineOpiner 1 Jun 2016 08:40
A snake oil salesman, a 'boiler room' operator, a phishing scammer, that's all Trump is. Honestly, is there any lie this sociopath could not tell? Is there any con game too crooked and despicable for even him?
PostTrotskyite -> MartinMckay 1 Jun 2016 08:36
Sounds like a third world country with no social contract other than the "opportunity" to exploit one another.

Btw, supplanting content with the cheer leading, rhetoric, hate, and cheap one liners is the creed of the Trumpeteers.

AntonZ1 -> Aaron Rosier 1 Jun 2016 08:34
A 'predatory capitalist' is a thief, no matter how "biased" or "naive" you are.
Aaron Rosier -> ElfenLied2 1 Jun 2016 08:28
Clinton is already tirelessly working to drive voters away with her beams of blind arrogance, pretentiousness, divisiveness, unwillingness to accept/acknowledge consequence of her glaring failures of judgement, the naked pandering, the belligerent "campaign theme", and of course all of the old hits (Slick Billy and the Slimers, NAFTA, welfare reform, KXL, TPP, Fracking, Wall Street Transcripts, etc).

Donald Trump will feast on Clinton's garbage, while slowly moderating his platform positions, and steering his rhetoric slowly back to professional (from simpleton).

karmarama -> elemenohpee 1 Jun 2016 08:21
You seem to misunderstand me. Like several other posters on this thread, I am suggesting that Trump's practices are part of the wider world of business, and not so far from normal (not, in my view the same as 'acceptable') practices. The use of the name 'University' was certainly fraud, but why was it not caught right away by whoever is in charge of that in the US? His sales pitch, while pretty sleazy, is not far away from normal practice in brokerage, real-estate, holiday sales and many other areas of business, including the bottom of the education industry - indeed, doesn't every university 'oversell' itself to students, hence the need for independent surveys, and aren't there a host of 'degree for sale' schools in the US?

As a socialist I consider it all to be 'unacceptable', and I hope you don't take me for a Trump supporter, which I suspect you do. He is even more unacceptable than the Bush clan was! However those who are using this to smear Trump are walking a tightrope between 'normal' and 'fraud' when I think that the distinction is not at all clear.

ID673139 -> Carl123 1 Jun 2016 08:18
Clinton has a pretty shady past as well, like covering up potential rape allegations for Bill.

I'm not saying it is a defence at all, but as soon as Trump becomes a presidential candidate suddenly its front page news. He not done anything illegal, and if your so upset over these business practices why not look at the industry as a whole and people who do skin people with these practices. I said it before with Clinton or Trump either of them is a bad choice for president.

bbqtv -> ConnecticutNutmeg 1 Jun 2016 08:18
Student loans are encouraged even for courses & "degrees" that have no future earning potential. Colleges & universities increase non teaching & non research "staff" using these funds because they have money to spend for which there is NO accounting. [Why do you need to hire two assistants? So I don't have to teach!"
ConnecticutNutmeg 1 Jun 2016 08:10
Trump U. apparently targeted adults-not teenagers.

If only all the millions of students who were coerced by high school guidance counselors and campus administrators to sign contracts for government student loans, and are now on the hook for hundreds of thousands of dollars of debt without any good job prospects in this Obama economy, could sue the government for failing them as these students are suing Trump. Many of these students had no business going on to college and many drop out without getting the degree-but they still owe the money.

By having the students sign these loan agreements (not their parents) , government considers college students adults . But when it comes time to repay these loans, all of a sudden all the Democrats whine about these poor kids and their debt. Make up your mind. Are they old enough to take on the responsibility of signing a contract or not? If not, perhaps they should not be given the ballot either.

Muz Murray -> c0n0r 1 Jun 2016 08:03
Just about everything, if past presidents and their cronies are anything to go by. They are in it for the business of making money and feathering their own nests, while blithely blabbering about doing it 'for America.'
Martin Cohen 1 Jun 2016 07:55
I just don't understand how the US has wound up with a Clinton or Trump choice. Can the electorate be so politically disengaged as to allow one of these two into the most powerful job in the Western world? If Trump is simply the anti-establishment protest vote, that is all very well but someone as divisive and offensive as him can never unite a country. There are already protests on the streets that thankfully haven't turned too violent yet but it won't take much for heavily armed riot police to trigger something unthinkable. Being President always seemed to be a unifying job that commanded loyalty and respect even from staunch opponents. I always admired that about the Presidency. I don't see much evidence of it these days. Has respect for politics and politicians reached at an all time low in The States too? Trump isn't the answer, nor is a shady Clinton. We need politics and our politicians to once again embrace the concept of public service, morality and the precise rule of law. It would have been tremendous if more principled candidates had emerged victorious and given a much needed shot of public confidence in such a maligned vocation. I fear for the future. We may have stopped the cycle of European wars but globally it's more dangerous than ever. A competent steady hand on the tiller is what's needed now, especially in America.
Paul Freeman 1 Jun 2016 07:47
Unfortunately, american's tend to believe that businesses should be ruthless - except, of course, if it is them who has been the victim of a ruthless scam. And I think that they want a president who is not afraid of making tough, ruthless decisions (in America's interests). So it would not surprise me if these revelation actually boost Trump's popularity.
Tommo68 -> HardboiledChicken 1 Jun 2016 07:39
anyone who can stump up 35 grand for a three day course doesn't need the course in the first place...


HiramsMaxim -> garth25 1 Jun 2016 07:11

I'm not going to analyse all 50 States. US elections come down to a very few swing States. Those three are the most important.

The "Latino" vote in Florida is primarily not Mexican. Assuming legal immigrants will automatically support illegals from a different country is probably not wise. The real power in Florida is the retirees, although as Florida's population continues to grow, that is diminishing.

I very much doubt bill Clinton can capture white rural voters from Trump.

Clinton has nowhere near the support that Obama had among black voters. And, it doesn't do any good to win California with a bigger margin, the electoral votes remain the same.

I have no idea what the outcome will be, but I can say that Mrs. Clinton's huge lead has evaporated in about a month.


Tom Voloshen -> Maharaja Brovinda Singh 1 Jun 2016 07:09

We came we saw he died...the human Killary.....


Tom Voloshen 1 Jun 2016 07:09

The US keeps the the piece around the world using 720 military bases in foreign countries under the direction of people like Killary and the result is 15 years of war, death, destruction, millions dead, countries dissolved, missile batteries ringing Russia, our economy debt/GDP equal to Greece with NO END INSIGHT.....and you speak about Trump's lack of success? Lets talk of Killary's, Obama's, Bush's, Billy's....vote for anyone but Killary.


RussZimm 1 Jun 2016 07:07

HRC was paid $385,000 for 3 speeches given to Goldman Sachs, nearly 10 times what the Trump 3 day course costs per person. Based on the speeches we hear from HRC, what could have been in these speeches that made them so valuable? Afterward there may have been the same buyer's remorse felt by Trump-course attendees. The comments that say that the U.S. is full of scams like this are on target, starting with the $1 lottery ticket. It is the dream that brought and brings people to the U.S., and if it turns out to be an expensive nightmare, the answer is "caveat emptor."


Karen Poyser -> HardboiledChicken 1 Jun 2016 07:06

What a horrible way to see the world! These are vulnerable people being prayed upon, desperation can make people do stupid things. Considering all the ''american dream'' capitalist propaganda thrust on people from the minute they are old enough to comprehend, its surprising more don't fall for this sort of thing.


tempestteacup 1 Jun 2016 07:27

Am I alone in finding the steady drip of tidbits regarding Trump's business practices interminable? It is not news and it is not even particularly illuminating. This is all known grown that merely lends him greater exposure and entrenches his supporters in their view that he is the victim of an establishment conspiracy to smear, discredit and misunderstand.

Meanwhile, we have next to nothing on the devastating IG report on Clinton's e-mail server. We have almost no analysis on how the Republican Party is quietly, begrudgingly, rallying around Trump at exactly the moment that the Democrats are doing the opposite and degenerating into a fractious mess because they meretriciously anointing a terrible candidate 18 months ago.

Trump has received millions of votes. He has decimated a crowded Republican field, most of them smooth political operators with huge financial backing. This did not happen because there are millions of racists in America. It is because we are entering a potentially bloody phase in America's Culture Wars, with an increasingly mindless adherence to identity politics pitted against the historic grievances of a working class that now feels abandoned by the left (Bernie notwithstanding).

Anything about that, instead of fanning the flames of Trump's Plot Against America-style campaign?

*tumbleweed*


edithamy -> ljonesjr 1 Jun 2016 06:48

Salesman uses corrupt and illegal sales techniques to generate sales would be even more of a shock headline.


Kris Penny 1 Jun 2016 06:41

Not as ruthless as other ventures he's been involved in....
http://www.alternet.org/labor/donald-trumps-hiding-something-those-unreleased-tax-returns


Rita Hoeffner -> SEADADDY 1 Jun 2016 06:38

The real problem here is that Obama got elected, who had such a checkered past yet the media have him a pass. The media is still giving Hillary a pass.

At least with Trump, by the time he gets in office, I have a feeling he will be thoroughly vetted. What a nice change from having no clue about the man in the White House for the last 8 years!

Was he born in Kenya as a book jacket reported? Was he born in Hawaii as a dubious birth certificate stated? Who was his mom? Who was is dad? Who were his mentors? Where did he go to school? What were his grades? Lots of questions that we were told several answers to, but he was NEVER really vetted by the press, only anointed.

I'd rather know for sure what I'm getting! I think I know how ruthless Trump is...even before this article....that's why I'm voting for him.

[Jun 01, 2016] The Offshore Oil Business Is Crippled And It May Never Recover

Notable quotes:
"... Offshore production has lower decline rates than shale does, but considerably higher decline rates than onshore vertical developments. ..."
"... That would put the offshore decline rate somewhere between 15-20 percent per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines. ..."
"... That is substantially more than the spare capacity of OPEC right now. ..."
oilprice.com

OilPrice.com

... ... ...

Offshore Oil Production By The Numbers

Offshore production accounts for 30 percent of total global oil production. The percentage of global production has remained the same since the early 2000s but the absolute amount of production has grown.

(Click to enlarge)

Today nearly 22 million barrels of oil per day is produced offshore; the figure in the chart above includes all liquids.

Offshore production has lower decline rates than shale does, but considerably higher decline rates than onshore vertical developments.

It is hard to pinpoint these decline rates exactly since each field is unique. What the industry generally believes is that offshore production declines at twice the rate of conventional onshore.

Related: Nigeria's Oil Production In Free Fall After More Attacks

That would put the offshore decline rate somewhere between 15-20 percent per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines.

Off a 22 million barrel per day production base, 15-20 percent would equal 3.3 to 4.4 million barrels a day-gone. That is substantially more than the spare capacity of OPEC right now. That means that in just one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore exploration and development stagnate.

... ... ...

[May 31, 2016] Youre witnessing the death of neoliberalism – from within

Notable quotes:
"... This neoliberal ideology died already in 2008 and is kept alive artificially, it's Frankenstein ideology. ..."
"... Certainly something very wrong with a system that sees a larger and larger share of our national wealth going to fewer and fewer people. ..."
"... We're not quite there yet, but with the dawn of the information age, and the flow of information about how so called perfect "free"!markets are so recklessly constructed, controlled - not to mention generally to the benefit of those already with more than enough - it can't be long before we move on from this ridiculous charade to something altogether more intelligent. ..."
"... the word "mature" was hiding complete irresponsibility of driven sociopaths. The usual confidence trick...: " don't you trust me, me the caring man !" ..."
"... So do you think neoliberalism could adapt away from just focusing on growth, in its almost certain attempts at clinging to power? ..."
"... Neo-liberalism is just another failed attempt but has perhaps been the most successful so far out of the different ideologies. ..."
"... the lack of factual evidence demonstrating the utility of privatization remains one of the most telling aspects of its failure. ..."
"... The economists at the IMF - like most of their colleagues elsewhere in this dismal profession - have an unsullied track record of getting everything wrong. Why would they be right about this? ..."
"... Neo-liberalism is bankrupt and austerity is the economic equivalent of a severely self-destructive bipolar personality disorder ..."
"... Even when the British Empire was at its high point, there were still slums and poverty. Now the world population has gone up hugely India and China are huge consumers and so is the rest of the world. People are living much longer and have to be cared for. At the same time the food sources in the seas and land are being used up and their eco systems destroyed. Not to mention climate change and many other things that would take pages to write about. Yet we expect our standards of living to improve or at least be maintained. The outlook is not favorable, under any system of government. ..."
"... I don't think the obsessions of endless growth and financialism are going to disappear within this century, but they're almost certainly going to have to downsize ambitions and take a more sustainable place alongside the state and ever increasing non-market-non-state sectors. Either that or party up with the proponents of soft totalitarianism. ..."
"... Neoliberalism is just Laissez-faire capitalism renamed. In-between the two we had welfare capitalism, or social democracy as some call it, that arose as a response to the crippling societal problems caused by neoliberalism - mass poverty, disease, economic collapse and war. As soon as some welfare reforms were put in place, using public money to provide stability for people, they were under attack by capitalists who have a pathological need to glean personal profits from anything and everything. So we came full circle, back round to Laissez-faire capitalism. ..."
"... The history of capitalism is one of rapacious greed, intermittently tempered with redistribution policies when the either the elites cannot profit further without some form of redistribution taking place or they fear the pitchforks at the door. Capitalism cannot be fixed, it cannot be tempered, it will always end up back like this, as capitalism is the crisis. History shows us that accepting reform of the system only ever provides a fleeting fix, we need a new economic model entirely, capitalism has to end. It's not just a human issue, but for the sake of all life on Earth, we need an entirely different economic model. ..."
"... The failure of an ideology premised on something that doesn't even exist (free-markets) should be of no surprise. Market ideology was built around a crackpot idea of capital flows, concomitant with rational individual 'self interest', behaving like a self-regulating eco-system. Just remove as much government, regulatory framework and hierarchy as possible, and let eco-Gaia set the natural balance. ..."
"... The people promulgating this quixotic nonsense ranged from fugitives from totalitarian regimes like Hayek (whose motives for imagining a utopian fantasy land were at least understandable); to right-wing politicians who at root believed in anything but individual freedom. Thus, state spending increased under Reagan (except on the wealthier section of society), and the global free-market became a centrally-planned oligarchy. Furthermore, so much capital has become securitized that 'trickle-down' can no longer be taken seriously as a concept. ..."
"... "Mass privatization not only does not deliver on its own terms, but is fundamentally anti-democratic." ..."
"... While even Guardian columnists (the Guardian being a leading Neoliberal voice) talk prematurely about the downfall of Neoliberal ideology the fact is that the EU is so thick with Neoliberals hand picked by Merkel, and Germany/Merkel's unchallenged hegemonic power over the EU it could take decades to change the people at the top and decades more to change the bureaucracy of the EU. ..."
"... The world has a very serious problem on its hands. Vast wealth has been accumulated by the oligarchs they have taken this wealth in the same way the Porsche family has taken billions from VW - every penny of which they get to keep in spite of it having been earned from fraud and racketeering. Huge amounts of oligarch wealth has been extracted by such illegal means. ..."
"... Leave those fortunes in place and the same thing will happen that happened after the "reforms" of the New Deal - the oligarchs pay higher taxes for a brief time until they bribe and blackmail themselves back into control and it all starts again. ..."
"... In the 70s, though, there was much more pluralism in economics. Although neoliberalism was hardly mainstream, it did have respected proponents and prestigious econ. departments were teaching it. Today that is not the case- 'economics' is taught as if the word referred to the neoclassical synthesis (from which neoliberalism is derived) alone, with all other traditions relegated to crank or historical curiosity status. There are very few respected universities where you can get an econ PhD and not produce work within the neoclassical framework (Utah being an honorable exception, as well as SOAS and City in the UK). ..."
"... The old orthodoxy wasn't Keynesian by 1970. Keynesian economics had been progressively abandoned after about 1960. If you look at the Lewis Powell Memo of 1971 you can see the fundamentals of Neoliberalism were all in place and the takeover was beginning. ..."
"... Only those who benefit from neoliberal dogma support it. It tends to screw everybody else over. ..."
"... Neoliberalism seems to involve sacrificing anything and everything society has to give on the altar of "growth", which is what keeps derivatives markets profitable for the 0.0001%. ..."
"... What a dreadful mess my generation has made of the world, the irony being that we are beginning to value more highly the intangible values we have lost than the gadgets we have created. It's beginning to appear that revolution is the only cure. ..."
"... As I recall the 60's was the real start of "consumerism" with the ending of postwar austerity and the popularity of Hire Purchase, expansion of home and car ownership, people renting TV's buying washing machines, fridges and starting to take foreign holidays. ..."
"... The world changed in 2008 just as in 1929 and 1973: an economic orthodoxy ran out of steam. We have yet to decide on an alternative, hence the interregnum, but the first thing to change is, as ever, discourse, because, like J.M.Keynes before them, the IMF, World Bank et al see their mission as saving Capitalism. Neoliberalism can be sacrificed as yet another false God, a discredited version of Capitalism, a virulent strain, a form of fundamentalism. ..."
"... Unfortunately the real world does not conform to this free market libertarian fantasy. When China refused to buy its exports, Britain sent in its gunboats to force them to buy ..."
"... If someone admits that they murdered someone, it doesn't mean that they cease to be a killer or that they can be forgiven and can now be trusted, the likelyhood is that they are simply sociopathic in nature. It was just a moment of reflection, or is it that they are trying to regain trust, if anything one should be on a higher level of alertness, the distraction has been made, now we must wait for their next move. ..."
"... Great, thought provoking article. It raises the notion that neoliberalism has failed because it has only benefited an elite few whilst everyone else is worse off. Maybe that isn't a failure though? Maybe that's what it is meant to do? ..."
"... Of course it was meant to do just that. Neo-liberalism is class warfare..... the rich and privileged won so decisively that I doubt we can emerge from neo-liberalism without violence or at least a period with populist autocratic governance. ..."
"... Thatcher, Reagan - both arch-disciples of Hayek and others of the Austrian & Chicago schools of economic shite, and both massively responsible for it being liberally spread across the world. Would have been nice to see a recognition of their roles in this, along with the second wave of Clinton & Blair, with their "third way" economic take on the same models. ..."
"... And now we have Hilary as a contender for the presidency, as orthodox a neolib bag carrier as they come, and someone who will continue to carry the torch for Bills policies. Failing that, we have the absolute lunacy of Trump to look forwards to, and as a man who so obviously worships at the alter of Mammon, no game changers from him to be expected either. ..."
"... Neoliberal ideology has been an instrument for justifying the growing wealth and power of financiers and global corporations for about 40 years. They are highly unlikely to want to let go their gains, so reports of the impending 'death' of neoliberalism are a bit premature. The fact that this comes from the IMF makes me wonder if it isn't another ploy to divert attention from the ongoing process of wealth consolidation by making us think that a big change in policy is just around the corner. Ostry is an excellent scholar who has written some good papers warning about inequality and I have no doubt that he wants to influence decision-making. But it may be that he is being used as a 'useful idiot' by the powers that be. ..."
"... Neoliberalism has turned out to be similar in many ways to a better connected and more efficient form of feudalism. Great for those with power, greed and wealth and very much at the expense of everyone else. Perhaps newspapers and mass media have replaced swords, so it is an improvement in some ways. ..."
"... It strikes me that rather than "neoliberalism having failed", the most striking movement since the 1960ies is how private capital managed to bend democratic socialism (which means the welfare state in its various incarnations including in the USA) and bend it to its own profit. ..."
"... 'Neo-liberalism' or free market capitalism will die when a better alternative system is seen to be superior. As the article says there was a time when sensible people could believe that this better alternative was Marxian socialism. Sixty odd years later it is impossible to believe that. The remaining examples in the world like North Korea and Venezuela are to be avoided like the plague and previously socialist countries like China and Vietnam have longed eased to be so. ..."
"... So this was the reason for the death of the Ancien Regime in France and the death of the Romanovs? I think people were not going to wait for an alternative to come along. ..."
"... The same was thought/proclaimed about slavery, feudalism, colonialism. But new systems are born as the old ones become obsolete and an impediment to progress. Capitalism will go the same way. ..."
"... Free markets without state interference invariably drift towards feudalistic monopolies. They end up exactly where communism also ends up. A small elite controlling the economic fate of the masses. A "market" where supply and demand no longer play any part, because any small competitor can be bought or liquidated at will by the monopolist. ..."
"... Galbraith had seen this. He said that neoliberalism was like feeding the finest oats to the stallion in the hope it would generate some undigested droppings on which the sparrow could feed. ..."
"... The Achilles heel of neo-liberalism was that it over emphasized the supply side. Costs had to be driven down by emasculating Trade Unions, curbs on workers bargaining power were introduced and salaries plummeted, government services had to be cut with direct consequences on jobs and quality of life and, taxes to the rich were simultaneously cut exacerbating income inequality. ..."
"... Soviet state socialism lied, because it pretended to be a necessary step on the way to common ownership of the means of production: but instead fell into the hands of uncompromising thugs. It failed because the neoliberal capitalist system is a far more efficient way for uncompromising thugs to run things. ..."
"... The state has been militarised to such an extent armed revolution is all but impossible. What really terrifies them is that we will simply ignore them and create our own alternatives. Take Argentina in 2001 as an example. It was the only country in history to default on it's debt due to popular revolt. The revolt in question centered on people forming alternative social and economic services in their own communities around the rallying cry of "Que se vayan todos" or they can all go to hell. There are a few books published under that title about it that are free online. Similarly, have a look at this vid from David Graeber. You can start at 2:56 for a direct answer but it's worth watching the whole thing: https://youtu.be/mU1pQIMv8_A ..."
"... The dominant neoliberal, market fundamentalist order must, like any competent cult, enforce its authority by doubling down each time its worldview is threatened. This is accomplished by identifying and monetizing regions of social life that had hitherto been neglected or underutilized. In the latest sting, the student is reduced to the status of a consumer whose actions and decisions are governed purely by the market algorithm. The reduction must be so complete that the student-consumer identity should appear obvious and unquestionable. ..."
"... The captured organs of government managed to again bail out the big speculators and players, privatizing their gains during the expansion of the bubble and socializing their losses during its bust. In other words, a smooth operation of radiating risk from high-stakes gamblers and scammers to the society at large. However, the ripple effects of the latest crash have not been completely damped out and, if anything, the magnitude of the shock waves keeps increasing after each manifestation of discontent and protest against the neoliberal machine. ..."
www.theguardian.com

In the IMF's flagship publication, three of its top economists have written an essay titled " Neoliberalism: Oversold ?".

The very headline delivers a jolt. For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism. Now here comes the IMF, describing how a "neoliberal agenda" has spread across the globe in the past 30 years. What they mean is that more and more states have remade their social and political institutions into pale copies of the market. Two British examples, suggests Will Davies – author of the Limits of Neoliberalism – would be the NHS and universities "where classrooms are being transformed into supermarkets". In this way, the public sector is replaced by private companies, and democracy is supplanted by mere competition.

The results, the IMF researchers concede, have been terrible. Neoliberalism hasn't delivered economic growth – it has only made a few people a lot better off. It causes epic crashes that leave behind human wreckage and cost billions to clean up, a finding with which most residents of food bank Britain would agree. And while George Osborne might justify austerity as "fixing the roof while the sun is shining", the fund team defines it as "curbing the size of the state … another aspect of the neoliberal agenda". And, they say , its costs "could be large – much larger than the benefit".

