Great Leap Forward

Crony Capitalism, American Style

I loved the irony in the following headline from the NYTimes:

Scandal Poses a Riddle: Will This Nation Ever Be Able to Tackle Corruption?
A brazen brand of crony capitalism has created huge fortunes for a few, at the expense of the nation as a whole… (link:

The kicker was that they were referring to India (the headline actually had “India”, not “This Nation”)– not the king of crony capitalism, the USA. So far as corruption at the top goes, India is a piker. You cannot read a newspaper or serious blog without finding yet another example of US crony capitalism, aided and abetted by Washington. As we approach the first anniversary of the Occupy Wall Street movement’s origins, Washington remains steadfast in its refusal to do anything about Wall Street’s crimes. It’s a poster child for crony capitalism.

Oh, sure, the Obama Administration has slapped the hands of the crooks a few times, by imposing inconsequential fines. Much ado was made of nothing last year when Washington forced state Attorney’s General to go along the $25 billion settlement that amounted to little more than a public relations move (here’s a sure bet: much of the pittance will not even be collected). As “the London Whale” proved, any good trader at the biggest banks can lose more money in a few hours than Washington will demand in fines for fraud that screwed the globe out of trillions of dollars of wealth and tens of millions of jobs.

It’s as if we fined a bank robber ten bucks for stealing a thousand, then sent him on his merry way to hold up more banks.

Our nation’s top cops freely admit that they have no interest in prosecuting criminal behavior perpetrated by our elite 1% at the top of our crony capitalism pyramid. As reported at Naked Capitalism, Lanny Breuer, head of the DOJ’s Criminal Division, practically brags about the absence of criminal convictions for all the fraud perpetrated over the past decade. ( He freely admits that when his department suspects a big bank of fraud, he calls in the bank’s team to provide a flashy presentation showing why it should not be investigated. The banksters make the argument that actually prosecuting fraudsters would be bad for crony capitalism, which of course scares the bejeebers out of Washington. So Breuer’s office then makes nice with the banksters, and they all go back to doing what they’ve been doing—moving all wealth to the cronies in the top 1%.

The Wall Street bank’s business model is fraud. In many of my blogs I’ve been focusing on US real estate because a) homes are where most of the wealth of the bottom 99% of the population is held; b) the real estate mess is like Shrek’s onion, with layer upon layer of fraud; c) the bursting of the real estate bubble is what set off the Global Financial Crisis; and d) real estate fraud is the main tool used by the 1% to move all wealth to the top.

Each day we get more evidence to support what many of us have been saying for the past couple of years. You all already understand that mortgage brokers and property appraisers were in cahoots—overvaluing property to justify out-sized mortgages. You know that brokers pushed “don’t ask, don’t tell” “Liar’s loans” to put borrowers into loans they could not afford, and that they doctored loan documents after borrowers had signed them to cover up the lender’s fraud. And you know that the Wall Street banks created MERS to evade proper recording of property records, effectively wiping out half a millennium of record keeping so that no one any longer knows who owns what. (Oh, and that would mean the titles are a mess: That makes it easier for our modern feudal lords running hedge funds to just take what they want.

The trashy mortgages were then bought and sold multiple times before supposedly being securitized by trusts created by Wall Street banks, with the securities then sold to investors, including your pension fund. We know that the mortgages supposedly securitized did not meet the “reps and warranties”, in other words, they were too trashy. And we know that in their rush to earn fees, the banks lost or destroyed all the necessary documents—hence the robo-signing frauds as they tried to manufacture fake docs to use in foreclosures. ( Occasionally the banks put the same mortgage into many securities—perhaps this was intentional fraud, or it might have been mostly due to sloppiness. In a foreclosure, ideally the pension fund loses everything, the Wall Street banks suck all the money out of the mortgage through its servicing arm, and a hedge fund ends up with the real property for cents on the dollar.

