Global economics and finances - impacts

[SATire]

JimD - I agree EU is in bad shape. And now we face another problem: The decreasing costs for imported oil results in lower inflation and renders Germany’s efforts in austerity useless, since it is like a growth package. And thus it will drive our CO2 emissions and hinders de-growth. EU is still above zero growth and subtracting population growth the economic growth is way too high for a sustainable future. Of course other people ignoring climate effects or a "collapse" in future could see that just the other way around and start singing in the rain.

But in one point I disagree (you know me, I always have to pick a nit or two): In EU still the governments of nations are the only power based by the sovereign, so each nation may act as it likes. Maybe we will see a "Brexit" soon and later maybe a leaving tired Germany, too. But I doubt that. It might be better to stay together even if we are helping each other only up to a certain degree.

[Laurent]

Agree EU is in bad shape but from my point of view all nations are in bad shape simply because there is no way we can reimbourse our debts (especialy in France, 2000 billions euros) if you consider that we have to phase out oil, coal, gaz now if we want to avoid very bad climatic outcome.
I am for the nations (some aren't) and for EU but with a complete different set up. Even with a collapse the question of nations will come up compare to county (or something else...no nation, anarchy ?).
I am afraid most of the citizens will come through the stage of denier to zombi without transition (may be not...just wake up people).

[JimD]

http://www.nakedcapitalism.com/2014/12/peter-temin-lessons-great-depression.html

From the overview at INET:

Peter Temin, currently Gray Professor Emeritus of Economics, MIT, and former head of their Economics Department, has written extensively about the Great Depression. He argued persuasively in that book that the cause, spread and recovery from the Depression must be found in the monetary and fiscal policy regimes amongst the authorities of Great Britain, the US, France and Germany. The Great Depression, according to Temin, was the result of a shock to the system produced by World War I, coupled with an ideologically constrained response that exacerbated a bad situation and turned it into a crisis.

Does this sound familiar?

In the 1930s, governments practiced austerity to try and preserve the gold standard. And what they did was turn a recession into the Great Depression. And that seems to be what everybody is doing now with austerity. The Eurozone is still struggling with deflationary pressures because of an intensely austerian philosophy promoted by the Germans. In the US, the GOP also appears wedded to cutting government spending (except, it seems, when it applies to the military). The United Kingdom, which has no particular debt problems, is doing austerity because the Conservatives are in power.

In other words, governments which have other choices are making the choice for austerity. In the 1930s, they were doing austerity because they were adhering to the ideology of the gold standard. In their minds, austerity was the only way to preserve the gold standard, which would eventually restore prosperity. Today the justification for it is debt. But debt for the United States is de minimus; our debt service is a minor part of our government spending. So you have to believe that there’s another motive, and that appears to be attack on the very foundations of the modern day social welfare state via class warfare.

Feudalism coming to a theater near you.

[Sigmetnow]

...
... So you have to believe that there’s another motive, and that appears to be attack on the very foundations of the modern day social welfare state via class warfare.

Very nice conspiracy theory.  Customizable.  Succinct.   

[SATire]

... So you have to believe that there’s another motive, and that appears to be attack on the very foundations of the modern day social welfare state via class warfare.

Very nice conspiracy theory.  Customizable.  Succinct.

I have seen some members of that conspiracy today: My children - they will have to load the burden of dept as well as all the other shit I produce today. Strange to learn now, that they have any power...
You see, I customized that my way. Austerity is the thing to do in case you want to leave some ressources to those, who hopefuly may follow us a bit.

[Bob Wallace]

... So you have to believe that there’s another motive, and that appears to be attack on the very foundations of the modern day social welfare state via class warfare.

Very nice conspiracy theory.  Customizable.  Succinct.

I have seen some members of that conspiracy today: My children - they will have to load the burden of dept as well as all the other shit I produce today. Strange to learn now, that they have any power...
You see, I customized that my way. Austerity is the thing to do in case you want to leave some ressources to those, who hopefuly may follow us a bit.

But if you fail to spend to maintain assets and to invest in new infrastructure/research/education you risk leaving those who follow us a hollowed out shell of a future.

It's all about seeking the best balance....

[SATire]

But if you fail to spend to maintain assets and to invest in new infrastructure/research/education you risk leaving those who follow us a hollowed out shell of a future.

It's all about seeking the best balance....

Right. Never stop to invest in research and education - that does not cost much resources and helps a lot (less children, better life, ...). Infrastructure should also be preserved to make the life convenient for all the people. But when it comes to consumption, then frugality is appropriate. Consumption must come to a sudden stop. We have to learn to life with the things we have and to turn them in circles towards sustainability.

I know that this is in contradiction to today's economics. But let us blame today's economics (let alone finances - this resources-sucking non-sense thing) and not the reasonable way of living. Get sustainable or collapse. Austerity (frugality of one's own accord) is the friendliest way to get there.

[Bob Wallace]

You seem to contradict yourself.  You state...

"Consumption must come to a sudden stop."

The you state...

"Get sustainable or collapse."  Which I take to mean that we can continue to consume as long as we do it in sustainable fashion. 

