Steve_American wrote:
I'll respond to the 'petrodollar' question 1st. Prof. Mark Blyth says in Youtube videos that the stagflation of the late 70s was caused by full employment causing the investor class to stop investing to increase production.
What about the *early* '70s, though -- ?
Why did Nixon take the U.S. off of the gold standard then? It was a *qualitative* drop and the beginning of *inflation* in the U.S. due to the empire's drop in global status after having to withdraw from Vietnam without enjoying any spoils of war -- costs without benefits.
[E]ven during the heyday of Keynesian economics, the secular rise in long-term interest rates indicated that it was only a matter of time before the efficacy of Keynesian polices would come to an end. By the end of the 1960s, as the boom fueled by the regressive Kennedy-Johnson tax cut and the Vietnam War began to rapidly raise prices in terms of gold, gold production began to stagnate and then decline.
If the rules of the gold standard in any form—including the rules of the Bretton Woods dollar-gold exchange standard—had been followed, the result would have been a classic deflationary depression. Such a depression on the backs of the workers and other toilers would have set the stage for a new series of “expansionary” industrial cycles.
The policies of the Keynesians did change the form of the economic crises somewhat. Instead of deflation in terms of currency, there came inflation, combined with unprecedented interest rates as the money capitalists progressively lost confidence in paper currencies.
On two occasions, first in 1973-74 and then in 1979-1980, panicky flights to safety in gold led not only to extreme inflation but violent recessions that finally drove even the official unemployment rate in the United States above 10 percent by late 1982. In Western Europe, too, unemployment reached levels that were characteristic of the post-World I years rather than the “full employment” of the early post-World War II years.
https://critiqueofcrisistheory.wordpres ... ker-shock/
Under the dollar standard, the United States—both at the government and corporate levels—can pay most of its debts in U.S. dollars. If the weight of the dollar debts threatens to bankrupt U.S. corporations or state and local governments, the U.S. Federal Reserve System can simply devalue the dollar—that is, let the dollar price of gold rise, as well as allow the exchange rate of the dollar to fall against foreign currencies—and the debt is lessened. And of course the U.S. Federal Reserve System, which in effect prints dollars, is at the service of both the U.S. government and the big U.S. corporations.
However, the dollar standard does give the United States the ability to run balance of trade deficits that are far larger than those of any other country. The limit is that when the trade deficits get too large, the dollar starts to fall rapidly against both gold and other currencies. Once that point is reached, inflation and interest rates start to climb quickly, undermining the domestic U.S. and world currency and credit system.
That is exactly what we saw in 1973-74 and 1979-80. When that point is reached, a severe recession soon follows that again reduces the U.S. trade deficit to the level the world market is willing to tolerate. How large the U.S. trade deficit can get depends on the level of interest rates and the general credibility of the dollar on one side and the level of world gold production on the other.
https://critiqueofcrisistheory.wordpres ... ar-system/
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Steve_American wrote:
They did this because [he says] they felt that the inflation they could foresee was going to eat up any profit that their increased production would have generated.
Okay, yeah, stagflation would cut against the effectiveness of equity capital.
We should also use a *class warfare* analysis, wherein organized labor was becoming more socially empowered due to U.S. capital's lessened potency and effectiveness for social production and economic growth.
Dodge Revolutionary Union Movement
The Dodge Revolutionary Union Movement (DRUM) was an organization of African-American workers formed in May 1968 in the Chrysler Corporation's Dodge Main assembly plant in Detroit, Michigan.
Detroit labor activist Martin Glaberman estimated at the time that the Hamtramck plant was 70 per cent black while the union local (UAW Local 3), the plant management and lower supervision, and the Hamtramck city administration was dominated by older Polish-American workers.[1]
DRUM sought to organize black workers to obtain concessions not only from the Chrysler management, but also from the United Auto Workers. Walter Reuther and the senior leadership had been early supporters of the American Civil Rights Movement; yet in spite of their growing presence in the auto-industry African-Americans rarely rose to positions of leadership within the union. On July 8, 1968 DRUM led a wildcat strike against conditions in the Hamtramck plant. The strike was observed by some 4,000 workers, lasted 2.5 days and prevented the production of 3,000 cars. In the subsequent Local 3 election, DRUM ran as an alternative slate. Although it did not win, the new organization drew notice for its militancy and willingness to challenge the UAW hierarchy.
