Dodge Vs Greenspan

Posted on Friday, September 16 at 13:41 by eugene
Dodge regularly expresses the raw fears of the captains of capitalism, in this case he sounds like the Socialists at Monthly Review. Stagflation is the real fear of capitalism, which is why it requires Schumpeters law of creative destruction to use up excess capital.

Read the whole article at: Red Between the Lines [Proofreader's note: this article was edited for spelling and typos on September 18, 2005]

Note: Red Between the Lines

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  1. by hoopoe
    Sat Sep 17, 2005 7:27 am
    Dodge is as out to lunch as Greenspan, as demographics has little to do with sagging demand. Ravi Batra in his new book "Greenspan's Fraud" did an excellent analysis in detailing how it is the wage gap that is the chief result of the sluggish demand. The wage gap is productivity divided by the wage rate. My understanding is that in essence this means that while business has been happily reaping the benefits of higher productivity they have not been passing this on to their workers in the form of higher wages and in fact firing a lot of employees as their manufacturing is moved offshore in the US, which his book covers (according to Batra manufacturing done in the US is down to less 15% of the jobs from 30% in the 1960s). The end result is that workers don't have as much money to spend so consumer demand sags.

    Part of Greenspan's fraud in all of this according to Batra, and I think he is correct, is propping up this lack of disposable income from salaries by encouraging debt (all kinds but especially consumer debt) to make up for the shortfall. Problem is that eventually people run into a debt wall and they can't or won't borrow anymore.

  2. by eugene
    Sat Sep 17, 2005 8:07 am
    Neither of them is out to lunch, except that they lunch with the captians of capitalism and speak for them to the public.
    You are correct in pointing out that this is a debt crisis, which I also pointed out in my article on my blog.

    The irony about the decline in American manufacturing is that it is matched by an increase in Canadian manufacturing output in the same time period. See Studies in Political Economy issue 71/72 Internalizing Global Capitalism.

    Thanks for the tip on Batra.

  3. Sat Sep 17, 2005 3:24 pm
    Finance and the Economy of a Country is based on the “What If Factor”.

    Perception is two thirds of what we perceive reality to be.

    Difficult decisions are a privilege of rank.

  4. by mk
    Sat Sep 17, 2005 4:21 pm
    Prior to checking out Batra (thanks for the tip):

    Elsewhere on this site I posed a question related to inflation: suppose you take could the net present value of all this new consumer and other debt at the time it was assumed, and use it to pro-rate the prices used to form such inflation-control metrics as the consumer price index CPI. First, can you do that? Second, what does that do to the real inflation rate?

    I once worked for a company that relied heavily on market cap and a buy-the-rumour-sell-the-news approach to corporate transparency, and tended to underpay and over-pressure a young workforce and deal with the resulting turnover. That company ended up buying another company that had a completely different structure--their workforce happened to be relatively mature, heavily invested in terms of lifestyle, and enjoyed the past success of the company in terms of increased salaries and benefits. The company in turn enjoyed their loyalty. The acquirer did exactly as any left wing cynic or neoliberal economist alike would expect: immediately took over the product lines and laid off the mature, nominally expensive workforce, and ended up turning a mature and respected brand into a utter piece of crap, with almost no market share, in no time flat.

    The execs involved cashed in their options and moved on long before the employees and shareholders were left holding the (empty) bag. Even the ones who narrowly escaped legal action for insider trading enjoyed many, many millions and some still enjoy reputation and vast remuneration as captains of industry. Meanwhile, plenty of honest folks and speculators alike lost big and ended up taking on a pile of debt, probably in net proportion to the value essentially skimmed from these two companies. The productive potential of the original capital was exchanged for money capital for a few select insiders, and a debt obligation for others, the latter more or less indirectly becoming the creditor to the former as far as the "new economy" goes. Call it what you want, but "capitalism" this ain't.

    And before any flag waving starts, this was a Canadian corp acquiring an American one, a fact which for any real practical, populist, purpose is meaningless.

  5. Mon Sep 19, 2005 3:58 am
    I know it is old news, but unlike the U.S. Federal Reserve the Bank of Canada is PUBLICLY owned by the "people of Canada". This will unfortunately not force most PMs to learn about economics and force an incompetent like David Dodge to resign.

    The midget, Bush, and that Rumsfield deserve only to be beaten with shoes by freedom loving people everywhere.

    - Mohammed Saeed al-Sahhaf, The Iraqi Informat

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