Friday, September 4, 2015

Capitalism Could Have Worked

Capitalism is like Christianity, it's never been tried really, at least not in this era. 

Capitalism doesn't work when the people at the top of the pyramid are massively inept and corrupt and the people at the bottom are writing in coloring books while lying in the fetal position.

At one time, small businesses dominated the economy - they created local jobs, they sourced locally, they kept wealth within the community and they handed opportunity down from one generation to the next. They also ensured that employee skillsets remained diverse. 

But then along came Walmart with its Third World army and decimated the landscape of small businesses. Everything went in reverse - no local sourcing, no wealth in the community, no opportunity handed down, and every task dumbed down to the most basic level possible. Creating zombies with a 200 yard stare waiting to be the next mass shooter on the evening news.

It's a well known fact that small business creates more jobs than large corporations. Even now. Think about that, even after decades of unfair competition, small business is still the machine of job growth. Why? Because large corporations are constantly automating and outsourcing. Sadly, the 0% interest rates made possible by the 35 year trade deficit and rampant deflation, has led to basically free automation of jobs. The ROI for jobs automation at 0% cost of capital is essentially infinity.

The idea of trading with countries that have no labour or environmental standard was an inevitable disaster. Via industrial arbitrage any country attempting to do so, would end up unemployed and/or with no labour or environmental standard. We know which choice was taken. The Ricardian theory of Comparative Advantage is an asinine failure. They do everything we used to do but for ten cents on the dollar. All while we've "specialized" in cappuccino making. Fucking brilliant.

In a real economy, supply IS demand...

Modern day macro-economics is a colossal failure all around. It separates supply from demand via the fabricated jobless "consumer". All decisions are "optimized" with only half of the economy in mind. Beyond asinine. Only a PhD could believe in such a contrivance as a (jobless) "consumer" who only benefits from "efficiency", with zero side effect, ceteris paribus of course.      

But having a rent-seeking casino at the center of the economy is the worst idea possible. Instead of focusing on creating new enterprise, an entire generation is focused on gambling at the casino - trading pieces of paper back and forth in a zero sum game. According to John Bogle (Vanguard founder)the cumulative value of all stock transactions in one year is $40 trillion!!! That is roughly 3 times the value of the stock market itself i.e. the entire market turns over 3 times per year.  It's 200 times the amount of *new* capital raised for companies.  So the casino is one part value add and 199 parts pure speculation.

Ironically out-of-control greed corrupted the system and turned it into a zero sum ponzi scheme. Socialism for the rich. The capitalists didn't believe in capitalism. They didn't believe that markets should clear. They wanted bailouts so that their contrived wealth would be immune from the consequences of their bad decisions. All while putting the entire economy at even greater systemic risk. Why? Because they didn't build "this", they liquidated it in one generation for special dividends. 

No bailouts. No Casino. No problem.