If the competition between Activists and Big Business were played out as a baseball game, we would see the Activists lineup featuring a fantastic infield and pitching staff, but no outfield, probably because the brawn needed to throw from center field to home plate is missing in left wing circles.
Big Business does not have nearly the same talent and brain power, but they do have a decent outfield so when these two teams play, Big Business hits loopy inside-the-park home runs that win ball games while Activists agonize and bicker over strategy.
Amy Goodman's recent comments regarding the current food crisis is a case in point.
http://www.alternet.org/story/84130
The recent surge in food prices, and commodity prices across the globe is not caused by the actions of speculators, as she suggests. Sure, speculators play a part, but blaming speculators for this surge in food prices is like blaming looters for the food shortages and riots in Haiti. Speculators and looters are just grabbing what they can grab while the grabbing is good; they don't cause the problem.
The deeper problem, the problem that Activists need to talk about correcting, but never do, because, in their mind, it means (erroneously) eliminating jobs -- is the problem of extremely low interest rates and too much money in circulation -- not too little. That's right. Too much money, not too little. Keep in mind that when people talk about money, they falsely think they are talking about something with limited availability whose value ebbs and flows based on supply and demand. No. None of that kind of asset backed money is used by any government in the world today. Today's global money supply is actually just trillions worth of interest bearing IOU's that people, companies and countries swap with each other in a global game of fiat currency chicken. The one holding the biggest stash of fiat currency loses. This is something German banks just discovered. They thought they were holding U.S. AAA mortgage backed paper. Ooops.
The fact that virtually all of the problems identified by Activists as threats are actually the result of there being too much of these IOU's instead of there not being enough of them goes against every bone in Activist's bodies. And yet, there it is. The current food crisis a prime example.
The Right Wing knows, but isn't saying because they do not want to kill the golden fiat currency goose, that the systemic problem underpinning the food crisis is the inability of American and various world central banks to allow for the price of money to be set by the market instead of the cheap money loving Politburo of America's Federal Open Market Committee (FOMC). To allow the markets to set interest rates would mean less fiat currency and less fees for bankers, so they naturally override the system and make money artificially cheap to pay for mergers and acquisitions and pay themselves really fat year-end bonuses.
If the price of money, or interest rates (the more familiar term), were set by the supply and demand of the market; the dot-com boom and bust, housing boom and bust, and now agricultural boom (the bust has yet to be written) would not have inflated the global commodity markets the way that it has.
Activists need to get their head around this and address this problem with a degree of financial literacy that is currently lacking. When Amy Goodman had Alan Greenspan on her show recently, neither Amy Goodman nor guest Naomi Klein touched on the issue of money supply. It was actually Jon Stewart in his interview with Alan Greenspan who scored a solid home run against the former Fed Chairman when he rightly made the connection between money supply and price inflation.
To remedy the 'hole in center field,' (to keep my baseball analogy going) the Left needs to argue for higher interest rates. Additionally, a study of how interest rates are set needs to be commissioned, followed by a discussion of whether or not America wants to be a a free market economy or continue as it is now - a command and control communist-like Corporate Union without a free market price discovery mechanism setting interest rates.
Additionally, the Left in America must not be suckered into falling into the trap of believing what the Right tells them -- that raising interest rates means economic doom and job loss. Nonsense. Sure, raising the price of capital adds cost but so what? It also adds stability, reduces volatility, increases returns on savings and pensions, cuts inflation, discourages rogue traders and reckless speculation and supports the dollar. Plus, if interest rates were set by market forces instead of government fiat the playing field would be level and encourage more entrepreneurs of whatever party affiliation to start more companies and create more jobs -- way more than would possibly be lost by an increase in interest rates. Conversely, low rates encourage monopolies that results in fewer jobs.
The Left in America needs to beef up on its macro-economics understanding of money and credit before leaping into the fray of discussing global food prices or be left to stare perplexed as another inside-the-park home run hit by the Right and Big Business who add more runs the score board virtually unopposed.
Follow Max Keiser on Twitter: www.twitter.com/maxkeiser
This was clear at the time Greenspan was on amy's show..
no mention was made...
Progressives should have beat the FT to the punch and been arguing for this all along...
It was their ball to drop. they could have 'owned' this issue and showed real leadership I think.
http://www.ft.com/cms/s/0/87c1d002-213e-11dd-a0e6-000077b07658.html?nclick_check=1
I cannot agree with you more.