[SATire]

You seem to contradict yourself.  You state...

"Consumption must come to a sudden stop."

The you state...

"Get sustainable or collapse."  Which I take to mean that we can continue to consume as long as we do it in sustainable fashion.

Bob, are you kidding again? Why do you take the meaning of my words to its opposite?

Maybe I need a new translator - some kind of "Fox-marketing-English to German" translator to get through this Babylonian language problems with you...

No - with "sustainable fashion" I just mean that way of live without waste and without holes in the earth. Some kind of collapse of one's own accord - but with some effort trying to prevent that nasty by-products we disliked during the last collapse we performed some decades ago.

So for me "continue to consume as long as we do it in sustainable fashion" is a contradiction in itself. Unless you are talking about the consumption of education, art, music, care and other such valuable products not based on things dug out of the earth. The growth of such things can really be unlimited in a sustainable way. But for "normal things" austerity is the first thing to do.

[Bob Wallace]

Yes, I do suspect your lack of English skills is the problem.

[Sigmetnow]

Sign of global industrial slowdown/transition?

Australian Budget Gap Widens More Than Forecast on Iron Ore

“Our nation’s export income has not been what we expected,” Hockey said. “For example iron ore, which is one fifth of our nation’s export dollars, has fallen from $120 a tonne at the beginning of this year to around $60 a ton today.”

http://www.bloomberg.com/news/2014-12-15/australia-s-budget-deficit-widens-to-a-40-4-billion-on-iron-ore.html

[Bob Wallace]

China's growth is slowing.  Europe isn't in good economic condition.  The US is not growing very much, we're not spending on infrastructure.

[Sigmetnow]

I posted this under Oil and Gas Issues, but Global Economics is a better fit:

After the single worst day in Russia’s nine-month-old financial crisis, the fallout is spreading across global markets.

Pacific Investment Management Co. (PEBIX) is facing mounting losses on its Russian bond holdings; almost every bullish ruble option contract registered in the U.S. has been made worthless; and foreign-exchange brokers in New York and London told clients they’re no longer taking ruble trades. Sergey Shvetsov, a first deputy central bank governor, expressed astonishment at the scope of the collapse during a conference in Moscow.
...
Pimco Losses

Pimco’s $3.3 billion Emerging Markets Bond Fund has been one of the hardest hit. It held $803 million of Russian corporate and sovereign bonds at the end of September, equal to 21 percent of total assets, an amount that’s more than double that of the benchmark it tracks, according to data compiled by Bloomberg. The fund has lost 7.9 percent in the past month, trailing 95 percent of its peers.
...
Every single other contract is now out-of-the-money because they gave traders the right to buy the ruble at exchange rates that are stronger than yesterday’s closing level, according to data compiled by the Depository Trust & Clearing Corp. from clients of U.S. banks.

http://www.bloomberg.com/news/2014-12-16/russia-crisis-hits-pimco-fund-wipes-out-options-as-ruble-sinks.html

[Sigmetnow]

Here's a good summary of the current upset in global financial markets, much of it associated with plunging oil prices.  The US is gaining strength, while China cools.  Emerging countries' markets were once sought as an alternative to the near-zero interest rates in the US and other strong countries, but that risk is now starting to take a toll.

U.S.-China Economic Role Reversal Roils Emerging Markets

The world economy’s two biggest tectonic plates are shifting, setting off the frictions increasingly evident in financial markets and global capitals.

The U.S. is accelerating and China is cooling, marking a reversal of trends that followed the financial crisis. As a result, oil is slumping as American supply rises and Chinese demand falls; capital is fleeing emerging markets; the dollar is surging and the influence of the BRICs is on the wane.

While the biggest losers comprise commodity producers and emerging markets, Russia’s Vladimir Putin is proving the most exposed. His economy is headed for recession as the plunge in crude and the ruble deepen the impact of sanctions stemming from his aggressiveness in Ukraine.

“The shifts we’re seeing in the global economy show the potential for unintended consequences and unforeseen tensions,” said Lena Komileva, chief economist at G Plus Economics Ltd. in London. “Emerging-market vulnerability, headlined by Russia’s crisis, could trigger more safe haven flows.”

A strengthening U.S. and slower China once topped the wish list of international policy makers who repeatedly expressed concern that America was stagnating and China was overheating in the aftermath of 2009’s international recession.
...

Investors withdrew more than $2.5 billion from U.S. exchange-traded funds that buy emerging-market stocks and bonds last week, the biggest outflow since January. An index tracking 20 emerging-market currencies also fell to the lowest level in more than a decade.