The "Revolutionary Union Movement" form of organization spread to other Detroit plants: including FRUM (Ford Revolutionary Union Movement) at the Ford River Rouge Plant, and ELRUM (Eldon Avenue Revolutionary Union Movement) at the Chrysler Eldon Avenue plant. These organizations were brought together in the League of Revolutionary Black Workers which formed in June 1969.
https://en.wikipedia.org/wiki/Dodge_Rev ... n_Movement
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Steve_American wrote:
He also, mentions the OPEC oil price raises. OTOH, IMHO it was a combination of factors. 1] Vietnam war spending in the late 60s, 2] the run on the dollar and the US gold supply, 3] Nixon taking the world off gold, and 4] the Arabs in OPEC punishing the West for backing Israel by cutting oil production and also raising oil prices; and then stagnation was caused by the Fed.
First you're mentioning an array of historical factors, but then you finish here by *oversimplifying* the economic stagnation of the period to being caused by just Fed actions.
Steve_American wrote:
responding to the inflation that followed from oil prices raising with an interest rate increase that had to be raised several times because the inflation kept going up because the oil price kept being raised by OPEC. So, we got the combination of --- stagflation. The real lesion of stagflation in the 70s should have been that it is not possible to win a fight against inflation by raising interest rates if the inflation is caused mainly by increases in the price of a key commodity like oil, and will instead cause the economy to stagnate without stopping inflation.
It really sounds like you're trying to place blame entirely on OPEC, when, as you've noted, that action (of OPEC raising its oil prices) was rooted in *geopolitical* conflicts. Also, people obviously didn't want U.S. dollars then, so the empire took a hit as a result of its losing its imperialist adventurist foray into Vietnam, a totally unnecessary war.
Steve_American wrote:
. . . America's rich were mad because full employment seemed to keep their profits from being raised because wages kept pace with productivity increases. Those increases had been funded with the money of the rich or their corps and yet there was no return on those investments because wage increases ate it up. So, the rich pushed hard for a new theory to replace Keynesian economics.
The rich weren't a bunch of *intellectuals* then, 'pushing hard for a new theory' -- they brought the imperialism *home*, and intensified the U.S.' *internal colonies*, as in the South, and increased *class warfare* -- note that the correlation between wages and productivity increases only lasted till about '73:
And:
The explosion of media commentary, including an editorial in the New York Times denouncing McNamara personally, demonstrates that the deep divisions produced by the war in Vietnam continue to wrack the American ruling class 20 years after the final defeat of the puppet regime and the entry of victorious National Liberation Front (NLF) forces into Saigon.
By the early 1960s the economic consequences of these policies began to be expressed in a growing US balance of payments deficit that was further exacerbated as military spending in support of the war in Vietnam began to swell.
The Johnson administration was repeatedly confronted with the choice between escalating the war and financing the social programs proposed under the slogan of a “war on poverty,” whose urgency was underscored by the eruption of rioting in the ghetto neighborhoods of scores of American cities from 1965 on.
Forced to decide between guns and butter, Johnson sought to have both, and he refused to enact a tax increase to pay for the war, fearing its unpopularity. The result was a steady erosion of US financial reserves and mounting pressure on the dollar, culminating in the gold-dollar crisis of February 1968.
The political crisis that exploded to the surface in 1968—the year of the Tet offensive, Johnson’s announcement that he would not seek reelection, the assassinations of Martin Luther King, Jr., and Robert F. Kennedy—staggered American imperialism. The war in Vietnam dragged on for another seven years, but however bloody the denouement, decisive sections of the American ruling class had by then decided that the cost of the war was too great.
https://www.wsws.org/en/articles/2009/07/mcna-j08.html
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Steve_American wrote:
. . So no, I was not referring to the petrodollar. I was referring to Neo-liberal theory gaining momentum to maintain the old gold standard rules even though the world was off the gold standard. At first it was called Supply Side economics. And then, Europe going onto the euro certainly put it back onto a pseudo-gold standard. One of the key ideas that was pushed into the public's memory was the idea that the US Gov. is and must be just like a family or a corp.