You posit from the non-Austrian(??) left that we need to abolish the FED.
Ron Paul does the same from the Right.
And I agree.
Ron Paul posits no replacement for the quasi-Central Bank functions of the FED, leaving the free markets to handle “things” like money-creation.
Yeah, that’ll work.
You posit some intermediate steps that I agree with, but I see them as small, temporary steps in the right direction.
Then you state a truism in my economics education – leftist economists are caught in the headlights of criticizing the status quo, while offering no meaningful reforms that carry through to the monetary system where they are needed.
They would rather argue over fiscal policy and marginal tax rates.
I say, go for the power structure - the money-creating powers of the fat-cat capitalists.
That power is only there because we lost some political arguments way back when.
Private bankers are not nobility, born to a money-creation right.
That right rests with whatever power the people of a sovereign nation says gets that right.
Too many leftist economists get their research money from tax-supported foundations, the structure for which is dependent on the continuation of the status-quo.
So, wake up leftists.
Max is right about this.
Without your own monetary policy, the Right is eating your lunch.
You state that you live in France. I understand that there is no "market" in Europe for grains etc. And that, indeed, the Agruculture Ministers of the respective member countries meet each October to decide the prices for commodities covered in the CAP (common agricultural policy) and that tarriff barriers are established to protect the small scale European producer.
Can you find out the current European prices for corn(maize) and wheat ? It would be very interesting considering the attractions of the price-gravity and the dislocations that are most likely occurring. Here you have a pretty clearly defined difference between the market (America) and state control (Europe).
You have REALLY underestimated the effect of large scale investment of hedge funds
in commodities.....
Your "monetary policy"argument is classic....
Duh......
Supply and demand flew out the window in the oil trade last year.....
unless you're talking about BIG CASH chasing futures contracts.
BTW, WHAT is a "lefty economist"?
Oh, and thanks for conceding that "Sure speculators play a part...."
Absolutely brilliant......
As big as the hedge fund 'footprint' is, it thrives on cheap money - and interest rate arbitrage (borrowing in Yen and investing in Icelandic Krona) that can be Zapped! away by Central banks if they behave in the interests of the community at large and raise rates. The 'size' of the funds is 90% leverage - so by increasing the cost of that leverage, you can reduce their influence dramatically.
Sure speculators play a part.. to the extent that they are allowed to play a part... If the incentive is to reduce their part - - increase the cost of them doing business.. but the Fed does not want to reduce the hedge funds role in this price inflation - as the Fed works for the banks, not us... and the banks make tons of fees on this inflation.
A lefty economist is Keynesian (John Maynard Keynes) and a right wing economist is Friedman/ Laffer. The lefty believes that the economy can be guided (like a big spaceship) with levers like government spending and interest rate levels. The right wing economists are referred to as "monetarist" (in Friedman fashion) and "tax minimalist" (in the Laffer fashion) and believe that the "invisible hand" of the free market is all that is necessary for the economy and that government interference is a waste of tax payer money. A lefty believes in Section 8 housing and Medicaid. The right believes that the marketplace would accomodate the homeless and the medically needy in a way referred to as "market efficiency" ( which in reality means homeless or dead)
So on the left are the Keynesians and on the right you have your Monetarists. The former believe the government is the big deal, the latter believe the government is the problem. And... then you have the FED. A big "problem" for the so called monetarists.
I disagree about the comments you made about Amy. I believe it has to be because of speculation, because with the present system, the speculators cannot be removed from the equation, no matter what the money supply truthfully is.
So sorry.... Amy's absolutely right, and you are WRONG..
You can't hold it all against Amy, good grief, is she the only journalist our country really has? Sometimes I think so, God bless her.
Thank you for the lesson.
I agree with a lot of what you say here, especially the left's failure to comprehend anything about monetary policy.
But I don't agree with your analogy.
And, it's not because I am an Amy Goodman fan.
it's true that speculators aren't responsible for the huge amount of money they have to play with.
Also true, many of the problems of the planet including militarism and global corporate intervention have been fed by the over-abundance of credit.
But I don't agree on a lot of other points.
Back to the speculators.
I think you acknowledge that speculators drive up the price of commodity goods, like food.
That they do it only because there is a supply of almost-free capital doesn't forgive their actions.
It doesn't reduce their culpability one bit.
Capital serves its owners.
Money doesn't manage itself.