“Emerging markets could be a main theme in 2015,” said Jen. “This is a risk that most investors continue to dismiss.”

http://www.bloomberg.com/news/2014-12-16/economic-tensions-roil-emerging-markets-as-u-s-china-switch.html

[JimD]

http://blogs.wsj.com/economics/2014/12/16/oil-is-dragging-down-prices-faster-than-official-price-index-can-capture/

[Sigmetnow]

Great two-minute video explainer on the Russian crisis.
http://www.bloomberg.com/video/video-what-s-going-on-in-russia-the-crisis-explained-5qBR_MU6TsKx_ieeT2eHkA.html

[JimD]

It would take very little effort at rewriting the below article about the rot in Germany and make it appear to be about the rot in the US.  Interesting.

http://www.nakedcapitalism.com/2014/12/mathew-d-rose-germanys-dubious-successes.html

[Laurent]

Top 500 companies' carbon emissions rise despite calls for cuts
http://www.theguardian.com/environment/2014/dec/23/top-500-companies-carbon-emissions-rise-despite-calls-for-cuts

[JimD]

Another very good read.  I already had come to the same conclusion about the risks and possible downside to the current situation.  We will see as they say.

But the real caution is that such stair step downs are inevitable and have been common even when per capita energy was rising.  As we head into deep decline they will become more severe and recoveries (such as the current lack of a meaningful one) will be lacking.  Just a new lower temporary point of stability before the next step down.

In a world like this overhauling all of technology and rebuilding a global infrastructure, especially with a  still strongly growing population, just cannot solve the problems of climate change.  Let alone the depletion of resources, dwindling EROEI and other such annoying nagging details.

http://wallstreetonparade.com/2014/12/oil-crash-dont-believe-the-happy-clatter/

[Bob Wallace]

But the real caution is that such stair step downs are inevitable and have been common even when per capita energy was rising.  As we head into deep decline they will become more severe and recoveries (such as the current lack of a meaningful one) will be lacking.

With the falling cost of wind, solar and EV/storage batteries Jim sees a crash.

Others are seeing a vast transformation in our energy systems, unlike anything we've seen before.

Interesting how some look at a half full glass of water....

[JimD]

http://www.bloomberg.com/news/print/2014-12-26/japan-s-real-wages-decline-most-since-2009-in-challenge-for-abe.html

hmmm

Japanese drew down savings for the first time on record while wages adjusted for inflation dropped the most in almost five years, highlighting challenges for Prime Minister Shinzo Abe as he tries to revive the world’s third-largest economy.

The savings rate in the year through March was minus 1.3 percent, the first negative reading in data back to 1955, the Cabinet Office said. Real earnings fell 4.3 percent in November from a year earlier, a 17th straight decline and the steepest tumble since December 2009, the labor ministry said today.

A higher sales tax combined with the central bank’s record easing are driving up living costs, squeezing household budgets and damping consumption. Abe’s task is to convince companies to agree to higher wages in next spring’s labor talks to sustain a recovery.....

[JimD]

http://wolfstreet.com/2014/12/26/bullish-blackrock-frets-about-terrible-markets-in-2015/

What could go wrong?

[JimD]

The beginning of the Euro.  France initiates the idea and the strategy behind it.  Kind of makes you wonder what the world would look like if it had gone forward earlier and blunted the rise of US power.

http://www.nakedcapitalism.com/2014/12/yanis-varoufakis-euros-first-inkling-piece-lieu-best-wishes-2015.html

[JimD]

Many would think if they listen to the mainstream US news outlets that the US economy is just humming along and all it well.   As anyone on the ground here can attest that is propaganda.

Further evidence that big trouble is possible is the combination (laid on top of a basically non-existent recovery for everyone but the rich) of the big contraction just getting underway in the energy industry due to the low oil and gas prices, and the big housing bubble created (once again) over the last 3-4 years.  There is a very good chance that the combination of these two events will result in large impacts on the US economy.  We won't even go into the stratospheric levels of the stock market being insane.

http://www.nakedcapitalism.com/2014/11/after-messing-up-the-housing-market-the-smart-money-bails-out.html

[JimD]

Greece - the stair step down of the collapse process. 

http://www.nytimes.com/2014/12/30/world/europe/greek-patience-with-austerity-nears-its-limit-.html?_r=0

[JimD]

Fix this. 

http://www.project-syndicate.org/commentary/technology-labor-automation-robotics-by-nouriel-roubini-2014-12

NEW YORK – Technology innovators and CEOs seem positively giddy nowadays about what the future will bring. New manufacturing technologies have generated feverish excitement about what some see as a Third Industrial Revolution. In the years ahead, technological improvements in robotics and automation will boost productivity and efficiency, implying significant economic gains for companies.
......

Recent technological advances have three biases: They tend to be capital-intensive (thus favoring those who already have financial resources); skill-intensive (thus favoring those who already have a high level of technical proficiency); and labor-saving (thus reducing the total number of unskilled and semi-skilled jobs in the economy). The risk is that robotics and automation will displace workers in blue-collar manufacturing jobs before the dust of the Third Industrial Revolution settles.
....

Indeed, the factory of the future may be 1,000 robots and one worker manning them. Even the shop floor can be swept better and cheaper by a Roomba robot than by any worker.
...

a patient in New York may have his MRI sent digitally to, say, Bangalore, where a highly skilled radiologist reads it for one-quarter of what a New York-based radiologist would cost. But how long will it be before a computer software can read those images faster, better, and cheaper than the radiologist in Bangalore can?