But we always suspected that, in fact, in many cases mortgages were never bundled into the securities. So it is not just a problem with the quality of the mortgages backing the securities. And it is not just a problem with the fact that the trustees lied about what was behind the securities. And it is not just a problem of splitting off the notes from the deeds. There is accumulating evidence that the only thing backing securities is an empty “paper bag”: mortgages were never actually securitized. The securities your pension fund might be holding were never worth a dime because they securitized air. (See

And many of these securitizations were supposed to be REMICs, which offer tax advantages but only if done properly. Guess what. One of the rules is that the mortgages must be put in the REMIC almost immediately. That rule was probably rarely followed; and of course if the mortgages were never put there at all, REMIC rules were certainly violated so the investors owe huge backtaxes. Wall Street’s response is to make a new “Wall Street Rule”: hey we all did it, and if the IRS pursues taxes and if we are pursued for fraud, then the whole system blows up. (see here: This is precisely the kind of line Breuer finds irresistibly logical, so you can bet his office won’t be going after the securitizers.

What to do? Well, to rescue the banks one more time, Chairman Bernanke is sending the Fed out to buy…you guessed it, mortgage “backed” securities! Forty billion a month for the unforeseeable future! Get the securitized bags of air safely out of the banks and into the Fed. Bury the paper trail of fraud deep in the opaque Fed where it can never be uncovered! Because, as you must know, it takes an act of Congress to get information out of the Fed. (Literally. The Fed refused to provide any information on its $29 trillion dollar bailout until Senator Sanders and Congressman Grayson led the fight, aided by Bloomberg’s FOIA suit.)

Ah, what a wonderful country. For capitalism’s cronies.

Happy Birthday, OWS.

53 Responses to “Crony Capitalism, American Style”

JonfSeptember 17th, 2012 at 2:29 am

This is an incredible story of fraud and stealing and makes Madoff out to be a piker, along with MF Global. Still, I have not heard of anyone going to jail. OH yeah, Madoff did. When the chickens come home to roost, there will be another bail out. We can't have these good citizens going to jail. But I bet the IRS walks right past the whole REMIC mess. We'll see.

spiderSeptember 17th, 2012 at 10:33 am

Every time someone criticizes a third world country, some lefty idiot replies "Oh, but we're just as bad or worse". Go to those countries and try and do business, or talk to people who were raised in those places and now live here, and you'll find up why early communists were so contemptuous of people like Wray.

LRWraySeptember 17th, 2012 at 1:11 pm

Ah, Fido, you're back. Go do some business with Goldman Sachs! Whether you deal with them in America or in one of your "third world countries", you're going to get the short end of the stick.

Danny: no idea what you mean. A state bond issue is a bailout?

DeusDJSeptember 17th, 2012 at 1:41 pm

you could say all this if we were still in the early 90s, but definitely not now. Anyone who says this now (claiming that foreigners are saying good things about the USA and think it's the best place to live) is leaving in la la land. Isn't it funny how everyone in Canada will absolutely not consider living in the USA today? Yet if you ask an American, many of them will tell you who have been to Canada that it is the better place to live (outside of stuff like the weather etc), a place that actually provides for its citizens and where they actually make a living wage. Go look at their malls and be amazed at how, every day, they are PACKED.

spiderSeptember 17th, 2012 at 2:53 pm

Canada is a third world country? You must be one of those idiots. Rich Americans, and American artists, have been expatriots, for decades. Generations. But they didn't move to Zambia or Iraq. And if they did they certainly didn't live like the "natives".

Joe FirestoneSeptember 17th, 2012 at 2:56 pm

Statistics bear out that Canada is a better place to live for most working people. Here's a post about some data from a Credit Suisse Report:

There's a very big discrepancy in both Median ealth Per Adult, and the ratio of Mean/Median wealth when one compares Australia, the UK, Canada, and New Zealand to the US. The Median person in the US is far poorer than in the other major, industrial English-speaking nations. In fact, among the top 36 nations Credit Suisse looked at the US ranked 24th,

Also, the ranking doesn't convey the full extent of existing gaps. The “median Australian” is nearly 4.5 times as wealthy as the “median American; the “median Italian” is three times as wealthy. Japan and the UK have medians in the neighborhood of 2.5 times the US median, while Switzerland and Ireland have medians in the range of double the US number.

