How Much Capitalism?

Posted on April 14, 2016 by admin

How much capitalism is optimal for economic growth and stability?  Or, equivalently, the question is how much socialism or government?  Until now, no one appears to have posed this question, as most people tend to favour more and more of one or the other, in a political rather than scientific judgement.  This post provides some tentative answers based on empirical evidence.

Under our definition, no economy is purely capitalist, because there is always a government which expropriates private property through taxes for government purposes; hence there are only degrees of capitalism.  The degree of capitalism and the size of government are two sides of the same coin, as more capitalism means less government and vice versa.

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Keynesian Black Holes

Posted on February 24, 2016 by admin

The previous post suggests that the US economy may be in a Keynesian black hole. Many other countries around the world are also likely to be in Keynesian black holes. The danger is that the larger black holes will cannibalize smaller ones, leading to a supernova explosion and an orgy of wars which are being seen around the globe.

An economic black hole is defined as an economy which consumes more than it produces, leading to wealth destruction rather than wealth accumulation as in a normal economy. A Keynesian black hole is a black hole created by the pursuit of Keynesian economic policies. The phase transition to a Keynesian black hole occurs as an economy moves through the Keynesian singularity where the Keynesian multiplier is infinite.

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Posted in Econoclasm, Economics | 2 Comments

Fiscal Stimulus of Consumption

Posted on February 22, 2016 by admin

The global financial crisis (GFC) has been in temporary recess since its break in 2008, but has recently metastasized into a more dangerous form. Extreme real-time experiments are being forced on many economies without sufficient scientific justification. The extreme measures, apart from constant fiscal stimulus, now including negative interest rates and banning or restricting the use of cash, have been designed and implemented, in Europe, Japan and elsewhere, to prevent saving and force spending, and also to protect a flawed financial system. The slow recovery from the GFC has been blamed on insufficient consumer spending.

As a past US Secretary of the Treasury and now a Harvard professor, Summers (2011), has said and has repeated on several occasions:

…the central irony of financial crises is that they’re caused by too much borrowing, too much confidence and too much spending and they’re solved by more confidence, more borrowing and more spending.

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Corporate Socialism and Hollowing of America

Posted on January 19, 2016 by admin

Most people understand and assume that government income redistribution, where higher incomes are taxed and transferred to those with lower incomes, is a way of achieving greater income equality. But few people are aware of the extent of corporate socialism which is defined here as the transfer of capital, by government to corporations.

In the heat of the GFC, corporate socialism was blatant as there was no need to hide the fact that financial corporations needed to be saved by the government’s injecting trillions of dollars into them to maintain liquidity and solvency of the financial system. The income inequality created by corporate socialism was equally blatant, making billionaires of executives such as Lloyd Blankfein (in July 2015), CEO of Goldman Sachs, a bank which was central to the fraudulent dealings of subprime mortgage derivatives triggering the GFC.

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Posted in Economics | 1 Comment

Creeping American Socialism

Posted on January 17, 2016 by admin

The previous post discussed the influence of pluralism in economic policy. As an historical summary of the cognitive dissonance, it suffices to observe the policy circus: the free-market capitalism in the early twentieth century was blamed for the Great Depression; it gave way to Keynesian socialism after the Second World War (WW2) then back to deregulated market capitalism and monetarism since the stagflation of 1970s; and more recently back to renewed Keynesian government intervention since the global financial crisis (GFC) which started in 2008. With each circuit of theoretical favoritism, the structure of the US economy evolved with mutating blends of policy pluralism, but generally with increasing socialism.

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Posted in Economics, Finance, Regulation | Leave a comment