As always, the author here is James Livingston.  I say this because I’m told by certain readers that their friends didn’t know who was writing.  Awesome.

(9)  Never say that the Fed has shot its wad, not even when it has delivered two huge doses of “quantitative easing”—lots of money, buying government securities but small business paper as well—to a moribund economy.: QE 3 is coming, and then what?  Inflation?  Not a chance.  Under Ben Bernanke, there is no limit to what the central bank will do in the name of recovery.  Milton Friedman once quipped that you could drop money from helicopters when monetary policy exhausted its effects.  Bernanke is a disciple, he’ll do it.  More is better, he believes, or at least not as bad as less.  Still, dollar bills from on high can’t work for long.

(10)  Never say that Bank of America will collapse, even if its stock loses 20 percent of its value in one day—that would be today—and every hedge fund is now circling the company like greedy heirs gathered in the parking lot of an upscale hospice.  On the other hand, maybe it will, and maybe it should, since B of A is more deeply sunk in the mortgage market than any other bank thanks to its acquisition of Countrywide.  No one has any confidence in the “management team” there, not even the team itself.  Triage?

(11)  Never say that you have to be bullish when stock prices plunge—you can buy cheap!—because if you plug in the numbers (Q ratio, CAPE), the stock market is still about 40 percent overvalued, even in view of the slaughter of the last two business days.  But certain stocks are sure bets, they’re the ones, like Apple, that are driven by consumer demand, right?  Oops.  Where is that demand supposed to come from, now that state and local governments are cutting back, no spending stimulus is forthcoming from the feds, unemployment benefits are expiring, and wages are still stagnant?   Hold the presses.  Also, get cash heavy, and try to get out of equities unless you’re looking at emerging markets where local or regional distribution of consumer goods can be sustained by domestic demand.

(12)  Never say “double-dip recession,” because this locution marks you as a moron who can’t think seriously about what we’re going through.  The Great Recession didn’t end in 2009, when the NBER announced that it had, and it still isn’t over, not when you measure unemployment or consumer spending, or, for that matter, corporate investment.  There’s no correlation whatsoever between the numbers on output, employment, and consumer spending, in part because employers have increased output and shed jobs, in part because consumers are still trying to balance their household budgets.

(13)  Never say that private investment is crowded out by government spending, so that you then get to claim that cutting “entitlements” is the way to renewed growth.  If you do, be prepared to address this question: since when was private investment the cause of economic growth?  Don’t have a good answer?  Here’s a hint: not since 1919.  Take the argument a step further and acknowledge the possibility that private investment follows the demand curve determined by consumer spending—in other words, it doesn’t create jobs and thus increase consumer demand, in the proverbial sequence we all know by heart—and then what?  Then you’ve got a real problem on your hands, which might be outlined as follows.

(14)  Never say that where markets exist, there capitalism abides.  Markets and commodities were in common usage before capitalism appeared in the 18th and 19th centuries, and will presumably outlast this mode of production.  There were merchants, bankers, traders, and pirates galore back then, before the creation of markets in land and labor, but no capitalists and very few proletarians: there were market societies that weren’t yet capitalist societies.  Now think through the analogous possibility, that we already inhabit a market society which no longer requires capitalists as the trustees of the social surplus—a market society which is no longer a merely capitalist civilization.  If private investment is not the cause of economic growth, and hasn’t been for almost a hundred years, what are capitalists good for?  Why do we keep them around?  To allocate resources rationally, to develop the productivity of the labor force, as Marx suggested?  In view of economic events since 1983, you’d have to say, No.  To discipline our desires by containing them within the anal-compulsive demands of the profit motive, as Keynes suggested in calling that motive a “somewhat disgusting morbidity”?  In view of the same events, you’d have to say, Probably.  That is our real problem: we don’t know how to think past capitalism, even though it’s disintegrating right before our very eyes.  We don’t need the oligarchs, whether they’re members of the Politbureau or the Business Roundtable, to allocate resources on our behalf, but we cling to the comforting idea that we do.



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8 responses to “Postscripts

  1. Jim, I love your blog. Your insights are about the only thing that keeps me sane in this absurd discussion that is going on in the US today.

    Are you planning a tour when your book comes out. (I’ve already pre-ordered.) I’d love to get you down to Duke and UNC.

    Keep up the good work. bob

  2. Because I love your work and use it regularly to beat on friends and acquaintances who have no reason to know who you are or why what you say should carry any weight against their swashbuckling entrepreneurial notions:

    The blogly convention is to say who you are on the ‘About’ page. Cheers.

  3. Jim B.

    Great pieces, Jim. Your writings are an intellectual life raft in a sea of analytic drivel.

  4. Jim B.

    “That is our real problem: we don’t know how to think past capitalism, even though it’s disintegrating right before our very eyes.”

    O.K., Jim. Good point. But, what would a market without capitalists look like?

    • You maniac, thanks for this reminder of the real world. It would look like markets do where indicative planning is the norm–and that would be an enlargement of, not a radical departure from, the present. Interest rates would be set in view of employment goals as well as inflation estimates (nor very new), a reconstituted RFC would be loaning to cities and states, working through their budget crises, banks that take deposits would be socialized in fact as against mere theory, in effect going back to the regime of savings and loans, there’d be constant debate about how to make markets work better for the majority, as per Alan Greenspan’s instructions in the autobiography, and we’d understand that private investment determined by a profit motive is a mere supplement to the more important investment done by public bodies.

  5. A new book by Livingston? Oh ray of sunshine!

    It pains me that JL is so criminally unknown. Even, apparently, on his own blog.

  6. James Livingston

    Thanks for this encouragement, and this reminder of my obscurity, all at once. Self-knowledge is the hardest to come by. Maybe things will change with the new book out in November. Meanwhile your publication looks damned interesting.

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