Two things need to be borne in mind here. First, this study comes from the IMF's research division – not from those staffers who fly into bankrupt countries, haggle over loan terms with cash-strapped governments and administer the fiscal waterboarding. Since 2008, a big gap has opened up between what the IMF thinks and what it does. Second, while the researchers go much further than fund watchers might have believed, they leave in some all-important get-out clauses. The authors even defend privatisation as leading to "more efficient provision of services" and less government spending – to which the only response must be to offer them a train ride across to Hinkley Point C .

Even so, this is a remarkable breach of the neoliberal consensus by the IMF. Inequality and the uselessness of much modern finance: such topics have become regular chew toys for economists and politicians, who prefer to treat them as aberrations from the norm. At last a major institution is going after not only the symptoms but the cause – and it is naming that cause as political. No wonder the study's lead author says that this research wouldn't even have been published by the fund five years ago.

From the 1980s the policymaking elite has waved away the notion that they were acting ideologically – merely doing "what works". But you can only get away with that claim if what you're doing is actually working. Since the crash, central bankers, politicians and TV correspondents have tried to reassure the public that this wheeze or those billions would do the trick and put the economy right again. They have riffled through every page in the textbook and beyond – bank bailouts, spending cuts, wage freezes, pumping billions into financial markets – and still growth remains anaemic.

And the longer the slump goes on, the more the public tumbles to the fact that not only has growth been feebler, but ordinary workers have enjoyed much less of its benefits. Last year the rich countries' thinktank, the OECD, made a remarkable concession . It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the second world war. Even more remarkably, it said the same or worse applied to workers across the capitalist west.

Red Plenty ends with Nikita Khrushchev pacing outside his dacha, to where he has been forcibly retired. "Paradise," he exclaims, "is a place where people want to end up, not a place they run from. What kind of socialism is that? What kind of shit is that, when you have to keep people in chains? What kind of social order? What kind of paradise?"

Economists don't talk like novelists, more's the pity, but what you're witnessing amid all the graphs and technical language is the start of the long death of an ideology.

navarth , 2016-05-31 12:29:39
This neoliberal ideology died already in 2008 and is kept alive artificially, it's Frankenstein ideology.
RachelL , 2016-05-31 12:28:02
The introduction of A.I and robotic technology will probably kill off capitalism for good, particularly if the threat of job losses is realised. those with disposable income will just save, unwilling to commit to purchases for fear that they too will be soon losing their jobs.

Those who have lost their jobs won't buy anything other the most basic necessities.

The failure to comprehend the most basic requirements of capitalism; that people require jobs and a disposable income to actually buy things will be the final downfall, and the robots will sit rusting and covered in dust.

Cape7441 , 2016-05-31 12:27:59
Certainly something very wrong with a system that sees a larger and larger share of our national wealth going to fewer and fewer people.
pearjooce , 2016-05-31 12:27:21
When the capitalist ideologists whooped with joy and declared that socialism was dead back in 1990, I whispered to myself that, well, sure, everything passes, and neo-liberal capitalism would be next then. I reckoned about 25 years would do it, more or less. We're not quite there yet, but with the dawn of the information age, and the flow of information about how so called perfect "free"!markets are so recklessly constructed, controlled - not to mention generally to the benefit of those already with more than enough - it can't be long before we move on from this ridiculous charade to something altogether more intelligent.
mjhunbeliever , 2016-05-31 12:24:09
For those of us that have been highlighting the shortfalls of the Neo-Liberal agenda this does not come as a surprise, but the question others should ask themselves is, when the impact of what they were doing was so evident why do they still persist?

The answer is self evident, the people who benefit are not the ones suffering from their policies. Money and power has migrated upwards just as happened in Dickens time, and the real story behind the agenda is control of the masses using poverty and ignorance so that the few can continue to accumulate more and more at our expense.

To say that the great unwashed should wake up and smell the coffee has been said before, but will always be the case,whilst people earning low wages and jobs are in short supply.

The Bankers make profits from lending, people with savings do not borrow and the banks pay out interest on their accounts, the banks only like people to be poor as they are forced to borrow and pay interest, making them profit.

Those same banks though print money out of thin air, every time they make a loan, isn't it time people woke up and realised that we can use that money more efficiently by creating jobs and infrastructure spending, rather than trapping people into eternal debt.

This is the 21st century not the 1800s, why do people not see what is going on around them and why are they trapped like rabbits in the headlights, when the solutions rest in their hands?

Jeremy Corbyn is light years ahead of public opinion, isn't it time to start asking what the meaning of Peoples QE is?

Lets start asking him instead of believing lying Neo-Liberals that have crashed the world economy.

shithook , 2016-05-31 12:17:14
A good article-If further insight is needed into Neo Liberalism, I would suggest watching, The Mayfair Set as well The Power of Nightmares.
Two excellent Adam Curtis Films which go toward explaining how and why we arrived at where we are today.
HorseCart -> shithook , 2016-05-31 12:26:25
An Adam Curtis documentary made in 2000, long before I knew who Adam Curtis was?

You bet I'm going to watch it... I had no idea that even after catching up there is so much catching up left to do!

Gerry4 , 2016-05-31 12:15:12
Constant growth in a mature adult body we call cancer. Why expect it in mature economies?
havetheyhearts -> Gerry4 , 2016-05-31 12:25:42
the word "mature" was hiding complete irresponsibility of driven sociopaths. The usual confidence trick...: " don't you trust me, me the caring man !"
HorseCart -> Gerry4 , 2016-05-31 12:29:24
So do you think neoliberalism could adapt away from just focusing on growth, in its almost certain attempts at clinging to power? And would they tell us about it? Openly? (*collapses in first giggles of the day*)
CABHTS , 2016-05-31 12:07:34
Outside of the political elites and the cosy little Guardian CIF club, most people can't spell neoliberalism, let alone know what it means. The average person, neither know or cares about growth etc.

What matters is whether they have a job, taxes, how pay rises compare to inflation and are the schools, health services and council services functioning? And in that respect, by and large they are ok, albeit sometimes held together with sticking plaster.

They are more likely to be concerned about immigration than neoliberalism, but that is a taboo subject in political circles.

Sowester -> CABHTS , 2016-05-31 12:14:59
You have a point but years with no pay rises and the decomposition of public services does penetrate. The political sands are moving about but where they will come to rest is anyone's guess.
kafkathecat CABHTS , 2016-05-31 12:20:36
Because those elites constantly tell the that immigrants are the cause of all their woes whilst removing any semblance of a safety net from them. People aren't stupid they just don't have the time or energy to go digging for more complicated answers.
JennM , 2016-05-31 12:06:21
Say what? The ultra-ultra rich have realized that when there are only poor people left, they won't be able to squeeze any more money out of them? And look at Christina's outfit in that picture - the cost would support a family of five for a year in the US. I think they're just trying to figure out how to create more money without losing any for themselves. Business as usual.
TankOfPeace , 2016-05-31 12:06:17
I stopped reading when I got to "The results, the IMF researchers concede, have been terrible. Neoliberalism hasn't delivered economic growth – it has only made a few people a lot better off."

See https://ourworldindata.org/world-poverty/#declining-global-poverty-share-of-people-living-in-extreme-poverty-1820-2011-max-roserref . The only people to have seen no rise in living standards are people on middle incomes in rich countries, which is a problem for rich countries - but not a disaster.

FelixMyIcecream , 2016-05-31 12:05:49

They have riffled through every page in the textbook and beyond – bank bailouts, spending cuts, wage freezes, pumping billions into financial markets – and still growth remains anaemic.

I have always been skeptical of the idea that we need perpetual growth and have wondered whether it is desirable or achievable ?

In reality I think most people will be relatively happy if they have the basics of a roof over their head , enough food to eat a job which is not too time consuming ,monotonous or backbreaking and some time for themselves to enjoy their own entertainments outside of work.

Why we need to have perpetual growth to achieve this state of affairs and why we need to continually keep on producing and consuming more and more has always been a bit of a mystery to me ?

Surely things could be organised better and more sustainably and resources shared out more equably to give a more contented and harmonious society . Of course many people have thought the same but neither communism or capitalism has really managed to get it right yet. Neo-liberalism is just another failed attempt but has perhaps been the most successful so far out of the different ideologies.

Seem like 'The end of history' did not happen in 1989 . https://www.theguardian.com/books/2014/mar/21/bring-back-ideology-fukuyama-end-history-25-years-on

JayJay78 -> FelixMyIcecream , 2016-05-31 12:34:04

I have always been sceptical of the idea that we need perpetual growth and have wondered whether it is desirable or achievable ?

Desirable depends on what you want to achieve. If you want to be better off there's 2 options
1/ Grab a bigger slice of the same sized pie - this can get you a lot better off quickly but somebody else loses out
2/ Have the same sized slice of a bigger pie - this will get you gradually better off year by year but nobody else loses out.
Doing 1/ is what rich people are good at, that's how they get richer. Doing 2/ is how lower/middle income people get better off.
So yes you would need growth to support middle income people, they usually can't do 1/.

gbrading , 2016-05-31 12:04:29

The sooner we can break the neoliberal consensus, the better. I do find it incredible, but also reassuring, to see the IMF using this language though, even as they defend privatization without any kind of factual evidence to back it up. Indeed, the lack of factual evidence demonstrating the utility of privatization remains one of the most telling aspects of its failure.
cartidge , 2016-05-31 12:02:41
Perhaps a slightly older set of ideas regarding the role of the state and of capitalism should be considered? A few years ago there was a rather interesting government report on the topic:

http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/19_07_05_beveridge.pdf

RaymondDance , 2016-05-31 12:02:11
The economists at the IMF - like most of their colleagues elsewhere in this dismal profession - have an unsullied track record of getting everything wrong. Why would they be right about this?
thisisafact , 2016-05-31 12:01:38
Neo-liberalism is bankrupt and austerity is the economic equivalent of a severely self-destructive bipolar personality disorder..... yes, we know that; that's hardly news, but the idiots worshiping neoliberalism wont go voluntarily nor will they be booted out anytime soon. They will hang on even after the next major crash; trying one last desperate round of bailing out the financial gamblers.

People with access to the media, like Chakrabortty here, must start advocating specific alternatives. We don't see much of that in the Graun....... mostly it's just complaints the traditional approach doesn't work.

andybycz thisisafact , 2016-05-31 12:09:45
Spot-on! Gives them too much power, as defined in dollars and sterling...while, at the other end, the consumoron is both constructed and blinded at the same time, by this very power...
anyonelistening , 2016-05-31 12:01:00
Even when the British Empire was at its high point, there were still slums and poverty. Now the world population has gone up hugely India and China are huge consumers and so is the rest of the world. People are living much longer and have to be cared for. At the same time the food sources in the seas and land are being used up and their eco systems destroyed. Not to mention climate change and many other things that would take pages to write about. Yet we expect our standards of living to improve or at least be maintained. The outlook is not favorable, under any system of government.
gbrading , 2016-05-31 12:04:29
The sooner we can break the neoliberal consensus, the better. I do find it incredible, but also reassuring, to see the IMF using this language though, even as they defend privatization without any kind of factual evidence to back it up. Indeed, the lack of factual evidence demonstrating the utility of privatization remains one of the most telling aspects of its failure.
PashaNicos , 2016-05-31 11:59:58
Neoliberalism is destroying Europe
http://www.theguardian.com/commentisfree/2010/sep/14/neoliberal-europe-union-austerity-crisis
Atom57 , 2016-05-31 11:52:37
in theory the premise behind neoliberalism is a good idea i.e. to create competition and avoid monopolies, but in practice and as Marx predicted corporations either sink or buyout the competition and you're left with monopolies.

Neoliberalism is dead, its policy of greed and short-termism has ensured that.

LabMonkey -> Atom57 , 2016-05-31 11:59:33
And the trouble with competition in many sectors is that you spend a lot of time and money working to increase market share and less on actually serving customers/ clients.
ohforgoodnesssake , 2016-05-31 11:51:00
Great article as usual, hope you're right Aditya!

I think this is the key point; 'From the 1980s the policymaking elite has waved away the notion that they were acting ideologically – merely doing "what works". But you can only get away with that claim if what you're doing is actually working.' Given current predictions, it's hard to imagine how our neoliberal form of capitalism will manage to adapt without resorting to directly attacking democracy itself, and doing some hardcore Pinocheting.

I don't think the obsessions of endless growth and financialism are going to disappear within this century, but they're almost certainly going to have to downsize ambitions and take a more sustainable place alongside the state and ever increasing non-market-non-state sectors. Either that or party up with the proponents of soft totalitarianism.

mypipsranout , 2016-05-31 11:50:45
Neoliberalism is just Laissez-faire capitalism renamed. In-between the two we had welfare capitalism, or social democracy as some call it, that arose as a response to the crippling societal problems caused by neoliberalism - mass poverty, disease, economic collapse and war. As soon as some welfare reforms were put in place, using public money to provide stability for people, they were under attack by capitalists who have a pathological need to glean personal profits from anything and everything. So we came full circle, back round to Laissez-faire capitalism.

The history of capitalism is one of rapacious greed, intermittently tempered with redistribution policies when the either the elites cannot profit further without some form of redistribution taking place or they fear the pitchforks at the door. Capitalism cannot be fixed, it cannot be tempered, it will always end up back like this, as capitalism is the crisis. History shows us that accepting reform of the system only ever provides a fleeting fix, we need a new economic model entirely, capitalism has to end. It's not just a human issue, but for the sake of all life on Earth, we need an entirely different economic model.

richiep40 , 2016-05-31 11:50:00
I am puzzled. Just about everyone agrees that there is too much debt around and another financial crash is inevitable.

But many talk about debt as though it is some form of negative money, of course it is not, it is just a contractual commitment. Who ultimately are the beneficiaries of all this debt ?

Sounds like a Debt Jubilee all round would be a good idea. Why has it not happened? Without knowing who would lose out you can't tell.

Collectivist Hippopotamus -> richiep40 , 2016-05-31 12:01:19
Because it would utterly destroy financial institutions and investors who have purchased large swathes of private and national debt. They'd be short cash big time! Of course you and I would say to hell with them, but these are the guys (and let's face it, they're mostly guys) who hang out in the gentleman's clubs or tennis clubs or golf clubs or country clubs and who donate political parties. The old boy network type of thing. They will never allow that to happen, never.
WillShirley , 2016-05-31 11:49:56
I'm so glad to see articles like this being published. I've been tracking the decline in our American system for several years with some real alarm. Our current gaggle of morons running for President is a great example of how our neoliberals have failed to notice their policies are destroying the base of the economy. They may end up with most of the wealth, but it won't do them any good if the dollar takes a plunge and/or the oceans swamp cities like New York and Washington D.C. It's insane that it will take a global sized calamity before the people decide to remove those in power from power while we still can. Sadly, we are in fact headed for just such a perfect storm of global calamities.
Pinkie123 , 2016-05-31 11:45:42
Super article from Aditya as ever.

The failure of an ideology premised on something that doesn't even exist (free-markets) should be of no surprise. Market ideology was built around a crackpot idea of capital flows, concomitant with rational individual 'self interest', behaving like a self-regulating eco-system. Just remove as much government, regulatory framework and hierarchy as possible, and let eco-Gaia set the natural balance.

The people promulgating this quixotic nonsense ranged from fugitives from totalitarian regimes like Hayek (whose motives for imagining a utopian fantasy land were at least understandable); to right-wing politicians who at root believed in anything but individual freedom. Thus, state spending increased under Reagan (except on the wealthier section of society), and the global free-market became a centrally-planned oligarchy. Furthermore, so much capital has become securitized that 'trickle-down' can no longer be taken seriously as a concept.

Because, as a moderately intelligent child could tell you, a world without power structures is impossible. Which is why the supremacy of democratically accountable governments (rather than antidemocratic multi-national corporations) is imperative. Mass privatization not only does not deliver on its own terms, but is fundamentally anti-democratic. No one supporting the neoliberal project, which has eventuated in corporate feudalism, can legitimately call themselves a libertarian.

themostbeautiful -> Pinkie123 , 2016-05-31 11:55:09
"Mass privatization not only does not deliver on its own terms, but is fundamentally anti-democratic."

Why? Simple question and please answer.

Lafcadio1944 -> Pinkie123 , 2016-05-31 12:13:57
I haven't seen the evidence that Neoliberals are akin to libertarianism. Although they may have tried to use it politically to get votes in silicon valley. Frankly, I find it hard to believe that the extreme concentration wealth at the top was the goal all along and the Neoliberals have been very successful at it.

While even Guardian columnists (the Guardian being a leading Neoliberal voice) talk prematurely about the downfall of Neoliberal ideology the fact is that the EU is so thick with Neoliberals hand picked by Merkel, and Germany/Merkel's unchallenged hegemonic power over the EU it could take decades to change the people at the top and decades more to change the bureaucracy of the EU.

The world has a very serious problem on its hands. Vast wealth has been accumulated by the oligarchs they have taken this wealth in the same way the Porsche family has taken billions from VW - every penny of which they get to keep in spite of it having been earned from fraud and racketeering. Huge amounts of oligarch wealth has been extracted by such illegal means.

Leave those fortunes in place and the same thing will happen that happened after the "reforms" of the New Deal - the oligarchs pay higher taxes for a brief time until they bribe and blackmail themselves back into control and it all starts again.

There is simply no way to reform economies and allow the rich to remain rich.

hartebeest , 2016-05-31 11:43:38
I would like to think that we are experiencing a repeat/mirror of what happened to economic ideas in the 70s. Then it took the whole decade of crisis and stagnation for the old orthodoxy of Keynesianism to be abandoned in favour of neoliberalism.

In the 70s, though, there was much more pluralism in economics. Although neoliberalism was hardly mainstream, it did have respected proponents and prestigious econ. departments were teaching it. Today that is not the case- 'economics' is taught as if the word referred to the neoclassical synthesis (from which neoliberalism is derived) alone, with all other traditions relegated to crank or historical curiosity status. There are very few respected universities where you can get an econ PhD and not produce work within the neoclassical framework (Utah being an honorable exception, as well as SOAS and City in the UK).

So, a paper like this one from the IMF's research department is hailed as a significant moment, but its critique of neoliberalism is mild and limited, necessarily so because it works with the same basic assumptions as neoliberalism itself.

There are interesting figures with some influence around (e.g Ha Joon Chang, Justin Lin). In general, though, the unwillingness of the economics discipline to even acknowledge the existence of plausible alternatives to their own favoured models has produced widespread intellectual poverty and rigidity. Proposals for true alternatives will tend to fall on deaf ears, though few now have the tools and imagination to produce them in any case.

Jayarava Attwood -> hartebeest , 2016-05-31 12:04:03
The old orthodoxy wasn't Keynesian by 1970. Keynesian economics had been progressively abandoned after about 1960. If you look at the Lewis Powell Memo of 1971 you can see the fundamentals of Neoliberalism were all in place and the takeover was beginning.

But I totally agree on the potential impact of the IMF paper. A generation of economists, politicians and (crucially) journalists have been taught that economics is neo-classical economic and that there is no alternative. So there is not yet anything like a successful critique of the Big Lie.

totaram -> Jayarava Attwood , 2016-05-31 12:29:40
Have you even heard of MMT? Just for example:

http://bilbo.economicoutlook.net/blog /

jsayles , 2016-05-31 11:43:20
Only those who benefit from neoliberal dogma support it. It tends to screw everybody else over.
qwertboi , 2016-05-31 11:42:54
Incisive article Aditya.

Yanis Varoufakis and Noam Chomsky investigate and develop your central premise in an excellent NYPL film on YouTube. Well worth watching (all 1 hour 43 minutes of it).

Aditya Chakrabortty proves his value yet again.

Wrongthink2987655 , 2016-05-31 11:40:53
Neoliberalism seems to involve sacrificing anything and everything society has to give on the altar of "growth", which is what keeps derivatives markets profitable for the 0.0001%. That philosophy includes actively encouraging uncontrolled immigration. Blair, Brown, Cameron and Clegg would all be happy to see a 10% rise in population if it gives a 2% increase in GDP. They don't care that the real-world effect of that is to make the average Brit poorer. As long as the markets stay profitable for their chums.
justamug -> Wrongthink2987655 , 2016-05-31 12:17:15
Yes the focus on GDP as a marker of 'success' is deeply problematic. Especially as the average voter believes that increasing GPD equals better living conditions for householders generally. The reality of course, is very different.
tater , 2016-05-31 11:39:54
The next thing is what interests me. One of the effects of neoliberalism has been to create a stressed out competitive society where most people feel insecure and have a tendency to drink too much or otherwise distract themselves from the presented reality. This combination of powerlessness and pressure to perform is, I believe, what lies behind the rise of far right politics. At its heart far right politics is more a desire to escape individualism by defining an idea of "us" than it is about being nasty to "them". It is a desire to reclaim political, social and personal power from a system that offers no hope beyond the prospect of the next i phone.

For many people who are too smart and well educated to become followers of the far right, it is a matter of picking far right attitudes and putting them through a nice person's moderate filter. The result is the Labour supporter who has "concerns" about Islam, accepts the UK is "full" and thinks cuts are needed to discourage scroungers. Just as with the far right, their response to living in failing neoliberalism is to see hope in rejecting "others".

We all know, from the experience 30's and 40's Europe how easy the rich find it to adjust to far right politics. So while the far right are, for the moment, the leading contenders to inherit the political space dominated by neoliberalism, the left must face off the rich, the far right and sanitized far right thought in order to offer an alternative.

Leftist ideas and ideals are so broad in their scope that left unity is extremely difficult to achieve and rarely converges into a set of coherent ideas, methods and objectives. It doesn't matter that the left has the stronger intellectual and moral positions on most issues. Its inability to apply the same intellect and morality to difficult issues like migration and come to a populist conclusion obstructs its ability to access mass support. Its inability to address the conflicting demands of wealth creation, social justice and the environment are not in reality weaknesses, but are frequently perceived as such by those who focus only on wealth creation.

Just as the end of Soviet communism brought a difficult time for the people of the former Soviet empire, we have little to look forward to in the fall of neoliberalism. It invites international conflict and the worst form of politics and threatens to consign to the margins those who would try to build a world economy that reconciles our shared needs with those of a finite planet.

Galitsa , 2016-05-31 11:35:14
In other words, Marx's 19th Century critique of capitalism is pretty much spot on. We really do need some urgent answers but I fear we will not get them while party allegiance is prized over free thinking. I thank my lucky stars I am middle aged and have at least experienced (in the 60's and 70's) a world not so in thrall to consumerism and shallow self-interest. What a dreadful mess my generation has made of the world, the irony being that we are beginning to value more highly the intangible values we have lost than the gadgets we have created. It's beginning to appear that revolution is the only cure.
Exlgo06 -> Galitsa , 2016-05-31 11:40:18
As I recall the 60's was the real start of "consumerism" with the ending of postwar austerity and the popularity of Hire Purchase, expansion of home and car ownership, people renting TV's buying washing machines, fridges and starting to take foreign holidays.
maxfisher , 2016-05-31 11:31:29
Indeed, some of us have been making this argument since 2008 only to be pooh-poohed by columnists and savants btl.

