The Great Recession Never Ended
September 14, 2018 1:57 PM Subscribe
It’s been ten years since America’s largest bankruptcy filing- how have things been going? (The Nib) cw: suicide
The Real Cost of the 2008 Financial Crisis [New Yorker]
Underpinned by explicit and implicit governmental guarantees, the Western financial system survived the great crisis, and in some ways it appears to be more robust than it was before 2008. A recent analysis from the Bank for International Settlements, a Basel-based institution that has been at the forefront of efforts to strengthen the lending system, noted that big banks are, on average, now holding twice as much capital as they did before the crisis, and have adopted various other reforms. Yet banks remain highly indebted and highly interconnected. Everyone knows that in a 2008-style panic they could still go down like dominoes, and that only large-scale public intervention would be able to save them. As a result, the general expectation is that, were another crisis to occur, governments (and taxpayers) would again step into the breach. The too-big-to-fail problem hasn’t gone away; it may even be more acute than before, because a wave of mergers during the last crisis left the banking industry more concentrated than ever.posted by Freelance Demiurge at 2:41 PM on September 14, 2018 [4 favorites]
And banks aren’t the only potential threat to financial stability. According to the Basel report, asset managers now control nearly a hundred and sixty trillion dollars, more than the worldwide holdings of the banking industry. During a market sell-off, the report warned, some of these firms could face pressures—such as a surge of investors eager to cash out—that would lead to a downward spiral.
Other analysts point to the dangers of lofty stock prices and rising indebtedness among non-financial corporations, many of which have been borrowing heavily to finance stock buybacks and other ventures. A recent McKinsey study showed that in the past ten years the amount of outstanding corporate debt has tripled across the world. In the United States, the study noted, almost two-thirds of non-financial debt is rated as junk or one notch above junk. Roughly three trillion dollars of this questionable credit is set to mature in the next five years. If the economy falters, or if interest rates rise sharply, many corporations may find themselves in the position of new mortgage holders a decade ago—unable to repay or roll over their debts.
More than four decades ago, the economist Hyman Minsky observed that periods of stability and investor optimism—such as the one we have enjoyed for the past few years—tend to amplify the dangers posed by a financial system based on easy credit. If the benefits of financial risk-taking were plentiful and widely shared, it might be worth society’s time to play the odds and bear the cost of the occasional blowup. But, these days, who believes that an unleashed financial sector is good for anybody but financiers?
I wasn't aware anybody thought it had.
posted by The Underpants Monster at 2:49 PM on September 14, 2018 [5 favorites]
posted by The Underpants Monster at 2:49 PM on September 14, 2018 [5 favorites]
One of the biggest surprises for me recently was the idea that even Keynesian economic policy doesn't fix the periodic crises of capitalism. It certainly can soften the blow, but it also draws out the recession because the only thing that ends a downturn is the restoration of the rate of profit.
Where did you get that idea? The reason that the Great Recession dragged on so long is not the failure of Keynesian policies. It was fiscal austerity, largely driven by Republicans, the exact opposite if Keynesian policy, that slowed the recovery.
posted by JackFlash at 2:53 PM on September 14, 2018 [12 favorites]
Where did you get that idea? The reason that the Great Recession dragged on so long is not the failure of Keynesian policies. It was fiscal austerity, largely driven by Republicans, the exact opposite if Keynesian policy, that slowed the recovery.
posted by JackFlash at 2:53 PM on September 14, 2018 [12 favorites]
It's been ten years and I am only just now in a position where I can even begin to start paying down the debt I racked up during the worst of the recession.
posted by EmpressCallipygos at 2:56 PM on September 14, 2018 [19 favorites]
posted by EmpressCallipygos at 2:56 PM on September 14, 2018 [19 favorites]
Capitalism creates (and perpetuates) its own crises.
posted by GenjiandProust at 2:57 PM on September 14, 2018 [3 favorites]
posted by GenjiandProust at 2:57 PM on September 14, 2018 [3 favorites]
You're implying it has ended? I don't believe it has.
Also, while I was speaking more generally, we got a lot of economic stimulus here, not austerity politics as such.
Also, where did I get that idea? A fellow-traveller told me about the theory. I don't claim to be well versed in it.
posted by AnhydrousLove at 3:00 PM on September 14, 2018
Also, while I was speaking more generally, we got a lot of economic stimulus here, not austerity politics as such.
Also, where did I get that idea? A fellow-traveller told me about the theory. I don't claim to be well versed in it.
posted by AnhydrousLove at 3:00 PM on September 14, 2018
I wasn't aware anybody thought it had.
Bloomberg:
Bloomberg:
There’s no doubt that the U.S. economy is in a boom. The Conference Board is reporting the highest levels of job satisfaction in more than a decade. This is probably because of a tight labor market — the ratio between the unemployment level and the number of job vacancies is at its lowest level in a half-century:posted by Freelance Demiurge at 3:00 PM on September 14, 2018 [2 favorites]
A broader measure, the prime-age employment-to-population ratio, is back to 2006 levels. Meanwhile, real gross domestic product growth for the second quarter was just revised up to 4.2 percent. Corporate profits are rising strongly. And investment as a percentage of the economy is at about the level of the mid-2000s boom
Wages are still lagging. But all other indicators show the U.S. economy performing as strongly as at any time since the mid-2000s — and possibly even since the late 1990s.
