Financial Capitalism vs Industrial Capitalism

The danger of buying into the dogma of modern economists and business is that you begin to see the world through there eyes, unconsciously.

Our nation used to be one where capitalsm was centered on something real. Industry.

However, our nation has become something that is centered on something very unstable- if not ethereal. Finance.

Wouldn't they very first thing to consider when healing our nations economic problems be to find a way to return jobs to American workers? One could say that it would not help us in competing with China, but our distribution of local jobs to them is precisely why they've become a contendable force in the first place. Also, how can we be competing with China, industrially, when we hardly have a local industry left worth mentioning?

I believe our economy prioritizes the obviously risky, but highly lucrative financial market over industry, but the gains do not go to the people, but those financial entities. And their risks are paid for by the people, anyway, making it a lose-lose situation. And in a nation where even many of the veterans returning from war face homlessness and a lack of labor (all neatly pushed to the corner under the moniker "PTSD") our nation is slowly sinking into a really bad state.

Corporations would lose profits, yes, but come on. Do they really need all of their billions and billions? Bill Gates gave away nearly 26 billion dollars of his money, if not more, but makes about 16 billion annually making this astounding contribution (to us) a mere and whimsical charity for him. Yes, perhpas the rich will have to eat with silver forks instead of diamond ones, but I think they will survive. Meanwhile, let them show a little patriotism and pay their workers a respectable wage. Help bring jobs back to our nation, and at the very least, return America's economy to one centered on solid things rather than privatized financial speculation.

 

The solution is pretty simple--return to the gold standard. You want an economy built on something real, then you need money that is real.

 

Very likely, the second leads to the first, and that's because more money can be made from the financial industry than from manufacturing and even agriculture. This might also explain why most in the U.S. moved to the service industry, if not sought further education to get higher-paying jobs in the professional field.

The same is also happening even in countries where manufacturing was outsourced, as China has also been outsourcing manufacturing to other countries as more of their workers seek better jobs in the service industry.

 

It is a matter of perspective.
Is your perspective that the economy exists to serve the needs of society?
Or, is your perspective that society exists to serve the economy?

It is a chicken and the egg question, which is the prime mover of advance, finance or social harmony?

I would posit that it is both, but only in harmony.
Society can impose itself on finance in ways that impede economic advance but finance can impose itself on society in ways that rescind economic advances gained across society.

Finance that is focused only on the making of money regardless of anything else has much the same consequences on society as a war. Since the 1980s financial interests have waged a war on the built physical assets of the US with the goal of turning them into cash money that can be deployed in the financial markets. This was a complete reversal of the long held notion that the entire purpose of financial markets was to provide a market to fund the building of physical assets that would increase economic activity.

While there was always firms that went bankrupt and sold of assets it was always to pay off creditors. Beginning in the 1980s financial firms began to arise that would buy up companies with the goal of making a profit by driving them into bankruptcy, "maximizing the realization of underlying assets" was their mantra. They would start by financing their takeover with borrowing from themselves, saddling the company with massive debt, which allowed them to pay themselves huge fees as they "managed" the controlled demolition of the company, closing plants to reduce cash flow which allowed them to raid the pension fund to service the debt payments, selling off all the physical assets they could, setting up corporations overseas to buy them and claiming massive losses for tax write offs as their "foreign" buyers paid only pennies on the dollar for the machinery. This asset stripping made a few thousand people very wealthy. It pushed millions of people from the middle class into poverty.

So, is the purpose of the economy to serve people or is the purpose of people to serve the economy?

 

lol'd at the Gold Standard idea.

And on a more serious note, it just seems like a natural evolution of capitalism to go from industry to financial sectors as goods become cheaper and more efficient to produce.

 

Probably because you don't understand what inflation is.

 

Actually the solution is to radically debase the currency, but there would be one or two side effects of doing so that people would not be very fond of.

 

They've been trying that for years. The dollar has lost how much value since the last tie to gold was severed under Nixon?

 

Not good enough. It needs to be radical and instant, not a graduated decline. It creates in inflow of capital, but people just shouldn't plan on buying any foreign goods for a decade.

 

That would be terrible. Think about how much the poor would be hurt by such a policy of theft.

 

It would be terrible for awhile, but the poor would survive.

 

Ahhh, the old tired shock doctrine.

You should ask the people of Argentina how that worked out for them because they have been through it a few times. Before the shock doctrine was applied the people of Argentina had the same standard of living as the US. They do not have that anymore.

What you are proposing is a swift boot of the US from the ranks of developed nations.

 

So? The US standard of living is too high. That is part of the problem. The choice is simple--people have to choose employment/labor or they have to choose capital/wealth. There is no having cake and eating it too in a mature economy stagnating in the shadow of rising economic threats from the eurozone and asia. I personally would recommend people learn to to open their own service businesses, grow a garden, and lower their standard of living as it is obvious which way America will always choose.