The world changed in 2008 just as in 1929 and 1973: an economic orthodoxy ran out of steam. We have yet to decide on an alternative, hence the interregnum, but the first thing to change is, as ever, discourse, because, like J.M.Keynes before them, the IMF, World Bank et al see their mission as saving Capitalism. Neoliberalism can be sacrificed as yet another false God, a discredited version of Capitalism, a virulent strain, a form of fundamentalism.

transplendent , 2016-05-31 11:31:10
Capitalism is a consensual transaction. Someone makes something, you are free to buy it or not. The worst scenario is you decide to purchase from someone else and one or other goes out of business. Or, horror of horrors, make it yourself. No one is being forced to either buy or sell. Neo-liberals are the extreme fringe of capitalism. Not representative of anything or anyone but themselves.

I can't think of a single truly socialist sate (if such a thing could ever exist) that ever overproduced anything except grinding poverty and privation. Then attempt to sell the empty shelves to the people as the healthy option, usually just before being run out of town. Socialism, is however good in parts.

HarryTheHorse -> transplendent , 2016-05-31 11:36:52

Capitalism is a consensual transaction. Someone makes something, you are free to buy it or not.

Unfortunately the real world does not conform to this free market libertarian fantasy. When China refused to buy its exports, Britain sent in its gunboats to force them to buy

tiojo , 2016-05-31 11:26:37
The failure of neo liberal economics has been evident for some time. In the UK there are clear market failures in education, transport, housing, energy and health. Yet the die hard neo liberal ideologues continue to prescribe market mechanisms as the only way forward. It is disappointing, however, that the voices putting forward an alternative are so quiet.
Galitsa -> tiojo , 2016-05-31 12:29:48
Those alternative voices are so quiet because the likes of The Guardian silence them or resort to ridicule. Look at the treatment Corbyn has received at the hands of this 'newspaper'. He is attempting to put forward alternatives that are really far from radical if you have lived in pre-neoliberal times, and has been utterly condemned.
Meltingman , 2016-05-31 11:25:09
This just makes you aware of how poorly read and politically illiterate hacks are.

Everything goes in dogmatic cycles. After the war nationalisation , public ownership and controlled economies (via wages prices and incomes policies) ruled the roost. All political parties adhered to this "general consensus". But like all dogma's it ended up falling apart due to the paradoxes and plain unworkability of it all. Then we've had "privatisation is best" dogma since 1979 ; private is best, self regulation is best and so on and so on, and all political parties have adhered to this dogma (Blair the most fanatical) and like all previous dogmas it is falling apart.

Private health etc was only 'better' when it had an excellent public health as the bench mark, forcing them to improve to justify making people pay. Now there is no or poor public services, private can-and does- offer any old shite at any price it cares to dream up. This would suggest that Harold McMillan got it spot on in the 50's with his "Mixed economy-public and private-is best"

All that is happening-and that politically illiterate hacks fail to spot-is that the latest dogma has simply run its course. They fail to be saying that a return to -or even creation of-another dogma will lead to another crash when it implodes in 40 years time. Bering "left wing" or "Eight wing" they fail to be able to argue for what really serves us best. McMillans old mixed economy (something he probably didn't fully realise himself at the time)

All we get though is the left or rights blinkered and harmful dogmatic drivels, bound to fail

Galitsa -> Meltingman , 2016-05-31 11:47:33
So true. A little light reading of political theory and less obsession with party politics by those in the media who seek to influence would serve the populace well. The problem is, it requires a little application - so much easier to comment on Corbyn's dress sense or Boris Johnson's hair.
ID3924525 , 2016-05-31 11:25:04
The final stages of capitalism, Marx wrote, would be marked by developments that are intimately familiar to most of us. Unable to expand and generate profits at past levels, the capitalist system would begin to consume the structures that sustained it. It would prey upon, in the name of austerity, the working class and the poor, driving them ever deeper into debt and poverty and diminishing the capacity of the state to serve the needs of ordinary citizens. It would, as it has, increasingly relocate jobs, including both manufacturing and professional positions, to countries with cheap pools of laborers. Industries would mechanize their workplaces. This would trigger an economic assault on not only the working class but the middle class-the bulwark of a capitalist system-that would be disguised by the imposition of massive personal debt as incomes declined or remained stagnant. Politics would in the late stages of capitalism become subordinate to economics, leading to political parties hollowed out of any real political content and abjectly subservient to the dictates and money of global capitalism.
SubjectiveSubject , 2016-05-31 11:21:21
European Central Bank concur austerity is going to destroy the eurozone and EU economy, the greedy bastards are only concerned now that it hurts them. Wikileaks transcripts of IMF/Germany discussion imply that the IMF intended for Greece to collapse.
MrNight , 2016-05-31 11:21:14
If someone admits that they murdered someone, it doesn't mean that they cease to be a killer or that they can be forgiven and can now be trusted, the likelyhood is that they are simply sociopathic in nature. It was just a moment of reflection, or is it that they are trying to regain trust, if anything one should be on a higher level of alertness, the distraction has been made, now we must wait for their next move.
FelisLunartik , 2016-05-31 11:20:11
Great, thought provoking article. It raises the notion that neoliberalism has failed because it has only benefited an elite few whilst everyone else is worse off. Maybe that isn't a failure though? Maybe that's what it is meant to do? It certainly feels like there's little impetus or inclination from the those who've done very well out of neoliberalism to pull the plug on it out of the 'goodness' of their hearts.
WillShirley -> FelisLunartik , 2016-05-31 11:54:57
I believe the failure is that of a system which is supposedly supportive of society, allowing flow of goods and services while protecting rights of individuals. The actual in-place system is not the one the politicos advertise, a typical bait ans switch. Yes, the current system does what it is designed to do: funnel money from the middle class to the ruling minority. It is not designed to be sustainable, merely last long enough for one man to end up with 100% of the wealth. That's the end game of this game. The problem is that governing is not a game and the events on the horizon require a government of people, by people and for the people because corporations do not support human life, they merely move money around.
thisisafact -> FelisLunartik , 2016-05-31 12:09:08

Maybe that isn't a failure though? Maybe that's what it is meant to do?

Of course it was meant to do just that. Neo-liberalism is class warfare..... the rich and privileged won so decisively that I doubt we can emerge from neo-liberalism without violence or at least a period with populist autocratic governance.

wladber , 2016-05-31 11:19:59
Neoliberals can't see [Bretton] wood for the trees. Capitalist v Marxist? Boring. So ...pass the dripping Martha for me stale bread. Can't last you know.
unitedbynature , 2016-05-31 11:19:33
If you look at low growth worldwide. It really is a western disease, aside from failed states. Could it not be that a majority of people in the West live a reasonably comfortable life and are simply incapable of driving growth over 3% annually. How much shit do you need? You have a roof over your head, maybe a car, a job that pays the bills and the basics, the odd holiday, decent food to eat, reasonable health care provided. What else do you need? I don't think you can base an economy on "wants" long term an expect anything other than low growth. I've meet a lot of people in my life that are capable of driving themselves harder or smarter and earn substantially more money, but they're comfortable or lazy and see no "need".
AuldCurmudgeon , 2016-05-31 11:17:05
The essential failure of neoliberal theory lies in the notion that a free market is the second form democracy: any domain in which people are free to make their own choices. It fails because it assumes that, unlike the ballot in which all citizens take an equal share, that the market exists in a context where everybody is equally rich. In that case and that case only, free markets are a second form of democracy.

Neoliberalism is consequently a form of democracy in which people have a variable form of representation, such that my vote could be worth 100th of yours or 100 times that of everybody else.

Neoliberalism would work if there was a mechanism to ensure wealth was more evenly distributed. I think the ballot is generally a more viable proposition.

themostbeautiful -> AuldCurmudgeon , 2016-05-31 11:21:26
This was the idea of Mrs. Thatcher. To spread wealth and to create shareholders. It failed for many reasons.
ID864902 -> AuldCurmudgeon , 2016-05-31 11:22:21
well put
jalte -> AuldCurmudgeon , 2016-05-31 11:30:10
Wealth doens't only belong to individuals but to states,regions,cities,companies. That makes it even more difficult to distribute it more evenly. In rich countries many basic needs are fulfilled by those entities and not only by individuals,as unitedbynature notices. The drive to earn more may only exist if those entities don't get too important.
In fact,neo-liberalism works pretty well. And a lot of opposition to it is ideological more than practical.
BabylonianSheDevil03 , 2016-05-31 11:14:56
The mantra of those attempting to prop up neoliberalism is that nothing can ever change and if we ever attempt to change things then we are heading for disaster. A bit like the EU debate. A storm whipped up to keep us in line. But there is always another way, another option, and if this is not offered to the people then they will look for other options themselves that could lead to disaster, namely the voting in of anti-establishment heroes like Trump.
tomword -> BabylonianSheDevil03 , 2016-05-31 11:26:39
"Anti-establishment heroes like Trump"? Haha! Trump IS the gross face of neoliberalism and the One Percent. Who the hell do you think he is? Hello!
NorthernPessimist -> tomword , 2016-05-31 12:29:39
That's true but its not how he is perceived in the US. Its the same type of thing with the rise of the Far Right in Europe. Dissatisfaction with the current shower leading to potentially more dangerous alternatives.

If only the current shower would take note of that and start representing their constituents instead of taking advantage of them...

marcoguard , 2016-05-31 11:14:29
The IMF outing is too little, too late and way way way too short on apologies to the world.
ariaclast , 2016-05-31 11:12:46

In the IMF's flagship publication, three of its top economists have written an essay titled "Neoliberalism: Oversold?".

The very headline delivers a jolt. For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism. Now here comes the IMF, describing how a "neoliberal agenda" has spread across the globe in the past 30 years. What they mean is that more and more states have remade their social and political institutions into pale copies of the market.

The IMF under Lagarde has long since become a political weather vane, tilting in the direction of whatever theory happens to be fashionable. It should also be noted that academics will tend to make an argument in order to stimulate a debate; it would be foolish to immediately assume everything they have written is gospel (as has often been repeated during the referendum campaign, remember they thought the UK should have joined the Euro).


There's no doubt "neoliberalism" has become a pejorative term, used by opponents of the free market to decry its excesses. It used to mean a capitalist economy with strong state intervention, essentially the same thing as a social democracy. It's now used to describe a laissez-faire capitalism associated with rolling back any and all state provision of services. As with all such terms the definition is slippery and not useful: it's delivered as an insult rather than a description of any particular economic reality.

This is why "policymakers have denied the existence" of it. There is no "neoliberal agenda" being persued by a conspiratorial cadre of western leaders. That's a desperate simplification by people struggling to comprehend the vast proliferation of approaches to social democracy, with a range of countries all attempting in good faith to find a useful balance between free market capitalism and state intervention. Neoliberalism as Chakrabortty understands it exists only in the minds of its detractors

JamesValencia -> ariaclast , 2016-05-31 11:32:32
I've never hear "It used to mean a capitalist economy with strong state intervention" before.

Neoliberalism is "what comes after liberalism" and refers to the Thatcher/Reagan axis following the interventionist and statist seventies.

So pardon the blunt contradiction but neoliberalism is the opposite of what you say. It is reducing the state's role in the economy to the absolute minimum, which is, ideally, merely as the legal and executive power, and no economic role at all in business.
Control of economics to be entirely in public hands. Hence privatising everything, obviously.

"Laissez faire" economics has always been part of neoliberalism.

Why "neo": it means "new" as you know, and the "new" is because up until teh late seventies, there was a tacit agreement between right and left that some essential industries should be run by the state for national security and other reasons.

user0 -> JamesValencia , 2016-05-31 11:46:30
And what you're describing sounds like libertarianism.
JamesValencia -> user0 , 2016-05-31 11:58:41
The one includes the other:

• Libertarianism: No state interference in individual private citizen's lives.
• Neoliberalism: As little state interference in the economy.

The first is a subset and extreme simplified case of the second, and makes one think of trappers, the wild west, and Donald Trump. The second is a political system.

BeenThereDunThat , 2016-05-31 11:12:04
Thatcher, Reagan - both arch-disciples of Hayek and others of the Austrian & Chicago schools of economic shite, and both massively responsible for it being liberally spread across the world. Would have been nice to see a recognition of their roles in this, along with the second wave of Clinton & Blair, with their "third way" economic take on the same models.

And now we have Hilary as a contender for the presidency, as orthodox a neolib bag carrier as they come, and someone who will continue to carry the torch for Bills policies. Failing that, we have the absolute lunacy of Trump to look forwards to, and as a man who so obviously worships at the alter of Mammon, no game changers from him to be expected either.

So if we are, as this article claims, witnessing the death of neoliberalism, it is going to be a long, slow, agonising death, with a lot of collateral damage as the body economic writhes in its death throes. Oh dear, oh dear, oh fucking dear…..

BabylonianSheDevil03 -> BeenThereDunThat , 2016-05-31 11:21:44
Reagan and Thatcher spawned the neoliberal dystopia, Blair and Clinton carried on where they left off and so it goes on. Democracy has been sold to the highest bidders, and with no real options at the ballot box people are turning to extreme politics, those on the fringes, far right loons like Trump.
In short - I despair.
WillShirley -> BabylonianSheDevil03 , 2016-05-31 12:00:11
Britain is a republic, rule of the few over the many.... USA is a not even a republic, but more like an oligarchy as our election system has been corrupted by the Party and with the Supreme Republican Court to back them up we steadily lose the rights and protections for the middle class. The Constitution is the direct result of the 18th century ruling class hating the middle classes, hating minorities and desiring a nobility class without a king to rule over them. Madison and Jefferson adamantly despised the very concept of "democracy". This is how we ended up contemplating a President Trump.
bbcguard , 2016-05-31 11:11:30

"Paradise," he exclaims, "is a place where people want to end up, not a place they run from. What kind of socialism is that? What kind of shit is that, when you have to keep people in chains? What kind of social order? What kind of paradise?"

The statement is thoroughly stupid. Consistent with Chrushov's mental capacity.

History evolves in a discontinuous manner. Any social-economic transformation is performed by force and through a bloodshed, a civil war. This is simply a law of thermodynamics.

The best example: the huge butchery of religious wars in Europe of the 17th century which gave rise to the era of Enlightenment and Progress. Because of it, we live immeasurably more comfortable life than our ancestors. We were thereby kicked in this paradise.

Mkjaks -> bbcguard , 2016-05-31 11:22:09
And let's not forget the fall of Rome. That "thermodymic" didn't go so well -- for many centuries.
bbcguard -> Mkjaks , 2016-05-31 11:26:20
Meaning exactly what? Are you sure you know what thermodynamics is being discussed?
JamesValencia -> bbcguard , 2016-05-31 11:39:19
You're mis-using themodynamics in "Any social-economic transformation is performed by force and through a bloodshed, a civil war. This is simply a law of thermodynamics."

There's no relevance of thermodynamics there, even allowing for making an analogy.

Saying "All socio-economic change is violent" which is what you're saying there is a simply opinion, and, incidentally, contradicted by historical fact. Propping it up with an arbitrary reference to science does not help :)

Thermodynamics is about the transfer of heat and says three laws (1) energy is conserved (2) Entropy always increases (3) Entropy is a constant at absolute zero.
(plus a zeroth law thich I forget).

BaddHamster , 2016-05-31 11:11:13
A bit of a sideline, but I was watching TV yesterday and an ad caught my eye that I found fascinating. It was for chocolate- cadburys or something like that.
Essentially, an animated lady was giving a talk about 'boring economic stuff' and as she talked her face actually stretched and became distorted until the whole 'economic/ finance thing' was abandoned in favour of eating chocolate bars. The narrator's voice was what I presume marketing people think of as 'working class'.
what I took from the ad (I may be wrong) was a not so subtle message that 'boring' economics isn't for the likes of us (ii.e. the masses), and we'd be better off stuffing our faces with chocolate rather than thinking about 'hard stuff.'
I found it quite disgusting. Has anyone else seen this and, if so, what do you think?
Of course its possible that I'm a paranoid loon just a few steps away from hiding out in a bunker and talking to a balloon with a face drawn on...
Panda Bear -> BaddHamster , 2016-05-31 11:14:27
I rarely watch TV these days so haven't seen the advert but I will bet you are correct. That's if I was a betting person of course.

Trust your instincts.

richiep40 -> BaddHamster , 2016-05-31 11:24:47
That's why they are changing the education system so radically, can't have the plebs thinking for themselves can we ? They want just drone factories for the majority of the population.

Ironically R4 are doing a pretty good adaptation of Brave New World at the moment.

BastaYa72 -> richiep40 , 2016-05-31 12:25:42
Do you mean as a radio play or their editorial policy?
TomBakerIsGod , 2016-05-31 11:10:58
"no return to Tory boom and bust".

G. Brown, Labour Party conference 2000.

ID724312 -> TomBakerIsGod , 2016-05-31 11:15:06
Global Banking Crisis 2008
arbitrarynight -> TomBakerIsGod , 2016-05-31 11:33:18
It appears that Osborne - with zero growth-rate, zero-inflation, zero wage increases - is trying to give us that very paradise with a stagnant economy.

Not sure it's all it's cracked up to be.

Hammersfan , 2016-05-31 11:10:37
Yes neoliberalism has been oversold because neoliberalism is a catch-all. means nothing, basket insult for all policies that liberals hate. Blair was apparently a neoliberal, but the state grew under Blair and there was huge investment in public services. Take away the investment under Labour, and the NHS really would be on its knees now.

Secondly, we are still in crisis following the crash, the worst economic reversal since the Great Depression. nobody ever said it would be easy to climb out of this economic hole and the doomsayers might like to compare the lot of the working classes in 2016 with the lot of the poor in the 1930s, Perhaps Aditya would like to read Steinbeck to get a handle on what real poverty is, or if it is too difficult a read, he might tune in to some episodes of the Waltons.

There are no real shocks in the IMF issuing papers challenging political or economic orthodoxy - they do it all the time - and I seem to remember that Lagarde has long been a critic of Osborne's policies; the IMF, on balance, are Keynesian in outlook.

If you want to nail the real custodians of what is termed neoliberalism, then you need to the nail the EU. These are the technocrats who are running Europe for the benefit of the elites!

Panda Bear -> Hammersfan , 2016-05-31 11:21:12
A bit of history of Globalization and Neoliberalism or a different perspective from yours.
https://www.youtube.com/watch?v=GCqKYftRVE8
Hammersfan -> Panda Bear , 2016-05-31 11:42:12
History books will one day refer to the "so called neoliberals who were, in truth, free market capitalists packaged up under a new name." For your "Neoliberal" I offer you "New Labour" or "Snickers bars" or "Starbursts".
BastaYa72 -> Hammersfan , 2016-05-31 12:23:18
Your first mistake is to assume that Neoliberalism is equivalent to free market capitalism when its anything but that.
ChiefKeef , 2016-05-31 11:10:14
Yep its great,hope for the first time in decades,the right wingers are shitting bricks.
LorenzoStDubois , 2016-05-31 11:09:41
An interesting piece. Though it fits into a recent pattern of the Guardian picking up on stories that were in the FT a couple of days earlier.

Amusingly, in this case, the link to the IMF "oversold?" piece actually takes you to the FT's paywall, when the original piece is freely available on their site.

yoghurt2 -> LorenzoStDubois , 2016-05-31 12:42:35
Thanks for the link. Interesting.
Pinkie123 , 2016-05-31 11:09:22
What needs exposing is the purported 'pragmatism' promulgated by the likes of Blair and Clinton. A centrist position of ideological neutrality is a myth. 'What works' has become a synecdoche for what maintains the neoliberal model - which ironically, as the author explains, no longer works.

A purely managerial, non-ideological perspective is impossible. Anyone advancing a non-ideological world-view is a self-effacing ideologue. The best trick the devil ever played was to convince you he doesn't exist.

richiep40 -> Pinkie123 , 2016-05-31 11:15:50
I'm proud to call myself a social democrat, which in today's terms means I am far left.

I only care about what works.

David Owen of all people in an interview about the EU actually attacked New Labour for the marketisation of the NHS. In fact they didn't invent it, but they continued it with gusto. It doesn't work.

thisisafact -> Pinkie123 , 2016-05-31 12:39:35

which ironically, as the author explains, no longer works.

It never worked.... not for one minute. It just seemed to work because first the nation states were indebting themselves; then the private sector indebted itself and everyone. The "success" of neoliberalims was based on credit expansion all the time.

The model was always to enrich those at the top, while the unemployed lazy bastards at the bottom were stressed more and more to create a race to the bottom for the desperate and money less. The insanity of this policy, which took enormous amounts of money out of circulation was glossed over for decades by the never-ending expansion of credit. The credit expansion kept the middle class out of harms way thereby securing the political support to simply continue...... but keeping the middle class away from economic harm will end as soon as credit can no longer be expanded.

gilstra , 2016-05-31 11:08:41
Brilliant, thank you.
DAreisait , 2016-05-31 11:08:28
I cannot believe Guardian readers spend so much time contemplating their navels. No wonder Labour party is in such a mess. Believe in Britain....regain control of our money, borders and democracy!!
mattk81 -> DAreisait , 2016-05-31 11:57:25
I'm afraid you're looking in the wrong place if you want us to 'regain control of our money'- it's actually the commercial banks in the City that have us by the knackers... assisted by action or inaction their political wing the Tory party. Google 'Positive Money' for starters.

As with many problems we have in the UK, blaming the EU is either a deliberate red herring or just plain ignorance.

MAC4096 -> DAreisait , 2016-05-31 12:15:47
If we do not contemplate it them whom? This incessant need for 'growth' is a myth. How far can we grow? By it's very definition to continue with this mad strive for a wealthier state is at the expense of other states. There is PLENTY to go around but the current neoliberal philosophy has simply moved it to a few. Borders an illusion, there is only one planet and it is dying because of the neoliberal agenda for 'growth'. Democracy, in it's current form, is also an illusion. How can we be democratic when the state watches our every move, email, phone call and browsing history. Surly democracy should include some element freedom. Money is an illusion. The central banks print money to order, quantitative easing, bank bailouts, offshore tax havens. When the money is printed it immediately has a cost, a promise to pay bond yeilds as an element of its creation. So all money is debt. We live in an insane world with systems that will ultimately be our doom.
FlintstoneF , 2016-05-31 11:06:40
Great stuff AC

The whole EU project is reminding me of Brazil (1985 film) directed by Terry Gilliam and written by Gilliam, Charles McKeown, and Tom Stoppard.

https://en.wikipedia.org/wiki/Brazil_%281985_film%29

Thatcher/Reaganism was always a con trick, and incredibly sinister forces were always behind it.

themostbeautiful -> FlintstoneF , 2016-05-31 11:31:24
Yes, an excellent film . The EU in its current form has turned into a tool to circumvent national parliaments and to achieve legislation which is good for you and me and others. You can pass any law you want, if you bribe the right people. That said, we need a strong EU parliament and an informed audience to stop this. If necessary, Brexit could serve a wake up call, but the preferred way should be to hold these guys accountable.
yoghurt2 -> FlintstoneF , 2016-05-31 12:46:06
Great film. Worth rewatching.

https://www.youtube.com/watch?v=XmSBtDLgBSQ

zalacain , 2016-05-31 11:06:06
To debate this, wouldn't you first have to define what neo-liberal means?
thisisafact -> zalacain , 2016-05-31 12:43:57
Neo-liberalism = Everything can be made in into a market. Everything!!
Sowester , 2016-05-31 11:05:42
What disappoints me most about the current political situation is Jeremy Corbyn. It is not that I disagree with much of his economic policy (not that we know a huge amount about it) it is his inability to connect with voters.