Wages are still lagging
I love that this is always added in as an aside, as if it's not important.
posted by klanawa at 3:15 PM on September 14, 2018 [53 favorites]
I love that this is always added in as an aside, as if it's not important.
posted by klanawa at 3:15 PM on September 14, 2018 [53 favorites]
how have things been going?
I mean
*gestures broadly in every direction*
posted by penduluum at 4:00 PM on September 14, 2018 [22 favorites]
I mean
*gestures broadly in every direction*
posted by penduluum at 4:00 PM on September 14, 2018 [22 favorites]
The cartoon ended sooner than I expected - not sure what I was expecting, the topic could've ballooned into case studies of 100+ countries until it's the graphic novel equivalent of Piketty's Capital in the Twenty-First Century and it still would've seemed a bit too succinct to give anything like a full picture
The thesis is right on, though. Start your disaster prep now, not that it will help much.
posted by naju at 4:13 PM on September 14, 2018 [2 favorites]
The thesis is right on, though. Start your disaster prep now, not that it will help much.
posted by naju at 4:13 PM on September 14, 2018 [2 favorites]
Recovery? Economic boom? Really? My landlord has bee raising the rent as if this were a solid written in stone fact every year for the last 3 or 4 years and this year twice. I've had to move to a cheaper place in lower income neighborhood and take on a roommate.
But the economy is booming?
Really?!
Where can I get me some of this boom, it seems to have missed me?
posted by evilDoug at 4:33 PM on September 14, 2018 [17 favorites]
But the economy is booming?
Really?!
Where can I get me some of this boom, it seems to have missed me?
posted by evilDoug at 4:33 PM on September 14, 2018 [17 favorites]
BBC World Drama radio dramatization of the weekend of negotiations leading up to Lehman's collapse. [53m] Heard it the other night, it was really good.
posted by hippybear at 4:34 PM on September 14, 2018 [5 favorites]
posted by hippybear at 4:34 PM on September 14, 2018 [5 favorites]
One of the biggest surprises for me recently was the idea that even Keynesian economic policy doesn't fix the periodic crises of capitalism. It certainly can soften the blow, but it also draws out the recession because the only thing that ends a downturn is the restoration of the rate of profit.(...)
If anyone knows more, I'd be interested.
This concept of the tendency of the rate of profit to fall is a significant component of Marxist economic theory (this video is a good short primer on how it relates to crises.) For more in depth I'd suggest checking out contemporary heterodox economists like Richard Wolff and Michael Roberts.
posted by joechip at 4:57 PM on September 14, 2018 [9 favorites]
If anyone knows more, I'd be interested.
This concept of the tendency of the rate of profit to fall is a significant component of Marxist economic theory (this video is a good short primer on how it relates to crises.) For more in depth I'd suggest checking out contemporary heterodox economists like Richard Wolff and Michael Roberts.
posted by joechip at 4:57 PM on September 14, 2018 [9 favorites]
I'm familiar with the general tendency of the rate of profit to fall as the organic composition of capital increases, it's the specific counterargument against Keynes that I'm not familiar with.
Looking at some our your sources, though, and going back to my copy of Alex Callinicos' The Revolutionary Ideas of Karl Marx, while I can't see a specific argument against demand management, if I understand things correctly it would be along the lines of
- it doesn't lead to the destruction or removal from the market of constant capital, which would restore the rate of profit
- in fact, by injecting investment where the market would not support it, it can even increase the ratio of constant to variable capital, further compounding the problem (and therefore extending the crisis?)
- the lagging of wages in what recovery there has been then fits in nicely, the recovery is at least partially driven by the increase of surplus value instead as wages drop
I think that seems like a sound, if barebones argument against the long-term effectiveness of Keynesian demand management. It prevents some of the disruption of the destruction of capital, but therefore prevents the restoration of the rate of profit. Still, none of the sources seem to say this explicitly, so I could well be figuring things off on a wild tangent.
posted by AnhydrousLove at 6:03 PM on September 14, 2018 [3 favorites]
Looking at some our your sources, though, and going back to my copy of Alex Callinicos' The Revolutionary Ideas of Karl Marx, while I can't see a specific argument against demand management, if I understand things correctly it would be along the lines of
- it doesn't lead to the destruction or removal from the market of constant capital, which would restore the rate of profit
- in fact, by injecting investment where the market would not support it, it can even increase the ratio of constant to variable capital, further compounding the problem (and therefore extending the crisis?)