Okay, agreed on the facts here. ('Neoliberal' / supply-side / old-gold-standard economics = government austerity measures over the provisioning of social services = punishing the poor and/or workers = class warfare from above.)
Steve_American wrote:
Below, I assert that the family analogy is not logically true in a fiat currency system.
You asked 'how would MMT have allowed the economy to have been better than was possible on the gold standard'. Have you ever noticed the correlation between 'good economic times' and an increase in mining that increases the nation's per capita gold-silver (hard money) supply?
Yes:
In a classic depression—one without Keynesian intervention—the stagnation in the accumulation of real capital combined with rising gold production reduces the ratio of real capital to gold. That, in turn, leads to lower interest rates. More of the surplus value goes to the industrial and commercial capitalists in the form of the profit of enterprise and less to the money capitalists in the form of interest. All of this encourages a rise in investment when the economy recovers, just like it did after World War II.
The high unemployment of depression also leads to lower money wages and a rise in the rate of surplus value. Not only does a greater mass of the surplus value go to the industrial and commercial capitalists in the form of the profit of enterprise but the total mass of the surplus value also increases.
The policies of the Keynesians did change the form of the economic crises somewhat. Instead of deflation in terms of currency, there came inflation, combined with unprecedented interest rates as the money capitalists progressively lost confidence in paper currencies.
On two occasions, first in 1973-74 and then in 1979-1980, panicky flights to safety in gold led not only to extreme inflation but violent recessions that finally drove even the official unemployment rate in the United States above 10 percent by late 1982. In Western Europe, too, unemployment reached levels that were characteristic of the post-World I years rather than the “full employment” of the early post-World War II years.
https://critiqueofcrisistheory.wordpres ... ker-shock/
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Steve_American wrote:
And the corresponding correlation of bad times with a decrease in the per capita gold supply. Examples are --- ancient Athens and its silver mines, ancient Rome and the ending of gold mining in Spain coupled with gold being used to bribe the barbarians to not invade, Mexican gold and Inca silver flowing into Spain/Europe after 1520, and for America after 1849 thru 1900 when all that gold and silver was mined as the population grew.
Modern Money Theory claims to be just a description of how nations with a fiat currency now operate. IMHO this is not correct. MMT says that a jobs guarantee is required as a buffer to allow full employment without inflation,
Again your nationalism-based analysis here is insufficient -- by looking at *class* dynamics we can see that full employment is *injurious* to the capitalist economy because then organized labor is *winning* the class war, and workers can increasingly dictate the terms of their employment, or even take power themselves over what they're producing.
Steve_American wrote:
let alone hyperinflation. MMT also calls for the use of Gov. fiscal policy to provide full employment; real, not fake, full employment. And, the use of Monetary instead is claimed to not be enough once interest rates reach zero%. So, MMT does have some policy prescriptions. It is not just descriptive.
Again, capitalism inherently has *no interest* in providing full employment because it would diminish its dominant *class* position in the process.
Steve_American wrote:
MMT strongly claims that deficits don't matter *at all* until full employment is reached, if corps. will expand hire people to increase local production when effective demand (desire to spend coupled with cash in hand) is present. MMT strongly claims that the total national debt is not a bad thing because it just represents the private sector's savings, and the Fed. can control interest rates on that debt or buy the bonds itself (with a simple law change). MMT asserts that spending is always someone's income, so cutting spending (esp. Gov. spending) is always cutting someone's income and therefore their spending as well as their tax payments. MMT asserts that when and if inflation becomes too large that it can cut spending and raise taxes to suck up the excess cash at that time. MMT strongly asserts that that a Gov. with its own fiat currency can always pay its bills as they come due because in a pinch it can just create money to pay them. Therefore, MMT very strongly claims that such Govs. are *not at all* like a family or a corp.