Likewise, in the next decade, Foxconn, which produces iPhones and other consumer electronics, plans to replace much of its Chinese workforce of more than 1.2 million with robots. And soon enough voice recognition software will replace the call centers of Bangalore and Manila......

Kinda plays into the population reduction theme doesn't it?  Who needs people labor?

[Shared Humanity]

Fix this. 

http://www.project-syndicate.org/commentary/technology-labor-automation-robotics-by-nouriel-roubini-2014-12

NEW YORK – Technology innovators and CEOs seem positively giddy nowadays about what the future will bring. New manufacturing technologies have generated feverish excitement about what some see as a Third Industrial Revolution. In the years ahead, technological improvements in robotics and automation will boost productivity and efficiency, implying significant economic gains for companies.
......

Recent technological advances have three biases: They tend to be capital-intensive (thus favoring those who already have financial resources); skill-intensive (thus favoring those who already have a high level of technical proficiency); and labor-saving (thus reducing the total number of unskilled and semi-skilled jobs in the economy). The risk is that robotics and automation will displace workers in blue-collar manufacturing jobs before the dust of the Third Industrial Revolution settles.
....

Indeed, the factory of the future may be 1,000 robots and one worker manning them. Even the shop floor can be swept better and cheaper by a Roomba robot than by any worker.
...

a patient in New York may have his MRI sent digitally to, say, Bangalore, where a highly skilled radiologist reads it for one-quarter of what a New York-based radiologist would cost. But how long will it be before a computer software can read those images faster, better, and cheaper than the radiologist in Bangalore can?

Likewise, in the next decade, Foxconn, which produces iPhones and other consumer electronics, plans to replace much of its Chinese workforce of more than 1.2 million with robots. And soon enough voice recognition software will replace the call centers of Bangalore and Manila......

Kinda plays into the population reduction theme doesn't it?  Who needs people labor?

The structural problem facing world capitalism has nothing to do with people as labor. It has to do with people as consumers. With the dramatic and ongoing demand destruction that is occurring, there will simply be no need for such factories and the return on such investments will be so low that no company will choose  to make the investment. Reducing population will only make the problem worse.

The structural problem facing capitalism is that this is a growth system that is bumping up against a ever larger array of limits. The system will fail.

[Bob Wallace]

The system will fail.

The system will have to evolve.

You are never going to get rid of capitalism, it's baked in.

The first capitalist was a guy named Oorlewef.  He owned a really nice sharp stick.  He let his brother  Ouwefn use in as long as Oorlewef got a hunk of meat in exchange.

Or maybe it was earlier when their great granddaddy found a great throwing rock....

[Neven]

You are never going to get rid of capitalism, it's baked in.

The first capitalist was a guy named Oorlewef.  He owned a really nice sharp stick.  He let his brother  Ouwefn use in as long as Oorlewef got a hunk of meat in exchange.

Or maybe it was earlier when their great granddaddy found a great throwing rock....

Don't confuse market-based economy with capitalism. It's not the same thing.

[JimD]

The structural problem facing world capitalism has nothing to do with people as labor. It has to do with people as consumers. With the dramatic and ongoing demand destruction that is occurring, there will simply be no need for such factories and the return on such investments will be so low that no company will choose  to make the investment. Reducing population will only make the problem worse.

The structural problem facing capitalism is that this is a growth system that is bumping up against a ever larger array of limits. The system will fail.

SH

Of course you are right.  I was having a little fun alluding to (or trying to) the theme of what I think is in the back of many of the elites minds.  In that they do not think of working level people other than as rather balky inefficient machines.  Just make a better machine which does not join unions, need a pension, consume their wealth, become generally annoying and get in their way.  The typical elite view of everyone else being there just to take care of their wants and needs.  If you can make a machine to do all that they are better off.  And then a machine to make that machine and pretty soon the population problem is solved.

My dystopian view of the future?  I think there is a sci-fi novel about this.

How is progress on your big economics paper (thesis?) going? 

Jim

[JimD]

SH

I was reading the below today.  You might find it interesting.  It has a lot to say about the meme of 3rd world development and whether progress is really being made or whether much of the improvement is due to the 'accounting' method being used to evaluate.  Could have some interesting implications re the future.  Comments?

http://papers.nber.org/tmp/80245-w20791.pdf

ARE THE WORLD’S POOREST BEING LEFT BEHIND?
Martin Ravallion
Working Paper 20791
http://www.nber.org/papers/w20791