- the lagging of wages in what recovery there has been then fits in nicely, the recovery is at least partially driven by the increase of surplus value instead as wages drop
I think that seems like a sound, if barebones argument against the long-term effectiveness of Keynesian demand management. It prevents some of the disruption of the destruction of capital, but therefore prevents the restoration of the rate of profit. Still, none of the sources seem to say this explicitly, so I could well be figuring things off on a wild tangent.
posted by AnhydrousLove at 6:03 PM on September 14, 2018 [3 favorites]
If the recession is over but wages keep getting lower and rent keeps getting higher and most people keep getting poorer, maybe it doesn't matter if the recession is over. Maybe "the economy" is a sham.
posted by The Horse You Rode In On at 9:05 PM on September 14, 2018 [13 favorites]
posted by The Horse You Rode In On at 9:05 PM on September 14, 2018 [13 favorites]
To be cynical, it often feels like the recession was ended by adjusting the definition of how a recession ends until it matched current circumstances.
posted by ZeusHumms at 9:27 PM on September 14, 2018 [11 favorites]
posted by ZeusHumms at 9:27 PM on September 14, 2018 [11 favorites]
I think that seems like a sound, if barebones argument against the long-term effectiveness of Keynesian demand management. It prevents some of the disruption of the destruction of capital, but therefore prevents the restoration of the rate of profit. Still, none of the sources seem to say this explicitly, so I could well be figuring things off on a wild tangent.
That's all pretty much it, as far as I understand it, with a couple additions. I agree that Marxian economists would reject the injection of investment by the state as an incorrectly allocated waste of resources, because as you mention it doesn't change the allocation of constant capital. Maurice Dobb, who was one of Keynes' students, called Keynesian intervention a gimmick that would leave the structural problems behind capitalism’s boom-and-bust cycle unaddressed.
I don't want to oversimplify or mischaracterize this application of TRPF theory, but it seems the position then is that while the tendency is for the rate of profit to fall, it is not a linear drop, and in fact has been delayed quite successfully by the extraction of surplus value outside the capitalist core via imperialism (a subject that Marx did not touch on much but Lenin certainly did.) Keynesian demand management doesn't challenge these social relations and, like you said, can actually strengthen them by propping up the core's bourgeoisie. But the contradiction in the mode of production remains.
So I think for Marxist economists the rejection of Keynesian policy is more a wholesale rejection of an entire framework, whose political economy is invested in restoring the power of the bourgeoisie by temporarily nudging the equation under the guise of demand stimulus. The key difference seems to be a view of where that much needed value comes from during a recession recovery: Keynesians say that demand can be created, but Marxists contend that, without changing the underlying relationship of owner and worker, surplus value is only stolen.
posted by joechip at 9:43 PM on September 14, 2018 [2 favorites]
That's all pretty much it, as far as I understand it, with a couple additions. I agree that Marxian economists would reject the injection of investment by the state as an incorrectly allocated waste of resources, because as you mention it doesn't change the allocation of constant capital. Maurice Dobb, who was one of Keynes' students, called Keynesian intervention a gimmick that would leave the structural problems behind capitalism’s boom-and-bust cycle unaddressed.
I don't want to oversimplify or mischaracterize this application of TRPF theory, but it seems the position then is that while the tendency is for the rate of profit to fall, it is not a linear drop, and in fact has been delayed quite successfully by the extraction of surplus value outside the capitalist core via imperialism (a subject that Marx did not touch on much but Lenin certainly did.) Keynesian demand management doesn't challenge these social relations and, like you said, can actually strengthen them by propping up the core's bourgeoisie. But the contradiction in the mode of production remains.
So I think for Marxist economists the rejection of Keynesian policy is more a wholesale rejection of an entire framework, whose political economy is invested in restoring the power of the bourgeoisie by temporarily nudging the equation under the guise of demand stimulus. The key difference seems to be a view of where that much needed value comes from during a recession recovery: Keynesians say that demand can be created, but Marxists contend that, without changing the underlying relationship of owner and worker, surplus value is only stolen.
posted by joechip at 9:43 PM on September 14, 2018 [2 favorites]
There's no where else for global capitalism to *go*, the entire world is part of the system, there's no more frontier and the easily available cooper has been stripped out of the system. The only way for the rate of profit to remain even kind of stable is to erode the conditions of workers and exploit people even more. Everyone is locked in a room and starting to eat each other.
I'm seeing the same thing I saw right before the sudden crash of 09 - all the big money people and market lovers saying the economy is GREAT and working hot but everyone I know has been getting worse or treading water or starting to crack up.
We're heading for another crash that'll make 08 look like previews in Hartford. The news that the median income for US households JUST reached back to wear it was in 08 kinda solidified it for me. It's not If it's When.
unless there is democratic control over the economy and wealth these boom-bust cycles are going to keep happening. Unless the rich and powerful who create the boom-bust cycles are held accountable, they;re going to just keep happening. And with each bust, each recession, each collapse, we will be left with less and less until we have nothing and we'll accept anything just to survive.
posted by The Whelk at 10:01 PM on September 14, 2018 [16 favorites]
I'm seeing the same thing I saw right before the sudden crash of 09 - all the big money people and market lovers saying the economy is GREAT and working hot but everyone I know has been getting worse or treading water or starting to crack up.