Since I'm all for enabling social production I'd rather see *increases* in government spending than any austerity measures that strengthen nationalist capitalist currencies at the expense of wages, benefits, and jobs for the working class due to lessened economic activity and slow growth, as we have today.
Steve_American wrote:
Under the gold standard all gov. had to protect the nation's gold supply. This meant it could only deficit spend if it could borrow the money to do it. Just spending money in a pinch would soon mean there was more money in circulation than the nation had gold to back. If there was a run on its gold supply then, when there was no more gold, its remaining currency would be worthless. MMT asserts that this is no longer true when the nation meets a few criteria; it issues its own fiat currency, it floats that currency against all others, it only borrows in that currency, and it has no debts is any other currency. In this situation that nation can never go bankrupt, so there should never be any extra interest rate charged to cover the risk of bankruptcy. IMHO, this means it will always be better for that nation to create currency to repay its bonds and suffer some inflation than to instead suffer the far greater damage that defaulting on its bonds would cause.
Therefore, being off the gold standard would have allowed Gov. policies to maintain real full employment without inflation. This would have required Gov. policies to have protected the US economy from too much foreign imports. So, no NAFTA treaty.
You're being *contradictory* here, though, because you're first *acknowledging* a country's foreign economic relations by mentioning its own currency versus that of other nation-states, but then you're implicitly favoring economic isolationism and tariffs in order to cut-off international trade relations.
So while you sound nominally economically *progressive* with your orientation towards equity capital, over rentier capital, geopolitically you're being *regressive* with your line that attempts to constrain capitalism to each individual nation-state itself, instead of promoting international trade.
Steve_American wrote:
You accused me of being a 'nationalist' as if this is a shitty thing to be. Well, I do want the rest of the world to do better. And despite what you think I am willing to see the living standards of the mass of Americans fall. But, if and only if this also applies to the living standards of America's rich and to Europeans too. I am willing to see this because of the risk that AGW will heat-up the world enough to destroy the economic base of civilization, which is grain farming. If it were not for this I would not see a reason why Americans should suffer because the rest of the world can't get its act together.
Do you want to address U.S. sanctions on Venezuela now?
You seem to think that all nation-state relations ('geopolitics') are inherently *neutral*, when in fact there are *histories* to these international trade relations. The U.S. is *not* being isolationist / nationally-'self-sufficient' by reaching over to support a coup agenda over Venezuela while threatening military invasion.
No, Americans should not suffer, but neither should Venezuelans, though they are, by the millions.
Steve_American wrote:
. . . Of course, this also assumes that American foreign policy is totally different from what it has been in terms of working to keep the rest of the world poor and struggling.
Okay, thank you, that's better. I stand corrected.
Steve_American wrote:
You said you are a 'revolutionary'. You sound like a Communist. Don't get me wrong, I don't hate communists like most Americans do. I just don't think that system can ever be made to work because all people will do anything to get their children to have a better life. So, if they can't get power from money they get power from they & their children joining the Communist Party and pushing non-members down.
It's a valid critique, though I'll point out that, precisely, you're referring to *Stalinism*, and I'm not a Stalinist. I don't advocate a class-like substitutionist specialist professional administrative bureaucratic elite, but rather the collective control over social production by the world's working class, together.
Steve_American wrote:
You attack my ideas because I start from capitalism. I understand the risks of this that is why I call for a bunch of US constitutional Amendments to lock in economic rules to cap wealth and the resulting political power, to force the Gov. to provide Soc. Sec. and healthcare to all, and to make sure all the citizens have effective control over the Gov. through elections. {If you want we could start a new thread where I can explain these 3 sets of ideas, and you can argue your ideas in response.}
Well, I'm not against any social-service-type *reforms* that you may be touting, but I'll point out that they amount to mere drops in the ocean as long as the rule of capital is allowed to continue. Workers need to be in control.