..........
8. Conclusions
 A clue to understanding why we hear very different answers to the question posed in the
title of this paper can be found in the difference between focusing on the counts of poor people
(following in the footsteps of Bowley and others) versus focusing on the level of living of the
poorest, in the spirit of Gandhi’s talisman or the Rawlsian difference principle. Both perspectives
are evident in past thinking and policy discussions. Both have been advocated as development
goals, although the counting approach, as implemented in various poverty measures, has long
monopolized the attention of economists and statisticians monitoring progress against poverty.
Drawing on the results from household surveys for developing countries spanning 1981-
2011, the paper finds considerable progress against ultra-poverty using the counting approach;
indeed, the bulk of either the inter-temporal or the cross-country variance in rates of poverty
reduction for either $1.25 or $2.00 a day is accountable to progress for those living under $0.87
or even $0.77 a day. There is first-order dominance over the 30 years, implying an unambiguous
reduction in absolute poverty by the counting approach over all lines and all additive measures.
However, there has been very little absolute gain for the poorest. Using an absolute
approach to identifying the floor, the increase in the level of the floor seen over the last 30 years
or so has been small—far less than the growth in mean consumption. The modest rise in the
mean consumption of the poor has come with rising inequality (specifically, a rising variance
normalized by the mean poverty gap), leaving room for only a small gain in the level of living of
the poorest. The bulk of the developing world’s progress against poverty has been in reducing
the number of people living close to the consumption floor, rather than raising the level of that
floor. Growth in mean consumption has been far more effective in reducing the incidence of
poverty than raising the consumption floor. In this sense, it can be said that the poorest have
indeed been left behind. ...........

[Shared Humanity]

You are never going to get rid of capitalism, it's baked in.

The first capitalist was a guy named Oorlewef.  He owned a really nice sharp stick.  He let his brother  Ouwefn use in as long as Oorlewef got a hunk of meat in exchange.

Or maybe it was earlier when their great granddaddy found a great throwing rock....

Don't confuse market-based economy with capitalism. It's not the same thing.

Thank you Neven. I was going to make a similar comment. There have been semi-permanent and permanent markets located near sources of water along the western Sahara for a couple of  thousand years. These markets have supported a healthy trade between sub-Saharan Africa and North Africa. This is not evidence of capitalism.

While we may like to consider capitalism as a given, the simple fact is that modern capitalism did not first appear on the planet until the 1800's. Prior to this, centers of economic wealth might  more appropriately be labeled mercantilist economies, almost entirely dependent on trade. Since the mid 1850's (less than 200 years ago) this system of organizing economic activity has spread  across the planet. Two hundred years is a mere blip in the history of modern humans. While advocates will argue that capitalism is simply the perfect manner to organize human civilization, I look at the devastation we have wrought in 2 short centuries and would like to suggest it is a  failed experiment.

[Bob Wallace]

You are never going to get rid of capitalism, it's baked in.

The first capitalist was a guy named Oorlewef.  He owned a really nice sharp stick.  He let his brother  Ouwefn use in as long as Oorlewef got a hunk of meat in exchange.

Or maybe it was earlier when their great granddaddy found a great throwing rock....

Don't confuse market-based economy with capitalism. It's not the same thing.

A market economy is an economy in which decisions regarding investment, production and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit. Central characteristics of capitalism include private property, capital accumulation, competitive markets and wage labour.

I suppose there could be state owned market based economy something along the lines of what China is doing.  But that's more a confusion of government and mega-corporation.  I'm sure they operate expecting profits.

Don't expect capitalism to go away.  We've yet to invent a workable replacement.

I expect Oorlewef went out looking for more really nice sharp sticks.  Opened up  Spears R Us and lived off his capital.  Perhaps he expanded and opened a meat market....

[Bob Wallace]

I was reading the below today.  You might find it interesting.  It has a lot to say about the meme of 3rd world development and whether progress is really being made or whether much of the improvement is due to the 'accounting' method being used to evaluate.  Could have some interesting implications re the future.  Comments?

As someone who has traveled a fair amount of the "3rd" world over the last 35 years I've no doubt that there's not some "accounting trick".  The quality of life in many countries has greatly improved. 

(I am not saying that wealth has "tricked down" to everyone, everywhere.)

[Neven]

Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit. Central characteristics of capitalism include private property, capital accumulation, competitive markets and wage labour.

Limitless profit, limitless private property, limitless capital accumulation.

Don't expect capitalism to go away.  We've yet to invent a workable replacement.

How about a capitalism where limits are respected? Limited profit, limited private property, limited capital accumulation, limited wealth disparity, limited energy use. How much is enough?

[crandles]

Don't confuse market-based economy with capitalism. It's not the same thing.

Hmm., there are different types of capitalism:

http://en.wikipedia.org/wiki/Capitalism[/url]]
Economists, political economists, and historians have taken different perspectives in their analysis of capitalism and recognized various forms of it in practice. These include laissez-faire capitalism, welfare capitalism, crony capitalism and state capitalism; each highlighting varying degrees of dependency on markets, public ownership, and inclusion of social policies.

Perhaps there might be a need to distinguish more clearly that you are particularly criticising  laissez-faire capitalism and crony capitalism or at least more than welfare capitalism and perhaps other types?

Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit. Central characteristics of capitalism include private property, capital accumulation, competitive markets and wage labour.

Limitless profit, limitless private property, limitless capital accumulation.
[/quote]

Where did it say limitless?

Economics is usually considered to be about allocation of scarce resources not limitless resources.

How about a capitalism where limits are respected? Limited profit, limited private property, limited capital accumulation, limited wealth disparity, limited energy use. How much is enough?

Rewarding success creates an incentive to strive for success. When someone is so successful they start to approach your preferred limit for private property, do you want to throw away their talent? Should people like Bill Gates and Steve Jobs have retired after they had earned say $10 million?