This is the cost of embracing Reaganism, and later neo-liberalism in the US. The American Dream is alive and well in other English-speaking nations. But in the US? Not so much!

spiderSeptember 17th, 2012 at 2:58 pm

Do you have a point? Are you trying to say that all Goldman Sachs clients are dopes while you are brilliant? Or perhaps you're suggesting that "native" companies are better?

spiderSeptember 17th, 2012 at 3:45 pm

"other major, industrial English-speaking nations"
Can't you stick to the point? Wray is saying corruption is India is no worse than corruption in the United States. I called bullshit. Nothing you say has anything to do with that (except that you believe inequality is entirely the result of corruption, which is almost as stupid as Wray's claim).

Joe FirestoneSeptember 17th, 2012 at 4:13 pm

I wasn't replying to you Spider, but was supporting and extending DeusDJ's reply, which claimed that Canada was a better place for people to live. Nor did I say that inequality is the result of corruption. I said it was the result of Reaganism and neoliberalism. But now that you mention it is pretty clear that much of the inequality we now see in the US is due to the crash of 2008. That crash and its aftermath was, in large part, due to corruption and lack of regulation in the financial sector, which, in turn, was due to corruption throughout the political system which led to buying off elected officials, and anti-regulatory, anti-law enforcement policies applied to financial and other business elites.

DeusDJSeptember 17th, 2012 at 4:22 pm

Good job bringing something up which has nothing to do with Wray's point. Fraud does exist here, and it's institutionalized fraud, which is worse than fraud that everyone recognizes. Now whether that makes one country better or worse than another, it is not the only indicator. So you're not even confusing apples and oranges, it's much worse. Jackass.

LRWraySeptember 17th, 2012 at 4:37 pm

Fido Phil you are not a very careful reader. Yes there is corruption abroad and yes I've lived in a developing country. I've seen the routine sort of corruption that is common there. That is apples and oranges to crony capitalism and the corruption at the top that I'm talking about. You can take all the corruption in all the developing countries in the world and taken together they could not come close to what you will find in the US financial system, much less spark a global financial collapse. Nay, it takes Wall Street and Washington (and, yes, London and Frankfurt) to do that. And all those paying attention know that much of the corruption of governments of developing countries comes from Goldman, et al. Get some perspective.

spiderSeptember 17th, 2012 at 5:24 pm

Inequality is inherent in human nature. It's genetic. (Of course, this is disputed by the lefties who find it insulting to their manhood, self-worth, etc.)

You see it whenever free competition is allowed, in any sphere. Herbert Hoover (of all people!) opposed laissez faire capitalism (in a book he wrote in 1922) precisely because he felt it would lead to politically and morally unacceptable levels of inequality.

So government redistribution of wealth is necessary to ameliorate it. But government is just as corruptable as any other institution…by rich and poor. So it's replacing one problem with another and trying to decide which is the lesser of the evils (weevils).

Jefferson and Hamilton devoted a great deal of time and argument to this.

Joe FirestoneSeptember 17th, 2012 at 5:32 pm

I agree that some societies are better than others at dealing with fraud and corruption, and that these are societies that have traditions of free speech and the rule of law. But, in spite of having these traditions, our society currently seems incapable of dealing with fraud and corruption. That's what Randy's piece is about; and it is right on point. But your comments are nothing but a distraction from that point. So let's get back to it. Forget India, what would you do to bring justice to America? Now, not tomorrow, and not in 5 years!

spiderSeptember 17th, 2012 at 5:33 pm

Apples and oranges? Right. Wall street and Washington are to blame for most of it? Right.
No perspective? Right.

So tell me about what those third world governments were like before Wall Street or the City were so powerful. Tell me about the glories of Czarist Russia, or the Ottoman Empire, or Qing China, let alone Africa.