Is there someone in Labour who is not a Blairite that does not behave like a 1970s left wing geography teacher?

packc47 -> Sowester , 2016-05-31 11:08:43
What paragon of perfection are you looking for. The message is the important thing not the packaging. Blair surly taught us that. My geography teacher was a old conservative woman.
DepotCat -> Sowester , 2016-05-31 11:12:34
I must pass that on to my mate who started teaching geography in the late 1970s and who is an absolute Corbyn fan. He's very disappointed that his sixth form students do not feel remotely the same way.
Galitsa -> Sowester , 2016-05-31 11:39:24
I do think Corbyn needs time. The more the Tories and neoliberal ideologues eat themselves, the more the public will be receptive to alternatives.
zalacain , 2016-05-31 11:04:36
The best way of working out which type of society works best and worse is to find out where people emigrate from and where do they emigrate to. Capitalism, with low levels of corruption, wins hands down.
Surrealistic -> zalacain , 2016-05-31 11:10:25
I don't have an issue with capitalism per se. It can work very well as part of a balanced economy. However when almost everything is forced to become part of the market we can clearly see a problem.
deirdremcardle -> zalacain , 2016-05-31 11:12:22
but surely Capitalism is inherently corrupt . It's mantra is "maximise profit " and that's it . Isn't that what the Left are being unrealisitic about .They want some sort of purified religious experience of fiscal control . But we humans are of systems that need corruption and renewal ,just like our bodies ? Talk about the National Health failing ! Nobody wants to do the housework that's all ?
zalacain -> deirdremcardle , 2016-05-31 11:18:35
Maximising profit isn't corrupt. Breaking the law is corrupt.
wartypig , 2016-05-31 11:02:48
I'd like to thank Aditya for his article and I hope your right.

In my opinion all ideology creates shackles especially when taken to extremes. It creates distinct hierarchies that are imposable to circumvent if you just so happen to disagree or dislike it.

As you state neoliberalism is the extreme end of the capitalist system.

There's one major flaw in all hierarchal systems, if somebody is to climb up, someone must be pulled down. It can create animosity, greed and infighting so they are all inherently unstable. I'm not suggesting such systems are wrong, if they are based on cooperation and fairness then I think balance could be achieved.

jimmicki , 2016-05-31 11:02:27
A previous poster talked about automation destroying jobs and income which leads to depressed markets as consumers do not have the income to spend. Surely the current lack of growth is the result of manufacturing and other jobs exported abroad to save wage costs in developed countries. This results in the same lack of spare income to fuel growth. So free market policies are destroying the very markets they depend upon.
One solution is for government to own manufacturing in important areas such as combatting global warming. If the uk uses the £70bn proposed for HS2 and Hinkley we could set up manufacturing of solar panels, small wind turbines and other small renewable systems. Pay real living wage, use areas already with high unemployment and boost the economies in these areas. Manufacture under license and include batteries such as the Elon musk storage batteries.
Either install free or for small charge we could produce and fit renewable systems on 10 million homes trying to produce 40 gigawatts of electricity which is equal to uk off peak use - 4kwh x 10m. Costs £5000 per system + £2000 per battery = £7k x 10m = £70bn.
Result more good jobs, boost to economy, boost to deprived areas, less CO2, no nuclear, free electricity for many, less cost of imports of oil, gas, coal, less cost of social security. I am sure the list of benefits can be expanded into feel good factors and less inequality.
Surely common sense will prevail before riots and revolution will end this madness.
Exlgo06 -> jimmicki , 2016-05-31 11:10:48
What on earth leads you to believe that a UK Government could manufacture solar panels and wind turbines at a profit? Does the civil service have hitherto hidden talents relating to business start ups, manufacturing and energy technology?
themostbeautiful -> jimmicki , 2016-05-31 11:12:03
We are at a world population approaching 10bn people which need to be fed, clothed and served with clean water and electricity. And your answer - sorry to say, green dreamers - provides no answer at all. You can talk to as many worms as you want to. It is fantasy of rich people.
mwardman -> jimmicki , 2016-05-31 11:29:43
What on earth leads you to think that a 4kw *peak* solar system in the UK could produce 4kw of electricity cnosistently :-).

Your expectations of the average power produced by solar panels are exaggerated by a factor of about 6-7.

packc47 , 2016-05-31 11:00:18
I hope you are right.
Martyn Blackburn -> packc47 , 2016-05-31 11:05:22
She isn't. She is wrong. We are witnessing a re-adjustment of neoliberalism.
livingwill , 2016-05-31 10:59:21
Yes Soviet Communism was indeed "a place where people run from " which Western capitalism isn't.
MAC4096 , 2016-05-31 10:55:02
There is no doubt that people are waking up to the massive inequality imposed on us all by a greedy, compassionless, short sighted set of idiologies perpetuated by our neoliberal rulers. And the philosophy that has driven this is corporate capitalism which has created a stench so profound that it may literally cost us the earth.

The fact that it has progressed so rapidly and deaply into the human psyche can only be attributed to two things. Mans inherant greed and the media (who are an intrisic part of corporate capitalism). I heard a statistic that, in the first world war, only 17% of soldiers in the trenches pointed their guns at the enemy, not wishing to be party to the massacre of fellow human beings. I also understand this was little changed in the 2nd WW. To combat this (pardon the pun) recent developments in media have created computer based games of mass murder so that soldiers in the battle field, in aircraft and flying drones simply play out the games on their Xbox and annihalate 'the enemy'. War is very big business, for some. This form of brainwashing is an incidious method to do the bidding of the rich and powerful and there is, without doubt, a direct correlation between neolibralism and mass murder. The hawks of administrations, like Bush, Blair and co , have used it citizens to further their own agenda's for fiscal gain leaving behind millions of dead, service men missing limbs or dead, sevearly mentally damaged and what for? The road to peace is not through bombs and bullets but this makes money and lots of it. The media (not all, thank god for the internet) panders to the basest emotions of humanity to brainwash us into radicalised, subserviant masses ready to do the bidding of these cororations. It has created a Frankenstien which is now out of control. IF we start today to try and undo the immense harm it will take many generations to even begin to put things right, if at all possible. Every journey starts with a single step but we must RUN if humanity has any chance of survival. Stop the war on terrorism, stop the war on drugs, both proven and huge failures and start a war for tollerance, equality and, dare I say it, love.

nihilist , 2016-05-31 10:53:26
Seems to me that the wealth accrued by neoliberal beneficiaries could be more fairly distributed but it is not; why is that? On the other hand, "communisim" in the Soviet sense does not seem to work either when Dimitri has his house windows manufactured free gratis on the factory floor. Politicians and large corporations are self serving and insular, as are most people. The EU debate in the UK has descended into completely predicatable mud slinging as the electorate are increasingly ignored in the debate despite token efforts by the media. Those involved are watching after themselves, in or out is a sidebar to hang it on.
FineLeg , 2016-05-31 10:53:24
Neoliberal ideology has been an instrument for justifying the growing wealth and power of financiers and global corporations for about 40 years. They are highly unlikely to want to let go their gains, so reports of the impending 'death' of neoliberalism are a bit premature. The fact that this comes from the IMF makes me wonder if it isn't another ploy to divert attention from the ongoing process of wealth consolidation by making us think that a big change in policy is just around the corner. Ostry is an excellent scholar who has written some good papers warning about inequality and I have no doubt that he wants to influence decision-making. But it may be that he is being used as a 'useful idiot' by the powers that be.
Briar , 2016-05-31 10:39:23
If only. Social democracy was the popular choice in 1945 - the people knew what it was and voted for it. But neoliberalism was imposed on us in a flurry of fake claims and false dreams - low taxes, trickle-down riches, freedom is consumer choice etc. We could have it all, the hucksters promised, lying in their teeth. And now that the system is showing its true nature, how do we get rid of it. There isn't an institution, public or private, which isn't run by people who are professed neoliberals incapable of thinking there is an alternative - if they were, they wouldn't be where they are: they'd be mocked and undermined and shuffled out of the way, Everything from the BBC to the Health Service is run by people who believe in the power of the market, and think it's the same as democracy. We have to get rid of these servants of the market to make a fresh start, and they're not about to leave.
LordMurphy -> Briar , 2016-05-31 11:15:35
TTIP is the desperate last stand to get this permanently embedded as a supra-governmental policy in perpetuity. The crooks behind neoliberalism know that the wheels are about to fall off the bus and TTIP is their answer.
Selena Oldham , 2016-05-31 10:34:58
Whilst it's great that the report (rightly) condemns neoliberalism it appears to me that it is also contradictory.

On the one hand 'the IMF researchers concede, [the results of neoliberalism] have been terrible. Neoliberalism hasn't delivered economic growth – it has only made a few people a lot better off' but then goes on to say 'The authors even defend privatisation as leading to "more efficient provision of services" and less government spending'.

Privatisation of state assets has proven time and time again to be a false economy. The failed privatisation of Hinchingbrooke Hospital; The failed privatisation of East Coast Rail which was then put back into public ownership (under which it became profitable again) and was then re-privatised for no good reason; The Royal Mail scandal - hedge funds were permitted to buy millions of (undervalued) shares which they then immediately sold for a massive profit whilst ordinary people were limited to just £749 worth.

Am I missing something here? Isn't privatisation and the selling off of state assets to the neoliberal elite exacerbating and perpetuating the problem?

I'm still wading through Thomas Piketty's Capital in the Twenty-First Century but from what I've read so far it appears that the message is that extreme wealth inequality is not only morally unfair but is unsustainable as it is counter-productive and creates economic instability. It's this very instability and glaring unfairness which has led to the rise in ever more extreme politics isn't it? The Right cling to this neoliberal model of economics and then bitch and complain when Trump gets elected. What on earth did they expect? If elected officials continue to act in self-interest instead of the public interest then the successes of monsters like Trump are an inevitability which can only bad for everyone including the neoliberal elite.

themostbeautiful -> Selena Oldham , 2016-05-31 10:39:36
Not really. Privatisation is not an answer but if you red Orwell, the opposite is not a solution either.
BeenThereDunThat -> Selena Oldham , 2016-05-31 11:18:18
" I'm still wading through Thomas Piketty's Capital in the Twenty-First Century but from what I've read so far it appears that the message is that extreme wealth inequality is not only morally unfair but is unsustainable as it is counter-productive and creates economic instability ."

Not sure that you need to read Piketty to understand that. The accumulation and hoarding of wealth in offshore havens by the elite should be treated as an economic crime, as once this money is transferred out of the system, it ceases to function, the economy is impoverished, and these unelected super-wealthy are given powers many elected country leaders can only dream of. How the perpetrators of this cannot understand absolutely boggles me. But then again, to wish to have so much wealth indicates serious sociopathic issues, and not much ability to empathise with those who struggle and are deprived as a result of this accumulation of such wealth in the hands of a few individuals.

Selena Oldham -> BeenThereDunThat , 2016-05-31 11:36:06
Whilst I simply feel indignation, exasperation and anger regarding social injustice and extreme wealth inequality Piketty uses well researched data to support his arguments against it. It's not an easy read and I've been dipping in and out of the book on and off over the last year. I'm determined to finish it one day though.

I'm inclined to agree with you regarding the regarding your assessment of the super rich as sociopathic. How much money is enough? Why would they need or want so much economic control over so many people?

If you haven't seen it already I would certainly recommend watching Mr Robot - very topical and spot on regarding the psychopathic mindsets of the arrogant super rich the series condemns. The opening scene begins with a reference to the Bilderberg Group - 'they're the top 1% of the top 1%. They're the people who play god without permission'.

MrNight , 2016-05-31 10:34:41
They are starting to come out and admit it, they are still not to be trusted though.

"The specter of a break-up is haunting Europe. A vision of a federation doesn't seem to me like the best answer to it," Donald Tusk, May 2016.

LordMurphy , 2016-05-31 10:32:38
It beggars belief that Mark carney is now bemoaning the results, as events that we now are witnessing right across the globe, from his Alma Mater Goldman Sachs's policies that were foisted onto the world, have spawned. Low and now even negative yields on safe fixed term investments are now making it very difficult or even impossible for pension providers to deliver decent incomes to their customers. Tax evasion has been legitimised and rebranded as tax efficiency and corporations are mega monopolistic structures that no longer need to worry about a bottom line as they have rebranded profits into interest payments to tax havens.
SuffolkJason , 2016-05-31 10:24:46
After 8-9 years argument about austerity, it finally feels like we have reached a tipping point. Surely now no serious political or economic commentator will defend austerity. There are parallels with the climate change debate.

The Labour Party (encouraged by many in the media- including many Guardian journalists) for too many years pursued a policy of austerity appeasement. Many knew it was economic nonsense but felt that the argument was too difficult to win against the massed ranks of the Tories and the vested interests of the mainstream media. I recall so many discussions where it was pointed out that economists such as Krugman had destroyed the austerity case but "sensible" commentators continued to argue that the Labour Party would be destroyed if it dared to "speak truth unto power". Those that advocated austerity appeasement should be ashamed and apologise (I won't hold my breath).

Corbyn's greatest achievement in his first 8 months has been his firm stand against austerity. He and John McDonnell have significantly moved the debate, so much so that I fully expect that Osborne (if he survives the Referendum fall out) will start to adopt Labour policies (e.g. allow investment expenditure to be excluded from deficit target and, if recession spreads beyond manufacturing, some form of Infrastructure QE).

arsenico -> Charmant_mais_fou , 2016-05-31 10:35:16
Corporativism is fascism, the rule by an oligarchy who "knows better"...for themselves, of course.

Get your terms right

JekonGregory , 2016-05-31 10:22:57
Neoliberalism has turned out to be similar in many ways to a better connected and more efficient form of feudalism. Great for those with power, greed and wealth and very much at the expense of everyone else. Perhaps newspapers and mass media have replaced swords, so it is an improvement in some ways.

But for all those anticipating a return to something better, what will eventually come next? A return to nice, safe, gentle Western European style mild socialism is not a foregone conclusion. It will take a lot of effort and maybe 20 years to establish a new settlement and perhaps quite a lot of strife in the meantime. Now that the last convulsion that gave rise to a continent wide effort to attain a just society, the Second World War, is fading from memory and educational syllabuses, will it take another convulsion to teach us how to behave again?

Gallicdweller -> JekonGregory , 2016-05-31 10:38:45
Very well put. I don't think it will take another convulsion, the majority of Europe's population are fat unfit slobs but when there's no consumer swill in the bins, maybe.
OhNotAgain -> JekonGregory , 2016-05-31 11:09:29
I've had many discussions about what is necessary to make people active enough to change the status quo, although I do think that WW2 crystallized what was already public opinion, putting people into a position where camaraderie was sufficient to have reformists like Bevan take a lead and win. I sincerely hope it won't take another European conflict to increase class consciousness again.
BarrieJ -> Gallicdweller , 2016-05-31 11:16:16
As long as people have just enough and can be made afraid of losing it, they'll do nothing.
When they have nothing worth losing, then they'll kick off.
Rulers have known this since at least Napoleon, not all have acknowledged it.
As a people the British are a long way from it, recent arrivals might in time feel differently.
Michael Clarke , 2016-05-31 10:18:13

long before any public protests, the insiders led the way in murmuring their disquiet. Whisper by whisper, memo by memo, the regime is steadily undermined from within. Its final toppling lies decades beyond the novel's close, yet can already be spotted.

When Red Plenty was published in 2010, it was clear the ideology underpinning contemporary capitalism was failing, but not that it was dying. Yet a similar process as that described in the novel appears to be happening now, in our crisis-hit capitalism. And it is the very technocrats in charge of the system who are slowly, reluctantly admitting that it is bust.

The difference between a public document and a secretive memo seems a glaring one, which illuminates the fundamental difference between the two systems and as such the reason why capitalism will survive and communism cannot

I agree with the bits about economic consensus and neoliberalism but I can't for a moment agree that such problems are inherent to capitalism or reveal its flaws. If anything those problems show - as did the failings of communism - the impossibility of asserting stable state control over markets so large and complex as to be effectively random

ID1098053 -> Michael Clarke , 2016-05-31 10:31:57
While Julian Assange is incarcerated I don't think you can make the claim that Capitalism has no secrets. Hilary Cliinton's emails were leaked, and there were some pretty dastardly secrets in there. And who knows why fracking is being pushed onto people when practically no one, expert or public supports it. What secret deals are behind that? And of course David Cameron's tax evasion is a "private matter". In fact capitalism rests on the assumption that property is private. Now adays music and thought are considered private property. The bright boy who released JSTOR free on line had the book thrown at him and commited suicide under threats of decades in a private prison, where by all accounts rape is encouraged.
JamesValencia , 2016-05-31 10:10:00
Very interesting, that's a good read.
It also strikes me that "globalisation" and the frequently assumed "global neoliberal paradigm", is not correct. That is, the frequent assumption that free markets are the norm, and that this is how national and global exchanges function.

What we have instead in brief is a global free market capitalism which is financed and subsidised by the public sector. The often talked about "socialism for the rich".

It strikes me that rather than "neoliberalism having failed", the most striking movement since the 1960ies is how private capital managed to bend democratic socialism (which means the welfare state in its various incarnations including in the USA) and bend it to its own profit.

How it did this: "democratic socialism" (this isn't communism: all it means is "market regulation in the public interest" and includes public services such as education, health, defense) which flourished after the 1930ies was bit by bit taken over by the private sector. Not in terms of ownership, but in terms of supply and management.

So neoliberalism as it's commonly understood is a foil, a fiction, camouflaging the underlying reality of democratic socialist government which is in part at least run by private enterprise.

The practical consequences: Government support and financing of a range of industries, and private sector involvement in running government services: the neo-liberal "The market knows best" is an illusion.

Its complicated, and needs some thought, but I reckon there's some subtlety here, and my intention is not to rant "socialism for the rich" - its more subtle and more interesting than that slogan.

soundofthesuburbs , 2016-05-31 10:06:33
Neo-Liberalism - the more you see of it the less you like it.

Getting to the rotten core of Neo-Liberal globalisation, a UK journey.

1) Tony Blair announces the UK is a meritocracy where anyone can get to the top through hard work, drive and ambition.

Next elected prime minister – Eton educated and married into the aristocracy.
Eton boys occupy a myriad of positions of power.
Privately educated elite firmly re-established.

2) Everyone must be subject to market discipline and compete in a global market place.
Industries that cannot compete in the global market place must fail.

Heavy industry, manufacturing and mining decimated, severely affects the North of England and Midlands.

The financial sector fails and is given unconditional bailouts with no effort to punish those who made the losses, the tax payer will just pick up the bill.

3) The lasting damage to the economy caused by the financial crisis must be passed onto those at the bottom of society through austerity to balance the budget.

Are you rich or are you poor?
Neo-Liberalism helps the rich and disadvantages the poor.

Nice rich bankers – how much do you want?
Traditional industry – left to the whims of the global market place.

Neo-liberalism is rotten to the core.

hirpling -> soundofthesuburbs , 2016-05-31 10:17:53
WTF?
1. Margaret Thatcher announces the UK is a meritocracy where anyone can get to the top through hard work, drive and ambition.
hirpling -> soundofthesuburbs , 2016-05-31 10:18:53
Blair was a johnny-come-lately two decades on in the neoliberal project.
ghislain -> soundofthesuburbs , 2016-05-31 10:19:56
All very true, except that your milestone 1) should begin with Regan and Thatcher (and Deng Xiaoping!) not Blair, who merely continued it with a more soft-edged approach.
CheshireSalt , 2016-05-31 10:03:32
'Neo-liberalism' or free market capitalism will die when a better alternative system is seen to be superior. As the article says there was a time when sensible people could believe that this better alternative was Marxian socialism. Sixty odd years later it is impossible to believe that. The remaining examples in the world like North Korea and Venezuela are to be avoided like the plague and previously socialist countries like China and Vietnam have longed eased to be so.

It is important to understand the crucial advantage of capitalism over its rival, namely that it is self-organising. Milton Friedman gave the example of the ordinary 'lead' pencil which requires wood, paint, graphite, alloy metal for the ferrule and rubber for the eraser. Arranging for all that to happen by centralised control is an enormous undertaking yet in the capitalist world pencils sell for 50 cents apiece. Nobody believes in world economic direction by Central Committee and so it is likely that global capitalism will continue unabated not withstanding a few bumps in the road along the way.

SlumVictim -> CheshireSalt , 2016-05-31 10:13:19
'Neo-liberalism' or free market capitalism will die when a better alternative system is seen to be superior.

So this was the reason for the death of the Ancien Regime in France and the death of the Romanovs?

I think people were not going to wait for an alternative to come along.

5abi -> CheshireSalt , 2016-05-31 10:21:33
.....global capitalism will continue unabated not withstanding a few bumps in the road along the way.....

The same was thought/proclaimed about slavery, feudalism, colonialism. But new systems are born as the old ones become obsolete and an impediment to progress. Capitalism will go the same way.

NewSolomon -> CheshireSalt , 2016-05-31 10:36:27
It isn't either / or, black or white as you seem to suggest. A mixed economy is the ideal set-up. That's an economy where you recognise which sectors function best as services and which run best left to competition. That is the failure of neoliberalism, which throws almost every single enterprise into the jaws of the competitive market. The railways should never have been privatised. Our utilities should never have been privatised. The NHS should not be opened to 'any willing provider'. Strategic industries should have had more protection. The housing market should not have been globalised etc etc etc. Most of us know well who is most responsible for these failing policies.
atuocool , 2016-05-31 10:03:10
A child could figure out that neo liberalism wouldn't work for most people. I did when I was 11. But the super elite will always be willing to take a punt only an ideology tailor-made to make them richer while oppressing us more. Then all they have to do is get the slimey politicians who work for their interests to sing the anthem and get their little pay off.
MereMortal , 2016-05-31 10:02:45
Aditya is writing cracking article after cracking article these days. I thought that the one about Boots was riveting as well as disheartening.
We've had 40 years of relentless propaganda about private = good and public = inefficient or downright bad.
well it's surely true that private is good if you're making something like an iPhone or a Tesla, you need entrepreneurs driven by a fanatic obsession with perfection and the profit motive.
It's surely not true if you're trying to provide public housing, electricity, gas, water, rail or the prison system etc..
We've seen how groups of private individuals have been trusted to do right by society when their remit was always to do right by themselves and by their shareholders. How could it have been otherwise?
It's no use having a privatised utility and then blaming it for cutting costs and raising prices. The problem is a political one.
Leave what is best done by private individuals and companies to them, but get them totally out of our public commons. And regulate the financial industry so that it cannot trade with the certain knowledge that it will be bailed out by the politicians it has totally bought.

What killed neoliberalism ultimately was hubris. It worked very hard to eliminate every political obstacle, the left, trade unions, regulation, until it was squarely able to shoot itself not just in both feet, but in the head too.

CheshireSalt , 2016-05-31 10:03:32
'Neo-liberalism' or free market capitalism will die when a better alternative system is seen to be superior. As the article says there was a time when sensible people could believe that this better alternative was Marxian socialism. Sixty odd years later it is impossible to believe that. The remaining examples in the world like North Korea and Venezuela are to be avoided like the plague and previously socialist countries like China and Vietnam have longed eased to be so.