At the other end of the scale, getting rid of incentive to strive for success would tend to make people not bother getting out of bed. If that is the sort of green recession you think you want, should you be arguing for communism?

So how do you impose your limits into capitalism without it having adverse effects on incentivising success? Some success you may want to inhibit but I suggest there are some areas of success that you wouldn't want to inhibit. Do your limits just mean only affecting a few clever people and those clever people find clever ways around your limits?

Might these aspects of capitalism just be something you don't like but is the wrong target for the problems you do want to fix?

[Sigmetnow]

...
Rewarding success creates an incentive to strive for success. When someone is so successful they start to approach your preferred limit for private property, do you want to throw away their talent? Should people like Bill Gates and Steve Jobs have retired after they had earned say $10 million?
...

Allow them to earn as much as they want.  But they aren't allowed to spend it on themselves (or anyone in govenment...).   

[wili]

"getting rid of incentive to strive for success would tend to make people not bother getting out of bed"

The world would have been a much better place if most capitalists and industrialists had just stayed in bed. Or maybe I should say, that the world may have still had a fighting chance of remaining a place at all...!?

[Neven]

Perhaps there might be a need to distinguish more clearly that you are particularly criticising  laissez-faire capitalism and crony capitalism or at least more than welfare capitalism and perhaps other types?

You're right, I should state more clearly that I'm not anti-capitalism per se (or pro-communism for that matter, the opposite in fact), but I'm against free market fundamentalism and particularly the idea that the current - arbitrarily defined - definition of GDP growth is the be-all and end-all. Except that it never ends, of course.

That's why I'm talking about how a form of capitalism that respects limits might be better. If possible. I see that Sigmetnow has opened a thread on this very subject.

Limitless profit, limitless private property, limitless capital accumulation.

Where did it say limitless?

The current version of capitalism encourages all those things as if they can and should be limitless.

Rewarding success creates an incentive to strive for success. When someone is so successful they start to approach your preferred limit for private property, do you want to throw away their talent? Should people like Bill Gates and Steve Jobs have retired after they had earned say $10 million?

Make it 100 million, as far as I am concerned.

They could have gone on doing what they did, using their talent to push technology forward, except that there would be no more financial reward. The success would be its own reward.

Or they could have deployed their fantastic talent to do other stuff, perhaps even more useful things. But as it turned out, they were prisoners of their own success, where profits have no more real value, but are just numbers, like a score card.

At the other end of the scale, getting rid of incentive to strive for success would tend to make people not bother getting out of bed. If that is the sort of green recession you think you want, should you be arguing for communism?

Maybe because we have an erroneous cultural definition of success? In ancient tribes you were regarded successful and gained respect by helping others.

If we could change this cultural value of getting respect and status based on your fame or financial success to something else (take for instance the open source community), imagine how much talent you could free up.

So how do you impose your limits into capitalism without it having adverse effects on incentivising success? Some success you may want to inhibit but I suggest there are some areas of success that you wouldn't want to inhibit.

How much success is enough? Is there a limit to success, where one or a collective can say: wonderful, look at what we've achieved, let's now improve it further, without expanding it. Does this moment ever come? Or, when someone suggests it has, do we then say: Oh dear, how are we going to incentivise success?

Might these aspects of capitalism just be something you don't like but is the wrong target for the problems you do want to fix?

My problems can't be fully fixed if those aspects of this version of capitalism (the limitlessness) aren't fixed.

[Sigmetnow]

...
At the other end of the scale, getting rid of incentive to strive for success would tend to make people not bother getting out of bed. If that is the sort of green recession you think you want, should you be arguing for communism?
...

With a guaranteed monthly income for all adults, we wouldn't have to create jobs "just to employ people", and people who don't want to work won't have to.  And that means more people will be able to engage in volunteer work, or the arts -- or agriculture... -- who can't afford to do so now.  Yes, you will still have "lazy slobs" around, just as you do today.  But at least they won't be working, bitterly, in a job your health and safety might rely on!

If a person is working, it will be at will be at a job they at least like, if not love. Jobs that are needed but are not desirable will need to provide some sort of benefit that makes it worthwhile to the worker.  But the people will have a choice as to where they spend their money, so choices should still abound.

Edit: I've expanded a bit on this scenario here

[JimD]

If you are German this will be a tough read so you might want to skip it unless you are interested in what others are thinking about your country's international actions.  It is harsh.  Us Americans get used to reading harsh stuff about what we are doing, but that kind of criticism is pretty rare of the Euro countries in general.  Over the last year or two I have pointed out a few times how Germany is screwing the Greeks and is in the process of doing the same to many other of the EU countries. 

The below situation cannot end well.  The only way out for the Greek people (not their elites of course) is to dump the EU and the Euro, default, revive the drachma and start the long process of rebuilding their country.  It is not the Greek people who created this situation it was their elites conspiring with other EU elites.  Save them and hang the elites from the light posts.

http://www.nakedcapitalism.com/2015/01/mathew-d-rose-not-eurozone-crisis-european-union-crisis.html

The nicest part of the article...