Your arguments are about as good as your misidentification of me as Fido Phil, someone I never heard of.

Joe FirestoneSeptember 17th, 2012 at 5:39 pm

I largely agree with this reply. And my point was that many other nations are doing a much better job than we are in ameliorating inequality and in managing and limiting corruption. Randy's pointing to our problems because he wants us to do justice though the heavens fall. And so do I.

DeusDJSeptember 17th, 2012 at 6:22 pm

When I say institutional, I'm not referring to institutions, dummy. I mean it's just a part of society, happens without question or consequences. Power, and the law, reinforces it.

You're the idiot not making a "valid point". You're the one questioning Wray's judgement, and using the word lefty as if it's still in style. The entire point of your argument is to say "how dare you lefties even compare the USA to places like India. We're so much more advanced than them that you're not allowed, or shouldn't be allowed, to even say stupid stuff like that!1!!1!!!" But Wray is referring to fraud specifically, and that has nothing to do with what the country or countries were like in the past, and how it got to that point today. The point is that TODAY, or since a certain time, fraud has gotten worse and worse in the USA. And analysts who talk about other countries should hav some more self-reflection.

Point being, you're simply a dumbass and should prevent showing us your stupidity any further.

Joe FirestoneSeptember 17th, 2012 at 6:23 pm

Randy said:

"The kicker was that they were referring to India (the headline actually had “India”, not “This Nation”)– not the king of crony capitalism, the USA. So far as corruption at the top goes, India is a piker. You cannot read a newspaper or serious blog without finding yet another example of US crony capitalism, aided and abetted by Washington. As we approach the first anniversary of the Occupy Wall Street movement’s origins, Washington remains steadfast in its refusal to do anything about Wall Street’s crimes. It’s a poster child for crony capitalism."

The rest of the post goes on to discuss the corruption in the United States and its unprecedented scale and effects in destroying accumulated wealth. Nothing you've said in any of your comments speaks to any of Randy's points. This:

"Every time someone criticizes a third world country, some lefty idiot replies "Oh, but we're just as bad or worse". Go to those countries and try and do business, or talk to people who were raised in those places and now live here, and you'll find up why early communists were so contemptuous of people like Wray."

This is one of the most misdirected comments one will ever see. First, the point of Randy's opening paragraph wasn't to say that we're worse than some random third world country when it comes to corruption. It was to point out that the New York Times, the so-called "paper of record" has plenty to say about Indian corruption, and will even ask "Will This Nation Ever Be Able to Tackle Corruption?" while at the same time it is pretty silent about corruption in the financial sector of the United States and will not ask the very same question about us, even though the damage caused by frauds being committed by American companies here and elsewhere are far greater is severity and the scale of their impact.

You say "Go to those countries and try to business," but I say try and buy a home in the United States to and negotiate a contract that will absolutely guarantee that in five years a bank that cannot document its legal right to do so, will not foreclose on your house or force you into a situation where you "default" on your payments? Try and get a credit card which ensures that you won't have to pay an annual interest rate of 30% five years from now; if you happen to fall on hard times. Try and get the credit rating agencies to assume legal responsibility for mistakes they make in your credit record that are demonstrable in Court. Try and stop Bill Collectors from creating legal expenses for you even though you owe nothing and they have completely inadequate documentation to support a suit, and then try to get them penalized with substantial damages even if you win a counter-suit.

The reality is that's pretty bad here now for people who don't have a lot of money to fight their battles in a court of law. Our laws and our courts work for the few, not the many. Until we ameliorate that and punish the frauds, various other Western nations will be better places to live for working Americans than this country will be.

Finally, who cares about what the opinion of early Marxists about people like us would be? Are they some kind of authority whose standards we should hold ourselves to?