We're heading for another crash that'll make 08 look like previews in Hartford. The news that the median income for US households JUST reached back to wear it was in 08 kinda solidified it for me. It's not If it's When.
unless there is democratic control over the economy and wealth these boom-bust cycles are going to keep happening. Unless the rich and powerful who create the boom-bust cycles are held accountable, they;re going to just keep happening. And with each bust, each recession, each collapse, we will be left with less and less until we have nothing and we'll accept anything just to survive.
posted by The Whelk at 10:01 PM on September 14, 2018 [16 favorites]
This is fine.
posted by a halcyon day at 11:52 PM on September 14, 2018 [2 favorites]
posted by a halcyon day at 11:52 PM on September 14, 2018 [2 favorites]
From Kim Stanley Robinson's 2140, which is basically an extended exercise in imagining the possibility of optimism in our benighted world. In this bit one of the characters lays out the plan for how a social democratic government backed/pressured by a broader democratic socialist movement could use a 2008-style crisis to seize the commanding heights of the financialized economy and thereby lowkey throw a revolution:
"Even in 2008 they nationalized General Motors, and they could have nationalized the banks too, as a condition for giving them about fifteen trillion dollars. They didn’t do that because they were bankers themselves, and chickenshits. But they could have. And now you can do it.”posted by Reclusive Novelist Thomas Pynchon at 3:15 AM on September 15, 2018 [11 favorites]
“But what do you mean, nationalize? I don’t even know what you mean.”
“Sure you do.” Franklin had suggested this riposte. “I don’t know, but you do. So you tell me what it means! All I know is you protect the depositors. And I presume any profits the banks make from then on will go to the government, to pay back what they borrowed from it. So they turn into like federal credit unions.”
“Why would anyone work in a bank, then?”
“For a salary! A good salary, but just a salary. Like anyone else.”
“Why would shareholders invest in a bank, then?”
“Same reason they buy T-bills. Security. Secure investment.”
“I can’t even imagine it.”
“Your lack of imagination is not good grounds for making policy.”
Larry shook his head. “I don’t know. Why would they say yes to this?”
“Say yes or go bust! You offer the deal to the biggest bank, or the biggest bank in the worst trouble, the one about to blow up first. Put the fucking screws on them, they accept the deal or you let them fail as an encouragement to the others. So either way you’re okay. If they accept, the others have to fall in line or collapse. If they don’t accept, you blow the worst one up and go to the next one in line on the gangplank and say, Do you want to go down like Citibank or do you want to live?”
You can make it more palatable to invest, you can have the government invest regardless of profit, but the rate of profit will continue to fall. You're just pouring so much capital into things that growth continues relatively unabated, but the return on each dollar doesn't really come back up.
You might be interested in the evidence that the risk free rate of return has been slowly declining since 1311.
posted by atrazine at 4:28 AM on September 15, 2018 [5 favorites]
You might be interested in the evidence that the risk free rate of return has been slowly declining since 1311.
posted by atrazine at 4:28 AM on September 15, 2018 [5 favorites]
I live in an obscure boreal confederation, you probably haven’t heard of it. In 2008 my employer imploded, and the industry in which I was employed suffered a dramatic contraction from which it has never recovered. Groceries and gas and electricity skyrocketed in price while I became jobless. All savings were nuked in an effort to keep my family above water.
Just two weeks ago my wife and I went to the bank to re-start our retirement savings plan from square one. So...it’s been a slog. But now we can say with confidence we have the capacity to stow away enough money each month that, 20 years from now, our pittance just might keep up with inflation. Huzzah?
But, on the other, we had a bunch of fun Marvel movies to distract us all decade long while the world burned. My favourite is Captain Chris.
posted by Construction Concern at 4:57 AM on September 15, 2018 [7 favorites]
Just two weeks ago my wife and I went to the bank to re-start our retirement savings plan from square one. So...it’s been a slog. But now we can say with confidence we have the capacity to stow away enough money each month that, 20 years from now, our pittance just might keep up with inflation. Huzzah?
But, on the other, we had a bunch of fun Marvel movies to distract us all decade long while the world burned. My favourite is Captain Chris.
posted by Construction Concern at 4:57 AM on September 15, 2018 [7 favorites]
Keynesians say that demand can be created, but Marxists contend that, without changing the underlying relationship of owner and worker, surplus value is only stolen.
Hard to imagine that giving an out of work person $1000 cash doesn't create demand. What are they going to do with it? Put it under their mattress?
posted by JackFlash at 7:30 AM on September 15, 2018
Hard to imagine that giving an out of work person $1000 cash doesn't create demand. What are they going to do with it? Put it under their mattress?
posted by JackFlash at 7:30 AM on September 15, 2018
Also keep in mind that Marx noted that there were counter-tendencies to the falling rate of profit. I'd recommend Foley's book for anyone interested in a rigorous exposition of Marx's economic theories.
posted by Noisy Pink Bubbles at 8:34 AM on September 15, 2018 [1 favorite]
posted by Noisy Pink Bubbles at 8:34 AM on September 15, 2018 [1 favorite]
The most recent episode of Economic Update has an overview of Keynesian Vs Marxist economics
posted by The Whelk at 9:05 AM on September 15, 2018 [2 favorites]
posted by The Whelk at 9:05 AM on September 15, 2018 [2 favorites]
People above continually cite rising rents as an argument against economic prosperity, which bizarrely inverts the facts: rising rents are one of the surest signs of economic growth, because landlords can get higher rents for residential properties only when people have the higher incomes needed to pay them, and for commercial properties only when businesses believe they will have the better custom needed to pay the rents. Speculative fervor in equity almost never impacts the price at which people are willing to lease* properties (as appreciation goes to the landlords), and easy money in debt doesn't work to inflate residential rents at all (you can't borrow from a bank to pay your rent), and has a fairly minor impact upon leases* of commercial property. (Easy debt actually tends to decrease rents as it supports capacity increases and reduces costs of capital of landlords.)
