Good read: The Debt-Deflation theory of Great Depressions

In The Theory of the Leisure Class, which is probably his best-known work, because of its satiric look at American society, the instincts of emulation and predation play a major role. People, rich and poor alike, attempt to impress others and seek to gain advantage through what Veblen coined "conspicuous consumption" and the ability to engage in “conspicuous leisure.” In this work Veblen argued that consumption is used as a way to gain and signal status. Through "conspicuous consumption" often came "conspicuous waste," which Veblen detested.

Great read!

Politicians and talking heads on television are continuously warning the public that the current economic crisis that began in 2007 as a small sub prime mortgage default problem in the United States has created the greatest economic catastrophe since the Great Depression. What is rarely noted , however, is that what is significant about this current economic crisis is that it origin, like
the origin of the Great Depression, lies in the operations of free (deregulated) financial markets. As I pointed out in two recent articles (Davidson, 2008a, Davidson 2008b), it is the deregulation of the financial system that began in the 1970s in the United States that is the basic cause of our
current financial market distress.

Jerome Ravitz: Faith and Reason in the Mathematics of the credit Crunch

The Oxford mathematician Jerome Ravitz in an article entitled “Faith and Reason in The Mathematics of the Credit Crunch” appearing in Oxford Magazine (eighth week, Michaelmas term, 2008) has written:

“...the term faith is believed by these competent present observers to be relevant to the mathematics at the heart of the multi dimensional pyramid game that has led to our present [credit crunch] catastrophe. Combined with the corruption of quality and the abuse of uncertainty in mathematical models, blind faith in [classical] economics and mathematics forms... the toxic mix that has enabled greed an irresponsibility to wreak their destructive way. ... Mathematics first provided an enabling technology with computers, then with a plausible theorem it offered legitimation for runaway speculation....it framed the quantitative specification of its fantasised products. Mathematics thereby became uniquely toxic, what Warren Buffet has called ‘weapons of mass destruction’

Politicians and talking heads on television are continuously warning the public that the current economic crisis that began in 2007 as a small sub prime mortgage default problem in the United States has created the greatest economic catastrophe since the Great Depression. What is rarely noted , however, is that what is significant about this current economic crisis is that its origin, like the origin of the Great Depression, lies in the operations of free (deregulated) financial markets. As I pointed out in two recent articles (Davidson, 2008a, Davidson 2008b), it is the deregulation of the financial system that began in the 1970s in the United States that is the basic cause of our current financial market distress.

ALTERNATIVE EXPLANATIONS OF THE OPERATION OF A CAPITALIST ECONOMY: EFFICIENT MARKET THEORY VS. KEYNES’S LIQUIDITY THEORY

"Ill Fares the Land" is a remarkably compelling book made all the more so by the remarkable circumstances surrounding its composition.

Its author, British-born Tony Judt, is our preeminent historian of postwar Europe, a scholar of remarkable breadth and erudition and one of the West's foremost and most outspoken public intellectuals. Educated at Cambridge and at the École Normale Supérieure in Paris and currently university professor and head of the Remarque Institute of European Studies at New York University, Judt is by conviction a man of the left, though a formidable independence of mind seems to have rendered him impervious to orthodoxy.

In his youth, for example, he was a fervent Labor Zionist, lived on a kibbutz and volunteered as a driver and translator for the Israeli Defense Forces during the 1967 war. By 2003, his disenchantment with Israel had become so complete that he argued in the New York Review of Books that the Jewish state had become an "anachronism" and should be replaced by a single binational entity.

Common-pool resources (CPRs) are resources to which more than one individual has access, but where each person’s consumption reduces availability of the resource to others. Important examples include fish stocks, pastures, and woods, as well as water for drinking or irrigation.

On a grander scale, air and the oceans are common pools. Some common pools exist primarily due to technological properties of the resource. For example, difficulties in controlling people’s resource usage prevent the transformation of a common pool resource into a private resource. However, not all costs of precluding access are strictly technological. There are also cases in which common pools could be profitably privatized, whereupon access could easily be controlled, but where privatization attempts fail because the users cannot agree on the terms. For example, water basins and oil pools are frequently located underneath land that has many different owners.

I find here that the early and mid-aughts (2001 to 2007) witnessed both exploding debt and a consequent “middle-class squeeze.” Median wealth grew briskly in the late 1990s. It grew even faster in the aughts, while the inequality of net worth was up slightly. Indebtedness, which fell substantially during the late 1990s, skyrocketed in the early and mid-aughts; among the middle class, the debt-to-income ratio reached its highest level in 24 years. The concentration of investment-type assets generally remained as high in 2007 as during the previous two decades. The racial and ethnic disparity in wealth holdings, after stabilizing throughout most of the 1990s, widened in the years between 1998 and 2001, but then narrowed during the early and mid-aughts. Wealth also shifted in relative terms, away from young households (particularly those under age 45) and toward those in the 55–74 age group. Projections to July 2009, made on the basis of changes in stock and housing prices, indicate that median wealth plunged by 36 percent and there was a fairly steep rise in wealth inequality, with the Gini coefficient advancing from 0.834 to 0.865.