HypocriteSeptember 17th, 2012 at 6:32 pm

Why does MMT hate capitalism so much? Do you really think the government can fix everything? You seem nice and comfy in your ivory tower. I wonder if any of the MMT economists have ever had a real job. It's also funny to me how the founder of MMT is a crony capitalist himself who invented the mortgage swap and made his living running a hedge fund for years while paying close to zero taxes in the Virgin Islands. Why don't you criticize him like you criticize Goldman?

spiderSeptember 17th, 2012 at 6:37 pm

First. Corruption is no worse than its been since the Founding of the Republic. The reason it looks worse is because communications – in particular tabloid distributions – are so much better. What you're seeing is typical of a certain point in the business cycle.

Second. Justice is a bullshit word used by every cheap partisan to influence the ignorant, gullible, and desperate. What you're asking is what should we do to reduce inequality and violation of the law by the powerful.

Third. You won't like my answer. The biggest problem facing us today is impending environmental collapse. Republicans refuse to recognize it because of the limits its places on economic activity. Democrate think that egalitarianism can solve all problems. The Chinese don't really care about any of that. They just want revenge. The Arabs are consumed by a desire for revenge and a thirst for power. All are crazy and that prevents any "kind and gentle" solutions.
It's going to take a major collapse of the food and/or energy supply systems to change consciousness. That will initiate a desperate fight for resources. A dog eat dog fight. I want power in America concentrated to the max in that situation. That's the only way we can prevent destruction of everything as the Four Horseman reap the whirlwind (something like that).

DeusDJSeptember 17th, 2012 at 6:50 pm

You should change your name to "Dumbass"

Dear Dumbass,

It's laughable that anyone would want to defend the United States we live in after the Financial Crisis. So first of all you're probably a lapdog, or as the British would say a poodle, for some person/people or an ideology. And of course you are, because Wray is referring here only to the financial sector, so in other words you have a problem with someone attacking the financial sector…which by itself does not constitute what "capitalism" even means (hence why I changed your name/title). Yes, we think capitalism is unstable. but MMT is not a marxist school of thought. It doesn't "hate" capitalism, even if it finds a ton of problems with it.

Please, go get a clue.

HypocriteSeptember 17th, 2012 at 7:10 pm

1. I don't live in the USA.
2. MMTers always feel the need to insult people because their arguments are weak.
3. The most important component of capitalism is having access to capital. Who provides most of the capital in the world or makes capital formation possible? Banks.

You obviously have no idea what you're talking about and like most of your colleagues, can't maintain a conversation with anyone without getting angry when they call you out for bring hypocrites and wrong on multiple counts.

LRWraySeptember 17th, 2012 at 7:57 pm

Fido Phil (both of you): a) I suppose in your mind words like "lefty" and "commie" are automatically negative. Here they are not. We got over that back in the McCarthy era.
b) The piece is about crony capitalism, as was the NYTimes headline about India. Capitalism. Crony corruption. Read the piece. There is lots of corruption in developing nations (and as well in my little NYstate village). I'm not talking about paying the oil delivery guy under the table.
c) Your McCarthy-ite tactics presume that a criticisim of CRONY capitalism is automatically a rejection of capitalism. And, so, I suppose I should say that because you support capitalism, you must automatically support crony-ism? See how that works, Phil? (You don't fool me for a moment–we've done the textual analysis and can spot your posts.)

Danny BlackSeptember 17th, 2012 at 9:15 pm

The bond issue was tax privileged and subsidised by federal government to pay for basic necessities. Also wasn't a state bond issue was an issue by your universitiy

DeusDJSeptember 17th, 2012 at 9:23 pm

I insult people because it's part of my personality, it's what I do and at times I unfortunately get carried away, but I won't pretend that I'm having a rational conversation with someone who's not honest. I please ask that you either respect or insult my character, and not attribute it to some heterogeneous group of people.

You never made an argument, I insulted you because you called the financial industry "capitalism".

Neither Wray nor anyone else associated with MMT has attacked the role of bankers as a credit creating institution. It's almost everything else they do, in a modern world today, that brings us to use the word fraud unapologetically. So again, you never made an argument, and you only threw out insults. I throw out insults, and I make arguments, dumbass.

spiderSeptember 17th, 2012 at 9:33 pm

The New York Times "is pretty silent about corruption in the financial sector of the United States"

That's it for me. Argue with someone else.

