[badname]

There are a lot of going on but the point is to single out symptoms from root causes. Otherwise we will wallow trying to deal with symptoms forever.

Dunno if anyone has yet mentioned one of the basic contradictions inherent in capitalism which could very well be at the root of what we experience. Means of production are private (factories, etc) and the owners as almost all players in capitalism take care to maximize _their_ profit and not society's well being. That maximization involves dumping down workers wages (another commodity in capitalism). Interestingly enough, workers are also consumers so dumping their wages erodes their purchasing power. And that's just one of the contradictions that stem from having a social mode of production driven by private interest.

The name of the most prominent economist that pointed out this and other contradictions some decades ago is Marx (which interestingly enough is never mentioned when capitalism crisis are on the table).

[allthatglitters]

>Means of production are private (factories, etc) and the owners as almost all players in capitalism take care to maximize _their_ profit and not society's well being.<

No one forces you to purchase what's "produced". If you purchased a Windows computer - and so helped Mr. Gate's well being - that was your choice! The list of examples is long. As to "Windows" - whether society is better off ...

[dllthomas]

Though for a time, because of crapware subsidies, often computers with Windows installed would be cheaper than the identical computer without it. I think this is no longer the case but TBH I haven't actually checked in a while. In that case, "forcing" is probably too strong a word, but I'm being asked to pay if I want to avoid helping Mr. Gate's net worth (I think his well-being was plenty taken care of before I started making any purchasing decisions). I'm not sure to the degree this changes any of the reasoning above, but it was at least a little strange.

[logfromblammo]

I'm not tremendously impressed with Marx's analysis.

Here is my initial premise. Across the entire economy, current consumption is paid for by current production, with any difference buffered by available filled stockpiles and empty stockpile capacity.

If you eat an ear of corn, someone has to grow an ear of corn, and transport it to you. If that person grows more corn than other people want to eat, it has to be stored somewhere until those people get hungry again. And the transportation and storage themselves consume resources.

This is the economic gradient. Goods and services are brought to market by producers, and taken away by consumers. In order to make this worthwhile--remember that bringing something to market is not a zero-resource operation--the consumers must give the producers something of greater value to them than whatever it is they produced.

Because this is sometimes tricky, we all agree for convenience that everyone always wants "money"--whatever it may be--more than whatever it is that they produce.

This works just fine when all producers are also consumers.

Now introduce industrial capital. Now a producer can, via the multiplying effect of capital, potentially single-handedly satisfy the entire worldwide demand for a good or service, at lower cost than any other producer who lacks the required capital. Again, this still works fine, so long as that person can manage to somehow consume all those resources.

But then we run into a problem. What if that person cannot manage to spend that much? The excess has to be stockpiled, according to the premise. Without the convenient fiction of money, that super-producer would have to start filling warehouses with goods and services. (We will pretend for the moment that services can somehow be stockpiled.) But even then, until the imbalance is rectified, that guy will simply keep filling warehouses that can never be emptied. Those resources are lost to everyone else. The super-producer simply has everything he could possibly need or want, and there's nothing anyone could possibly give him in trade without first tricking him into thinking it is better than anything he already has. With money, the problem of warehouse space is solved by reducing all that surplus to a number, which is stored in a computer.

But then we run into another problem. The value of the money is determined via continual market recalculations by the amount currently in circulation. Warehoused money might as well not exist. The super-producer has to keep moving it around, or prices will adjust to accommodate the fact that it is not being spent. He therefore gets less in exchange for his production. Then, whenever he goes to buy something, prices rise again temporarily. So the super-producer "invests" his money stockpile, which is a fancy way of saying that he moves it around from being owned by him in his own name to owned by him in a fictional business name. Or it approximates virtual warehouse space for his owned physical goods and for his owned services. The point is that investment is not consumption.

Whenever someone produces at a level that far exceeds their level of consumption, someone else's production is essentially being thrown into an economic black hole.

That's the problem with Capitalism. It can concentrate wealth so much that the owner cannot possibly consume it all, over his entire lifetime, or even in the lifetimes of his heirs. And until someone in the line of inheritance can become creative enough to embark upon some consumption megaproject, the concentration of capital sucks the life out of the productive economy.

Marxism solves this problem by diluting the concentration right at the source, by distributing the capital production in the hands of more spenders. But then there are no megaprojects without re-concentrating that wealth via government.

The capitalist solution to this problem is to give rich people more expensive things to consume. If, for some reason, they don't want to consume, the system fails. And nowadays, rich people are mostly investing rather than spending. If they do not change their ways, and quickly, the traditional release valve is to take back ownership of resources by force.

[badname]

Interesting point of view. Just some notes on the rich spending: (I don't have time to find refs but that should be pretty easy) numbers show that rich spend a tiny proportion of their money compared to other classes. So they are effectively hoarding. Also they invest mostly at the only place that can give them returns over 3%(?) nowadays which is stock markets, etc (1). Real investments in industry/services that would translate to jobs are sparse in Western world. That's also part of the problem for Westerners debt problem which could be seen as a way to mitigate the effect of industry and services (real production that is) going to Asia (mainly).

So, I'm afraid that if you expect things to change via rich themselves changing their ways (e.g. see the light and start redistributing their own wealth) you're gonna wait for long. After all just imagine being one of them. Why invest in the declining west with worker wages say 50% more expensive than in China? Never mind that competition will inevitably do the same thing to undercut you and this will end only when both of you are out of customers. In some ways, as a rich man, you can see the customers/labor as a dwindling common source where the tragedy of the commons apply under the rules of the capitalism.

(1) That's not to put a distinction between good industrialists that create jobs and bad bankers that create hot air. For one thing they largely are the same people and even if they were not they still have to play the game to stay ahead of competition.

PS: I bear no affiliation to this page but it seems to explain the point I'm trying to make much better than my limited English can: http://www.massline.org/PolitEcon/crises/Crises01.htm

[logfromblammo]

Oh, I don't think they will change. There's nothing really in it for them. As I said, they not only have everything they want, but they have exhausted their imaginative ability to want things that do not yet exist.

You can sell a rich man a luxury yacht. You can't sell him a one-room habitat on the Moon, for other people to visit and live in, because it hasn't yet occurred to him that doing so might one day lead to more luxurious yachts. They are instead saving up their money to afford the next thing they want, the thing that doesn't exist yet, because no one seems willing to consume resources on research that other people might just copy and use for free.

If the rich don't start buying (not just investing in) costly megaprojects to employ them, the poor folk will simply build the default megaproject--war. And that will be used to redistribute some of the wealth and start over.

And as I said earlier, hoarding money is different from stockpiling actual goods and services. Hoarded money is ignored until someone actually tries to spend it, and then it triggers inflationary distortions. A stable economy requires that most of its money circulate continuously, rather than stagnating in pools.