…Yes, I listened to the interview, and add this to the mix of all explanations and economic thinking after the fact that I have read. Many, many theories and connecting of dots…
I was still struck while listening to the interview that his opinion was still so subjective. In the here and now I must protect what wealth accumulation I have guarded, and wish to hold, even capture some wealth to keep with inflation, whatever Inflation is. This as you know has been very difficult during these most incredible times.
You said:
"If you have a belief system and you look hard enough you will eventually find some type of data to support whatever position you want to advance. So it becomes a sin of omission, as data that contradicts the premise is suppressed or ignore".
I will not speak for others but this bias that you speak of is tended to and examined every day by me. I have done my work, and will continue too in the hopes I can blow holes through my understandings. So good of you to remind us how very important this is.
I fail to see what this has to do with Capitalism. Darbi seems to want to legislate a world whereby a factory must continue making things by hand, even if machines could make the product more cheaply, and with less variability (better quality). While the process of commodization may certainly be accelerated by the profit motive… it will be active in any economic system one could imagine, save for one that is legislated by force not to. It is simply human nature to find better ways to do things… improve yield and efficiency, reduce defects, improve quality, etc. It is not human nature to stand still. It is also human nature to seek higher margin work to be in, and this leads to innovation. Speaking of profit… I'll bet no Marxist ever conceived the software business, with its 50% profit margins.
If I look at a very long term chart of Corp. P/E ratio… I don't see this systematic profit compression you speak of over the 70 year debt supercycle that we are nearing the end of (as per Kyle Bass);
I will stick with my Gold and Silver as a means to hold onto some saved labor through the upcoming money crisis.
Darbi said; The truth is, if the explanation is singularly that the empirical does not match the theory because of manipulation, over and over again, that you really do not have a theory. This then becomes nothing more than an excuse to try and keep alive a dysfunctional premise. Yet, virtually any PM investment newsletter, or fund manager or anyone with any (financial) interest in the PM story will shout from the highest mountain- FRAUD- while they lose client’s money left and right.
This is more hyperbole... totally exaggerated argument. Gold and Silver have been in a 12 year bull market.. nobody is losing money left and right. I am up > 50% on my primary investments since 2009, and others on this site are up much more having seen the trend earlier. There is manipulation, but it is only slowing the progress of this market, not stopping it. How the hell would you protect your savings Darbi? Your arguments are so academic, so disconnected from the current reality on the ground, so totally dismissive of the pain and suffering of people in countries that are already suffering from the effects on their fiat currencies of this now ending 70 year debt supercycle (Iran, Argentina, and Venezuela to name a few) that I don't really know what else to say.
"Today a new epoch begins", Venezuelan President Hugo Chavez declared in his victory speech on December 3, having won the presidential election with the highest vote in Venezuelan history on a platform of deepening the struggle to build socialism. "That new era is the new socialist democracy. That era is the new socialist society."
Chavez has insisted that 2007 will be a year of a revolutionary offensive to greatly deepen the transformation of Venezuela that has begun through the Bolivarian revolution underway since Chavez was first elected in 1998. The struggle to challenge corporate interests and redistribute oil wealth to the impoverished majority has already brought about impressive social gains, and has been accompanied by increasing moves to organise working people into institutions of direct democracy. With the expansion of the state sector in conjunction with the formation of more than 100,000 cooperatives, the problems of the poor majority have begun to be tackled.
Globally, these gains have captured the imagination of many who believe a better world is possible. The growing radicalisation of the revolution, based on the increasing mobilisation of working people themselves (with the largest pro-revolution demonstration yet of 2.5 million the week before the election), has further focused attention on this attempt to create an anti-capitalist alternative in a world where corporate interests drive wars and environmental destruction…
So, darbikash, I agree that these points are a pretty good description of where we are in the developed world:
- Neoliberalism- e.g. income inequality and declining wage share.
- Lack of aggregate demand e.g. underconsumption
- Skyrocketing personal debt, necessary to replace declining wages in order maintain a sustenance lifestyle.
- Financial instability, e.g. intrinsic instability (per Minsky) as investors perpetually chase more risky returns.
But I don't understand at all your assertion that:
Gold plays a different role and has a different meaning in each of these arguments.
Setting to one side the Austrian school orthodoxy (which I, too, find simplistic) and the whole issue of manipulation in the PM markets surely the very policy response to date to the problems you have outlined is validation of the case for investing in gold and silver.
I don't like where we are, nor do I like how we got here. I don't even like having to bother with precious metals but we are where are and as far as financial investments are concerned I really don't see better alternatives.