SchofieldSeptember 17th, 2012 at 9:38 pm

Hey Hypocrite you come over like someone who worked for Bernie Madoff. Much of what's happened and is happening on Wall Street is morally and criminally wrong. Why do you complain about people who point out the lack of prosecution of this activity on Wall Street?

HypocriteSeptember 17th, 2012 at 10:18 pm

I just pointed out a simple fact. The founder of MMT invented the mortgage swap and has been responsible for business activities that other MMTers routinely disparage. He runs a hedge fund, avoids taxes, is responsible for "financial engineering", etc. Wray constantly criticizes the banks for repackaging loans and selling them to one another when Mosler was the guy responsible for this great invention. So unless you think hedge funds in the Cayman Islands being used for financial engineering are a good thing for the USA then you're being a hypocrite.

I just find it hypocritical.

HypocriteSeptember 17th, 2012 at 10:21 pm

And I guess in your mind words like"commie" are automatically positive because you haven't held down a real job in 30 years and instead sit in your ivory tower and tell the rest of the world how we should just mooch off the government for the rest of eternity because it has a printing press and can "never" run out of dollars.

DeusDJSeptember 17th, 2012 at 10:41 pm

They're positive because he's getting the attention from losers like yourself. What does he care what a miserable misanthrope like yourself says? But at least he knows you've wasted your precious time calling him names.

BTW, I've made a note that you use a person's social status as a judgement as to whether they're right or wrong, or whether they should have a blog as popular as Wray's (either on NEP or here on economonitor). Keep it up, I want to see how many times you use the same tactic.

SergioSeptember 17th, 2012 at 10:51 pm

You are wrong. Public universities and many other institutions including municipalities have actually lost trillions of dollars on bid rigging and also because of mismanagement by their brokers. A lot of their money was invested in Wall Street speculation, and when many of those bets went bad, universities lost a lot of money.

Thanks to people like Wray, the bottom 99% get to have a voice that is not compromised by people like you. I have always argued that corruption in third world countries is more overt, but less significant. I think if we measure it in real dollars, we can realize that it is very small relative to the corruption in Wall Street.

DeusDJSeptember 17th, 2012 at 10:52 pm

Not really. Mosler himself argues for social welfare policies. Just because one loves money (or, in Mosler's case, likes to live comfortably and glamorously with his family) does not mean he in particular is necessarily the root cause of all the problems, even if admittedly he might have contributed it (even by his own admission). The problem is when the ruling elite (others with money and power like Mosler) use their positions to further their own wealth or simply make statements in support of falsehoods like "we create jobs" or we are the arbitrageurs that efficiently allocate prices, etc, which prevents them from being prosecuted, from their activities being limited, etc. But even further, this suggests that our government is part of the ruling elite, which is why Wray tries to reach out through blogs so the public debate perhaps changes.

DeusDJSeptember 17th, 2012 at 11:01 pm

But I have thought about what you said again. You attack MMT for two reasons: one, because you say it hates capitalism (and we sit in ivory towers and don't really know anything), and two we're hypocrites because one of it's founders Warren Mosler is what you would consider a capitalist. So this is actually very, VERY interesting!

So the idea of you commenting at all is that you're annoyed that Wray is posting anything at all, and that we get so much attention. On the other hand you have found that your favorite argument to diminish people (based on their social standing) almost doesn't work because Mosler is what you would consider a capitalist. So what can a person like you resort to? Oh, I know! Let's call them hypocrites as well! That's it! So not only are MMT'ers ivory tower folk, but they're also hypocrites. Yeah, that should make them go away and be dismissed!

LRWraySeptember 18th, 2012 at 12:04 am

Bye for now Fido Phil (s). See you next time I criticize Wall Street's fraud. In one of your many guises.Hypocrite and spider are quite descriptive of you, if only unintentionally. Next time up: blood sucking vampire squid would be even better as a moniker.

