Actually, here. Lets have this conversation - how would you define Capitalism? A particular kind of market economy, any market economy, a culture, an ideology...? :/
@Angle Pulling a lot of this together, my /own/ synthesis is that "capitalism" is a system in which the primary determinant of economic production and productivity is given to be capital. That is, productive output reserved and utilised for production itself.
That's as opposed to other factors of production being considered most significant: labour (as with Marxists), natural resources (ecological economics), energy (thermoeconomics), the ideological hash of Libertarianism, ....
10/
"capital. That is, productive output reserved and utilised for production itself."
See, that's what I *don't* think 'capital' actually is in modern capitalism.
Perhaps to an economist this definition is correct? But that's why economists look foolish to most people. They build very clever models which do not actually connect with reality.
In our society, I believe, capital is a measure of *ownership and control*, often of something not productive or even *real*.
Eg: capital, as it actually exists and is deployed in our culture, is not any kind of physical 'productive capacity'. It's literally debt.
A venture capitalist comes in to an established business, and the only thing they bring is *capital* - ie, money, in the form of loans, with a corresponding debt.
With this capital the business can command the production of *others*... but it also requires them to produce for the VC, not things, but *money*.
So increasingly, capital in our culture is not *producing* things of real value but growing itself by *consolidating ownership and control*.
Our abstract form of tradable 'capital' may even grow by shutting down productive capacity: closing factories, outsourcing jobs, reducing living standards.
Housing is a great example. If a house doubles in price, it's called a 'capital gain', yet zero real productive capacity has increased. A number has gone up, that's all.
@natecull @Angle There's a whole lot of financial activity which centres around asset price inflation.
Asset prices rising or falling ***IS NOT WEALTH CREATION.*** It is a change in market price. And whilst that /may/ indicate a /real/ change in value, it can also reflect a manipulation of supply and demand. The notion of rents /does/ come to play here, particularly if supply can be manipulated independently of demand.
@dredmorbius @natecull @Angle This is nowhere truer than in the supposedly most tangible, least abstract asset class: real estate. In the USA, tens of millions of people live their lives worrying about this.
@wrenpile @natecull @Angle Right. I Made a Thing about that some time back: https://redd.it/608w97
I also just did another one pointing out how the Texas Railroad Commission, OPEC, and the 1973 Arab-Israeli War kicked off the 1980s homeless epidemic through FIRE:
https://plus.google.com/104092656004159577193/posts/eDscpi6Kg7L
@dredmorbius @natecull @Angle So it’s your position that the housing-shortage motor has been footloose international money, with few other places to go, bidding up the price of real estate under conditions of enforced scarcity?
@wrenpile @natecull @Angle Close, though a few niggles on that.
1. Currency backed significantly in financial assets rather than mineral commodities (gold, silver) creates both a role for those assets and their valuation in monetary management, and a significant financial trade in those goods. This isn't all bad: you end up with a vastly more flexible monetary system, and far more control by the central bank (and a fair bit amongst various commercial banks.)
1/
@Angle @natecull @wrenpile From 1972 to 1982, a bank lost $62.68 of each $100 in loans it had. Compare to $27.15 from 1962-72, and $12.25 from 1952-62.
The 1970s were a /really/ bad time to be a bank.
Interest rates skyrocketed.
And inflation was seen as a Bad Thing, so the Federal Reserve /triggered/ a recession to prevent it. This was, I believe, a massive error. The inflation wasn't the /cause/ of economic conditions, but a /response to them/.
Hrm... I need to look at '70s housing.
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@dredmorbius @Angle @wrenpile That's another thing that boggles me:
1. The 1970s were all 'inflation bad, must make war on inflation'
2. In the 'anti-inflation' culture of the 1980s to 2010s, house prices inflated by... 4-10 times?
3. But not a peep out of the anti-inflation people in the face of this massive, runaway inflation?
When they said 'inflation is bad', were the 'they' investors not workers, and by inflation did 'they' ONLY mean 'wages'?
Because from 2017, it sure looks that cynical.
@natecull @wrenpile @Angle That's an interesting case, and I'd like to dig into it further.
I've been thinking about, e.g., Bitcoin, and its recent gyrations.
One thing about Bitcoin is that its price, whilst volatile, has tended to rise. Another is that its cost /including transaction costs/ are also climbing, due to the mining algorithm itself.
This makes me wonder it that appreciation is built in, and how stable that is. Works only so long as people buy into it, mind. (Literally.)
@dredmorbius @natecull @Angle If you believe recent reports, *transaction* costs are also rising rapidly for Bitcoin.
This looks like self-limiting appreciation: beyond a certain point, high transaction cost starts to cross over into illiquidity, and that’s a drag on value.
@Angle @natecull @dredmorbius Oh, with a new competitor like this, Bitcoin’s really in trouble: 🙃 https://www.nytimes.com/2017/12/03/world/americas/venezuela-cryptocurrency-maduro.html
https://mastodon.social/media/_lMLLWr1F8USkHnykXQ
@natecull @Angle @wrenpile One of the few business broadcast programmes I catch is PRI's "Marketplace". I'm increasingly disenchanted with even it.
They ran a piece ... I think within the past year, asking "who wants inflation anyway", and suggested that ordinary citizens (the piece had a typo and substituted "consumers") don't.
That is absolute and complete bullshit.
*Banks hate inflation. Everybody else more-or-less loves it.*
*Inflation reduces debt costs.*
@wrenpile @Angle @natecull The main problems arise when you've got some contract that's got a built-in, fixed-notional-currency payment scheme built into it.
E.g., a loan.
Or, yes: a purchasing contract, or a subscription payment, or a policy payment (insurance companies are banks except you have to hurt yourself to make a withdrawal), etc.
But if you're a wage-earner, you get a COLA. Your wages rise with inflation. If you're a business, you mark up prices.
And your debt gets cheaper.
@dredmorbius @natecull @Angle Bondholders also hate inflation. Don’t forget, middle-class retirees — OAPs! — get harangued to own bonds.
But basically I take your point.
@natecull @dredmorbius @Angle @wrenpile
Yes, "we have inflation under control" is code for: "real wages for the working class are frozen."
@natecull @dredmorbius @Angle @wrenpile
by definition, if one class of assets is getting massively more expensive while everything else isn't, that's not inflation, that's that asset getting massively more expensive.
a key component of inflation is prices *and wages* rising together. rabid anti-inflation rhetoric in fact often comes from banks and rentiers who are hurt by the way inflation effectively whittles down old debts over time.
@wrenpile @Angle @dredmorbius Eg:
If one class of assets inflates while another stays flat, it's not called 'inflation', it's called 'growth'.
If housing costs inflate while wages stay flat, the newspapers proudly call it 'a recovery'
but to workers, that's still a recession.
In the 1970s we had 'stagflation'
In the 2010s, we have a 'recovercession'.
or maybe even a full-blown Great Recoverpression.