*assumes operating leases; capital leases obviously take on many characteristics of ownership in both investment posture of the lessee and the ability to finance.
Or to put it in MeFite terms: rents haven't doubled in Portland, San Francisco and Seattle in ten years because people there are poorer or companies there are less profitable, rather, precisely the opposite.
posted by MattD at 9:25 AM on September 15, 2018 [3 favorites]
*assumes operating leases; capital leases obviously take on many characteristics of ownership in both investment posture of the lessee and the ability to finance.
Or to put it in MeFite terms: rents haven't doubled in Portland, San Francisco and Seattle in ten years because people there are poorer or companies there are less profitable, rather, precisely the opposite.
posted by MattD at 9:25 AM on September 15, 2018 [3 favorites]
Hard to imagine that giving an out of work person $1000 cash doesn't create demand.
Without having read anything more since my last comment, I'd say that that's quite different from directly or indirectly encouraging investment in business.
It's the old marginal propensity to consume angle I'm thinking of. An unemployed person is very likely to spend that $1000, sure. Arguments that we can boost the economy by cutting corporate taxes etc as a form of stimulation are sending the money to people who are not likely to spend that, especially if the underlying rate of profit hasn't changed. They won't hire more people or expand their factories, they'll sit on it until there's a greater opportunity for profit elsewhere, because they can afford to and it makes sense for them to do so.
I wonder if the argument is then that once that $1000 dollars is spent, the recipients will then be business, and they're going to do the same thing as if you give it to then directly, thus not addressing the underlying problem and not solving the crisis of profit.
I think it's also worth saying that I see this as a discussion about Keynesian macroeconomic policy as a long-term solution to crises of capitalism, not about what might be advisable from the valid perspective of just keeping regular people alive and afloat through a crisis.
In fact, if the destruction or removal of capital is essential to restoring the rate of profit, then intervening to keep a market functional would prevent that destruction, and not decrease the organic composition of capital.
I think the core argument is that capitalism as a system relies on the economic destruction of a crisis to increase the rate of profit by changing the ratio of constant to variable capital. War also always gets brought up, the non-productive use of vast amounts of capital in war has a similar effect, as I understand it.
If a crisis prompted a shift to much greater and continual redistribution, that might be something else, but as far as that sort of stimulus to individuals, it doesn't seem like it's usually what happens, it's right back to the old policies as soon as they can get away with it. After all, welfare costs, costs require taxation, taxation reduces profit.
Still, gotta listen to that podcast and do a bit more reading. I'm just spitballing here. All the sources do mention counter-tendencies as well, although as the Whelk says, going outside any particular economy as a solution becomes less and less viable as integration continues. The things I've been reading to say though, that's why it's a general tendency, not a strict law. Counter-tendencies are definitely real, but over time the general tendency proves true.
posted by AnhydrousLove at 9:37 AM on September 15, 2018
Without having read anything more since my last comment, I'd say that that's quite different from directly or indirectly encouraging investment in business.
It's the old marginal propensity to consume angle I'm thinking of. An unemployed person is very likely to spend that $1000, sure. Arguments that we can boost the economy by cutting corporate taxes etc as a form of stimulation are sending the money to people who are not likely to spend that, especially if the underlying rate of profit hasn't changed. They won't hire more people or expand their factories, they'll sit on it until there's a greater opportunity for profit elsewhere, because they can afford to and it makes sense for them to do so.
I wonder if the argument is then that once that $1000 dollars is spent, the recipients will then be business, and they're going to do the same thing as if you give it to then directly, thus not addressing the underlying problem and not solving the crisis of profit.
I think it's also worth saying that I see this as a discussion about Keynesian macroeconomic policy as a long-term solution to crises of capitalism, not about what might be advisable from the valid perspective of just keeping regular people alive and afloat through a crisis.
In fact, if the destruction or removal of capital is essential to restoring the rate of profit, then intervening to keep a market functional would prevent that destruction, and not decrease the organic composition of capital.
I think the core argument is that capitalism as a system relies on the economic destruction of a crisis to increase the rate of profit by changing the ratio of constant to variable capital. War also always gets brought up, the non-productive use of vast amounts of capital in war has a similar effect, as I understand it.
If a crisis prompted a shift to much greater and continual redistribution, that might be something else, but as far as that sort of stimulus to individuals, it doesn't seem like it's usually what happens, it's right back to the old policies as soon as they can get away with it. After all, welfare costs, costs require taxation, taxation reduces profit.
Still, gotta listen to that podcast and do a bit more reading. I'm just spitballing here. All the sources do mention counter-tendencies as well, although as the Whelk says, going outside any particular economy as a solution becomes less and less viable as integration continues. The things I've been reading to say though, that's why it's a general tendency, not a strict law. Counter-tendencies are definitely real, but over time the general tendency proves true.
posted by AnhydrousLove at 9:37 AM on September 15, 2018
>Hard to imagine that giving an out of work person $1000 cash doesn't create demand.
