Aleks and Alex, Excellent! I opened yesterday's blog post with this condensation of his latest post:
Alex Krainer (who grew up in Communist Yugoslavia, has thrived as a hedge-fund manager and financial advisor), Untangling the "socialism" vs. "capitalism" dichotomy
Few ideological dichotomies polarize opinions as readily and as completely as that between "socialism" and "capitalism." Those who embrace socialism tend to blame capitalism for everything that's wrong with our world today. Those who embrace capitalism harbor a seething contempt for socialists, but both camps base their views on ideology with only vague notions about the true nature of either system.
The “socialists” think of capitalism as a rapacious system of exploitation that favors a few at the detriment of many. There is some truth in that. The "capitalists" think of socialism as a system that gives free stuff to the lazy and undeserving, choking society's progress. There's some truth in that too, but having lived in both systems and having experienced the ideological brainwash from both sides, I find neither side convincing.
Both systems’ ideological foundations amount to marketing, the intellectual gloss on the cover of their respective sales brochures. But the gloss never captures the essence of either system - an omission that is so egregious that it is almost certainly deliberate...
..I'd rejected the Marxist ideology already as a teenager, not because I had any deep understanding of the economic and socio-political issues we faced but because the system wasn't delivering as advertised... But the more I learned about the "capitalist" system, the more I became convinced that the same seed of doom that made "socialism" unsustainable was also baked into the foundation of the "capitalist" system.
For starters, in both systems we had the familiar old fiat currency with fractional reserve lending. This one element guarantees the collapse of both systems: over time it reliably corrodes the democratic framework of society, suffocates free market economy, kills entrepreneurship and innovation, and guarantees that government sector of the economy will gradually displace more and more private enterprise. It does this due to an economic effect called the deflationary gap...
..[Deflationary Gap explanation paragraphs] ...
..The system can be balanced either by lowering the supply and prices of goods, by enhancing its total purchasing power, or a combination of both. Lowering prices and production of goods will stabilize the economic system at a low level of economic activity [Nixon tried this]. Increasing the purchasing power in the system will stabilize it on a higher level of activity.
Left to itself and without intervention, a modern economic system would fall into what we call a self-reinforcing deflationary depression: the deflationary gap would lead to falling prices and output, decline of income and rising unemployment. Furthermore, in recessions and depressions, the level of investment typically declines even more rapidly than savings. To avert this, government intervention is necessary.
Without government intervention, the economy would stabilize when the level of savings declined to the level of investments which would be at a depression level of activity. This is an anathema in all modern economies, and governments invariably pursue the imperative of economic growth. To generate growth, they must inject new purchasing power into the system. This cannot be done through taxation since taxation doesn’t create new purchasing power: taxes only transfer money from those who earn it to the government.
This is why governments have no alternative but to continuously engage in deficit spending [when money is debt-based, or mining more gold & silver, or printing more bills], adding debt in excess of their tax receipts. This is why virtually all governments in the world today run budget deficits and chronically grow public debt. In spite of all the incessant talk about balancing the budget, paying down debts or imposing debt ceilings, the debts only keep rising at rates that predictably accelerate over time. It doesn't matter whether we call the system “socialist” or “capitalist,” they both necessitate an ever growing role of government in the economy [when economic growth is desired].
Today, in many of the “capitalist” nations, government spending accounts for almost half of the GDP and in some cases significantly more. In the UK, the mothership of capitalism, the government's share of GDP is 44%. In France it's over 58%....
..There’s no point railing against “socialism” and dreaming about a small government, private capital utopia which doesn't, and cannot exist so long as our economies are based on fiat currencies with fractional reserve lending. Even if we start with zero public debt, the pursuit of economic growth will lead to the same outcomes. With fullness of time, the government sector will progressively crowd out private enterprise: it’s a mathematical certainty...
..With that, we can address the false dichotomy between “socialist” and “capitalist” economies as they're commonly discussed. Namely, in what we call “capitalist” economies, a larger proportion of government-injected purchasing power flows top-down. In what we call "socialist" economies, it flows bottom-up.
Capitalist governments splurge their largesse on large private corporations in the form of subsidies and generous government contracts. Socialist governments splurge on social welfare programs like low-cost or free health care, education, generous unemployment benefits and pension plans, and programs that maintain full employment even where jobs couldn't be justified by private enterprise...
..The idea that the state would splurge on the lazy and undeserving free-loaders is understandably revolting. However, all those undeserving free-loaders might also be your customers, so even the hard-core entrepreneurial types benefit if the lazy bums have money to spend.