Let me just make one further comment to disagree with Joe, if he was giving in too quickly to Fido's argument that inequality is inherent in human nature. There's nothing inherent about that at all. Humans are way too complex and are "inherently" social animals. Certainly we can produce inequality if we want to. And selfishness. And people like Fido. But there's nothing "inherent" or inevitable about that at all. I view these as social mistakes that go against a million years of human evolution. Or, better, a billion years. The path that led to Fido Phil is a socially destructive deadend. We can do better.

Joe FirestoneSeptember 18th, 2012 at 12:35 am

It's BS that corruption is at the same level at it was since the beginning of the Republic. Any American history book will record variations in the degree of corruption throughout American history. There was a great deal at the beginning of the Republic and it persisted throughout the development period. The worst corruption occurred during the post-Civil War gilded age and its aftermath continuing to close the turn of the 20th Century. Then Government got cleaned up by the Populists and the progressives and was kept reasonably clean during the post-war period until the aberration of the Nixon Administration.

After that, the Reagan Administration unleashed the forces of unfettered capitalism and began a long slide away from the rule of law until during the last decade we reached the point of the domination of control frauds in the financial sector. The present period is easily the most corrupt in the history of America since the gilded age itself.

Second, if you believe that justice and fairness are BS words then we have nothing left to talk about, because those words are at the core of my belief system and that they are the only thing standing between us and the beasts. Without those ideas we aren't even human! But, further I am demanding that we reduce inequality stop violations of the law by the powerful and I an also saying that these are aspects of Justice and Fairness and Public Purpose.

Finally, I understand your view about the environment and climate change. I do think that is our most important problem and that we must rapidly turn to face it. But I don't agree we can do that by imposing totalitarian or by maintaining an unjust society. In fact, I think the opposite is true. We have a whole range of problems to solve, and if we don't solve many of them then we won't get people to agree that we are all in the same lifeboat when it comes to the environment. So, I think it's imperative that we create both a just and a sustainable society; and I also insist on us doing both

Joe FirestoneSeptember 18th, 2012 at 1:03 am

I'll skip your remarks about MMTers, since they're obviously a generalization that doesn't apply to very MMTer. On "capital." There are many different kinds of "capital." It may come as a shock to you; but in 19th century economists, the capital that was owned and controlled by capitalists referred to the machines and other tools that labor could use to produce real wealth. All the classic economics textbooks are careful to distinguish real wealth in the form of goods, including machines and tools, from the mere financial wealth accumulated by the wealthy and by banks.

A for "capital formation" banks don't do that in the sense that they create real capital. They do create money when they make loans, but only because they have that authority in out present economic and financial system under the umbrella of the Federal Reserve System, which is a system run by the Board of Governors of the Federal Reserve, a Government agency. Banks in other countries also can create money; but only because the authority to do so is delegated to them and ultimately backed by high-powered money created by the Government, including the Central Bank. It's also important to keep in mind that Banks would perform this same function whether they were publicly or privately owned and publicly regulated. So, the idea that banks provide money (financial capital) to borrowers doesn't mean that they provide either net financial assets (financial wealth), or work better when they're privately owned than they do when they're publicly owned.

Nor would an economic system in which banks were publicly owned be socialist, since public ownership or regulation of banks doesn't mean that all or even most businesses in society would be owned by the Government.

Joe FirestoneSeptember 18th, 2012 at 1:24 am

Hyp, I think the charges you just leveled above are false. Can you show through quotations from MMT sources that they are true by matching "the founder's" activities with activities MMT writers disparage?

Joe FirestoneSeptember 18th, 2012 at 2:06 am

Let me make clear what I meant by agreeing with: "Inequality is inherent in human nature. It's genetic." Humans are born with varying genetic backgrounds, so they are not "equal" in the sense that their genetic heritage is the same. People have different genetic predispositions which mix with varying environments and life experiences to produce differences across individuals. I think the above is "inherent in human nature."