(Apologies for the indentation issues. Can't make the buttons work to order.)
Jim, I’m not really sure what exactly you think Marxism is, at least in the context of economic theory. Marxism, as advanced by Capital vI, vII, and vIII, is critique of the political economy. Nothing more. Nowhere is machine automation discouraged (or encouraged for that matter). It is an objective look at the anticipatory effects of the intensification of production, and the effects of same on profit margins. It is also a discussion (and clarification of other’s work) on the labor theory of value, first advanced (with serious flaws) by Adam Smith and Ricardo. Above all, it is an examination of the social implications of commodity production, and an expose of exploitation.
It does not ask that the world stand still. It does not opine that things “should be made by hand”. It simply points out that if such measures (intensification of production) are utilized (and suggests that they indeed must be utilized) than one should expect that profit margins will decline.
Most, when confronted with this conclusion, challenge the theory that profit margins must decline. This is the “normal” response to that part of Marxist theory. However, Kliman posits that previously successfully challenges to this theory by neo-classical economists was and is wrong. He does so not of opinion, but by supporting the preexisting Marxist theory of the tendential decline of profit margins, a famous and well known (and controversial) conclusion of Marx. He does this by providing data, not P/E stock market data, but in analysis of company actual profit margins, which are not the same thing as stock market valuations (obviously).
He suggests that the period of 1949 to 2001 (trough to trough to normalize the business cycle) there is between a 40-55% decrease in actual company profit margins. Notably, he also calls attention to the neoclassical parlor trick of simultaneously valuing the production inputs and outputs, which is necessary to support equilibrium theory so vaunted by the neo-classical economics crowd. This trick artificially skews the profit margin calculations, confounding any meaningful collection of comparative profit data across time. No business- and I mean none- would sign up for an accounting trick that resets the price of cost of goods sold if supply prices fluctuate downward after the product is actually sold.
If his data is correct, I would call this without question “a systemic compression of profit margin”. In fact, coupled with corporations holding excess undeployed cash reserves in the billions of dollars, this to me would justify a scathing indictment of neoclassical theory and a strong indicator that Marx’s theory was and is correct.
Let’s be clear about the implications. If margins decline to such a point where business no longer finds it attractive to invest, if the intensification of production reaches the point where machine automation supplants armies of workers, what exactly are the displaced workers supposed to do? Are all of them to advance into “innovation” skill sets? Legions of strawberry pickers, assembly line workers, hamburger flippers, etc. are they to toss off their dungarees and uniforms and get advanced degrees in computer science?
And yet it is me who is out of touch with reality?
As to your comment on the software industry, there is some merit to your point, but on the one hand, Marx did contemplate such types of industries. He called them “ficticious capital”, lumping them in with other such high margin/low investment “products” such as financial derivatives and other specious inventions of post crisis capitalism.
Kliman specifically speaks to the issue of software, and (correctly) states that it is valid only under monopoly capital conditions, because it has a use value of nearly zero, as there is virtually no tangible labor cost to replicate it. Without robust IP protection (by force), there would be no software market as everyone would bootleg it for free. Consequently you find entire markets driven either by monopoly protection, or by trading entirely on speculative exchange value (tulips, etc.)
It would be interesting to get a deeper understanding of how other types of knowledge workers (to coin a Peter Drucker phrase) would fit into the commodity/labor value construct.
This is more hyperbole... totally exaggerated argument. Gold and Silver have been in a 12 year bull market.. nobody is losing money left and right. I am up > 50% on my primary investments since 2009, and others on this site are up much more having seen the trend earlier. There is manipulation, but it is only slowing the progress of this market, not stopping it. How the hell would you protect your savings Darbi? Your arguments are so academic, so disconnected from the current reality on the ground, so totally dismissive of the pain and suffering of people in countries that are already suffering from the effects on their fiat currencies of this now ending 70 year debt supercycle (Iran, Argentina, and Venezuela to name a few) that I don't really know what else to say.
Which part is the hyperbole, Jim, the part where I claim that if the main explanation of a broken and deeply flawed monetary theory is manipulation, that there really is not a theory after all, or the part where I claim that the PM newsletters and internet pundits prime stock in trade when their trades fail is market manipulation? Because that seems fairly accurate to me. Note the interview at the top of this thread, I think you downplay the degree that market manipulation is called upon to explain the unexplainable. It’s ubiquitous, and to suggest that it is a claimed as only a minor “slow down” on what one supposes is the “natural” market behavior is disingenuous.
I'm sure their version of Marxism, even though it had the headwinds of oil resources behind it.. just needed some subtle tweaking, right Darbi?