The alternative in governments splurging on large corporations is far more dangerous. If purchasing power is distributed bottom up, the decisions about how to spend that purchasing power are up to the ordinary people. As such, they'll tend to benefit ordinary businesses that produce consumer goods and services: bakers, apparel makers, restaurants, coffee shops, musicians, tour guides, bicycle repairmen, etc.
By contrast, if the state spends top-down, it runs the moral hazard of determining the winners and losers in the supposedly free market competition. The winners will tend to be those corporations and groups that can “invest” the most in political lobbying efforts. As a result, we get the TBTF banking behemoths, big Ag, big Pharma, big Media, big Tech and a massively bloated military-industrial complex. Ultimately, this favors the emergence of "corporatism", as Benito Mussolini characterized fascism. Today we prefer the sanitized term, “private-public partnership.”
These are the musings that get me labelled “communist,” but, whatever. If we want to fix what's wrong in the world today it is essential that our analysis goes past the handy but misleading labels of “socialism” vs. “capitalism,” or left vs. right, and that we deconstruct our challenges down to their essential building blocks... Labels only perpetuate our problems and make it difficult to transcend the dysfunctional elements in our system and evolve toward better social arrangements.
This is another conversation using Marxist categories that presumes that these "systems" are active algorithms that can be "analyzed" through intellectual discussion. What an utter waste of time when the people doing the talking clearly have a wealth of direct experience that they could share if they would do the work of remembering events in their own lives and the details. When you all go back to talking about particulars and leave the sotheology (the academic speak that is the current secular religion) to academics, let us know.
You might read that condensation of Alex Kreiner's recent post carefully.
He seeks to get away from false dichotomies of "socialism" and "capitalism" and to look at the power of fractional reserve lending, underlying both economic templates in practice.
This interview begins by helping clarify that, but then goes further into the "pirate" financial oligarchs of history, and their current iterations, poised for another collapse.
Thx for the reply. "Fractional reserve lending" is the bewildering name now used by people who are bothered by the fact that people promise more than they pay. Kreiner and Alex are troubled by that; so was Marx. That is understandable. There is no synthesis to be found that somehow merges domestic legal tender (what the people with guns and lawyers tell you to use to pay your taxes) with international money (what pirates and others involved in trading between nations) use to clear their debts with one another.
For intellectuals and others this will always be an itch that their minds cannot avoid scratching. The explanation for central banks is very much simpler; it is the only way a country can rely on direct income taxes and have permanent fiscal deficits. As long as people are free to discount against their countries' own currency (as they were in the United States until 1912) by swapping it for international money, the government runs up against the limit of the public's willingness to lend. The irony of the present situation is that, thanks to the boycott against their international trade and exchange, the Russians are now close to adopting that same 19th century American system of open discounting.
In his highly instructive analysis, Alex Trainer said that both capitalist and socialist experiments implode because of exponentially rising debt. To whom did the USSR pay the debt? To foreign capitalists? Is debt really inevitable, as he states? Theoretically a state run bank under socialism or a mixed economy need not charge interest. Thus a society that at least puts its money management under a state run bank can avoid the historical problem of money lending, recognized and banned by Islam and Christianity as usury and corrected already in ancient societies by periodic debt cancelation, which one might call a kind of creative destruction.
Now, it is true that even without a capitalist class siphoning off the wealth production of society as interest, a society must use part of wealth production for reinvestment, if only simply to maintain current levels of production, and therefore well-being. But that is quite different from usury. A society can learn the importance of saving for investment - a kind of small deflationary pressure - when it knows that it is the price of long term prosperity. It is the difference between a culture of unrestrained but unsustainable greed and one of paying the price for stability that counters entropy and ensures the survival of the system.
Let me put it more simply, it the hope of a critical response. A financial institution run purely to serve the public, not a parasitic private financial class, will need neither fractional reserve lending nor lending at interest, which is like a mafia shaking us down for tribute, because interest is rent, which is unearned income. Any nation or social group of any scale can lend at no interest for investments that the group has democratically decided will benefit everyone over time, as China claims to have done with some nations in Africa. It is like the Grameen bank. It is like a farmer saving a small part of the corn harvest as seed for the next year. If the farmer makes intelligent investments, he prospers. Nothing implodes. The only cost is allocating a small part of production for reinvestment. Please Alex or someone tell me what is wrong with that system.
I have now watched the entire interview, which I found very useful, Aleks.