Speculators are a large part of the the cause of the rise in prices.
They are not the sole cause.
Trillions are borrowed and made available for any speculative purpose.
My position is that there ought to be a law.
It ought to be illegal.
Priority use of the money supply is a tenet that my Dad used to stress.
Speculation is a practice that nobody should be able to do with other people's money.
Whether they are paying two-percent, or ten.
It doesn't reduce their culpability one bit."
On this point, let me interject something to think about. Why not harness the shameless actions of speculators to do the work of activists? In other words, as I"ve been writing about on KarmaBanque for close to six years now.... Activists who want to 'de-capitalize' a 'bad' company can do so by organizing boycotts of companies with stock that is vulnerable to a boycott (and excluding all companies that do not fit this category - which takes discipline on the part of activists; a trait they are not known for). If the boycott is big enough.. the speculators will gladly attack that companies stock with short-sales, driving the price down. Here's a wiki link with some links including the legal opinion on the technique propared by a Washington D.D. think tank.
http://es.wikipedia.org/wiki/Karmabanque
The point being that the powers that speculators possess to shape the global economy are free to use by activists - (free as in 'no money required') If activists are willing to take the extra step of familiarizing how the global money markets work.
feeding the poor, for example, could be accomplished by carving out a few billion from Coke's stock; per the KbQ methodology.
"It ought to be illegal.
. . .
Speculation is a practice that nobody should be able to do with other people's money"
So says Joe.
George Soros "took" billions from shorting the Pound and the Baht! He did that legally. The Hedgies manipulate the markets "taking" billions, possibly trillions of other peoples' money. This needs to stop. Money needs to be "earned" not taken or "extorted" from others. It is shameful.
Look at the Presbyterian and Lutheran churches. They practice "disinvestment" from Israeli firms in protest of the State of Israel vis-a-vis their brothers, the Palestinians, but they do not extort by short sales. It is disgusting and unethical per se(naked shorts to manipulate value). Joe is right. And you should think about this. The SEC needs to regulate aggressively and limit the range of speculative tools and the degree to which they can be exercised.
Which, of itself, is to acknowledge that you are not the stooge for the corporate financial world, as claimed by others.
But I also feel that, being a player, it is in your interest to keep the game going.
I was sure I read a recent FED report confirming the exact connection between speculation and excess pricing, and I will get back on that.
You claim that the real problem is the FED creating too much cheap money that is enabling the speculators to do their dirt.
And that their dirt is just proof of the market working – after the big mistake of the FED.
Which sounds a lot like Lenny Bruce’s Father Flotsky skit on the good boy and the bad road.
Let us consider, is the problem the interest rate? Or is the problem too much money?
To me, no question, it is too much money.
There is no connection, and there is no requirement for a connection, between money supply growth and any economic indices.
I think the superior issue you have raised is the power of the FED to control the economy of this country, the FED being private bankers acting in their own interests.
Why don’t we talk about whether THAT is the problem, or is it too cheap a price for THEIR money, or too much of THEIR money?
Wrap a macro economic head around this. The economy has been in recession ever since Reagan. The CPI as deflator of the GNP has kept the reporting pretty. Low inflation means the GNP is high(er). The Fed has been fighting an ongoing recession since Reagan started screwing with the CPI, the effect of which was to retard wage and COLA increases relative to the real cost of living, a net depressor of the economy.
Whatever got the Fed into this corner, maybe making the case for lower taxes stimulating the economy, is still in play.
It is not that there is not enough money, there's plenty around, it is just not in the hands of the people who drive the economy. Increasing concentrations of wealth have made speculative games more fruitful. And, there are no Tulip crazes on the horizon for big money to chase. Money manager have food, fuel and healthcare to work with.
There might have been American companies to invest in, but that ship has already sailed to China.
Lower taxes is a fools game. Simply paying less tax and just looking at that number - and seeing that it is a 'lower' number and than patting oneself on the back and cheering that one is now paying 'less' is I repeat, a fools errand. The inflation that comes with a falling dollar - falling because, in part, of a broken tax system - adds more cost to more house holds than if the tax rate in America was considerably higher... Sure, pay less tax, but your gas and food will cost more than you saved, so what exactly does one gain? I live in France where the tax rate is higher than in the U.S., but the transportation, health, postal, and school system are so well run nobody even talks about them. They are just a given that they all run incredibly well and give incredible value for tax-dollar. Americans should be well past trying to figure out how to run their basic infrastructure at this point Yes, the country is only 200 years old, but maybe its time to stop crawling and start walking.