It is important to understand the crucial advantage of capitalism over its rival, namely that it is self-organising. Milton Friedman gave the example of the ordinary 'lead' pencil which requires wood, paint, graphite, alloy metal for the ferrule and rubber for the eraser. Arranging for all that to happen by centralised control is an enormous undertaking yet in the capitalist world pencils sell for 50 cents apiece. Nobody believes in world economic direction by Central Committee and so it is likely that global capitalism will continue unabated not withstanding a few bumps in the road along the way.

SlumVictim -> CheshireSalt , 2016-05-31 10:13:19
'Neo-liberalism' or free market capitalism will die when a better alternative system is seen to be superior.

So this was the reason for the death of the Ancien Regime in France and the death of the Romanovs? I think people were not going to wait for an alternative to come along.

5abi -> CheshireSalt , 2016-05-31 10:21:33
.....global capitalism will continue unabated not withstanding a few bumps in the road along the way.....

The same was thought/proclaimed about slavery, feudalism, colonialism. But new systems are born as the old ones become obsolete and an impediment to progress. Capitalism will go the same way.

NewSolomon -> CheshireSalt , 2016-05-31 10:36:27
It isn't either / or, black or white as you seem to suggest. A mixed economy is the ideal set-up. That's an economy where you recognise which sectors function best as services and which run best left to competition. That is the failure of neoliberalism, which throws almost every single enterprise into the jaws of the competitive market. The railways should never have been privatised. Our utilities should never have been privatised. The NHS should not be opened to 'any willing provider'. Strategic industries should have had more protection. The housing market should not have been globalised etc etc etc. Most of us know well who is most responsible for these failing policies.
atuocool , 2016-05-31 10:03:10
A child could figure out that neo liberalism wouldn't work for most people. I did when I was 11. But the super elite will always be willing to take a punt only an ideology tailor-made to make them richer while oppressing us more. Then all they have to do is get the slimey politicians who work for their interests to sing the anthem and get their little pay off.
MereMortal , 2016-05-31 10:02:45
Aditya is writing cracking article after cracking article these days. I thought that the one about Boots was riveting as well as disheartening.
We've had 40 years of relentless propaganda about private = good and public = inefficient or downright bad.
well it's surely true that private is good if you're making something like an iPhone or a Tesla, you need entrepreneurs driven by a fanatic obsession with perfection and the profit motive.
It's surely not true if you're trying to provide public housing, electricity, gas, water, rail or the prison system etc..
We've seen how groups of private individuals have been trusted to do right by society when their remit was always to do right by themselves and by their shareholders. How could it have been otherwise?
It's no use having a privatised utility and then blaming it for cutting costs and raising prices. The problem is a political one.
Leave what is best done by private individuals and companies to them, but get them totally out of our public commons. And regulate the financial industry so that it cannot trade with the certain knowledge that it will be bailed out by the politicians it has totally bought.

What killed neoliberalism ultimately was hubris. It worked very hard to eliminate every political obstacle, the left, trade unions, regulation, until it was squarely able to shoot itself not just in both feet, but in the head too.

Josh Graver , 2016-05-31 09:59:55
Got to hand it to the neoliberalists for keeping it going for 40 odd years

"You'll love it, we get filthy rich and we chuck a few quids down to you!"
"Don't say that, say trickle-down effect"
"Ok, you'll love it, the trickle-down effect will make everyone better off!"
Over 40 years
"Are you still here? I told you, it's great because of the trickle-down effect"
"Where's the trickle-down effect, it's not happening"
*silent* "Fuck right off, I don't want you snooping around my offshore trust funds, not illegal, go on piss off"

eatonTheDonis -> Josh Graver , 2016-05-31 10:09:28
A neoliberal will seriously argue that despite real median incomes stagnating in the US for forty years and in the UK for almost a decade and a half that we're all better off because nearly everybody can afford a smartphone and washing machines are cheaper.
Panda Bear , 2016-05-31 09:55:22
It's not Neoliberalism that is crashing, it's Capitalism! They got too greedy and tunnel visioned with their 'market knows all' dream in a system that favours and rewards what used to be considered corruption and now they looting are putting in repressive and restrictive measures to control the devastation they have caused. They are floundering about trying to work out how to stop the major crash coming and keep their ill gotten gains and gravy train for the legions of self serving enablers as I call them!

Prof Richard D Wolff a Marxist economist, here's this weeks talk, 1 hour. Based on US news topics but in the second half he talks about the Neoliberal god... 'the market' or rather the use of (or not) markets in economic systems. Krugman and Uber get mentions in the first half.
Markets from 30.00
http://www.democracyatwork.info/eu_listen_prof_krugman

uuuuuuu , 2016-05-31 09:52:53
Free markets without state interference invariably drift towards feudalistic monopolies. They end up exactly where communism also ends up. A small elite controlling the economic fate of the masses. A "market" where supply and demand no longer play any part, because any small competitor can be bought or liquidated at will by the monopolist.

For capitalism to work the state needs to be both, strong and accountable to the people, not the vested interests. In a global marketplace this control needs to come from a global organisation, like the UN.
A t present the global corporations play the nation states against each other in a race to the bottom (the end game in this game is to make the UK the Bangladesh of the North, which it was in the 18th and 19th century). At some point we will turn the corner; the question is just whether it is done with or without armed conflict.

ayupmeduck2 , 2016-05-31 09:50:05
This might not be the 'in depth' analysis some would like, but I think that Chakrabortty is correct that there has been a big change in the background. The majority of politicians don't see this, from Boris Johnson to Jean-Claud Juncker, they are clueless and out of touch, but Chakrabortty makes an astute observation that:

...policymaking elite [claims it was doing] ... merely doing "what works". But you can only get away with that claim if what you're doing is actually working.

Today you can read Ben Bernankes PhD thesis and see that it is wrong, you can see that the IMF/EU Greek 'Bail Out' failed 3 times in a row, you can see that Osbourne has missed every single economic target he set himself, you can see that 'trickle-down' economics never worked, etc., etc.

Meanwhile Steve Keens open source economic simulator works rather well, and explains why the the UK, USA, Europe and Japan are very unlikely to ever recover if they keep on with the current economic policies.

YeOldPhart , 2016-05-31 09:48:35
All political systems fall under thier own weight. The infamous bread v guns can still be applied to nation states but not obviously economic systems. The workers or any other outside group can never change economic systems (they can only protest through populist politicians who will bend to the system when in power), only insiders can do that. You have to hope that the change they come up with is an improvement but it is unlikely given that almost all will want the status quo maintained.
SlumVictim , 2016-05-31 09:47:55
It was clear in the 80s the Thatcherite experiment wouldn't work and it was widely discussed and most of the reasons put forward why it wouldn't work, have proved correct.

But we all have the evidence of privatisation. Britain has effectively been asset stripped by the Tories, aided and abetted by New Labour but where are all the promised tax cuts? As a nation we pay about the same in taxes as Germany, yet Germany owns the most state assets of any country in Europe. It is what ideological neoliberal call socialist but it does better than us. Meanwhile, for all the privatisation in the UK, our taxes are still high and on top of that, the privatised services and utilities and businesses are more expensive, more inefficient and more unreliable and we have to pay for much of them, on top of our already high taxes!!!

The biggest joke came when the nationalised East Coast Line came in as the most cost efficient mainline in the country, which had the Tories desperate to privatise if as quickly as possible to get rid of a sample of state run trains being more efficient than privatised trains. Well, we just have to look at many European countries to see most state railways are more efficient than privatised ones. In Holland when rail was privatised, it more or less collapsed and had to be effectively renationalised and then partly privatised again but the trains still are useless compared to what they were when they were completely state run.

Neoliberalism was always a corrupt ideology with corruption conscious;y at its heart. Neoliberalism has normalised corruption to the point where the establishment and our political masters don't even try to hide corrupt practices, they are every day work and business practices. The biggest question is, why we aren't rioting on the streets like the French. Why are we British so damn passive when we are being ripped off and abused? Our we really like an abused wife or child, who has grown used to abuse and can't imagine life without it?

juliameg , 2016-05-31 09:45:58
Economics has long been practiced at the level of a voodoo cult - light the candle and chant a mantra.
This was apparent in 2007 when Northern Rock went bankrupt having been handing out mortgages 120% over the value of over valued property thus accelerating a house price bubble and instantly putting mortgagees into a position of negative equity.

It was most apparent when China kept announcing, cheered on by a chorus of economists, a 10% growth rate whilst it tipped 70% of the world's concrete into non viable mega projects, produced a mountain's supply of cheap steel that far exceeded any demand and pumped out clouds of gaseous pollution and lakes of poisonous waste to the detriment of the global environment (uncosted)

Since then, well it seems that most of that extra money that was pumped into the unregulated money markets got invested in London's luxury property market and fracking - both unsustainable, environmentally damaging and unnecessary.

I am afraid that a mass extinction event will be the only solution.

Toeparty , 2016-05-31 09:44:16
Great piece Aditya

The impossibility of capitalism

The quantity of capital needed just to stay in the game nowadays is so gobsmackingly vast that 62 individuals now control more personal wealth than 3.5 billion of the world's poorest. This is a level of concentration of wealth and power that the absolutist monarchies of yore could not even have dreamed of. Corporate cartels and monopolies dominate and charge their monopoly prices snuffing out not just their competitors but production in general as others have to charge below value whilst the monopolists charge way above. The financial structures that kept this situation going for the past 30 years has now collapsed owing several times the national debts of the nations that hosted them and which liabilities they have now assumed. Even the smallest percentages of growth require such vast amounts of capital but there is no room for further concentration or state support for it as they are bankrupt. US-sponsored globalization and all the institutions built upon it as a result of the death of capitalism is unraveling at an alarming rate. Globalization behind the greatest discreet political power the world has ever seen was as far as capitalism could take us and it has to be said that a lot of the `development' of the last half-century has been purely destructive and will have to be reversed before we can once again go forward. Which brings us to the second reason for the impossibility of capitalism. The political necessity of growth, without which capitalism as a political economic system is finished, is obstructed not just by sclerotic monopolisation and bankruptcy but by the fact that every tiny percentage of growth requires transforming huge swathes of the nature on which we depend into useless product and nature does not have anything left to give on this basis. Catastrophic global warming is upon us along with a myriad of other environmental catastrophes such as the death of our oceans. It is as it was prophesied that it must eventually be a matter now of socialism or barbarism. Socialism or a New Dark Ages from which are species is unlikely to emerge or survive. We either transcend capitalist globalization, neo-liberal bourgeois internationalism, through world proletarian revolution and a world commonwealth of nations or we die with capitalism.

nishville , 2016-05-31 09:41:58
The authors even defend privatisation as leading to "more efficient provision of services" and less government spending – to which the only response must be to offer them a train ride across to Hinkley Point C.

Or try to get anywhere in the Netherlands by train when fallen leaves or an inch of snow completely paralyses our privatised rails.

Privatisation is a total bullshit served in a very expensive sandwich to the taxpayers.

Ziontrain , 2016-05-31 09:39:33
I would have like to see the author consider the role of power in this situation. With absolute power comes also the ability to determine "reality" - distorted or not. If the emperor wields absolute and devastating power, well who's to tell him he is naked and should abdicate?

So it, vital to note that a huge change our societies at this moment is the increasing militarisation of civil society, erection of an unprecedented surveillance machiney, reallocation of resources from human development to the military state under many guises, along with a close collaboration of military and business.

In short, basically anything the author is saying is already in a scenario painted by the likes of Rand Corp - and accounted for in the current state of affairs. There are many disguises for all this including supposedly "threat" of migrants.

Honestly I don't think there is any stopping this train on its way to a crash.

Unusualsuspect -> Ziontrain , 2016-05-31 09:54:54
Except the military as a whole haven't exactly benefitted from austerity. That said, as Iraq demonstrated yet again, senior military personnel who go to Whitehall soon adopt the political drive and beliefs of their masters.
Ziontrain -> Unusualsuspect , 2016-05-31 10:54:13
"Austerity" in the west applies to human development programs. Not to the machinery of warfare - or internal policing - or domestic surveillance. All of which are also essential pillars of neoliberalism.

And there is a carve-out as well. See here:
http://www.nato.int/cps/en/natohq/official_texts_112964.htm

Wales Summit Declaration

Issued by the Heads of State and Government participating in the meeting of the North Atlantic Council in Wales

05 Sep. 2014 - | Press Release (2014) 120Issued on 05 Sep. 2014 | Last updated: 31 Jul. 2015 09:05
14. Allies currently meeting the NATO guideline to spend a minimum of 2% of their Gross Domestic Product (GDP) on defence will aim to continue to do so. Likewise, Allies spending more than 20% of their defence budgets on major equipment, including related Research & Development, will continue to do so.

Allies whose current proportion of GDP spent on defence is below this level will:

halt any decline in defence expenditure;

aim to increase defence expenditure in real terms as GDP grows;

aim to move towards the 2% guideline within a decade with a view to meeting their NATO Capability Targets and filling NATO's capability shortfalls.

Allies who currently spend less than 20% of their annual defence spending on major new equipment, including related Research & Development, will aim, within a decade, to increase their annual investments to 20% or more of total defence expenditures.

Barmaidfromhell , 2016-05-31 09:35:23
If you think the western neo cons will go with a whimper like the ussr me thinks you are mistaken. The Chinese new yuan is gold backed and has the support of Japan Russia and France as the new international currency. If every American paid 100% tax it wouldn t cover the federal expenditure annually. Without the hall mark of international exchange the dollar is paper. And you think these old east European ideologues led by Kessinger are gong to let their vision of hell go quietly into the night?
Mukkinese -> proximity1 , 2016-05-31 10:07:55
This newspaper long ago bought into neo-liberalism. A few individual journalists allowed to write here know what a social-conscience is, but they are "tokens"to present a fig-leaf of social values and justice.

We see no genuine outrage anymore, no campaigning for the truth or justice, just a resigned, brow-beaten shrug and "what can we do?"

On the whole the Graun is a paper aimed at the middle-class, professional who wants to talk as if they care, but in the end will scurry over to the side of whoever will look after their investments and protect them from becoming one of those whose situations they wring their hands over...

proximity1 -> Mukkinese , 2016-05-31 11:04:07
Exactly! The virtue-signalling done in these pages makes me want to puke.

In short, while Chakrabortty himself is sincere, most people at this paper reek of hypocrisy.

nishville , 2016-05-31 09:31:46
Neoliberalism hasn't delivered economic growth – it has only made a few people a lot better off.

Neoliberalism isn't an ideology, it is not even a doctrine - it is a legalized thievery, a plundering of public resources aided and abetted by corrupt politicians.

It is pre-revolutionary France situation all over again, is it possible that the human race cannot invent a working political-economic system that could effectively keep greedy, egotistical psychopaths at bay?

Writeangle , 2016-05-31 09:26:17
The only real news is that the IMF researchers have caught up with research elsewhere but that not to say that the big boys in the IMF have lost faith in making the rich richer as the answer.
Neoliberialism does not describe the real problem. The real problem is financialisation of western economies which started in the 1970s. This leads to ever less money being invested in the real economy because the financial sector can make bigger returns from bets and rents.
Some links for financialisation
https://mostlyeconomics.wordpress.com/2016/05/23/how-financialisation-is-destroying-us-economy-how-far-is-india-from-it /
http://www.industryweek.com/competitiveness/financialization-economy-hurts-manufacturing
http://www.forbes.com/sites/stevedenning/2014/06/03/why-financialization-has-run-amok/#4bdb261d3e0d

The trend varies slightly country by country, but the broad direction is clear," says Adair Turner, a former British banking regulator .... "Across all advanced economies, and the United States and the U.K. in particular, the role of the capital markets and the banking sector in funding new investment is decreasing." Most of the money in the system is being used for lending against existing assets such as housing, stocks and bonds....To get a sense of the size of this shift, consider that the financial sector now represents around 7% of the U.S. economy, up from about 4% in 1980. Despite currently taking around 25% of all corporate profits, it creates a mere 4% of all jobs. Trouble is, research by numerous academics as well as institutions like the Bank for International Settlements and the International Monetary Fund shows that when finance gets that big, it starts to suck the economic air out of the room. In fact, finance starts having this adverse effect when it's only half the size that it currently is in the U.S. Thanks to these changes, our economy is gradually becoming "a zero-sum game between financial wealth holders and the rest of America,"... from http://time.com/4327419/american-capitalisms-great-crisis /

Assuming financialisation continues
...In the United States, for example, "trickle down" economic policies that support tax cuts for the rich with the aim of boosting economic growth and jobs have led to a $2 trillion annual redistribution of wealth from the bottom 99 percent of earners to the top 1 percent over the last 30 years...If the trend continues, by 2030, the top 1 percent of Americans will earn 37 to 40 percent of the country's income, with the bottom 50 percent getting just 6 percent...
Europe won 't be much different as the richest 1% are global so we are heading to a plutocracy where the 1% will own pretty much everything making government a waste of time. Ownership is the real power. Politics is BS.
The economy is working well for the 1% so they will not be interesting in changing it. There may be rising dissension throughout the West but that's not their problem to even care about. Any alternative means them getting a smaller cut of the cake - not gonna happen.

tnbskts -> Writeangle , 2016-05-31 09:42:45
That's what Rana Foroohar (economics writer at Time magazine) has been saying; she's recently written a book about the finacialisation of the global economy, called Makers and Takers. http://www.theguardian.com/commentisfree/2016/may/21/crisis-in-capitalism-and-role-of-wall-street
variation31 , 2016-05-31 09:17:10
Neoliberalism = wealth-stripping countries to pad the nests of the executive class.
Neoliberalism = granting more and more legal protection to those who already have greater power over their fellows on account of private wealth.
Neoliberalism = Blair not in prison for war crimes.
Neoliberalism = sweetheart tax deals, privatisations, a bust and back-broken NHS, shut libraries if not enough pensioners can be guilt-tripped into sitting there all dya giving a pretence of business as before.
neoliberalism = horsemeat in the savoury pancakes.

Really, such a foul and ugly construct should have died YEARS ago. For the sake of basic national wellbeing and human decency. Except this paper has been doing what it can to conflate it with Labour (and with "moderates"!!!!), defend it and perpetuate it.

GarfieldTheCat -> variation31 , 2016-05-31 09:22:28
"Neoliberalism = wealth-stripping countries to pad the nests of the executive class.
Neoliberalism = granting more and more legal protection to those who already have greater power over their fellows on account of private wealth."

Those first two are also prevalent in other regimes - North Korea or Venezuela for example. And last time I looked neither of those were exponents of Neo-Liberal economics.

ramous -> GarfieldTheCat , 2016-05-31 10:07:17
Funny how the ideology of freedom once run its course winds up in the exactly same position as all the other despot systems, with a grossly undeserving wealthy elite making the rules to preserve their reign over everyone else. We have less freedom now than we did before neoliberalism. We live under a financial tyranny.
variation31 -> GarfieldTheCat , 2016-05-31 10:13:23
Yes, they are prevalent in far more nakedly barbaric and cruel ways to run countries.

Neoliberalism is the professional-seeming way of enabling the rape of resources and the demolition of social structures by means other than military dictatorship or brainwashing the people into drooling at the cult of the god-ruler.

I do hope that "North Korea do something similar too" wasn't supposed to be a subtle defence of neoliberalism!

hartebeest , 2016-05-31 09:16:21
Good stuff from Chakrabortty again. However, it's important to stress that the IMF article operates within the same paradigm as the agenda it critiques and so is quite limited in many respects.

By far the most surprising and important aspect of the paper is symbolic, in that it uses the word neoliberalism. The IMF (and most 'serious' people) tend to think of neoliberalism as a term employed by Rage Against the Machine fans whose economic knowledge extends to having thumbed through a copy of The Shock Doctrine in a hostel on their gap year.

In terms of the detail, there's actually not much new in the paper. It sounds a lot like Latin American ideas from the 1990s, some of which later appeared in diluted form within the World Bank and which are still basically grounded in neoliberal logic. Essentially: markets are the gold standard for optimal distribution of resources, but they don't always function perfectly in the real world and so it is the task of the state to ensure they do work properly, using strong, efficient institutions and efforts to boost competitiveness (education etc.).

It's basically the same adaptation (but not abandonment) of the old structural adjustment logic that the World Bank made in the mid 1990s, in the face of mounting evidence that adjustment wasn't working (because they'd stripped away the capacity of govt. to even implement the favoured reforms).

proximity1 -> hartebeest , 2016-05-31 09:40:43
..." in the face of mounting evidence that adjustment wasn't working (because they'd stripped away the capacity of govt. to even implement the favoured reforms)."

You may ve surprised how quickly and easily this capacity, supposedly "stripped away," can be reasserted as soon as that's what those in power agree they should do.

hartebeest -> proximity1 , 2016-05-31 11:10:00
Well, that depends what you mean. I was talking about the paring down and then reorientation and partial reassembling of many developing countries' administrative structures under the direction of the World Bank and IMF in the 80s and 90s. Those sorts of organisations wouldn't countenance a return to anything like the state of play prior to the 1980s.

However, if you are talking about security, then this is one area where developing countries are very much encouraged to build state capacity as far as is possible (given the 'development=security' mantra now adopted by DFID and the like).

ID17071882 , 2016-05-31 09:15:03
I question whether Aditya Chakrabortty has actually read the article in question. Chakrabortty claims that "The results [of the neoliberal agenda], the IMF researchers concede, have been terrible" In reality the article says:

There is much to cheer in the neoliberal agenda. The expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and know-how to developing economies. Privatization of state-owned enterprises has in many instances led to more efficient provision of services and lowered the fiscal burden on governments.

The IMF writers actually address three specific failings of recent neoliberal policy, rather than gives a critique of newliberalism in general:

An assessment of these specific policies (rather than the broad neoliberal agenda) reaches three disquieting conclusions:

• The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.­

• The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.­

• Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.­

Like I say, it appears that Chakrabortty has not actually read the IMF article and is actually discussing what he would have liked to have been in the article.