At the end you commented on the similarity of your views and on working together.
I have recently been introduced to the work of a former Moldovan politician, anti-communist in his youth, Deputy Prime Minister of Moldova at one point, Iurie Rosca, whose views are also aligned.
As a Moldovan politician, he's anti-Russia, but as a non-politician he becomes an anti-Great resetter and supports Russia.
In his latest post: "Jazz, Blues, Rock and Roll, Hard Rock, Heavy Metal, Hip Hop or Rap etc., etc. are just a few variations of the more or less rhythmic and traumatic noise that has spread over the whole world like a deadly plague that dissolves all tradition, annihilates all religion, dynamites all moral codes and pulverizes all culture built up over millennia of human civilization... . In recent decades the pace and scale of the mass imbecilization strategy known as Sex, Drugs, Rock & Roll has become even more successful. In addition to electricity (the minimum condition for the spread of mass culture), radio and TV, the internet has emerged. This deadly poison that turns crowds of people into subhuman herds has affected Russia as catastrophically as the rest of the world... What prompted thousands of Russians to gather in that Moscow concert hall on that fateful evening?. The popular Russian rock band Piknik. But it has been known for at least half a century that this kind of alleged music is satanically inspired. And this is not a figure of speech or an exaggeration, but a reality confessed by the very stars of this demonic practice, who admitted their pact with the devil in exchange for popularity and wealth."
Sounds like my dead mother, and she was, sadly, nuts.
Thanks Mike. Yes, I read that post of Iurie's, and it does paint an entire realm of popular music as evil, with considerably too broad of a brush.
Carol King is not Lady Gaga, for instance.
Following monied interests in the music business, and their influence upon the "product", was addressed by the principled Roger Waters in the lyrics to this song, "Have A Cigar" https://www.youtube.com/watch?v=hMr3KtYUCcI
"And if we tell you the name of the game, Boy, we call it riding the gravy train..."
Aleks and Alex, Excellent! I opened yesterday's blog post with this condensation of his latest post:
Alex Krainer (who grew up in Communist Yugoslavia, has thrived as a hedge-fund manager and financial advisor), Untangling the "socialism" vs. "capitalism" dichotomy
Few ideological dichotomies polarize opinions as readily and as completely as that between "socialism" and "capitalism." Those who embrace socialism tend to blame capitalism for everything that's wrong with our world today. Those who embrace capitalism harbor a seething contempt for socialists, but both camps base their views on ideology with only vague notions about the true nature of either system.
The “socialists” think of capitalism as a rapacious system of exploitation that favors a few at the detriment of many. There is some truth in that. The "capitalists" think of socialism as a system that gives free stuff to the lazy and undeserving, choking society's progress. There's some truth in that too, but having lived in both systems and having experienced the ideological brainwash from both sides, I find neither side convincing.
Both systems’ ideological foundations amount to marketing, the intellectual gloss on the cover of their respective sales brochures. But the gloss never captures the essence of either system - an omission that is so egregious that it is almost certainly deliberate...
..I'd rejected the Marxist ideology already as a teenager, not because I had any deep understanding of the economic and socio-political issues we faced but because the system wasn't delivering as advertised... But the more I learned about the "capitalist" system, the more I became convinced that the same seed of doom that made "socialism" unsustainable was also baked into the foundation of the "capitalist" system.
For starters, in both systems we had the familiar old fiat currency with fractional reserve lending. This one element guarantees the collapse of both systems: over time it reliably corrodes the democratic framework of society, suffocates free market economy, kills entrepreneurship and innovation, and guarantees that government sector of the economy will gradually displace more and more private enterprise. It does this due to an economic effect called the deflationary gap...
..[Deflationary Gap explanation paragraphs] ...
..The system can be balanced either by lowering the supply and prices of goods, by enhancing its total purchasing power, or a combination of both. Lowering prices and production of goods will stabilize the economic system at a low level of economic activity [Nixon tried this]. Increasing the purchasing power in the system will stabilize it on a higher level of activity.
Left to itself and without intervention, a modern economic system would fall into what we call a self-reinforcing deflationary depression: the deflationary gap would lead to falling prices and output, decline of income and rising unemployment. Furthermore, in recessions and depressions, the level of investment typically declines even more rapidly than savings. To avert this, government intervention is necessary.
