Economic Aphorisms (nothing that is very new for these sites)

(These are extracts of various posts of mine in other electronic media for Feb. 20th)
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Civilization is about rules, regulations, laws.Capitalism, free markets, etc. cannot happen in the jungle...

Take the!Kung: they have very high MURDER rates. Why? Few laws, little ways to enforce them, so violence shapes society. But: little law, little technology... The concept of physical law is related to the concept of civilizational law. The later helped formed the former...

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Capital and social are not mutually exclusive concepts. Saying government does not come first is exactly saying civilization does not come first. It's a bit like opposing the Earth, the planet, and gravity, the force. Distinction is the mother of comprehension.
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Some people compare and oppose socialism and capitalism. They are comparing, and opposing, incomparables that live in different dimensions.

If there is a speed limit (that would be socialism), that has nothing to do with gasoline in the tank (that would be capital). OK, you could break the sound barrier in your car (violation of socialism!), and then crash into a brick wall (that would be the terminal encounter with reality) and then explode in great balls of flames (that would be what is going on now)... It's a mess, but it is not because those things were alternatives you had to chose from...
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(Sent to Krugman blog, Feb.17):

What the government demands, in a nationalization, is exactly what new investors demand, in a new round of venture capital investment, namely, ownership. If the preceding owners do not like it, they can always come up with new money.
Another interest in a nationalization is to fire managers who have demonstrated that they were incompetent, and replace them, with competent managers.

Several French banks just published profits in the billions (Societe Generale doubled its profits to two billions). So it is not because one manages a giant bank that one is incompetent, or corrupt (like some managers at UBS).

There are strictly no contradiction between nationalization and the capitalist system or the principles of ownership. It is simply a case when the largest source of capital around (the State) is called for, and exert its property rights.

Patrice Ayme
http://patriceayme.wordpress.com/





What the economy and American society needs now is jobs, jobs, jobs, and jobs that will make the economy state of the art, efficient, and so superior in some ways that those extremely added value jobs can reestablish a balance of trade. In that sense the Obama stimulus was a waste: at the last moment he added 8 billions for high speed trains. But building Alstom (French) or Siemens (German) high speed 250 miles per hour trains under license could save General Motors, right away (and there are two other types of trains to build: light rail, as used to exist, and 150 mph trains (also built by Alstom) that lean in turns, on more normal tracks. Russia is massively purchasing these ultra efficient technologies from Alstom and Siemens. One would need 15 billions just to build the high speed line in California between San Francisco and Los Angeles (but it would be extremely profitable, since, even with three or four stops, it would connect downtown LA to downtown San Francisco in less than two hours with Alstom AGV technology).

To produce efficient. high value jobs fast and mighty, the many sectors where American high tech leads the way should be pushed: electronics, nanotechnology, biotech, planes. In the sectors where American technology lags, European technology should be purchased immediately with technology transfers (that would be in cars, trains, civil nuclear technology, and some aspects of rocket science where cooperating with Arianespace would save a lot of money).

The Summers-Geithner team is back to its tricks of more than ten years ago, that caused the present Great Depression III. Except nobody believes in them now anymore. Since Bill Clinton had named these people, and elected their disastrous strategy, he is hardly in position to pontificate about what is to be done.

There are only two tricks in financials that will work now: 1) unfreeze credit by separating the banks from their holding companies and the hedge funds and private equity dear to Geithner-Obama (that liberation is called nationalization). 2) lower fixed rate mortgages to 4%, to restart the housing industry for everybody. To help just some homeowners and banks as proposed by Mr. Obama violates the Equality Clause of the US Constitution (Santelli did not point this out, but close enough).

This is an extremely serious situation that will result in serious war if not fixed swiftly. The way out is with tremendous imagination and inspiration, and it is technological, scientific, but also a return to the brazen values of the enlightenment.
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Depression III is here; the median income has been going down (in inflation adjusted dollars) since 1998. That was thanks to the policies of Rubin-Summers-Geithner, more than 10 years ago. That the same people are in charge now goes hand in hand with similar decisions of the Obama administration friendly to hedge funds and private equity and existing big banks managements.

Nationalizing banks is a big word for separating the banks from their greedy bank holding companies, the hedge funds, private equity, and their monstrous bad assets and derivatives. It is a way to unfreeze the credit machine and free the banks so that they can lend again. Maybe one should call it "liberation" instead of nationalization.

The Obama administration should have freed the big banks on Obama inauguration day. That was not done because the administration is too friendly to the very people that have caused the crisis. During that month, terrible damage was done to the economy of the USA and of the world. In some ways, the crisis is already worse than in the 1930s.

Germany just nationalized a giant bank, Hypo Real Estate (which, as its name indicates, invested in the USA). Such nationalizations, as the ones in Scandinavia, are temporary. Bill Seidman and his Resolution Trust Corporation nationalized 747 banks ("thrifts") during 1889-95. the banks were held as nationalized companies only three to four months before being sold again. Sweden imitated that. Seidman went on to solve the crisis in Japan.

As the Romans used to say: "to err is human, but to persevere is diabolical". Summers and Geithner have been persevering with what they did more than ten years ago. It is diabolical.

Patrice Ayme

http://patriceayme.wordpress.com/




Patrice Ayme
http://patriceayme.wordpress.com/