But on taxes, cutting taxes has never stimulated the economy, at least not in a way that is detectable by our gross barometer the GDP. Taxes are a full partner in the factors adding up to the GDP, ergo, taxes are not removed from the economy, they are spent by the government. So in a sense, robbing Peter to pay Paul does not even work in reverse.
So the Fed keeps interest rates low, in order to keep the economy moving at all, all the while hiding behind a artifically low stated CPI for justification.
So now we are stuck with a dual track in the economy, declining real property and stock values and rising consumer staple prices. The Fed is helpless to do anything but shore uup an economy that they know is in decline and must ignore inflation as it has no means of dealing with both at once.
This is very bad news. The intervention that is needed is to raise wages and interest rates and raise taxes on the wealthy. Hah, but that is inflationary. But paradoxically, in this environment, not so.
Speculators? Yes, in every system there are "speculators". Transparency necessary for a "free market" is lacking. So are the regulations needed as a check on the greed of others that lead to detrimental results. Such as the current economic debacle in America. Self-regulation would exist is everyone played on a level field and were saints. We are not. We exploit each other in personal relationships and business. Get that edge. Hence the need for full transparency and regulations. When writing regulations, special interests would still try to write into law benefits only for themselves. Public corruption. Bribery. Perfect examples.
As far as the "free markets or command-control economies"? What are you saying? You are either with us or against us? What a load of steaming dog crap. Mix it up. Certain sectors do not belong in a free market. Others should exist as a public-private partnership. The rest? Capitalist style for the rest.
Fixing the Problems on Wall Street is Easy: Raise Margin Requirements
http://www.huffingtonpost.com/max-keiser/fixing-the-problems-on-wa_b_95338.html
This places a drag coefficient on our economy that has nothing whatsoever to do with interest rates. This in turn causes unnecessary economic strain on growers, shippers and retailers who all have to pass along the artificial spike in energy costs/gas prices. The recent increase in the price of an airline ticket is another good example. Almost every business in the world has been affected by the cost of energy increases. But there is also another component.
If the markets were responsible and efficient lending with low interest rates, everything would work out fine. But when you factor in inefficient investment of those low rates, by huge lenders giving massive quantities of loans to unqualified buyers based on overinflated real estate vales, you have defeated the value of the lower rate.
Low interest rates are great for business and consumer alike. It is the abuse and mismanagement of low rates and bad lending policies that cause those in the pickle to argue for higher interest rates so they can clean up their mess. Factor in artificial and abusive inflation of the core building block of society, oil, and you have a problem that has nothing to do with the need for higher interest rates.
Which is not to say there are not mitigating circumstances, but as a policy choice, raising interest rates would make the situation better. Had rates, on average, reflected demand over the past five, ten, twenty years - we would not be seeing the price spikes in 'stuff' that we are seeing now.
The idea is not to 'pick' a high or low rate, but to let the market, based on supply and demand 'pick' a price (rate) albeit with a few checks and balances like one sees with the OCC (options clearing corp.)
It's tempting to look at oil prices at $126 and say the problem is oil at $126, but that is the symptom not the problem.
America should not have let OPEC run their lives and should not have let the Fed run their money. Now there are serious systemic problems that probably cannot be worked out with the usual tweaks and financial engineering tricks.
Aside from the need for a significant push back on OPEC and fed, we need more oversight on the financial markets to stem the rampant abuses that have wasted a good chance to invest cheap money wisely.
As a free market type thinker I never thought I would advocate oversight, but it is clear that the fox guarding the hen house is not working.
It all boils down to paying attention to the fundamentals. It's not rocket science, but when you don't enforce adherence to the basics, to borrow your baseball analogy, you end up in center field, and regardless of which team you are on home plate gets farther and farther away.
Think you impressed people using Marco and Micro ?
Well they Marco effects on business lead to the MICRO effect on the consumer. That business operations where business does not over produce and turn raw materials into finished good only means the have greater MICRO control over pricing as the Futures Market for Commoditys is played for profit by the BIG RETIREMENT FUNDS AND MUTUAL FUNDS.
Marco has always tickled me in this age of computers the new Marco is Micro because we now have NANO!
http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1208490908300500.xml&coll=7
http://www.signonsandiego.com/news/business/20080422-0715-foodprices-speculation.html