The austerity policy dictated to the Eurozone by Germany has failed to generate a recovery. The news goes from bad to worse – and even worse. Nowhere is that more tangible than in Greece. Just to repeat the otherwise well known facts for the German readers of Naked Capitalism, who are withheld such facts in their own media: 1 million people have lost their jobs (approximately 25 percent of the working population); youth unemployment is well over 50 percent despite massive immigration; a third of business have closed, salaries have sunk almost 40 percent; pensions have been reduced almost by half; the economy has contracted by a quarter; there has been a 43 percent increase in child mortality and the health system has broken down; the Greek economy is in deflation; and, since the imposition of the austerity programme in 2010 the public debt has increased from 130 percent of GDP to 175 percent.

All these figures hide the most important fact: What is occurring in Greece is not so much an economic crisis as a humanitarian disaster. That the Greeks have raised the question of the appropriateness of austerity by precipitating elections is proof that democracy has survived these pernicious times and deserves our greatest respect. I sincerely do not believe that German democracy would have survived under similar conditions.....

It is not likely that democracy could survive under the above conditions in America in today's world either.

[Sigmetnow]

Don’t Believe the Hype: Why Germany Needs Greece to Stay in Euro
http://www.bloomberg.com/news/2015-01-08/don-t-believe-the-hype-why-germany-needs-greece-to-stay-in-euro.html

[GeoffBeacon]

Sigmetnow you said

With a guaranteed monthly income for all adults, we wouldn't have to create jobs "just to employ people", and people who don't want to work won't have to.  And that means more people will be able to engage in volunteer work, or the arts -- or agriculture...

I like it but that would it would have to struggle against Crandles' "would tend to make people not bother getting out of bed". Wikipedia says of UK Channel4's Benefits street

It shows benefits claimants committing crimes, including a demonstration of how to shoplift, and portrays a situation in which people are dependent on welfare payments and lack the motivation to seek employment.

A leading Labour Party politician has said to me that it is not part of Labour Party thinking to give people something for nothing. I don't think "giving people something for nothing" is part of the thinking of other UK parties either. It may take too long to overcome this attitude.

That's why I want to see more joined up research on economics and climate on policies like taxing (meaning fining) carbon emissions to cut taxes on labour - including Carbon Fee and Dividend policies. I'm not saying your vision is wrong but the politics is difficult.

Joined up economic and climate research needed   http://www.brusselsblog.co.uk/economic-models-for-climate-policies/

[SATire]

If you are German this will be a tough read so you might want to skip it unless you are interested in what others are thinking about your country's international actions.  It is harsh. 

Hi JimD. Such text is not that unfamilar in Germany - and it is not really "from others" since the author seems to be sitting in Berlin. However, before (or instead of) going into details of the message and the wording of the text I would like to propose to dig into the background of such texts. I do not know this author but usually it may be interesting to aks such person, if he/she would propose to help e.g. Ukraine people (that country is also close to default) in similar way as we helped Greece nation. If not, then "helping people" might not be the main purpose of his/her work but something else. You know, there are quite a few "old-fashioned socialists" here with a very different agenda and not all "left-people" are really "nice people"...

Maybe it is to long/complicated to discuss all the issues about Euro and Greece and such at this place. My personal opinion are just 2 points here: Also the economy of a nation should be sustainable so it should not spend more than it earns - at least on average and in medium-term. Second point is, that each nation is responsible for the way it spends its money and how it earns its money. So if Greek people prefer to elect cleptocratic politicians, who are bleeding the 90% to death with the goal to avoid any taxes for the 10%, then that is their responsibility. Maybe in the next election they could change that.

And keep in mind that this "Troika" is not forcing the Greek government to bleed its poeple. The reason for Troika was to supervise the actions of the government, since those politicians repeatingly cheated both other partners and especially their own poeple in each and every aspect. There is the risk, that blaming "Nazi-Germany" responsible for the suffering may be just some kind of cheating of their own poeple to deflect the eligible anger. We can read such words frequently in German media and if readers here would take that seriously, that would result in frustration and the wish to "let them go". But that would not be fair to the Greece poeple, since it is their corrupt government that needs to be controlled. The difficulty is, that their government must actually be controlled by their own poeple but it is prooven multiple times, that this control did not work properly... So any help and suggestions would be appreciated to solve this dilemma.

[GeoffBeacon]

SATire

I wouldn't criticise the current German Government more than ours in the UK - I do hope for better in both - but there are all sorts of issues when you say

the economy of a nation should be sustainable so it should not spend more than it earns - at least on average and in medium-term

One relatively straightforward issue (that you can justify with free market arguments) is this:

German carbon emissions 745 million tonnes CO2e. That's 645 million tonnes more than Greece. At a mere 100 euros a tonne that's 65 trillion euros in carbon fines - per year.

Should Germany be handing over half the difference to Greece? i.e. 32 trillion euros a year.

P.S. Growth is polluting. That's why we need a green recession.
http://www.brusselsblog.co.uk/free-markets-poverty-and-equality-and-climate/

P.P.S. Germany is doing well with renewable energy.
http://www.euractiv.com/sections/energy/renewables-dominate-german-energy-mix-311101
but as the average German is richer that is counterbalanced by other consumption emissions.