Without government intervention, the economy would stabilize when the level of savings declined to the level of investments which would be at a depression level of activity. This is an anathema in all modern economies, and governments invariably pursue the imperative of economic growth. To generate growth, they must inject new purchasing power into the system. This cannot be done through taxation since taxation doesn’t create new purchasing power: taxes only transfer money from those who earn it to the government.
This is why governments have no alternative but to continuously engage in deficit spending [when money is debt-based, or mining more gold & silver, or printing more bills], adding debt in excess of their tax receipts. This is why virtually all governments in the world today run budget deficits and chronically grow public debt. In spite of all the incessant talk about balancing the budget, paying down debts or imposing debt ceilings, the debts only keep rising at rates that predictably accelerate over time. It doesn't matter whether we call the system “socialist” or “capitalist,” they both necessitate an ever growing role of government in the economy [when economic growth is desired].
Today, in many of the “capitalist” nations, government spending accounts for almost half of the GDP and in some cases significantly more. In the UK, the mothership of capitalism, the government's share of GDP is 44%. In France it's over 58%....
..There’s no point railing against “socialism” and dreaming about a small government, private capital utopia which doesn't, and cannot exist so long as our economies are based on fiat currencies with fractional reserve lending. Even if we start with zero public debt, the pursuit of economic growth will lead to the same outcomes. With fullness of time, the government sector will progressively crowd out private enterprise: it’s a mathematical certainty...
..With that, we can address the false dichotomy between “socialist” and “capitalist” economies as they're commonly discussed. Namely, in what we call “capitalist” economies, a larger proportion of government-injected purchasing power flows top-down. In what we call "socialist" economies, it flows bottom-up.
Capitalist governments splurge their largesse on large private corporations in the form of subsidies and generous government contracts. Socialist governments splurge on social welfare programs like low-cost or free health care, education, generous unemployment benefits and pension plans, and programs that maintain full employment even where jobs couldn't be justified by private enterprise...
..The idea that the state would splurge on the lazy and undeserving free-loaders is understandably revolting. However, all those undeserving free-loaders might also be your customers, so even the hard-core entrepreneurial types benefit if the lazy bums have money to spend.
The alternative in governments splurging on large corporations is far more dangerous. If purchasing power is distributed bottom up, the decisions about how to spend that purchasing power are up to the ordinary people. As such, they'll tend to benefit ordinary businesses that produce consumer goods and services: bakers, apparel makers, restaurants, coffee shops, musicians, tour guides, bicycle repairmen, etc.
By contrast, if the state spends top-down, it runs the moral hazard of determining the winners and losers in the supposedly free market competition. The winners will tend to be those corporations and groups that can “invest” the most in political lobbying efforts. As a result, we get the TBTF banking behemoths, big Ag, big Pharma, big Media, big Tech and a massively bloated military-industrial complex. Ultimately, this favors the emergence of "corporatism", as Benito Mussolini characterized fascism. Today we prefer the sanitized term, “private-public partnership.”
These are the musings that get me labelled “communist,” but, whatever. If we want to fix what's wrong in the world today it is essential that our analysis goes past the handy but misleading labels of “socialism” vs. “capitalism,” or left vs. right, and that we deconstruct our challenges down to their essential building blocks... Labels only perpetuate our problems and make it difficult to transcend the dysfunctional elements in our system and evolve toward better social arrangements.
https://alexkrainer.substack.com/p/untangling-the-socialism-vs-capitalism
Thanks John. I know, I read your article yesterday and it inspired me to design my today's interview around Alex's article :)))
This is one of the most informative interviews I’ve ever listened to. Well done!! As with the best “classes”, I walked away with more questions.
I'm glad to hear that. Thank you :))
Nice work. I've shared the link.
A Skeptic War Reports
https://askeptic.substack.com/
Thanks :) I returned the favour today... If you mentioned it :D
Great interview, thanks to both of you!
This is another conversation using Marxist categories that presumes that these "systems" are active algorithms that can be "analyzed" through intellectual discussion. What an utter waste of time when the people doing the talking clearly have a wealth of direct experience that they could share if they would do the work of remembering events in their own lives and the details. When you all go back to talking about particulars and leave the sotheology (the academic speak that is the current secular religion) to academics, let us know.
You might read that condensation of Alex Kreiner's recent post carefully.
He seeks to get away from false dichotomies of "socialism" and "capitalism" and to look at the power of fractional reserve lending, underlying both economic templates in practice.
This interview begins by helping clarify that, but then goes further into the "pirate" financial oligarchs of history, and their current iterations, poised for another collapse.