Perplexed123 -> ID17071882 , 2016-05-31 09:31:15
Thank you. Scrolling down I can see that others have picked this up. Very, very lazy journalism pushing a particular agenda.
slinky09 , 2016-05-31 09:08:23
One article in one magazine does not mark a shift so no, nothing has yet changed in terms of rampant globalisation and neoliberal economic policy. What I do see changing though is the growing realisation that nearly forty years since Thatcher and Reagan set us on this path (with their wealthy supporters urging them on) we're finally getting some realisation that it's a failed model - the trickle down doesn't happen, the elites still gain more, workers and middle classes stagnate ... I don't believe for one minute though that those at the top of the pyramid will give up easily. What next though?
BrassTrumpet -> galava , 2016-05-31 09:21:15
While neoliberalism is delusional rightist nonsense, as we can see if we open our eyes.
Brightdayler -> galava , 2016-05-31 09:22:27
It doesnt matter what the IMF research "actually said". Neoliberalism doesnt work - if by "work" you mean benefit the majority of people rather than a small minority - and it's delusional to suggest otherwise.
It's an extreme form of neoclassical economics, most of whose assumptions - required to make its bizarre assertions even remotely plausible - would cause the average person to fall about laughing. Except of course its practitioners are careful to ensure that the average person never does confront its absurdities head on, partly by hiding its doctrines away, partly by disguising them in false platitudes like the "law" of supply and demand and the definition of the economic problem as matching scarce resources and unlimited wants (resources arent scarce and wants are not unlimited).
Think yourself lucky that it's only Aditya you have to contend with. He seems unaware of the vast amount of work being done by genuinely good economists who have carried on from Keynes and his model of a monetary production economy (hint: most of those claiming to be Keynesians - such as Paul Samuelson - are nothing of the kind).
crinklyoldgit , 2016-05-31 09:03:50
I am not so optimistic that this article signals the end of neoliberalism. As AC says, it is a description of a process, or way of thinking that is supposedly non-ideological( and therefore 'does not exist'. The term is a kind of denial, in itself.
It is about the supremacy of technology and technical systems, but only partly so, because there is always the impression that there is a wilfulness to the decision making process which is used as a screen to obscure the malicious undercurrents of 'pragmatic' decision making -where certain economic elements are defined as having an inevitable quality akin to the enthalpy of energy changes-'we cannot resist the (economic ) laws of nature' is the
siren call of these duplicitous money-grubbers-while all the time their simplistic nostrums ignore the subtler importances of the entropy of the system, leading to ever greater disorder and ever greater human costs.
One of the most interesting aspects of living through the "Thatcher' era , when she and her acolytes were promoting this simplistic 'revolution in thinking-the supremacy of the market idea ' - leaving behind the failures of statism the forlorn social contract and the established principle of seeking out complex, negotiated accommodations of conflicting interests, was the clear impression that behind all that quasi- philosophical/right wing ideological stuff was a simple deep desire to rip off the dupes (the wider public) who had no idea what was really happening under their noses.
It was nothing more than a considered cynical position to take advantage of the money making opportunities offered by public systems that had been heavily invested in over decades, and were therefore available for carpetbagging capitalism.
Essentially it was the use of insider knowledge and trading. The elevation to a philosophical perspective was simply a cover for the criminal activity and insider plundering.

Essentially we saw the identical pattern emerge after the collapse of the Soviet Union where serendipity, desperation and ruthless gangsterism coincided to create the squalor of what we now see being enacted in the west-end property casino of London.
What should be remembered is the Yeltsin era, when, to all intents and purposes. western 'scrap metal' dealers or their agents were snuffling around the wreckage, looking for the quick profits of (the equivalent of) ruthlessly ripping out the copper pipes and plumbing of that empire.
What did we get? We got a regression into the Putin (orderly and systematic theft) statist despotism, and the lurch into a competing despotism, which we see in places like the Ukraine, being fascist puppet operated for the convenience of malignant interests in the west.

Socrates69 , 2016-05-31 09:02:04
No political party or country can stand up to neoliberalism and decide to go their own way. Sooner or later the guys with the baseball bats, probably German, will pay them a visit.

It's pessimistic but like global warming, things will only change after a catastrophe hits really close to home. We may have more information than we had in the past but the deadening comforts of western middle class living has left us dull and unable to respond.

lawsorna , 2016-05-31 09:01:03
Galbraith had seen this. He said that neoliberalism was like feeding the finest oats to the stallion in the hope it would generate some undigested droppings on which the sparrow could feed. It seems that the sparrows now want more of the oats and not from the droppings. Corbyn and Bernie Sanders-phenomena that Blair purports not to understand- are symbols of dissatisfaction of the increasing and disenchanted young people denied opportunities. They do have plans to put in place of neoliberalism. Let us hope that this uncaring world changes.
oddballs , 2016-05-31 08:53:26
The Stock Exchange, once an instrument to raise capital for investment is now nothing more than a casino.
German family owned businesses are the backbone of the German economy, in the UK companies listed on the Stock Exchange are the fiches on the casino table.
Just look where it all 'ends', huge pharma (Pfizer) companies buying up the competition, not for research, not for the good of the employees but as a way to embark on tax dodging.
Chakraborty one of the best in this news medium
shaksvshav , 2016-05-31 08:51:41
The ultimate novel on neoliberalism must be Ayn Rand's 'Atlas Shrugged'. Here is part 3 of an interesting commentary on it: http://www.alternet.org/civil-liberties/ayn-rands-demented-mind-understood-through-atlas-shrugged with links to parts 1 and 2.
craighm -> shaksvshav , 2016-05-31 08:56:12
Ayn Rand is a joke.
shaksvshav -> craighm , 2016-05-31 09:11:17
Agreed. Horrifying that it has cult status amongst neocons.
Gordon1929 , 2016-05-31 08:48:29
Reminds me of the old joke. My father died peacefully in his sleep....unlike the passengers on his bus who went screaming to their deaths. Better if neoliberalism's demise were to be assisted by a viable alternative economic theory. If not, it'll take us all with it, over the cliff into oblivion. So, anyone got a plan?
themostbeautiful -> Gordon1929 , 2016-05-31 08:55:15
We will rely more and more on machines and AI to make a plan. They can play chess and maybe they can come up with a plan. The machines of the first industrial revolution were daft, nowadays these machines start to become smart. This is a huge difference.
Leigh Harkness -> Gordon1929 , 2016-05-31 09:11:05
My 2012 paper "Saving the Euro" describes an economic model of Europe that replicates the GFC monetary crisis and then tests the effect of a range of policy options on the model. Some policy options have positive effects. The paper is available at: buoyanteconomies.com/SavingTheEuro.pdf
eidos3 , 2016-05-31 08:46:59
The remarkably naive idea that any market could be free, and that some god called 'market forces' would always take care of things, is awfully primitive, but also very human. Time to get heads out of sand, however, and face facts. We are never going to have the ideal anarchist state; we are never going to see real communism (as opposed to state capitalism) work; and neo-liberalism was dead in the water from the start.
There are ways to make economies work, but they involve much more thinking and work, and much less knee-jerk spouting of opinion.

I just hope we survive the mess left by the last 35 years' mismanagement of everything.

Mick James -> eidos3 , 2016-05-31 09:28:07

There are ways to make economies work, but they involve much more thinking and work, and much less knee-jerk spouting of opinion.

If you read the report that's pretty much what it concludes.

This is the second piece in as many days that completely travesties a reports (Z WIlliams article on pregnancy advice is the other).

I would suggest as a rule of them that whenever you see the word "report" in a Guardian opinion column you go looking for it on the internet, because what you are about to read will have very little to do with the research, rather a projection of the author's own views onto it.

What's sad about his is not just the level of misinformation being spread about but how resistant the views even of intelligent and articulate people are to evidence and research. They read the reports, and just say what they were going to say anyway.

eidos3 -> Mick James , 2016-05-31 11:25:46
Quite right. A lack of what used to be called 'reason' or 'rationality' has been dominant for decades now, and it seems to be getting worse.

It should have been clear from the start that Thatcher, Reagan, et al. were wrong. A more equitable distribution of wealth, and hence a more healthy economy, will involve all sorts of things at which both left-wing and right-wing conservatives (by that I mean those on both sides of the political spectrum who cling to old ideas) will scream bloody blue murder. One could start with the complex of environmental concerns, for example.

Robert Tressell , 2016-05-31 08:46:20
Another insightful article from Chakrabortty, who, along with John Harris continues to provide welcome sense, in contrast to a host of Westminster bubble hacks that get regularly aired in the Guardian (my personal frustration list includes Behr, Freedland and Rawnsley).

I don't, however, yet think we can be sanguine about a lessening grip from this destructive ideology. It has a grip in higher education economics departments, where it seems to take the Jesuits approach to grabbing them whilst young and impressionable. It also has a grip on what passes for media in many western countries, where it continues with its poisonous propaganda in which symptoms morph into causes.

Read any of the articles in this paper in which the EU referendum is mentioned, and see the blaming of immigration for everything from zero hour contracts and pressure on housing and services to the weather (OK, I made the last one up, but you get the drift). A classic is the article on Stephen Hawkings views on Trump and the referendum where btl is infested with all sorts of crap about how he 'doesnt get it because he's not working class'.

Neo-liberalism is and has been the establishments ideology for a few decades now, and whilst it's cheer leaders and supporters continue to exert their influence over the media and HE it could stagger on a while longer yet.

JoeSoapy , 2016-05-31 08:45:32
neoliberalism...to me the biggest problem is globalisation..a race to the bottom..
. http://www.theguardian.com/world/2016/may/25/adidas-to-sell-robot-made-shoes-from-2017
Mick James -> JoeSoapy , 2016-05-31 09:32:57
You don't need globalisation to make shoes with robots.

If cheap labour is out of the equation then robots will most likely return production to local markets, as shipping will be an unnecessary cost.

And Adidas have been using evil sewing machines for decades, also naughty electricity: how far do you want to roll back this particular "race to the bottom"?

Collectivist Hippopotamus -> JoeSoapy , 2016-05-31 11:24:24
Automation is terrible in neo-liberalism. But Guy Standing, Paul Mason, David Graeber, Yanis Varoufakis and Robert Reich make clear that you can have automation and still have social cohesion and security. Universal Basic Income is step one on the road to Postcapitalism.
ermagerd , 2016-05-31 08:45:21
Yes; lots of valid points - although you left out that the report didn't say neoliberalism was all bad - nothing lasts thirty years in a democracy if it's entirely sh*t. We all voted for more cheap tellies, cheap clothes, cheap holidays, cheap nannies etc etc.

The question is not even 'How do we adapt to the death of neoliberalism?" It's 'How much can we even afford to let neoliberalism die?' No politician who wants to stay in the job for ten minutes, is going to tell the electorate what the future of globalized free trade (which means globalized free movement of labour units) really looks like - so they keep filtering the whole thing through the old meaningless panto of "left and right."

Farage and Trump are punting exactly the same "hard-left" protectionism that the likes of Arthur Scargill once fought for, yet the media (and politicians) still shriek about them being "right wing," while Sanders and Corbyn have an internationalist view that George Soros would happily endorse.

We've already had the mainstream begin to adapt - eg; Hillary Clinton faking concern about neoliberalism's excesses in order to see off the threat from Saunders, while the Conservatives had to concede an EUref to UKIP. And while it's (on balance) a welcome death - we'd better hope that it's a reasonably gentle one that acknowledges what works, not the kind of infantilized 'pull-up-the-drawbridge' populist crap that Trump spoon-feeds his demographic. The faster the mainstream adapts, the better.

AvidViewer , 2016-05-31 08:44:11
Neoliberalism necessarily impoverishes. Its object is to produce goods and services more cheaply, ie reduce wages. Unfortunately, workers are also consumers, so reducing wages means reducing consumption, which in turn means reducing production.

A pleasanter system may be to separate production (by machines) from consumption (by humans), hence the interest in helicopter money and citizens income- methods by which individuals are paid by their society to consume.

The simpler, and so perhaps more likely scenario, is war and pestilence, to create shortages.

Collectivist Hippopotamus -> AvidViewer , 2016-05-31 11:22:03
Universal Basic Income yes, helicopter money no. Helicopter money is the last bullet of neo-liberalism. Printing and dumping cash in the hopes that people will spend or invest it. It's the ultimate act of can kicking.
jessthecrip , 2016-05-31 08:44:09

Last year the rich countries' thinktank, the OECD, made a remarkable concession. It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the second world war. Even more remarkably, it said the same or worse applied to workers across the capitalist west.

I wonder if these bastions of economic probity, the IMF and the OECD, will ever apologise for supporting neoliberalism. I wonder if they will ever take any responsibility for advocating a system which has resulted in the rich geting so much richer whilst most of the rest see little or no improvement in their lives, and now increasing numbers of the poor become destitute. I wonder, but I doubt
totallydude , 2016-05-31 08:38:30
Yes, it's dying, but not dead yet. It's as much a social doctrine as it is an economic ideology. DBS checks and criminal registers are still very much alive, and these are beacons of neoliberal philosophy. But creating environments where the masses destroy each other-and the rich few prosper- is not a new thing. For years Christianity advocated a similarly dogmatic stance. The biblical "meek shall inherit the earth" has been catastrophically and deliberately misrepresented by those with a vested interest in doing so. You think there is absolute truth and morality? Think again, the market defines what is and is not moral, always has done, always will do. The only thing that neoliberalism changed was the moral goalposts. Instead of blasphemy it uses sexual deviancy as it's antithesis. Oh the myopic masses.
ramous , 2016-05-31 08:36:06
All the problems we face today have their roots in the neoliberal ideology. It created a monster that now stamps across the world crushing any country with independents from the grip of this corporate elite. They use financial weapons to destroy economies that don't give into their way of doing things. It breaks up communities to make workers vulnerable, drives wages down, reduces the tax on their profits, sells off all state assets the taxpayer built to made to modern world possible... at rock bottom prices. The list of destructive aspects that can be attributed to neoliberalism is long. Here are a couple of biggies we won't be able to recover from for generations to come. Intergenerational theft by it's approach to the housing market used to prop up the decreasing wages and create and illusion we were all getting richer. All it was doing was stealing from their children to enrich themselves in the present. Then the problems now with care in the community, a result of the break-up of communities to exploit labour. This could turn into an extremely long post if I was to just name all the major problem but Pensions and the privatising the utilities have left the lives of the children of today blighted. Oh and then there is the climate, another problem exacerbated by neoliberalism. Its control of media outlets means the public will never be properly informed about this issue or any issue that might challenge the neoliberal agenda.
I think we can now say after this debacle that the most productive cohesive and successful period the west has had was under socialist democratic control after the WW2.
Shadenfraude , 2016-05-31 08:33:29
The Achilles heel of neo-liberalism was that it over emphasized the supply side. Costs had to be driven down by emasculating Trade Unions, curbs on workers bargaining power were introduced and salaries plummeted, government services had to be cut with direct consequences on jobs and quality of life and, taxes to the rich were simultaneously cut exacerbating income inequality.

Some of us have been saying this for sometime, that if you create unemployment in the name of efficiency and drastically reduce the salaries of those already in employment who is going to buy the goods and services which were now being produced "efficiently" under neo-liberalism. You can not get growth under this scenario, ultimately you have to reckon with question of decline in aggregate demand and the concomitant income in equality caused by neo-liberalism. What the proponents of neo-liberalism thought was the holy grail of economics turned out to a be a veritable cul-de- sac. The rising tide that was supposed to lift all boats has turned out to the whirl pool that threatens to suck all of us to the bottom of the sea.

rpfuller , 2016-05-31 08:32:25
The only death here is in the acknowledgement of neoliberalism's essential failure to deliver a fair and equitable society.

Soviet state socialism lied, because it pretended to be a necessary step on the way to common ownership of the means of production: but instead fell into the hands of uncompromising thugs. It failed because the neoliberal capitalist system is a far more efficient way for uncompromising thugs to run things.

Unfortunately, unlike soviet state socialism, there is no practical alternative to neoliberalism, since all the institutions that opposed it or ameliorated it have been destroyed or suborned. Consequently, neoliberalism no longer needs to pretend that it is an ideology committed to fairness or equality.

This is not the death of neoliberalism. It is neoliberalism beginning to shed a false skin, coming out of the closet.

It is neoliberalism coming to life, and walking the streets unashamed of its true nature.

The only death is the death of its pretence to be a system that benefits all: and this results from an arrogance that considers all alternatives, such as socialism or Islam, to have been consigned to the dustbin of history.

Collectivist Hippopotamus -> rpfuller , 2016-05-31 11:07:43
I would disagree. Have a look at this: https://youtu.be/mU1pQIMv8_A
ordinaryukdweller , 2016-05-31 08:31:33
These lying ideological bastards have destroyed millions of lives and dented the hopes and aspirations of millions more. Their warped gurus, Hayek and Mitford et al are economic illiterates who have been peddling their failed filth for years, buttressed by soulless politicos such Reagan, Thatcher and Blair. They and their failed experiment based on greed rather than need should be confined to the dustbin of history.
Sproggit , 2016-05-31 08:24:03
Interested to read the comment about the fact that UK workers no longer enjoy a share of economic growth. I'm 50 and have one 48-year-old sibling. As we grew up as children in the 70's and 80's, our father's salary as a department manager in a major high street supermarket chain was more than enough for us to have a very comfortable childhood. For children today to have the same experience would require both parents to work - and much longer hours.

The fable 'you never had it so good' is a blatant lie.

We can't turn back the clock and even if we could I have no desire to return to the strikes and conflict of the 1970s. Yet at the same time it is abundantly clear that as a people we are being squeezed until the pips squeak... Today it is zero hours contracts and "If you don't like it, quit, and I'll hire a migrant on half your salary"... This isn't freakonomics, it's fearonomics - and it's far too effective to go away any time soon.

Thooley , 2016-05-31 08:22:44
the real irony being that capitalism is driven and sustained by demand, while neo-liberalism privileges supply, which increases inequality.

This becomes a problem as capitalism is also dependent upon the poorest half spending for its health. Neo-liberalism is, in essence, economic Anorexia Nervosa.

No where in their bag of tricks did they try the one that would actually work, increase the spending power of the lower half, but that is anathema to neo-liberal philosophy.

The real advantage for neo-liberalism is that they've already made off with most things of value that weren't legislatively nailed to the floor.

ID4545445 , 2016-05-31 08:22:10
Excellent article - particularly the reference to the NHS.

The biggest damage done by neoliberal ideology is the disfigurement of thinking, and its hostility to opposing views.

V good.

Collectivist Hippopotamus -> Monkeybiz , 2016-05-31 10:58:18
The state has been militarised to such an extent armed revolution is all but impossible. What really terrifies them is that we will simply ignore them and create our own alternatives. Take Argentina in 2001 as an example. It was the only country in history to default on it's debt due to popular revolt. The revolt in question centered on people forming alternative social and economic services in their own communities around the rallying cry of "Que se vayan todos" or they can all go to hell. There are a few books published under that title about it that are free online. Similarly, have a look at this vid from David Graeber. You can start at 2:56 for a direct answer but it's worth watching the whole thing: https://youtu.be/mU1pQIMv8_A
fakeamoonlanding , 2016-05-31 08:14:56

It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the second world war.

When the economy crashed in 2008 they labelled it credit crunch. The explanation was, and still is, that lenders ran out of credit to carry on lending. But all along they knew that they needed credit primarily to cover their ever mounting losses and carry on business as usual. If their loanees were keeping up payments, not a single lender would crash because of lack of credit.

Quite basically neoliberal capitalism bit off the same finger that fed it. By going for eternal suppression of wages, forever reducing taxes, and forever shrinking states, they set up a system that helped them to keep more and more proceeds of growth for themselves. Sounds great until you realise that demand has disappeared from the economy. That is what happened in 2008. There was never a credit crunch. If there is real demand, credit would be found somewhere. Central banks can make credit available to meet real demands.

If the economy is to start growing again, there has to be a fairer distribution of the proceeds of growth. It means higher and fairer wages, higher taxes, a more robust state (the state has always been a major redistributor of wealth). This would bring back demand into the economy. These changes go against every principle of neoliberalism. But then that's why it died,

DannyNicol , 2016-05-31 08:13:19
Neoliberalism isn't an ideology, it's about class interests. Neoliberal principle is turned on its head whenever that's in the interests of the economic elite - witness the nationalisations and state aids during the banking crisis.
Drewv -> DannyNicol , 2016-05-31 08:22:15

Neoliberalism isn't an ideology, it's about class interests.

Why can't it be an ideology that is organically linked to class interests? The fact that an ideology involves an internal, situational gap between official rhetoric and policy substance, is not enough to disqualify it as an ideology. It just means that the ideology is more complex than its surface suggests.

RedSperanza , 2016-05-31 08:10:44
We live in the Breshnev era of neoliberalism. The ideology is utterly discredited, and all around is stagnation and despair, but the more it fails in fact, the more it is enshrined in law. TTIP is one example, the Berlin-Brussels determination to "constitutionalise" neoliberalism in the EU by outlawing alternatives is another. If anyone does not know what I'm talking about, I refer them to the Fiscal Compact, and to the ongoing assault on Greek democracy.

The tragedy is that the Soviet example demonstrates that such zombie systems can continue for decades. The post-mortem phase of the Stalinist system was of much greater duration than its brief pre-mortem era (if it ever was alive for more than 5 minutes). Metaphorically speaking, the embalmed corpses of Thatcher and Merkel may be inspecting parades in Red Square for years to come, as one wasted generation gives way to another.

ShiresofEngland -> RedSperanza , 2016-05-31 08:41:32
I hope you are wrong, and there is hope that you are. One of the big ones is me being able to talk to you from here in Angola where I am currently working. The internet.

Nothing like that existed in Russia, or anywhere else in the world. They could only go by word of mouth as nothing was written to give an alternative. People were isolated, they lacked credible information, yet today we are awash with more information than any of us can handle. The job today is to sort the wheat from the chaff.

2008 woke up the people when they found out what the banks have been up to, but that was also as the internet was growing exponentially. Even granny is on Facebook today. The best bit is governments cannot control it in the same way they could control the media before.

There is hope.

mandatoryusername , 2016-05-31 08:08:37

...what you're witnessing amid all the graphs and technical language is the start of the long death of an ideology.

The start ?

Y'know I could swear I remember both the IMF and the World Bank officially donning hair shirts and admitting what research had clearly shown: that the imposition of neoliberal policies as preconditions for financial aid packages had generally proved totally disastrous for those they were supposed to help.

That was back in the 1990s... In practice very little has changed--except that nowadays an article such as the one we're commenting on may include journalists--in this case TV correspondents --in the list of those who continue to reassure us, regardless of any evidence to the contrary, that neoliberal policies really are working.

Thus the delectably cynical modern definition of a journalist: one who is paid by the rich to tell the middle classes to blame the working classes.

heathermary , 2016-05-31 08:08:32
It all feels a bit late. Growth figures have become meaningless. It doesn't matter what the state of the economy is, because all most of us see is zero hours contracts and zero public services. The result has been Trump, the rise of the far right, and the probable break-up of the EU (and possibly UK as well). Our political elites are still asleep on the job. I genuinely don't know where this is taking us.
WatermelonClaus , 2016-05-31 08:04:26
From the IMF paper:
"Austerity policies not only generate substantial welfare costs
due to supply-side channels, they also hurt demand-and thus
worsen employment and unemployment. The notion that fiscal
consolidations can be expansionary (that is, raise output and
employment), in part by raising private sector confidence and
investment, has been championed by, among others, Harvard
economist Alberto Alesina in the academic world and by former
European Central Bank President Jean-Claude Trichet in
the policy arena. However, in practice, episodes of fiscal consolidation
have been followed, on average, by drops rather than by
expansions in output. On average, a consolidation of 1 percent
of GDP increases the long-term unemployment rate by 0.6 percentage
point and raises by 1.5 percent within five years the Gini
measure of income inequality (Ball and others, 2013)."

And here in Australia, the Liberal government is trying to sell us a $50 billion reduction in company tax, and an even larger, unspecified reduction in government spending to return to budget surplus as a "plan" for "jobs and growth".

Seamus Daly , 2016-05-31 08:02:28
This sucker went down in 2008. What has happened since has been a nightmare. The money-printing, giving that money to the rich, economic 'growth' based on immigration has rewarded those that brought 08 about, whilst punishing it's victims again. Hopefully either Trump, Corbyn, Brexit or Russia re-exerting it's power can finally drive a stake through the neolib heart.
BelieveItsTrue , 2016-05-31 07:53:27
" Global Financial Crisis Coming – Japan Warns of "Lehman-Scale" Crisis At G7

Japanese Prime Minister Shinzo Abe warned his Group of Seven counterparts on Friday that the world may on the brink of a global financial crisis on the scale of Lehman Brothers."
This quote from an article on zerohedge.com this morning.