Of course, in the UK,  politicians don't care as much about the climate. *******s (expletive deleted)

[SATire]

German carbon emissions 745 million tonnes CO2e. That's 645 million tonnes more than Greece. At a mere 100 euros a tonne that's 65 trillion euros in carbon fines - per year.

Should Germany be handing over half the difference to Greece? i.e. 32 trillion euros a year.

No - not to Greece. Per person (11 million in Greece instead of 80 million in Germany) Greece people are not emitting much less even at significantly lower GDP. People in Greece allready got a lot money from EU taxpayers (even from poorer ones in eastern Europe). That money should better be handed over to poeple not emitting CO2, e.g. in Africa... But please give it to the individual persons and not to the cleptocrates in governments. 

[GeoffBeacon]

SATire

The figures I took from Wikipedia had on a per capita per year basis

• Germany 9.115  tonnes CO2
• Greece    7.775  tonnes CO2

That might be largely due to differences in income - but the Greek climate might help.

Otherwise, I more-or-less agree with what you say.

A common meme in th UK is "hard working families" but these are very big polluters.
Note: "Hard working families" is not meant to include the poor in UK politico-speak.

[JimD]

An almost Black Swan!

http://www.nakedcapitalism.com/2015/01/swiss-national-bank-shock-biggest-us-retail-currency-brokers-equity-wiped-out-others-suffer-major-losses.html

Swiss National Bank Shock: Biggest US Retail Currency Broker’s Equity Wiped Out; Others Suffer Major Losses

Even though traders say they like volatility, their attitude is straight out of Golilocks: not only is too little too bad, but so is too much. The recent oil price plunge has sent rattles across financial markets around the world, with more knock-on effects expect as shale gas players start to show signs of stress.

And today’s big event was so unforeseen as to verge on being in black swan terrain. The Swiss National Bank, which had a program in place to keep the euro from falling below 1.20 to the Swiss franc.

The Swiss National Bank abruptly terminated the cap today....

The currency move was brutal. The euro fell 30% against the franc.* Customers in trading accounts of the trade had their account equity wiped out, according to Bloomberg, in turn leaving the brokerage firms short.

The Wall Street Journal describes the carnage:

A major U.S. currency broker said it suffered “significant losses” that wiped out its equity and a New Zealand foreign-exchange trading house failed as the fallout from the decision by the Swiss National Bank to cease capping the nation’s currency spread across the world.

FXCM Inc., the biggest retail foreign-exchange broker in Asia and the U.S., said in a statement that due to unprecedented volatility in the euro against the Swiss franc, its losses left it with a negative equity balance of around $225 million and that it was trying to shore up its capital.

“As a result of these debit balances, the company may be in breach of some regulatory capital requirements. We are actively discussing alternatives to return our capital to levels prior to today’s events and discussing the matter with our regulators,” the company, which has a market capitalization of around $701.3 million, said in a statement. Shares of the company fell 15% in U.S. trading and tumbled another 12% after hours…

Earlier, small New Zealand currency trading house Global Brokers NZ Ltd. said it would close its doors as it could no longer meet regulatory minimum-capitalization requirements of 1 million New Zealand dollars (US$782,500).....

People feel hurt and betrayed....

Hurt and betrayed???!!    LMAO

There is no honor among thieves as they say.  Or as Buffet says, "You only find out who is swimming naked when the tide goes out."

[JimD]

http://www.nakedcapitalism.com/2015/01/energy-debt-go.html

So Where Did All the Energy Debt Go?....

A big puzzle, as oil prices have plunged and look unlikely to return to their former levels, is who is holding energy-related debt, particularly give the high level of issuance in 2014. Yet it is troublingly difficult to get hard information, a situation troublingly similar to the mortgage backed securities and CDO markets in 2008....

and that one of the provisions of Dodd-Frank gutting HR 37 that is now moving through Congress is to delay for two years a stipulation that would banks to sell most collateralized loan obligations held on their balance sheets. The reason for wanting CLOs out of banks is that they are actively traded vehicles, effectively mini hedge funds.

The reason for concern is the recent plunge in energy-related debt prices and their questionable prospects, and where that debt is sitting.......

Another possibility is that a lot of the loans never actually got sold to investors – and ended up staying on bank balance sheets.

Investors are asking a lot of questions and are worried. That’s why the banks are parcelling out pieces of information. It’s troubling that this sort of thing can’t be answered easily.

[JimD]

http://www.bloomberg.com/news/2015-01-15/polish-banks-zloty-slump-as-swiss-franc-mortgages-get-expensive.html

Eastern European Currencies Dive as Swiss Loan Costs Hurt Banks

“Massive Swiss franc appreciation is extremely bad news for foreign-currency borrowers in central Europe,” Michal Dybula, an economist at BNP Paribas SA in Warsaw, said in an e-mailed note. “It will make servicing franc loans more expensive, reducing disposable income and hurting consumption. That’s bad news for growth and the banking sector as the non-performing ratio of Swiss franc mortgages is likely to increase.”