Thx for the reply. "Fractional reserve lending" is the bewildering name now used by people who are bothered by the fact that people promise more than they pay. Kreiner and Alex are troubled by that; so was Marx. That is understandable. There is no synthesis to be found that somehow merges domestic legal tender (what the people with guns and lawyers tell you to use to pay your taxes) with international money (what pirates and others involved in trading between nations) use to clear their debts with one another.
For intellectuals and others this will always be an itch that their minds cannot avoid scratching. The explanation for central banks is very much simpler; it is the only way a country can rely on direct income taxes and have permanent fiscal deficits. As long as people are free to discount against their countries' own currency (as they were in the United States until 1912) by swapping it for international money, the government runs up against the limit of the public's willingness to lend. The irony of the present situation is that, thanks to the boycott against their international trade and exchange, the Russians are now close to adopting that same 19th century American system of open discounting.
In his highly instructive analysis, Alex Trainer said that both capitalist and socialist experiments implode because of exponentially rising debt. To whom did the USSR pay the debt? To foreign capitalists? Is debt really inevitable, as he states? Theoretically a state run bank under socialism or a mixed economy need not charge interest. Thus a society that at least puts its money management under a state run bank can avoid the historical problem of money lending, recognized and banned by Islam and Christianity as usury and corrected already in ancient societies by periodic debt cancelation, which one might call a kind of creative destruction.
Now, it is true that even without a capitalist class siphoning off the wealth production of society as interest, a society must use part of wealth production for reinvestment, if only simply to maintain current levels of production, and therefore well-being. But that is quite different from usury. A society can learn the importance of saving for investment - a kind of small deflationary pressure - when it knows that it is the price of long term prosperity. It is the difference between a culture of unrestrained but unsustainable greed and one of paying the price for stability that counters entropy and ensures the survival of the system.
Let me put it more simply, it the hope of a critical response. A financial institution run purely to serve the public, not a parasitic private financial class, will need neither fractional reserve lending nor lending at interest, which is like a mafia shaking us down for tribute, because interest is rent, which is unearned income. Any nation or social group of any scale can lend at no interest for investments that the group has democratically decided will benefit everyone over time, as China claims to have done with some nations in Africa. It is like the Grameen bank. It is like a farmer saving a small part of the corn harvest as seed for the next year. If the farmer makes intelligent investments, he prospers. Nothing implodes. The only cost is allocating a small part of production for reinvestment. Please Alex or someone tell me what is wrong with that system.
I have now watched the entire interview, which I found very useful, Aleks.
At the end you commented on the similarity of your views and on working together.
I have recently been introduced to the work of a former Moldovan politician, anti-communist in his youth, Deputy Prime Minister of Moldova at one point, Iurie Rosca, whose views are also aligned.
https://iurierosca.substack.com/
As a Moldovan politician, he's anti-Russia, but as a non-politician he becomes an anti-Great resetter and supports Russia.
In his latest post: "Jazz, Blues, Rock and Roll, Hard Rock, Heavy Metal, Hip Hop or Rap etc., etc. are just a few variations of the more or less rhythmic and traumatic noise that has spread over the whole world like a deadly plague that dissolves all tradition, annihilates all religion, dynamites all moral codes and pulverizes all culture built up over millennia of human civilization... . In recent decades the pace and scale of the mass imbecilization strategy known as Sex, Drugs, Rock & Roll has become even more successful. In addition to electricity (the minimum condition for the spread of mass culture), radio and TV, the internet has emerged. This deadly poison that turns crowds of people into subhuman herds has affected Russia as catastrophically as the rest of the world... What prompted thousands of Russians to gather in that Moscow concert hall on that fateful evening?. The popular Russian rock band Piknik. But it has been known for at least half a century that this kind of alleged music is satanically inspired. And this is not a figure of speech or an exaggeration, but a reality confessed by the very stars of this demonic practice, who admitted their pact with the devil in exchange for popularity and wealth."
Sounds like my dead mother, and she was, sadly, nuts.
Thanks Mike. Yes, I read that post of Iurie's, and it does paint an entire realm of popular music as evil, with considerably too broad of a brush.
Carol King is not Lady Gaga, for instance.
Following monied interests in the music business, and their influence upon the "product", was addressed by the principled Roger Waters in the lyrics to this song, "Have A Cigar" https://www.youtube.com/watch?v=hMr3KtYUCcI
"And if we tell you the name of the game, Boy, we call it riding the gravy train..."
Using Roger Waters as an example is an easy way of getting people to like you :)