Jim, I have no interest in Venezuela, and no knowledge whatsoever as to what may or may not be going on down there. The point of my posts is that the explanation of currency manipulation and the associated anticipation of a currency collapse make a poor explanation for many observable events today, yes, some things are explained, but many are not. And it is the ones that cannot be explained by elliptical descriptions of pending currency collapse that worry me. I do not see people that follow this line of thinking looking outside the box at alternative explanations, rather I see them getting defensive when PM’s are questioned, and ignoring very large phenomena (like why are major multi-nationals parking large sums of cash on the sidelines- when they have a fiduciary responsibility to reinvest this money and maximize shareholder return- is this the confidence fairy?)
I think Andrew Kliman's claims deserve deeper investigation-not reflexive dismissal and spurious comparisons to Venezuela -as to how he got the data, and is it valid. Because if he is right, some Austrians and currency conspirators got a whole lot of ‘splainin to do.
I’m not sure I have any better solutions than PM’s either, but I am deeply suspicious of an investment class that is focused primarily on either the collapse of currency, or the significant and instantaneous devaluation of said currency.
If these theories of monetary destruction are incorrect, or superseceded by effects not considered by the fiat catastrophe guys, then the “fundamentals” behind the investment decision are flawed. If the value simply goes down, you are neither preserving wealth nor going to win the FOFOA lottery. It may well be the case that of the alternative scenarios there is no “safe” class of wealth preservation. Land might go down, gold might go down, food based commodities might go down, in fact rampant deflation might be a more plausible outcome, and these outcomes might well be predicted if the underlying causality could be reliably ascertained.
So yes, I think it matters how you believe this is going to play out as to how and what you invest in, or more accurately if you invest at all, and the alternative scenarios provide a sobering view of a world that might not see currency collapse.
…but your excellent analysis also tells me that it appears your views as opposite, and just as well intentioned as Jim's, and in the final analysis I have to decide which way the world financial issues fall.Clearly the world is printing in such a way that they are trying to get ahead of each others so that exports help to raise each countries bottom line. Not everyone can be an exporter but every country is printing, and that is most certainly a Inflationary policy.
Deflation or Inflation, and even as you have stated, this may or may not end in a Deflationary (I assume this basically as I assume you have checks and balances to your Biases). So, would I be incorrect or irresponsible to play both side of the fence? I say I am NOT. I see Gold as historically a favored plan against Inflation. History has also shown me that Deflation, and Gold's relative value, will still purchase me the same loaf of bread on either side of the scale. My visuals of an extreme case is that I can walk into any grocery store with Gold, and not worry whether Hyperinflation or extreme Deflation, and purchase at the moment those goods or services I require. In such a situation, I visualize the merchant being very secure in accepting my Gold, and not so much with my paper.
It is important to know that I only care that I have the ability to purchase a loaf of bread not to be viewed as an investor of PMs.
I clearly see the struggle that you and Jim are positioning here. I believe we all do. Now, if I were to care about the fluctuation of Gold, and was asked to guess Inflation or Deflation I would guess Inflation. So, as an investment, after satisfying all Preparations and Resilience (ex: oliveoilguy) I would then buy Gold but I wouldn't pile in, I would hold a core amount, and add to this if I was able to on a percentage to income basis.
Respectfully
BOB
[quote=Jim H]
I fail to see what this has to do with Capitalism. Darbi seems to want to legislate a world whereby a factory must continue making things by hand, even if machines could make the product more cheaply, and with less variability (better quality). While the process of commodization may certainly be accelerated by the profit motive… it will be active in any economic system one could imagine, save for one that is legislated by force not to. It is simply human nature to find better ways to do things… improve yield and efficiency, reduce defects, improve quality, etc. It is not human nature to stand still. It is also human nature to seek higher margin work to be in, and this leads to innovation. Speaking of profit… I'll bet no Marxist ever conceived the software business, with its 50% profit margins.
If I look at a very long term chart of Corp. P/E ratio… I don't see this systematic profit compression you speak of over the 70 year debt supercycle that we are nearing the end of (as per Kyle Bass);
[/quote]Nowhere is machine automation discouraged (or encouraged for that matter).[/quote]
I'm not really sure if that is 100% correct - http://www.marxists.org/archive/marx/iwma/documents/1868/machinery-speech.htm
I'm by no means an expert on Karl Marx. I've read a fair amount Das Kapital & The Communist Manifesto and as a small business owner that started a company with 3 people and built it to 35+ I find his work tiring and intellectually lazy. Life is way to short to sit around and pontificate for hours, days, weeks, months and years on end about how to divide up labor and how many weeks vacation employees should have. Quite frankly nowhere in your responses in this thread do you get to the point. As they say in sales, all sizzle, no steak.