Yet most of humanity remains in the dark, continuing their lives without thought of what is about to happen - a financial crash of such enormity, life will never be the same again. Hardly anyone is preparing and even if they do, it will be to no avail because apart from the elite who will disappear into fortified underground bunkers, we shall be left to fight for our lives by whatever means possible.

Too bleak a picture? Food riots going on in Venezuela should be enough to demonstrate what can happen. And the US is partially to blame, labelling Venezuela a threat to their security. That Venezuela will pushed into using the dollar for trade is one way of protecting the petrodollar and the reason behind such a stance. Is there no end to the hegemony of a would be slavemaster?

Indeed, as per the ending of the book Red Plenty "What kind of socialism is that? What kind of shit is that, when you have to keep people in chains? What kind of social order? What kind of paradise?"

HansB09 , 2016-05-31 07:52:30
Yes; it's dying from within. It was theory, and scholars are abandoning it. But those who put the theory into practice are still there, and they're clinging to their ideology as much as to their seats.

Neoliberalism is bankrupt in every sense of the word but that doesn't stop the EU, in particular, from imposing its destructive "remedies" - read poison - on member states. And the problem is that we can't remove either the Commission or the bureaucrats, no matter how much they fail. The EU is not a democracy but a kleptocracy. Once you're in, you're in for good. The high-placed bureaucrat who fears for his/her job doesn't exist. Elections are a sham. Nobody - absolutely nobody - votes for a European party or a European platform. The minority that goes to the voting booths uses their ballot as a way to express approval or disapproval of national governments.

And so we are stuck with neoliberalism, just as the Soviet Union was stuck with communism under Breznev and Andropov. It wasn't working, but the bureaucrats and leaders had a vested interest in keeping it going.

trp981 , 2016-05-31 07:44:08

"Two British examples, suggests Will Davies – author of the Limits of Neoliberalism – would be the NHS and universities 'where classrooms are being transformed into supermarkets'. "


The dominant neoliberal, market fundamentalist order must, like any competent cult, enforce its authority by doubling down each time its worldview is threatened. This is accomplished by identifying and monetizing regions of social life that had hitherto been neglected or underutilized. In the latest sting, the student is reduced to the status of a consumer whose actions and decisions are governed purely by the market algorithm. The reduction must be so complete that the student-consumer identity should appear obvious and unquestionable.

"Since the crash, central bankers, politicians and TV correspondents have tried to reassure the public that this wheeze or those billions would do the trick and put the economy right again."

The financial crash of 2008 was the biggest and latest bursting in a series of asset bubbles, following on the footsteps of the 2000 bust of the Dotcom bubble. Taking the long view over the last thirty years, the blowing and bursting of one asset bubble after another has served as a means of vacuuming up the social wealth, as the top economic tiers have been successively bailed out at the expense of the majority of the population.
To express it in the precise language of physics, the bubble-burst-bail cycle is the pump'em-fleece'em-blame'em game that the economic elite perpetrate on the unsuspecting commoners.

The captured organs of government managed to again bail out the big speculators and players, privatizing their gains during the expansion of the bubble and socializing their losses during its bust. In other words, a smooth operation of radiating risk from high-stakes gamblers and scammers to the society at large. However, the ripple effects of the latest crash have not been completely damped out and, if anything, the magnitude of the shock waves keeps increasing after each manifestation of discontent and protest against the neoliberal machine.

A cascading series of cracks are beginning to appear in the illusion of the steady-state equilibrium of the world, fracturing the end-of-history narrative that the neoliberal order has been energetically maintaining for the past three decades. Nevertheless, the this-can't-go-on-but-it-will-go-on state of affairs seems to be sputtering and not going on as smoothly as before. Occupy Wall Street, Corbyn, Sanders, Syriza, Podemos, etc., are the fissures through which the pent-up and inchoate frustrations of various social forces are periodically finding an outlet to the surface.

The dangers of the ever-increasing extreme inequality and the instability it can cause are explored by various scholars including Acemoglu and Turchin . The latter applies a dynamical system approach to estimate political stress pressures that could lead to crises. According to his analysis we are on the cusp of one such instability. The increasing instability of the neoliberal order implies the shifting of the ground beneath it. The previous givenness of the passive citizenry is becoming less so, and critical junctures might approach fast and unforeseeably.

Collectivist Hippopotamus -> trp981 , 2016-05-31 10:24:52
A very interesting and convincing post, thanks. Could you elaborate on Turchin and his prediction of instability, what exactly does he mean?
Stumphole , 2016-05-31 07:33:52
It's reaching end game in the US. The global elite now control most of the world's wealth. Congress is corrupt as hell. TTIP will grab any jewels the people own, like the NHS.
But communism fell internally when the people didn't want it. one way to stop the global elite is to tax them properly, including their corporations, like Facebook and Google. The French are at least taking Google to court for extra tax. And these damned tax-shelters need to be closed down and firms outlawed from sending their money their.
Even Luxenbourg is a parasite. It offers these company's a nice low tax rate ( in the EU!) and their citizens have the highest standard of livening in the EU for doing zero.
RollyW -> Stumphole , 2016-05-31 09:04:31
Please, do not keep equating the Russian dictatorships to Communisim.
It isn't, never was and never could be.
The USofA demonised the concept of true socialism by using the excesses of the USSR as a blind in order for its wealthy ruling elite to further mislead the general population.
Collectivist Hippopotamus -> Stumphole , 2016-05-31 10:11:06
As Rolly said, USSR was neither socialist nor communist. It was a torture chamber with a red flag and social welfare. There are multiple paths to a communist society, to the tragedy of the people who lived under it that was not one of them. The Spanish anarchists have it a fair go and did particularly well given the circumstances. I don't know if I would follow any of these ideologies as a way out but alternatives do at least exist.
politicsblogsuk , 2016-05-31 07:33:17
"... the start of the long death of an ideology."

Yes, it's certainly too soon to add bunting and balloons to the shopping-list and, as the Straw Man says in The Wizard of Oz, it will probably get worse before it gets better, with those who truly, madly and deeply believe in the ideology or cult of neoliberalism exercising and inflicting it more savagely and ruthlessly in the years to come.

Neoliberalism is a heist of wealth from those who create it at the bottom to those who plunder and squander it at the top.

It is forever aided and abetted by useful idiots, who think that earning a few multiples of the average wage or having a few thousand in the bank puts them on a level which is closer to Carlos Slim or Warren Buffet than the sanctioned, hardworking, wage-free supermarket shelf-stacker and charity food-bank shopper.

The cheerleaders and shills who swarm like flies around shit.

urryCanary , 2016-05-31 07:21:04
Excellent article. I particularly enjoyed 'fiscal waterboarding'.

This is one of Spufford's crucial insights: that long before any public protests, the insiders led the way in murmuring their disquiet.

... what you're witnessing amid all the graphs and technical language is the start of the long death of an ideology.

Well, we live in hope. I'm sure I'm not alone in wishing neoliberalism dead and buried. Unfortunately, it's clear that the key word in each of those quotes is 'long'. The relatively few who are benefiting from the neoliberal model won't give it up without the mother of all power struggles.
RadioPartizan -> FurryCanary , 2016-05-31 10:04:09
"The relatively few who are benefiting from the neoliberal model won't give it up without the mother of all power struggles."

Yeah - thats the nub. They are not going to give up their huge power and privilege merely because the system it relies on is screwing everybody else. Intellectual critques will get nowhere without change being forced by unrelenting pressure from mass movements of ordinary people - strike, occupy, demonstrate, boycott and organise.

TheDudleyOmmer , 2016-05-31 07:18:48
What is remarkable is how long it has taken for institutions like the IMF to state what has been obvious to most populations for many years. The contrast with the rise of rewards at the top and food banks at the bottom should have been a red rag to a bull for any organisation which supposedly has the whole of the worlds population to consider. The lies about 'public bad and private good' have led to whole sectors of teachers, doctors and other public servants to be alienated.
I find the difficulty of voting to stay in an obviously neoliberal Europe or a probably more neoliberal UK a difficult choice. My gut feeling at the moment is to vote out and hope the more extreme neoliberal policies of Redwood and Johnson will quickly alarm the British public and we may get back to electing a socially minded government and not have to endure this lying 'caring conservatism' which voting remain will entrench for many years.
DiscoveredJoys -> TheDudleyOmmer , 2016-05-31 07:28:36
It seems that the political arm of the IMF which supports Bremain is at odds with the research arm which is more ambivalent about the excesses of neoliberalism.
amesValencia -> MattyTwo , 2016-05-31 10:13:43
The "Free market" is a non-sequitur: A free market ends up in monopoly.
Inevtitably.
That's why all free market economies have at their root a mechanism for preventing monopolies working.

Economist is fundamentally illogical based on the basic fact that economics deals in "Value", and that value is something essentially illogical. It is not possible to objectively give a value to a kilo of potatoes, much as economists have tried, not elast Marx who was a clever person.

This need to prevent monopolies originates in that, in various tortuous and complicated labyrinthine ways.

geoffhoppy -> themurf , 2016-05-31 10:44:00
The reality is that a "free market" only exists where there are numerous buyers and numerous sellers. Once supply is consolidated in the hands of the few (i.e. almost every commodity in our modern world) then the market is distorted and no longer free.

Whereas states previously had powers to prevent monopoly power in their own country there is no such mechanism to regulate at a global level.

zoominu -> GodfreyRich , 2016-05-31 11:43:13

But the fundamental reality of a market is the basis of human society.

What is that supposed to mean exactly?

"...Lessons of October (156k) written only shortly after Lenin's death in 1924, issued a serious warning to workers about the mistakes and inadequacies of the clique already forming around Stalin. It obliquely draws lessons from the failure of the German revolution, "a perfectly exceptional revolutionary situation of world historic importance," due in part to the failure of leadership of Stalin himself, which left the Russian revolution isolated.

But it is Trotsky's In Defence of October which is most recommended to the new reader. Trotsky concludes this remarkable explanation of the ideas of Marxism (as developed by Lenin and Trotsky) with the words:

"The historic task of our epoch consists in replacing the uncontrolled play of the market by reasonable planning, in disciplining the forces of production, compelling them to work together in harmony and obediently serve the needs of mankind."
(In Defence of October)

http://www.socialistparty.org.uk/russia/r2frame.htm?intro.htm

bootsyjam -> themurf , 2016-05-31 13:33:39
There are no free markets at all. Lesson 1 in "Mistakes people make when discussing economics."

[May 30, 2016] New IMF Paper Challenges Neoliberal Orthodoxy

Notable quotes:
"... The article cheekily flags the infamous case of the Chicago Boys, Milton Friedman's followers in Pinochet's Chile, as having been falsely touted as a success. If anything, the authors are too polite in describing what a train wreck resulted. A plutocratic land grab and speculation-fueled bubble led quickly to a depression, forcing Pinochet to implement Keynesian policies, as well as rolling back labor "reforms," to get the economy back on its feet. ..."
"... Overly mobile capital , meaning unrestricted cross-border money flows. The IMF paper points out that while the neoliberals claim that freely mobile money helps growth, there's not much concrete evidence to support that. By contrast, higher levels of capital flows lead to more instability and more frequent and severe financial and economic crisis. Ken Rogoff and Carmen Reinhart determined that high levels of international capital flows were strongly correlated with bigger and nastier financial crises. The BIS also made a persuasive, well-documented case that excessive "financial elasticity" which means lots of cross-border funds mobility that can quickly collapse, was the cause of the 2008 crisis. ..."
"... It's also hard to see how highly mobile money can be a plus, particularly for smaller and even not so small economies. Look at the how much the yen has moved over the past decade. How can investors in things that would actually make an economy more productive (foreign direct investment, such as factories and other operations) make any kind of accurate assessment of returns to cross border investment with so much foreign exchange volatility? And that uncertainty will lead a foreign investor to require a higher rate of return. Similarly, even if there were measurable benefits from highly mobile money movements, the costs of the busts need to be offset against that. It's pretty hard to see how you "offset" the cost of the blowup just past, whose total cost is estimated at one times global GDP. ..."
"... The publication of this IMF paper is a sign that the zeitgeist is, years after the crisis, finally shifting. It is becoming too hard to maintain the pretense that the policies that produced the global financial crisis, which are almost entirely still intact, are working. And the elites and their economic alchemists may also recognize that if they don't change course pretty soon, they risk the loss of not just legitimacy but control. With Trump and Le Pen at the barricades, the IMF wake-up call may be too late. ..."
"... Call me a cynic, but something tells me this won't change anything for the people currently suffering under the IMF yoke. IMF has put out plenty of papers that actually take a realistic look at the world, but it hasn't stopped them from pursuing policies essentially guaranteed to immiserate the majority of the population. ..."
"... you finally figured out that neo-liberalism isn't all it's cracked up to be? Well what a bunch of frickin' geniuses! ..."
"... The point of the shifting rhetoric is not to introduce policies that will better serve the poor, or the citizenry generally, it is a defensive action on the part of the elites to maintain their legitimacy and control. ..."
"... even worse, it just proves that they are able to learn to speak the right language about the economy. while we peons wait on for the inevitable co-optation and corruption of it towards elite ends once again. ..."
"... All power flows from the barrel of a gun. ..."
"... Jefferson – Nice treason going eh? Boy some overconfident are in for a shock. The French army thought they were the shit until longbowmen showed up. Enough said. As to this article. No, there is no free lunch. There could be a free snack if the money was directed at productive endeavors. But they did not and now trust and the social contract is totally broken. Even Larry Summers by 2010 was calling for a new one. That all said, the last 40 years elite did get some good advancements in science and medicine done. I'll give credit where it is due but the empire building shit isn't a plus, that is for sure. ..."
"... Something that always bears repeating is that a split in elite factions is essential to implementing real change. Access to power, money, and influence is what is needed to move society in any direction. Thru my own experience in life, I find most people are not sociopaths, they generally will direct their actions in benevolent manner if the overall social convention is to do so. This is why leadership is so important, and points to the true crisis of our time. We have a crisis of leadership. ..."
"... The split in elite thinking is showing itself because we have reached a crisis point and the elite are finally feeling the heat. While it is easy to paint these class divisions with a broad brush, there is an underlying dynamic of the classes that has been lost in recent years. The sense of duty to ones people and nation. What we have now, at least in America, is a confused mess. You cannot serve the nation by impoverishing its people. ..."
"... Like Lord Ashby's observations that it typically takes 200 years before new knowledge makes its way into policies and institutions. Reduce that time somewhat due to internet, but even so his point is well made. He argues that policies and institutions only incorporate the new knowledge once a significant percentage of the general public has already accepted it. This says to me that new thinking has to happen from the ground up, and we should not expect it to happen from the top down. ..."
"... What's the old saying – "A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it." ..."
"... "Unrestricted cross-border money flows" absolutely shouts dynamic instability from the get go and how could it be otherwise? Foreign direct investment also smells of absentee cross-border slum lord -ism; out of sight out of mind irresponsibility. Common currency (the Euro) wipes out fault tolerance and resiliency in the system and hard wires contagion. Nobody even discusses trade imbalance instability from so-called "free trade". ..."
"... Neoliberal policy is to replace men, with whatever combined circuit is most efficient. It's not rocket science. ..."
"... Yves may wish to weigh in with a more detailed explanation (here is a recent treatment of the "neoliberal thought collective" ) but "Neoliberalism Expressed as Simple Rules" for rules of thumb that will enable you to detect neoliberals in your ordinary dealings in comment sections and on the twitter. If your interlocutor, for example, has a dogmatic faith in the workings of markets, you're dealing with a neoliberal. ..."
"... I would say neoliberalism has been the dominant ideology, across the board, since the mid-70s (in other words, pre-Reagan). I'd have a hard time finding any policy that fits within the Overton Window of permitted discourse of DC, from left to right, that is not neoliberal, scholastics-level fine-grained faction-driven distinctions aside. The current stasis of the Overton Window is being challenged a bit by the Sanders campaign (from the left) and the Trump campaign (from the right), granting for a moment that politics are bipolar. Too long an answer, I know! ..."
"... Please see Recent Items. We have a post on the Mirowski's paper on the Neoliberal Though Collective prominently displayed. ..."
"... How about this; hyper aggressive top down global economic integration no matter what the fallout. ..."
"... Keep the masses ignorant, wanting and distracted. Under the current social system, you are offered a choice: Be "SMART" and join in on the looting, or be exploited as one to the sheep. It seems humanity must evolve to a third position- one of collective benefit and sustainability or end in extinction. ..."
"... Neither a swindler nor a sucker be. Neither a looter nor a victim be. ..."
"... The Central Banks produced low inflation figures in the US, while massive inflation was occurring in the costs of housing, education and healthcare causing the cost of living to sky rocket. This fictitious inflation figure targeting seems to be a rather pointless exercise. There is no point in producing low inflation figures while the cost of living is sky rocketing. A global youth now sit at home with their parents unable to afford to move out due to high mortgage payments and rent. They are not starting families and the demographic problems are going to get a whole lot worse. Why is global aggregate demand so low? Suppressed wages with sky rocketing costs of living. Neo-Liberalism really is just silly. ..."
"... A look at the UK. We have followed the US idea of paid further education. One of the first things the US banks did in 2008 was to get the Government to back student loans as they were beginning to default on a large scale. In the UK we have linked repayments to RPI and not the CPI figure the Central Bank targets. The usual silliness for masking the rising costs of living and an opportunity to rip off young people. Another idea, unregulated, trickle down capitalism, which we had in the UK in the 19th Century. In the 19th Century those at the top were very wealthy those at the bottom lived in abject poverty, no trickledown. The first regulations to deal with wealthy UK businessman seeking profit, the abolition of slavery and child labour. ..."
"... If we abolish Free Trade and restore Protectionism, the American minimum wage won't HAVE to compete with China. Free Trade is the new Slavery. Protectionism is the new Abolition. ..."
"... The IMF is trying to wash its own face now. Too late. Both the IMF and the WB must stand Trial for Crimes Against Humanity. ..."
May 27, 2016 | nakedcapitalism.com

While the IMF's research team has for many years chipped away at mainstream economic thinking, a short, accessible paper makes an even more frontal challenge. It's caused such a stir that the Financial Times featured it on its front page . We've embedded it at the end of this post and encourage you to read it and circulate it.

The article cheekily flags the infamous case of the Chicago Boys, Milton Friedman's followers in Pinochet's Chile, as having been falsely touted as a success. If anything, the authors are too polite in describing what a train wreck resulted. A plutocratic land grab and speculation-fueled bubble led quickly to a depression, forcing Pinochet to implement Keynesian policies, as well as rolling back labor "reforms," to get the economy back on its feet.

The papers describes three ways in which neoliberal reforms do more harm than good.

Overly mobile capital , meaning unrestricted cross-border money flows. The IMF paper points out that while the neoliberals claim that freely mobile money helps growth, there's not much concrete evidence to support that. By contrast, higher levels of capital flows lead to more instability and more frequent and severe financial and economic crisis. Ken Rogoff and Carmen Reinhart determined that high levels of international capital flows were strongly correlated with bigger and nastier financial crises. The BIS also made a persuasive, well-documented case that excessive "financial elasticity" which means lots of cross-border funds mobility that can quickly collapse, was the cause of the 2008 crisis.

It's also hard to see how highly mobile money can be a plus, particularly for smaller and even not so small economies. Look at the how much the yen has moved over the past decade. How can investors in things that would actually make an economy more productive (foreign direct investment, such as factories and other operations) make any kind of accurate assessment of returns to cross border investment with so much foreign exchange volatility? And that uncertainty will lead a foreign investor to require a higher rate of return. Similarly, even if there were measurable benefits from highly mobile money movements, the costs of the busts need to be offset against that. It's pretty hard to see how you "offset" the cost of the blowup just past, whose total cost is estimated at one times global GDP.

Thus the paper argues that the heretical idea of capital controls can make sense as a way to choke off a credit bubble stoked by foreign investment.

Austerity . The IMF article argues that while small countries may have no choice other than to curtail their overall level of indebtedness, this is not a one-size-fits-all prescription. For larger countries, running larger deficits, particularly after a financial crisis, is a better option than belt-tighening.

This section of the article is frustrating, since it utterly fails to distinguish fiat currency issuers from states that are not monetary sovereigns. It also blandly accepts the idea that high levels of indebtedness are bad, when government debt increases typically make up for shortfalls in private sector investment and demand. Recall that in the supposedly virtuous Clinton budget surplus years, households, which are normally net savers in aggregate, managed to make up for the Federal government fiscal drag by going on a big debt party. But it does have some zingers, at least by the standards of policy wonkery:

Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand-and thus worsen employment and unemployment. The notion that fiscal consolidations can be expansionary (that is, raise output and employment), in part by raising private sector confidence and investment, has been championed by, among others, Harvard economist Alberto Alesina in the academic world and by former European Central Bank President Jean-Claude Trichet in the policy arena. However, in practice, episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1 percent of GDP increases the long-term unemployment rate by 0.6 percentage point and raises by 1.5 percent within five years the Gini measure of income inequality (Ball and others, 2013)

Depicting "fiscal consolidation" as snake oil is radical, at least among Serious Economists.

Increasing inequality . The paper gratifyingly says that both austerity and highly mobile capital increase inequality, and inequality is a negative for growth. And it firmly says Something Must Be Done:

The evidence of the economic damage from inequality suggests that policymakers should be more open to redistribution than they are.Of course, apart from redistribution, policies could be designed to mitigate some of the impacts in advance-for instance, through increased spending on education and training, which expands equality of opportunity (so-called predistribution policies). And fiscal consolidation strategies-when they are needed-could be designed to minimize the adverse impact on low-income groups. But in some cases, the untoward distributional consequences will have to be remedied after they occur by using taxes and government spending to redistribute income. Fortunately, the fear that such policies will themselves necessarily hurt growth is unfounded.

Mind you, this article is far from ideal. For instance, careful readers will see that it treats the debunked loanable funds theory as valid.

In some ways, the fact that this article was written at all, and that it is apparently fomenting debate in policy circles is more important than the details of its argument, since it does not break new ground. Instead, it takes some of the findings and analysis of heterodox and forward-thinking development economists and distills them nicely.

The publication of this IMF paper is a sign that the zeitgeist is, years after the crisis, finally shifting. It is becoming too hard to maintain the pretense that the policies that produced the global financial crisis, which are almost entirely still intact, are working. And the elites and their economic alchemists may also recognize that if they don't change course pretty soon, they risk the loss of not just legitimacy but control. With Trump and Le Pen at the barricades, the IMF wake-up call may be too late.

diptherio , May 27, 2016 at 10:18 am

Call me a cynic, but something tells me this won't change anything for the people currently suffering under the IMF yoke. IMF has put out plenty of papers that actually take a realistic look at the world, but it hasn't stopped them from pursuing policies essentially guaranteed to immiserate the majority of the population. Talk is cheap, in other words. The IMF has caused so much suffering and been responsible for propagandizing so much BS over the years that reports like this just don't move me at all. Oh really , I think, you finally figured out that neo-liberalism isn't all it's cracked up to be? Well what a bunch of frickin' geniuses!

Too little, too late.

diptherio , May 27, 2016 at 10:23 am

The publication of this IMF paper is a sign that the zeitgeist is, years after the crisis, finally shifting. It is becoming too hard to maintain the pretense that the policies that produced the global financial crisis, which are almost entirely still intact, are working. And the elites and their economic alchemists may also recognize that if they don't change course pretty soon, they risk the loss of not just legitimacy but control.