>Without having read anything more since my last comment, I'd say that that's quite different from directly or indirectly encouraging investment in business.
The government could try to directly encourage investment in business, but it would be futile if there is insufficient demand to support business expansion. Even if you give businesses tax credits for building a new factory, they are unlikely to do that if they can't even sell what they already produce. There is excess capacity and supply, so little incentive to invest in more production.
In a recession there is insufficient demand, people don't have enough money, to buy the products that businesses have for sale. So businesses lay off workers to slow production, which also means more laid off workers have less money to spend on products, which further decreases demand. That is how a recession spirals downward.
To stop the recession, you just give people money, particularly people who are likely to spend it, such as laid off workers, for example, unemployment insurance. If people have more money to spend, they will buy more products which is an incentive for a business to rehire workers and maybe invest in another factory.
Another way of increasing demand is government spending on infrastructure projects. Government hires more people (or contractors) to work on the projects. The money flows into more paychecks and more demand for concrete, asphalt and steel, and workers have more money to spend, which further increases demand.
The incentive to invest in more business, hire more workers, build more factories, is created by demand.
The Keynesian view is that recessions are a result of insufficient demand. The solution is straight forward. Increase demand by giving people money, directly or indirectly.
posted by JackFlash at 10:06 AM on September 15, 2018 [1 favorite]
>Without having read anything more since my last comment, I'd say that that's quite different from directly or indirectly encouraging investment in business.
The government could try to directly encourage investment in business, but it would be futile if there is insufficient demand to support business expansion. Even if you give businesses tax credits for building a new factory, they are unlikely to do that if they can't even sell what they already produce. There is excess capacity and supply, so little incentive to invest in more production.
In a recession there is insufficient demand, people don't have enough money, to buy the products that businesses have for sale. So businesses lay off workers to slow production, which also means more laid off workers have less money to spend on products, which further decreases demand. That is how a recession spirals downward.
To stop the recession, you just give people money, particularly people who are likely to spend it, such as laid off workers, for example, unemployment insurance. If people have more money to spend, they will buy more products which is an incentive for a business to rehire workers and maybe invest in another factory.
Another way of increasing demand is government spending on infrastructure projects. Government hires more people (or contractors) to work on the projects. The money flows into more paychecks and more demand for concrete, asphalt and steel, and workers have more money to spend, which further increases demand.
The incentive to invest in more business, hire more workers, build more factories, is created by demand.
The Keynesian view is that recessions are a result of insufficient demand. The solution is straight forward. Increase demand by giving people money, directly or indirectly.
posted by JackFlash at 10:06 AM on September 15, 2018 [1 favorite]
The incentive to invest in more business, hire more workers, build more factories, is created by demand.
The Keynesian view is that recessions are a result of insufficient demand.
I think this is the core of the disagreement? The incentive is profit, as I see it. There's plenty of demand, in one sense, regardless of a recession, it's just not demand in a strictly economic sense because it's not backed up by the funds to realise that demand. So it's not profitable to meet that demand. You can create demand by giving people with a high mpc money, sure.
Whether that actually makes it worthwhile to continue investing and keep the economy growing is dependent on whether the rate of profit has been restored.
If there's a Keynesian argument about how creating demand changes the composition of capital and restores the rate of profit, that would be interesting.
Also, at some point we have to consider the environment impact of the necessity of continual growth.
posted by AnhydrousLove at 10:29 AM on September 15, 2018
The Keynesian view is that recessions are a result of insufficient demand.
I think this is the core of the disagreement? The incentive is profit, as I see it. There's plenty of demand, in one sense, regardless of a recession, it's just not demand in a strictly economic sense because it's not backed up by the funds to realise that demand. So it's not profitable to meet that demand. You can create demand by giving people with a high mpc money, sure.
Whether that actually makes it worthwhile to continue investing and keep the economy growing is dependent on whether the rate of profit has been restored.
If there's a Keynesian argument about how creating demand changes the composition of capital and restores the rate of profit, that would be interesting.
Also, at some point we have to consider the environment impact of the necessity of continual growth.
posted by AnhydrousLove at 10:29 AM on September 15, 2018
I guess in one sense it's a discussion about whether crises are a bug or a feature.
posted by AnhydrousLove at 10:30 AM on September 15, 2018 [1 favorite]
posted by AnhydrousLove at 10:30 AM on September 15, 2018 [1 favorite]
Or perhaps a signal of something we haven't learned to notice yet.
posted by hippybear at 10:31 AM on September 15, 2018
posted by hippybear at 10:31 AM on September 15, 2018
Crises are defiantly features of the system cause they kill off all but the most rich and most entrenched - it’s totally okay to create rushes and mad bubbles if you know there’s a good chance it’ll never *really* effect you, and if it does, the goverment can bail you out as it has done time and time again.
posted by The Whelk at 10:41 AM on September 15, 2018 [3 favorites]
posted by The Whelk at 10:41 AM on September 15, 2018 [3 favorites]
> People above continually cite rising rents as an argument against economic prosperity, which bizarrely inverts the facts: rising rents are one of the surest signs of economic growth, because landlords can get higher rents for residential properties only when people.