I've found success by finding a group of people as driven as I am and focused on producing. In order to do that, sacrifices have to be made. Some people are cut out for sprinting around the track, others not so much. The ones who can run the fastest without bitching are hands down the most successful and happiest. FYI, most of them are from Ethiopia and lived there in the 70's and 80's thru the brutal Marxist regime. The horror stories they told me of loved ones being executed and generations of wealth, land and possesions being destroyed are gut wrenching. One word of advice, if you're ever around Ethiopians, don't mention Karl Marx.
That's part.'n parcel of the transition to real-time gold-as-money now that gold trades in real-time (floating). That transition cannot be by fiat. It cannot be top-down but must be market driven in view of the real-time component. We are seeing a market migration, bottom-up, from debt currency to asset currency. The free floating, debt currency stop-gap measure has been a "necessary evil" in the process of developing fully integrated real-time relationships between currencies, precious metals and commodities. Think Bretton Woods. Gold is a wonderful store of value, debt-free, but could never make for a good liquid currency as long as the price was fixed. Keep in mind that a weighted currency's total liquidity is the product of (weight x trade value). This is why the FIXED peg had to be severed in order to set gold free for the sake of future re-monetization … in real-time. Allow the value to rise … split the weight. Simple. Keep it that way.
It's actually socialism via the development of free floating, debt based fiat currency that is indispensible to free market debt-free asset currency that floats in real-time. Marx got it wrong. His computer was busted.
Why do people dismiss so many economic theorists? I've spent a fair amount of time reading Smith, Malthus, Ricardo, Marx, Keynes, Hayak, etc. They all have incredible insights, and yes, not one of them has a complete grasp on economic theory. Why would we expect a complete view? It's one of the most dynamic subjects. They could only write within the context of their experience and time. Times change.
Jim, I've enjoyed so many of your posts and I've learned so much from them…especially the bitcoin, but claiming that commodization is "natural" makes a lot of assumptions about human behavior and nature itself that are currently being challenged, and in my opinion not entirely true. Your comment on efficiency, profitability, and productivity as progress and "making things better" depends on where you sit in relation to them and how those "improvements" impact our world. From reading your other posts, I know you know this, that's why I'm kind of surprised?
It does appear that our old models aren't working, but now that think of it, models should follow experiential narratives not the othe way around. It feels to me as TPTB are trying force our way of life to conform to models, and yet the narratives are changing. We need new these new narratives to drive new models of theory, if we want models at all. Maybe all this hyper-organization and re-organization is not making things better?
Gillbilly, Thank you for your post. I was actually agreeing with Marx (I guess) that profit margins compress over time, and I called this process commodization, and I called it natural for the reasons mentioned. My point of argument was that this process is not somehow unique to capitalism, but is rather just natural. I think you would have to give examples for me to better understand the point or points you are trying make. My point is that it is human nature to want to make things better, cheaper, and higher in quality. There has always been a push toward increasing mechanization, and there always will be. Darbi said above,
Are all of them to advance into “innovation” skill sets? Legions of strawberry pickers, assembly line workers, hamburger flippers, etc. are they to toss off their dungarees and uniforms and get advanced degrees in computer science?
And my answer to that is, regardless of Darbi once again using hyperbole, or overdramitization to make a point... um, yeah. No, everyone does not need to get a four year degree to be productive, but yes, people doing work that will be mechanized or digitized in the future will need to get training if they want to be productive in the future of much of the available work (not including a hopeful boom in re-localized farming). They will need to understand computers, databases, statistics, some math, etc. I am not saying this is good or bad.. only that it is. Andrew McAfee of MIT sees this and yet makes the point the future he sees because of it is not a dystopian one;
Note that I do not happen to agree with his comment that economies don't run on energy… that they run on ideas. They run on both.
So, to summarize… I see the progression of technology as a natural human endeavor, disconnected from the political economy (save for instances where progress is stunted by force). I think that commodization is a natural subset of this progress, and that profits are compressed in the process due to competition. Examples of this would be;
* Making complex car parts that used to be assembled from many sub-pieces out of one, cheaper to make, monolithic piece using advanced injection molding.
* Making car parts that used to be metal out of engineered plastics
* Making some plastic replacement parts on the spot, as needed in real time, via 3D printing rather than holding them in inventory (along with associated carrying costs).