Research Scholar Gennaro Zezza updates the Levy Institute’s previous Strategic Analysis (December 2009) and finds that the 2009 increase in public sector aggregate demand was a result of the fiscal stimulus, without which the recession would have been much deeper. He confirms that strong policy action is required to achieve full employment in the medium term, including a persistently high government deficit in the short term. This implies a growing public debt, which is sustainable as long as interest rates are kept at the current low level. The alternative is an ongoing unemployment rate above 10 percent that would represent a higher cost to future generations

The president could not have been more justified when he condemned "the evil scourge of terrorism." I am quoting Ronald Reagan, who came into office in 1981 declaring that a focus of his foreign policy would be state-directed international terrorism, "the plague of the modern age" and "a return to barbarism in our time," to sample some of the rhetoric of his administration. When George W. Bush declared a "war on terror" 20 years later, he was redeclaring the war, an important fact that is worth exhuming from Orwell's memory hole if we hope to understand the nature of the evil scourge of terrorism, or more importantly, if we hope to understand ourselves. We do not need the famous Delphi inscription to recognize that there can be no more important task.

This classified CIA analysis from March, outlines possible PR-strategies to shore up public support in Germany and France for a continued war in Afghanistan. After the Dutch government fell on the issue of dutch troops in Afghanistan last month, the CIA became worried that similar events could happen in the countries that post the third and fourth largest troop contingents to the ISAF-mission. The proposed PR strategies focus on pressure points that have been identified within these countries. For France it is the sympathy of the public for Afghan refugees and women. For Germany it is the fear of the consequences of defeat (drugs, more refugees, terrorism) as well as

for Germany’s standing in the NATO. The memo is an recipe for the targeted manipulation of public opinion in two NATO ally countries, written by the CIA. It is classified as Confidential / No Foreign Nationals

Suicide terrorism is rising around the world, but the most common explanations do not help us understand why. Religious fanaticism does not explain why the world leader in suicide terrorism is the Tamil Tigers in Sri Lanka, a group that adheres to a Marxist/Leninist ideology, while existing psychological explanations have been contradicted by the widening range of socio-economic backgrounds of suicide terrorists.

To advance our understanding of this growing phenomenon, this study collects the universe of suicide terrorist attacks worldwide from 1980 to 2001, 187 in all. In contrast to the existing explanations, this study shows that suicide terrorism follows a strategic logic, one specifically designed to coerce modern liberal democracies to make significant territorial concessions. Moreover, over the past two decades, suicide terrorism has been rising largely because terrorists have learned that it pays.

Behavioral economics has demonstrated systematic decision-making biases in both lab and field data. Do these biases extend across contexts, cultures, or even species? We investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles. We show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles, including reference dependence and loss aversion. Given our capuchins’ inexperience with money and trade, these results suggest that loss aversion extends beyond humans and may be innate rather than learned.

Perhaps the central challenge for indeterministic (“libertarian”) accounts of human freedom is one of integration: squaring one’s understanding of an agent’s control over his own free action with a plausible account of how such actions are properly explained by the reasons the agent had for so acting. Two types of account predominate. 1 One is centered on the notion of agent causation. The other holds that a free action is the (event) causal, but nondeterministic outcome of antecedent factors including the states of the agent’s having reasons for so acting. Many philosophers judge that typical agent causal accounts of freedom improperly sacrifice the possibility of rational explanation of the action for the sake of securing control, while others judge that the reverse shortcoming plagues typical event causal accounts. (Of course, many philosophers make both these judgments.) After briefly rehearsing the reasons for these verdicts on the two traditional strategies, we undertake an extended examination of Randolph Clarke’s recent attempt to meet the challenge by proposing an original, “integrated agent-causal” account of human free action.

The subprime mortgage crisis and ensuing global downturn led many to speculate whether any challenger might emerge to replace the us as the dominant player in the capitalist world economy. [1] Because the financial crisis in the us and global North had originated in high indebtedness, low productivity and overconsumption, it seemed natural to look to their polar opposites—the East Asian exporters’ huge holdings of us debt, productive capacity and high savings rates—to identify likely candidates. Immediately after last year’s collapse of Lehman Brothers lifted the curtain on the global recession, there were proclamations of the final triumph of the East Asian, and above all Chinese, model of development; American establishment commentators concluded that the Great Crash of 2008 would be the catalyst for a shift of the centre of global capitalism from the us to China.

Read the full Ipaper

http://www.newleftreview.org