The point of the shifting rhetoric is not to introduce policies that will better serve the poor, or the citizenry generally, it is a defensive action on the part of the elites to maintain their legitimacy and control.

nony mouse , May 27, 2016 at 10:40 am

i concur wholeheartedly with both of your above statements.

even worse, it just proves that they are able to learn to speak the right language about the economy. while we peons wait on for the inevitable co-optation and corruption of it towards elite ends once again.

congrats on your podseries, by the way.

drb48 , May 27, 2016 at 11:09 am

The point of the shifting rhetoric is not to introduce policies that will better serve the poor, or the citizenry generally, it is a defensive action on the part of the elites to maintain their legitimacy and control.

Yep.

Indrid Cold , May 27, 2016 at 4:01 pm

All power flows from the barrel of a gun.

Quantum Future , May 27, 2016 at 5:03 pm

Jefferson – Nice treason going eh? Boy some overconfident are in for a shock. The French army thought they were the shit until longbowmen showed up. Enough said. As to this article. No, there is no free lunch. There could be a free snack if the money was directed at productive endeavors. But they did not and now trust and the social contract is totally broken. Even Larry Summers by 2010 was calling for a new one. That all said, the last 40 years elite did get some good advancements in science and medicine done. I'll give credit where it is due but the empire building shit isn't a plus, that is for sure.

TheCatSaid , May 27, 2016 at 7:24 pm

That Tampa exercise is really something. Maybe it was a practice run to take out Maduro, since they "messed it up" with Chavez. Or a warning to Others who don't play nice with the USA.

Yves Smith Post author , May 27, 2016 at 6:24 pm

The IMF research side and the IMF program side operate separately from each other. However, IMF research does influence other economists and media coverage. You are not going to see changes in policy anywhere until you see changes in orthodox thinking.

And splits within the elites are a necessary but not sufficient condition for change. We are seeing the start of a real split in the elites.

norb , May 28, 2016 at 7:37 am

Something that always bears repeating is that a split in elite factions is essential to implementing real change. Access to power, money, and influence is what is needed to move society in any direction. Thru my own experience in life, I find most people are not sociopaths, they generally will direct their actions in benevolent manner if the overall social convention is to do so. This is why leadership is so important, and points to the true crisis of our time. We have a crisis of leadership.

Two points that need to be driven home again and again. Government policy implemented in the service of the people and the notion that the middle class was created thru public policy, not some natural occurrence. It was a choice.

The split in elite thinking is showing itself because we have reached a crisis point and the elite are finally feeling the heat. While it is easy to paint these class divisions with a broad brush, there is an underlying dynamic of the classes that has been lost in recent years. The sense of duty to ones people and nation. What we have now, at least in America, is a confused mess. You cannot serve the nation by impoverishing its people.

True wealth, happiness, and stability can only be achieved through bonds of respect forged between the ruling class and citizens. Without this functioning ideal, you will have strife and hardship. The elite must make a choice. Keep doubling down on their oppression of the working class, or decide they have a duty to humanity.

In the end, responsibility for ones actions in life cannot be avoided forever. As the destruction of inequality grows ever more apparent, the elite must face their conscience or the mob, it would seem to me, any sane person would rather choose the former than the later.

Plenue , May 27, 2016 at 6:18 pm

"IMF has put out plenty of papers that actually take a realistic look at the world, but it hasn't stopped them from pursuing policies essentially guaranteed to immiserate the majority of the population."

Not directly related to this subject, but this reminds me of book reviews. I have any number of books that challenge orthodoxy of one kind or other (like, say, David Graeber's Debt: The First 5,000 Years) that feature quotes from reviews on the covers and first few pages that praise the book as 'groundbreaking', 'important' etc. But then as far as I can see the publications that issued those reviews absorb none of the new wisdom and continue parroting the status quo. Hell, sometimes these books get awards or selected as best books of the year before whatever information they contain is completely ignored.

TheCatSaid , May 27, 2016 at 7:28 pm

Like Lord Ashby's observations that it typically takes 200 years before new knowledge makes its way into policies and institutions. Reduce that time somewhat due to internet, but even so his point is well made. He argues that policies and institutions only incorporate the new knowledge once a significant percentage of the general public has already accepted it. This says to me that new thinking has to happen from the ground up, and we should not expect it to happen from the top down.

fresno dan , May 27, 2016 at 11:20 am

What's the old saying – "A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."

And I'd say with something like economics, something much more similar to a religion than a science, its more like "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so"

Synoia , May 27, 2016 at 11:23 am

Such heresy!!!!

Options:

1. Ignore it until it goes away.
2. Publish a counter example.
3. Claim that disaster will entail, and We Are Doing The Best We Can in an uncertain world, and debt is bad because It Must Be Repaid.
4. Have an election, and Nothing Can Be Done until after the election (which is never in the US because there is always an election looming)
5. Sex scandal. (The authorities have an ample supply, due to their pervasive surveillance)
6. If all else fails, then terrorism, because existential enemies, carefully built on a continuing basis, and must have war, like Syria.
7. Refer it to a committee for further study.

Minnie Mouse , May 27, 2016 at 11:25 am

"Unrestricted cross-border money flows" absolutely shouts dynamic instability from the get go and how could it be otherwise? Foreign direct investment also smells of absentee cross-border slum lord -ism; out of sight out of mind irresponsibility. Common currency (the Euro) wipes out fault tolerance and resiliency in the system and hard wires contagion. Nobody even discusses trade imbalance instability from so-called "free trade".

Mustsign topost , May 27, 2016 at 12:29 pm

"For instance, careful readers will see that it treats the debunked loanable funds theory as valid."

They know it's wrong, page 50 of https://www.imf.org/external/pubs/ft/fandd/2016/03/pdf/fd0316.pdf

Both feel like a cry for help and a warning to outsiders that the IMF is indeed a hammer.

JerseyJeffersonian , May 27, 2016 at 12:43 pm

And we, the preterite [Def.: A person not elected to salvation by God.], are the nail for which that hammer was intended.

Synoia , May 27, 2016 at 1:21 pm

preterite: A person not elected to salvation by God? Not what my search says:

noun
1. a tense of verbs used to relate past action, formed in English by inflection of the verb, as jumped, swam
2.a verb in this tense
adjective
3. denoting this tense
Word Origin
C14: from Late Latin praeteritum (tempus) past (time, tense), from Latin praeterīre to go by, from preter- + īre to go

Tom Allen , May 27, 2016 at 1:32 pm

Add Pynchon to your search, or Calvinism. One blog post says:

Expat asks, what is Pynchon talking about when he refers to the "preterite?" Let me take a hasty stab at an answer.

As I recall, the Calvinists thought that there were three kinds of people: the elect, the preterite, and the damned. The elect are going to heaven. The damned very clearly are not. The preterite can't be sure, so they do their very best to act like elect, since if they act like the damned they won't be happy in the end.

JerseyJeffersonian , May 27, 2016 at 2:29 pm

Oxford English Dictionary, Noun, Definition #3

3. Theol. A person not elected to salvation by God. Cf. preterition n. 3. rare.
1864 Fraser's Mag. May 533/2 The reprobates who are damned because they were always meant to be damned, and the preterites who are damned because they were never meant to be saved.
2006 http://www.adequacy.org 5 Dec. (O.E.D. Archive) Weren't the Elect who interbred with Preterites committing bestiality? Are they not therefore condemned to Hell?

Admittedly rare, but as with Tom Allen nested in the comments, I came upon this meaning through reading Thomas Pynchon's Gravity's Rainbow, and taking in his ruminations upon the Calvinist classes of humans, the elect, the damned, and the preterite. Fit in very nicely with the story line. Fits in all too well with the way of the world, in my opinion.

Synoia , May 29, 2016 at 2:57 am

I'd conclude the Calvinists misused a word. The Latin root seems to Indictate this.

If we are not chosen, then I'd also assery we are the dammed.

The Calvinists indeed there is some hope for salvation for their definition of preterite.

However, the Calvinists have a harsh, unforgiving creed, and consequently do not appear to me to meet our Lord's definitions, especially the "let him who is without sin cast the first stone" and certainly miss "judge not."

Synoia , May 29, 2016 at 3:01 am

I'd conclude the Calvinists misused a word. The Latin root seems to Indictate this.

If we are not chosen, then I'd also assert we are the dammed.

The Calvinists indeed there is some hope for salvation for their definition of preterite.

However, the Calvinists have a harsh, unforgiving creed, and consequently do not appear to me to meet our Lord's definitions, especially the "let him who is without sin cast the first stone" and certainly miss "judge not."

ke , May 27, 2016 at 1:22 pm

Neoliberal policy is to replace men, with whatever combined circuit is most efficient. It's not rocket science. Last time we approached -Johnson & Johnson, your bait and swap inversion specializing in the baby slave trade, Yves was talking about credit unions and I was talking about Proctor & Gamble.

I have no use for peer friends, and recognize no enemy among a herd. Labor is a tribe, with as many different spirits / passion as possible, NOT a pyramid of rotated peer pressure groups, under the all seeing eye of debt as money.

Theories are like people, NOT R&D is r&d. I have been teaching young women AI programming right in front of your eyes, essentially what I would teach my daughters, funny, just as if they were at my armchair, before dinner, after she played with mommy all day. Serious time.

Just because you are surrounded physically, doesn't mean that you are the prisoner.

TheCatSaid , May 27, 2016 at 7:35 pm

baby slave trade? I don't follow.

Help me connect the dots: theories, R&D, young women learning AI, your daughters. . .

ke , May 27, 2016 at 10:46 pm

You are moving awfully fast. I think if you print out several pieces, and recombine the sentences, you will find/ the answer.
Essentially, farming people is a tuning problem, through DNA filters. The bananas up a ladder experiment (look it up).

Feminism and chauvinism have their trade offs, more now and less later. Well it's later, and young women like my daughters, thrown in that black hole, are NOTS, who will be far better programmers than anything currently on the planet. But. Proof is in the pudding.

TheCatSaid , May 27, 2016 at 11:21 pm

Thanks, I think I can put a few pieces together.
I'm working on my NOT status. My progress feels slow, not fast.

rjs , May 27, 2016 at 1:40 pm

i just realized that i dont know what neo-liberalism is, other than a pejorative i've heard used dozens of times…i couldnt even tell you who is one, and who isnt..

uasi , May 27, 2016 at 2:17 pm

Yves may wish to weigh in with a more detailed explanation (here is a recent treatment of the "neoliberal thought collective" ) but "Neoliberalism Expressed as Simple Rules" for rules of thumb that will enable you to detect neoliberals in your ordinary dealings in comment sections and on the twitter. If your interlocutor, for example, has a dogmatic faith in the workings of markets, you're dealing with a neoliberal.

I would say neoliberalism has been the dominant ideology, across the board, since the mid-70s (in other words, pre-Reagan). I'd have a hard time finding any policy that fits within the Overton Window of permitted discourse of DC, from left to right, that is not neoliberal, scholastics-level fine-grained faction-driven distinctions aside. The current stasis of the Overton Window is being challenged a bit by the Sanders campaign (from the left) and the Trump campaign (from the right), granting for a moment that politics are bipolar. Too long an answer, I know!

Yves Smith Post author , May 27, 2016 at 2:55 pm

Please see Recent Items. We have a post on the Mirowski's paper on the Neoliberal Though Collective prominently displayed.

Quantum Future , May 27, 2016 at 5:38 pm

I understand your nuanced depth UASI but I think that commentator was asking in laymens term. Liberalism is spending other peoples money. It can be used by government for good or evil. Neo liberalism implies such term on steroids. An always fair question as a taxpayer is this.:

Does what I am being taxed for increase my security, freedom and potential upward mobility?

The last 40 years tells me no. Mixed bag sometimes, not all evil but certainly the wrong direction and alarming. Not only does the looting damage opportunity but those that got the money by stealing have the worst attitudes in the world. Anybody with one penny or position over you has a shitty attitude. By the way, I am my own boss so my observations are neutral.

Having a business model and political system that hoovers it all into the top guarantees a global slum. The 'isms' (capitalism vs socialism, fascism, communsm) and democrate vs. republican wind up being a flimsy excuse but serious distraction from looting.

This current cycle of it is double standards and law, looting. Call it whatever you want. Robbery is part of many species, but so is wising up to it and defending oneself.

The IMF knows this cycle of looting is near over so there is not cost abandoning an 'ism'. But they do want you to think free lunch can always be had. The snack can be, leave math asidethe reason why is some perception can become a reality. Debt issued for productive purpose can have a multiplyer effect. But when issued to hand out in to crony buddies or consumption of some things, the economy grinds down to near halt.

Had to explain the term while simply explaining the context. The why is as important as a term or nothing can be learned or improved.

jerry hamrick , May 28, 2016 at 8:55 am

But, because we have an unlimited supply of money then government would be spending money that belongs to no individual. There can be no deficit spending, only spending. The new economics system would be one that distributes rather than redistributes, Society would decide the rules for such distribution and individuals can still be denied their "fair share." Rules of exchange and possession of money would guide our interactions But the most important aspect of an unlimited supply of money is that as individuals small children would learn that they will have enough money to go as far as their talents and efforts can take them; they will learn that they will have equal access to resources, opportunities, rights, and protections that will enable them to build long lives worth living.

So we really don't have to worry about the supply of money, we just have to worry about a society that really does give young humans equal access to resources, opportunities, rights, and protections. The only government that has come close to reaching that goal was the democracy of ancient Athens.

Athens did not have an unlimited supply of money, but they spent their money for the common good which included giving some money to people who needed it as well as spending great sums for the common good rather than giving equal shares of those sums to its citizens.

Under our current systems of government and economics an unlimited supply of money would make the rich richer and the poor poorer.

Under a democracy that has an unlimited amount of money the GDP would become the ADI, average domestic income, and our success would be measured by the level and the growth of the ADI.

Minnie Mouse , May 27, 2016 at 2:54 pm

How about this; hyper aggressive top down global economic integration no matter what the fallout.

Benedict@Large , May 27, 2016 at 3:57 pm

Finding the balance?

I have no idea why this paper is even here on NC. Because decades later the IMF is saying, well, maybe we were a little wrong? They had to butcher people to put this crap in power and butcher people to keep this crap in power. That's not a little wrong. The economy exists for the people; not the other way around.

JCC , May 27, 2016 at 7:16 pm

For rjs: For a good start on what neoliberalism means, a base definition to start with is the exact opposite of Benedict@Large's statement above, "The economy exists for the people".

Most sane people feel that economic "science" is inherently a social, soft, science and that economics as a field of study and policy determination exists to serve the people The neoliberal contingent feels the economy is "the invisible hand", equivalent to God. We exist to serve the economy.

Robert NYC , May 27, 2016 at 8:50 pm

Didn't anyone read John Gray? He laid bare all the neo-liberal fallacies in his 1998 book: "False Dawn, The Delusions of Global Capitalism". So now the IMF comes along 18 years later and states what was explained nearly two decades ago. Gray is an intellectual giant in a land of fools so nobody paid any attention to him.

norb , May 28, 2016 at 8:00 am

Keep the masses ignorant, wanting and distracted. Under the current social system, you are offered a choice: Be "SMART" and join in on the looting, or be exploited as one to the sheep. It seems humanity must evolve to a third position- one of collective benefit and sustainability or end in extinction.

different clue , May 29, 2016 at 1:53 am

Neither a swindler nor a sucker be. Neither a looter nor a victim be.

etc.

Sound of the Suburbs , May 28, 2016 at 4:43 am

About time, the IMF and World Bank have been using these ideas for decades even before they were adopted globally under the "Neo-Liberal" ideology.

They have a track record of nearly 50 years of unmitigated disaster.

When South American and African nations were in trouble the World Bank stepped in and offered loans as long as they reformed their economies with less public spending, austerity and privatising previously public companies.

It was a disaster.

In the Asian Crisis in 1998 the IMF stepped in and offered loans as long as they reformed their economies with less public spending, austerity and privatising previously public companies.

It was a disaster.

When Greece got into trouble recently the IMF stepped in and offered loans as long as they reformed their economy with less public spending, austerity and privatising previously public companies.

It was a disaster.

Sound of the Suburbs , May 28, 2016 at 4:48 am

The US and the UK were the first to adopt these ideas with Reagan and Thatcher.

One idea was to make countries competitive in a global economy.

Let's have a look at the US.

The minimum wage must cover the cost of living in that nation, what must the minimum wage cover in the US?

1) The cost of sky high mortgage payments or rent
2) The repayments on student loans
3) The cost of all services that were once free or subsidised
4) The cost of healthcare

The minimum wage necessary to cover the cost of living in the US ensures it can never compete with China.

Central Banks were supposed to keep inflation low to ensure the cost of living does not rise too quickly ensuring wage inflation can be kept low.

The Central Banks produced low inflation figures in the US, while massive inflation was occurring in the costs of housing, education and healthcare causing the cost of living to sky rocket. This fictitious inflation figure targeting seems to be a rather pointless exercise. There is no point in producing low inflation figures while the cost of living is sky rocketing. A global youth now sit at home with their parents unable to afford to move out due to high mortgage payments and rent. They are not starting families and the demographic problems are going to get a whole lot worse. Why is global aggregate demand so low? Suppressed wages with sky rocketing costs of living. Neo-Liberalism really is just silly.

Sound of the Suburbs , May 28, 2016 at 4:50 am

A look at the UK. We have followed the US idea of paid further education. One of the first things the US banks did in 2008 was to get the Government to back student loans as they were beginning to default on a large scale. In the UK we have linked repayments to RPI and not the CPI figure the Central Bank targets. The usual silliness for masking the rising costs of living and an opportunity to rip off young people. Another idea, unregulated, trickle down capitalism, which we had in the UK in the 19th Century. In the 19th Century those at the top were very wealthy those at the bottom lived in abject poverty, no trickledown. The first regulations to deal with wealthy UK businessman seeking profit, the abolition of slavery and child labour.

Where regulation is lax today? Factories in China with suicide nets. No wonder the French are rioting and the populists are getting angry. Neo-Liberalism really is rather nasty.

Sound of the Suburbs , May 28, 2016 at 6:46 am

Michael Hudson in "Killing the Host" goes into the rather more sensible thinking of Classical Economists on how to make nations competitive. You lower the cost of living to the minimum, to ensure the basic minimum wage is low enough to compete with other countries.

Pretty much the opposite of the US today:

1) Low housing costs
2) Free or subsidised education
3) Free or subsidised services
4) Free or subsidised healthcare

You need to get the cost of living down, so the minimum wage necessary is the same as that in China.

different clue , May 29, 2016 at 1:55 am

If we abolish Free Trade and restore Protectionism, the American minimum wage won't HAVE to compete with China. Free Trade is the new Slavery. Protectionism is the new Abolition.

Guglielmo Tell , May 28, 2016 at 7:31 pm

The IMF is trying to wash its own face now. Too late. Both the IMF and the WB must stand Trial for Crimes Against Humanity.

flow5 , May 29, 2016 at 3:57 pm

There was only one explanation for the GR – Bankrupt U Bernanke was the sole cause.

Rates-of-change in money flows, M*Vt = roc's in PT (Professor Irving Fisher's "equation of exchange".

POSTED: Dec 13 2007 06:55 PM |

The Commerce Department said retail sales in Oct 2007 increased by 1.2% over Oct 2006, & up a huge 6.3% from Nov 2006.

10/1/2007,,,,,,,-0.47,,,,,,, -0.22 * temporary bottom
11/1/2007,,,,,,, 0.14,,,,,,, -0.18
12/1/2007,,,,,,, 0.44,,,,,,,-0.23
1/1/2008,,,,,,, 0.59,,,,,,, 0.06
2/1/2008,,,,,,, 0.45,,,,,,, 0.10
3/1/2008,,,,,,, 0.06,,,,,,, 0.04
4/1/2008,,,,,,, 0.04,,,,,,, 0.02
5/1/2008,,,,,,, 0.09,,,,,,, 0.04
6/1/2008,,,,,,, 0.20,,,,,,, 0.05
7/1/2008,,,,,,, 0.32,,,,,,, 0.10
8/1/2008,,,,,,, 0.15,,,,,,, 0.05
9/1/2008,,,,,,, 0.00,,,,,,, 0.13
10/1/2008,,,,,,, -0.20,,,,,,, 0.10 * possible recession
11/1/2008,,,,,,, -0.10,,,,,,, 0.00 * possible recession
12/1/2008,,,,,,, 0.10,,,,,,, -0.06 * possible recession

Trajectory as I predicted:

[May 30, 2016] Debt of LTO companies has been increasing progressively every single year regardless of price how can you say that CAPEX has any correlation with price

Notable quotes:
"... So I am asking you or whoever thinks price had any role in CAPEX to show me where is that correlation between price, CAPEX and Debt? If Debt has been increasing progressively every single year regardless of price how can you say that CAPEX has any correlation with price? ..."
"... There is clear correlation between oil price and oil companies capex. Combined capex of the U.S. E&Ps was down more than 40% last year and will decline further this year. ..."
"... The issue with the shale players is that the decline in capex is not sufficient to achieve cashflow neutrality. Operating cashflow declines even more than capex; therefore their debt is rising. They were outspending cash when oil was at $100/bbl, and they continue to outspend it with much lower capex at $30-50/bbl. ..."
"... Just like Tesla :-). ..."
"... Big guys/majors that you mentioned that also reduced CAPEX are completely different animal: they are vertically integrated, they produce overseas, in different currencies, they do all kinds of deals, they have economy of scales, and they are big and established long enough to make balance of payments in offices in New York or Panama and not just on the oil field, they have army of lobbyist, tax breaks, whatever they like. You can't compare them with shale. They are protected like polar bears. ..."
"... Disturbing indeed. That said, at $75k/BOPD (giving credit for what I suspect is ample PUDs), YE15 value is about $16B. They will survive…but debt will tie their hands until oil is above $150/bbl. ..."
peakoilbarrel.com

Ves ,

05/20/2016 at 6:19 pm
"My point is in response to the price collapse at the end of 2008, CAPEX in 2009 was cut substantially from 2008 levels."

But that is only true if you pick years 2008 & 2009 and compare it. If you pick 2008 and 2015 CAPEX did not get cut substantially considering the price drop. CAPEX is 3x higher than in 2008 and debt is 6x higher. So I am asking where is correlation with the oil price in 2015? There is no correlation because CAPEX should be zero in 2016.

Yes they need the price of $150 for the next 10 years if you look just debt but hey that's why there is Chapter 11 so they will still be around for few more years (like Halcon) drilling little bit here and there even without $150 price.

shallow sand , 05/20/2016 at 7:09 pm
I don't disagree that they should have spent less, or even zero, CAPEX in 2015.

I am just making the point CAPEX was cut in half in 2009 as a result of 2008 crash, and again in 2015 as a result of 2014-15 crash, and in half again as prices trended even lower second half 2015 into 2016.

Ves , 05/20/2016 at 7:57 pm
I agree with you that CAPEX was cut but I don't agree with you and Dennis that price was factor because look from 2008 untill 2015 BOE went from $77.66 (2008) to $31.48 (2015) and in between and debt increased from $376 million to 7 billion regardless of price movement.

So I am asking you or whoever thinks price had any role in CAPEX to show me where is that correlation between price, CAPEX and Debt? If Debt has been increasing progressively every single year re