One can think of endless examples. I understand that commodization, as practiced in Corp. America today, has many ugly sides, including the loss of our factories to places like China where labor is more abused, and the environment gets abused too… but I view this as a regulatory problem - one can level the playing field via tariffs.
I apologize for all the typos in the last post. I was typing while being called for dinner. Lol
I agree that it is in our nature to make things better, but our concept of "better" is constantly changing in real time. I'm finding terms like "better," "always," and "the way it is" troubling and often confusing right now. Aren't we finding that some things that are better for some, turn out to awful for others? (and often those others are many more than those who benefitted) I'm not saying life needs to be fair or everything needs to be thought of collectively. That would be wishful thinking, but at some point there's a recognition that the improvements that are thought to be making things better are just making things worse.
I think we need new models that acknowledge and find a balance between the past individualized disembodied theories and models that include collective embodied theories. So many of the past theories are built on the foundations of the actions, freedoms, and the desires of the individual and then applied outward to the collective. I keep thinking about the foundations of macro-economics, don't the assumptions boil down to the individual in the end.
Technology is an important part, but too often now it becomes the only consideration because of the need to survive, i.e. the corporation needs to technologically advance or it will die. We all participate in this narrative by our actions. I think there can be a point where technology, the means, becomes the end, which can have devastating effects. The first example that comes to my mind is from the documentary "Surviving Progress" …hunter/gatherers learned how to use technology/weapons to kill more than one animal at a time. Things were better for them because they had more food. Then they figured out how to run the entire herd over the cliff thinking…killing all of them would be even better. Oops.
Anyway you get the idea. What if we are in the process of running the entire herd over the cliff on a global scale? Terms like better, cheaper, and higher quality are subjective in the end and are in need of re-evaluation. I think we are in a period of re-evaluation because we are seeing the herd going over the cliff in real-time, maybe even in slow-motion, and we asking ourselves…is this a done deal, or can we still do something about it.
Thanks for your thoughts, I always appreciate your posts.
Gillbilly, Why do we need models at all in economics? I think I gravitated to hard science and engineering because I am just not comfortable with the endless variability and ambiguity of the human state, physiologically, and mentally. I am often repelled, at a gut level, by efforts to model something like the economy using just a few variables, where so many actually exist. As well, the idea that we must optimize and then impose some system of political economics upon ourselves seems unneccessary. It seems to me that one can become enamored by the resplendent, mathematical beauty of a model.. losing sight of the fact that humans are just going to act like humans are wont to do.. and you had best have some rules to make sure that the good gets harnessed, and the bad gets restrained. I think Steve Keen has shown via model that money does not have to expand exponentially... great.. that's really helpful.. all our problems are solved. If only the bankers would acknowledge the elegance of Steve's model... we would all be saved.
My own ideal of restraint would indeed have us being very careful not to run the entire herd off the cliff, as you say Gillbilly. There seem to be so many means via which we try; Throwing mass quantities of sequestered Carbon back into the atmosphere, creating GMO everything, exposing ourselves daily to a huge smorgasbord of trace level synthetic chemicals, low level electromagnetic radiation, and other environmental insults. It seems that we have a very, very unrestrained form of capitalism these days... with a toothless FDA, CTFC, all the way up to an Attorney General who will indict no banker. I don't think we need a new model.. we just need some non-captured regulators.
" It seems that we have a very, very unrestrained form of capitalism these days"
I visualize every "model" as rounded up or down because the numbers DO NOT jive with THE PLANNED FOR RESULTS. Because of this everyone in bed with the Government are therefore given a pass/amnesty for not speaking the truth. Is it right though? I guess that depends on the "Models", A vicious circle then. The "Models" are broken, and is why our economy is broken. Personally I look to the price of Oil and Copper to tell the tape.
Gillbilly, Why do we need models at all in economics? I think I gravitated to hard science and engineering because I am just not comfortable with the endless variability and ambiguity of the human state, physiologically, and mentally.
Jim, I ask the same question. I like how you acknowledge your left brain leanings as I struggle with the same thing from the right...hence, you the science side, me the social side. I often get lost in the nitty gritty details of the data. Galbraith, yet another incredibly insightful theorist! I completely agree with the quote about Marx. Considering Marx's life it's not hard to put this quote into context...his struggle to maintain a job, his marraige, his loss of children, and his reliance on Engels for financial support... he must have been a cranky old distrustful bastard.
Another question that comes to mind after reading your post: If our world is to grow more complex through technology how can we adequately regulate without models? Isn't regulation reliant on models? I'm not familiar with Keen's model of solving the exponential growth of money, but I will put him on the list of books to read.
Thank You