 

The US economy is only stagnating because the current tax regime encourages the national savings towards speculation in the markets and divestment overseas over domestic capital improvement.

I personally would recommend increasing the capital gains tax rate to above the income tax rate and penalizing companies that divest investment and jobs from the US.

Indeed, there is no having your cake and eating it too and the wealthy in the US have been doing that for far too long at the expense of the rest of the nations people. It is time for them to pay up or go away. The people of US will be better off without them and their unmitigated greed that demands that everyone else be reduced to poverty so they can have more.

The US is by far the wealthiest nation on the planet and could easily afford everyone in the nation a decent standard of living and has for a very long time. It is quite obvious that the people are facing a stark choice and if you think that they are willing to be reduced to poverty while the rich get richer you are grievously misinformed about the character of the people of the US.

One more economic shock to the middle class and there will be wholesale changes. Populist socialists will gain control and run this nation for generations.

 

The middle class won't do anything but whine. We will have a shock later this year or early 2015 and we will have a major shock in 2025 when the global bond crisis hits and another in 2030 when SS becomes insolvent. The middle class will bend over and take it.

 

By then there will be no middle class left. The class warfare of 100 years ago will repeat itself. I am not so sure that the right will have any populist champion to save its wealth this time around.

 

Really?

Inflation/Deflation fluctuated wildly under the Gold Standard. For the past 30+ years we have low and stable levels of inflation. Sorry, but no Economist with real credentials advocates going back to the Gold Standard for good reason. Milton Friedman even said it was not a practical solution.

 

You just proved my point. You don't know what inflation actually is. Inflation is an increase in the supply of money. To say that the supply of gold fluctuated wildly would be just silly. You probably think price level increases are inflation when that is just a symptom of inflation.

Regardless, that's the whole point of a gold standard--you can't have wild fluctuations because the amount of gold above ground doesn't wildly fluctuate.

Also, for the past 30+ years we have had very high inflation when we look at the money supply increases, especially under Greenspan and Bernanke. CPI is a manipulated statistics that intentionally understates price level increases in order to make the government look good. That statistic is put out by the government. That's like me going to a bank and telling them to accept my word that I have perfect credit and a high income job, so they should give me a million dollars.

Going to a real gold standard is the only practical solution. The only reason the government doesn't like hard currency is because they can't just print more of it. Inflation is just another method of taxation the government uses.

 

That's the lousiest definition of inflation ever.

Inflation is the rise in prices of consumer goods. Which can be caused by other things than good old Janet Yellen pulling some levers and printing off those Benjamins.

You do not really understand what "printing cash" actually means if you think what is going on is the fed actually printing physical money. Which it appears you do when you say the "government doesn't like hard currency because they can't just print more of it."

FYI: No serious Economist with real credentials has worried about Zimbabwe dollars. Why is that?

 

Then how is a non-existent class going to rise up?

The middle class is fine and will continue to be fine. The only people at risk are mid-income, over-paid union factory workers and paper pushers. People are just pissy because their belief that they could get a job at the local factory and make all sort of money and retire early and rich because they made tires or cookies in some union shop isn't panning out and they may actually have to acquire additional skills/training, find new jobs, and not have some shop steward protecting them when they screw up. The lower middle class and the upper middle class are plugging right along and the whiners aren't willing to make the investment to jump into the upper middle class and the lower middle class is beneath their egos.

 

I believe our elected representatives may not believe in Capitalism as much as they claim from public venues. They have an official Mint at their disposal but insufficient Faith in Capitalism, to make more money like good Capitalists should.

 

Sounds like you have a really good point there.

I think when you look at it that way, both politiicans and clergy realize that their own livelihood depends on people believing in their necessity and function and so naturally promote their faiths as it promotes their own interests.

 

While many in the middle class are doing fine the middle class as a whole is shrinking and that will continue, especially since the top 5% are currently receiving 93% of US income growth. Do the math, the 95% get to share 7% of the 1% US income growth. In order to invest people need to accumulate wealth and median wealth has declined by a third over the last decade so the average person's ability to invest has declined quite a bit.

The median household income in the US has been declining for decades. The difference these days is that everyone knows it. The class warfare of 100 years ago is returning because the wealthy have returned to their ways of 100 years ago. The fight to increase the minimum wage is just the beginning.

The only people who are not at risk are the 1%.

 

I think they may just be fibbing to us regarding really having Faith in Capitalism. We know the religious do claim to believe in a divine "Commune of Heaven".

 

I believe Bill Clinton is the one who was focused on reorienting our economy into a consumption based one. This is what happens when people consume the products provided by capital investments. The solution isn't to tax the money back out of the wealthy. It is to let people learn the hard way to become better consumers. In the meantime, poor people will run out to buy their $600 iPhone and pay $50 a month for their unlimited texting and talk while they are sitting in front of their Mexican made flat screen TV watching MSNBC blame rich people via their $85 a month cable.