There are two classes of parasite: employers and landlords. When the employer parasites for whatever reason can’t extract as much value from workers as they’d prefer, the landlord parasites are there to pick up the slack. Being exploited by landlords instead of by employers is no one’s idea of prosperity.
(Judging from the case of Allende’s Chile, it seems like if workers establish sufficient control over the state to keep both the employers and the landlords at bay, capital responds by trying to squeeze workers on the cost of food. If this last-ditch measure doesn’t succeed, capital then turns to naked force.)
posted by Reclusive Novelist Thomas Pynchon at 10:58 AM on September 15, 2018 [5 favorites]
There are two classes of parasite: employers and landlords. When the employer parasites for whatever reason can’t extract as much value from workers as they’d prefer, the landlord parasites are there to pick up the slack. Being exploited by landlords instead of by employers is no one’s idea of prosperity.
(Judging from the case of Allende’s Chile, it seems like if workers establish sufficient control over the state to keep both the employers and the landlords at bay, capital responds by trying to squeeze workers on the cost of food. If this last-ditch measure doesn’t succeed, capital then turns to naked force.)
posted by Reclusive Novelist Thomas Pynchon at 10:58 AM on September 15, 2018 [5 favorites]
The incentive is profit, as I see it. There's plenty of demand, in one sense, regardless of a recession, it's just not demand in a strictly economic sense.
You are making a typical Republican supply-sider argument, otherwise known as Reaganomics or the trickle down theory. Republicans say that in a recession if you just cut taxes on businesses to increase their profits, they will invest and produce more. But who are they going to sell stuff to if people have no jobs and no money? The supply-side argument about recessions has been soundly refuted both in theory and empirically.
it's just not demand in a strictly economic sense
I guess, then, you are talking about something other than economics.
posted by JackFlash at 11:00 AM on September 15, 2018 [1 favorite]
You are making a typical Republican supply-sider argument, otherwise known as Reaganomics or the trickle down theory. Republicans say that in a recession if you just cut taxes on businesses to increase their profits, they will invest and produce more. But who are they going to sell stuff to if people have no jobs and no money? The supply-side argument about recessions has been soundly refuted both in theory and empirically.
it's just not demand in a strictly economic sense
I guess, then, you are talking about something other than economics.
posted by JackFlash at 11:00 AM on September 15, 2018 [1 favorite]
I meant that there is need and desire, we just don't call it demand if people don't have the money. So food may as well rot in the fields if starving people can't afford it.
Also, I've specifically argued against cutting taxes as being a solution. I suspect there is no solution to crises of capitalism, supply or demand side, because I believe they're integral to the functioning of a capitalist economy.
posted by AnhydrousLove at 11:16 AM on September 15, 2018
Also, I've specifically argued against cutting taxes as being a solution. I suspect there is no solution to crises of capitalism, supply or demand side, because I believe they're integral to the functioning of a capitalist economy.
posted by AnhydrousLove at 11:16 AM on September 15, 2018
So food may as well rot in the fields if starving people can't afford it.
They could afford it if you give them cash or food stamps to buy it.
I have to marvel at the argument that there's nothing to be done, people must just starve, because demand stimulus --just giving people money --doesn't work.
posted by JackFlash at 11:29 AM on September 15, 2018
They could afford it if you give them cash or food stamps to buy it.
I have to marvel at the argument that there's nothing to be done, people must just starve, because demand stimulus --just giving people money --doesn't work.
posted by JackFlash at 11:29 AM on September 15, 2018
If you think that's my argument, then we're clearly not getting through to each other very well.
posted by AnhydrousLove at 11:51 AM on September 15, 2018
posted by AnhydrousLove at 11:51 AM on September 15, 2018
More at The Nib: The Economy is Broken: Five Cartoonists on The Great Recession. 10 years on, we’re still feeling it.
posted by homunculus at 1:41 PM on September 15, 2018 [4 favorites]
posted by homunculus at 1:41 PM on September 15, 2018 [4 favorites]
So food may as well rot in the fields if starving people can't afford it.
Yeah, I've seen that literally happen. One year, a couple of farmers where I grew up couldn't get South American migrant workers for some reason. Rather than pay slightly more for American workers and make less of a profit, they let their crops sit and rot. (I'm guessing the crops were insured for more than the smaller profit, but they only ever talked about it in terms of The Principle Of The Thing. Gleaners wanted to volunteer harvest some of it for the food bank, but they weren't allowed to.) Living across the road from a vast field of rotting cabbage was... an interesting experience.
posted by The Underpants Monster at 11:28 PM on September 15, 2018 [6 favorites]
Yeah, I've seen that literally happen. One year, a couple of farmers where I grew up couldn't get South American migrant workers for some reason. Rather than pay slightly more for American workers and make less of a profit, they let their crops sit and rot. (I'm guessing the crops were insured for more than the smaller profit, but they only ever talked about it in terms of The Principle Of The Thing. Gleaners wanted to volunteer harvest some of it for the food bank, but they weren't allowed to.) Living across the road from a vast field of rotting cabbage was... an interesting experience.
posted by The Underpants Monster at 11:28 PM on September 15, 2018 [6 favorites]
rising rents are one of the surest signs of economic growth, because landlords can get higher rents for residential properties only when people have the higher incomes needed to pay them
If nothing else this is a fantastic example of the sort of naive simplicity that makes right wing economics possible. It just never occurs to you guys that maybe people are cutting back on other things to make the rent. Consumer goods. Vacations. Food for their children.