But, I don't infer from this that some people ought to be more equal that others in any social, ethical, or legal sense of the terms, or that any differences among people "entitle" some people to get better treatment than others, or that genetic differences among people make some "inherently" more capable of producing value than others. So my belief in equality and leveling playing fields is very strong. And I agree with you that:

". . . Humans are way too complex and are "inherently" social animals. Certainly we can produce inequality if we want to. And selfishness. And people like Fido. But there's nothing "inherent" or inevitable about that at all. I view these as social mistakes that go against a million years of human evolution. Or, better, a billion years. The path that led to Fido Phil is a socially destructive deadend. We can do better."

To put this in academic terms that may provide some perspective, I do not subscribe to the way of thinking of evolutionary psychology, which to me is a way of thinking that imports positivism into psychology through the back door. Nor do I subscribe to the kind of primitive evolutionary ideas found in Herbert Spencer or Ayn Rand.

Instead, I like an evolutionary paradigm called Interactivism, which has roots in both Critical Rationalism, Piaget's constructivism, and American Pragmatism coming from Peirce through through Donald Campbell's work to the current research on interactivism best represented by Mark H. Bickhard of Lehigh University. I could give links, but I'm not sure about the spam filter at this site. I seem to remember having a problem once before. Anyway, Mark's Papers: Pre- and Post-Publication page can be easily googled and contains links to many papers stating various aspect of this Critical Rationalist/Pragmatist/Constructivist perspective on epistemology, psychology, AI, and Complex Systems.

LRWraySeptember 18th, 2012 at 12:09 pm

OK Joe, agreed. I see what you were getting at. Obviously we have different physical characteristics, largely genetic. But that does not dictate that we promote or even allow the selfishness celebrated by our apologists for Wall Streets one-percenters. Proto-humans would never have survived if they had followed that evolutionary deadend.

Joe FirestoneSeptember 18th, 2012 at 5:17 pm

"But that does not dictate that we promote or even allow the selfishness celebrated by our apologists for Wall Streets one-percenters. Proto-humans would never have survived if they had followed that evolutionary deadend."

Yes! In fact, if proto-humans were probably selected by the environment for their abilities to live within groups and communities, because being able to live, work, and collaborate with others in communities has greater survival value in proto-human environments than radical individualism does. The development of language in particular is tied to communities and social groups. Such speech communities formed the basis of social and cultural integration in early human groupings.

There is no way we should promote the selfishness we hear from Wall Streeters, many of the 1% and their apologists. Think about Romney's latest disaster recorded in the Mother Jones released video. His frank expression of Randian philosophy and denial of the idea of entitlements immediately makes one ask who is entitled to what in America?

For example, are people who have spent their whole lives working here and supporting our society, culture, and political system and often serving in our armed forces entitled to a decent living in retirement and the health care they need to stay or alive; or are people like Romney who have destroyed American jobs by the hundreds of thousands and created greater numbers of jobs in other nations, and declined to serve in the armed forces, entitled to avoid taxation on their ill-gotten gains and to continue to victimize the 99% with their irresponsible economic activity?

I know which entitlement I'd support and which I'd get rid of; and I also know which group of people really care about and are more loyal to the United States and its people and which group betrays America freely and without remorse all the time, while continuing to wrap themselves in the American flag, as they laugh all the way to the bank, while they claim it's the American way for the rich to screw everyone else.

barfSeptember 19th, 2012 at 12:44 am

the war will get them actually. the fact of the matter is having gotten their illegal money these clowns now must turn around and support the biggest war effort expansion in the history of the United States (we're on year 10 of the current one btw–easily the longest in our history.) in other words the politicians do one thing…but the Government will do another. "and never shall the twain meet" would appear…

karineJuly 8th, 2013 at 4:18 am

The trashy mortgages were then bought and sold multiple times before supposedly being securitized by trusts created by Wall Street banks, with the securities then sold to investors. a href="; rel="dofollow"&gt <a href="http://;” target=”_blank”>;

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