When the quantitative evidence says you are wrong (wages are stagnant) and you do not reconsider your dogma, what you're left with is religion.
posted by klanawa at 10:11 AM on September 16, 2018 [11 favorites]
If nothing else this is a fantastic example of the sort of naive simplicity that makes right wing economics possible. It just never occurs to you guys that maybe people are cutting back on other things to make the rent. Consumer goods. Vacations. Food for their children.
When the quantitative evidence says you are wrong (wages are stagnant) and you do not reconsider your dogma, what you're left with is religion.
posted by klanawa at 10:11 AM on September 16, 2018 [11 favorites]
Ten Years After The Financial Crisis, The Contagion Has Spread To Democracy Itself
And yet throughout the mess, the Federal Reserve and the U.S. Treasury had been permitting the largest banks in the country to funnel as much cash as they wanted to their shareholders ― even as it became clear those same banks could not pay their debts. Lehman itself had increased its dividend and announced a $100 million stock buyback at the beginning of 2008. Insurance giant AIG paid a dividend of $4.40 per share, the highest in company history, on Sept. 19, 2008 ― three days after the Federal Reserve handed the insurance giant $85 billion in emergency funds. According to Stanford University Business School Professor Anat Admati, the 19 biggest American banks passed out $80 billion in dividends between the summer of 2007 and the close of 2008. They drew $160 billion in bailout funds from the U.S. Treasury, and untold billions from the Fed’s $7.7 trillion in emergency lending.posted by the man of twists and turns at 8:07 AM on September 17, 2018 [1 favorite]
When poor people engage in such activity, we call it looting. But for the princes of American capital and their lieutenants at the Fed and the Treasury, this was pure crisis management.<>
When the quantitative evidence says you are wrong (wages are stagnant) and you do not reconsider your dogma, what you're left with is religion...It just never occurs to you guys that maybe people are cutting back on other things to make the rent. Consumer goods. Vacations. Food for their children.
But wages are not stagnant except at the aggregate of the entire country. There are two Americas, one where wages are growing, and one where wages are stagnant to decreasing.
For example:
Historical Nominal Median Household Income for Boston
Date US Massachusetts
2016 $57,617 $75,297
2015 $55,775 $70,628
2014 $53,657 $69,160
2013 $52,250 $66,768
posted by The_Vegetables at 11:02 AM on September 17, 2018
But wages are not stagnant except at the aggregate of the entire country. There are two Americas, one where wages are growing, and one where wages are stagnant to decreasing.
For example:
Historical Nominal Median Household Income for Boston
Date US Massachusetts
2016 $57,617 $75,297
2015 $55,775 $70,628
2014 $53,657 $69,160
2013 $52,250 $66,768
posted by The_Vegetables at 11:02 AM on September 17, 2018
If the median income for the entire country is decreasing, why do you think the median income increasing in some subset of that country a valid counter argument?
posted by karanlyons at 10:51 PM on September 17, 2018
posted by karanlyons at 10:51 PM on September 17, 2018
And with each bust, each recession, each collapse, we will be left with less and less until we have nothing and we'll accept anything just to survive.
"In the end they will lay their freedom at our feet, and they will say to us, 'Make us your slaves, but feed us.'" - Dostoevsky
I think about that quote a lot
posted by CheesesOfBrazil at 5:46 AM on September 18, 2018
"In the end they will lay their freedom at our feet, and they will say to us, 'Make us your slaves, but feed us.'" - Dostoevsky
I think about that quote a lot
posted by CheesesOfBrazil at 5:46 AM on September 18, 2018
It's been ten years and I am only just now in a position where I can even begin to start paying down the debt I racked up during the worst of the recession.
yeah, me too. i had to take out ANOTHER loan in 2016 just to be able to afford to exist. because 100% of my paycheck goes to paying debt from the recession, so i don't have any money available to like, pay rent, or buy food or gas.
posted by misanthropicsarah at 2:01 PM on September 19, 2018 [1 favorite]
yeah, me too. i had to take out ANOTHER loan in 2016 just to be able to afford to exist. because 100% of my paycheck goes to paying debt from the recession, so i don't have any money available to like, pay rent, or buy food or gas.
posted by misanthropicsarah at 2:01 PM on September 19, 2018 [1 favorite]
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You can make it more palatable to invest, you can have the government invest regardless of profit, but the rate of profit will continue to fall. You're just pouring so much capital into things that growth continues relatively unabated, but the return on each dollar doesn't really come back up.
I don't understand the details fully yet, but it's been a pretty big new idea to swallow for me. If anyone knows more, I'd be interested.
posted by AnhydrousLove at 2:07 PM on September 14, 2018 [6 favorites]