From Zombie Banking to Zombie Democracy on Capital Account

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Cap­i­tal Account is one of my two favorite finan­cial pro­grams (the other is Max Keiser’s The Kaiser Report). The show is as slick as any show on the major net­works, yet its pre­sen­ter Lau­ren Lyster and Exec­u­tive Pro­ducer Demetri Kofi­nas are lit­er­ally “on the money” about the finan­cial system–in stark con­trast to the waf­fle that passes for analy­sis on CNN or FOX. If you want con­tent as well as glitz, watch Cap­i­tal Account.

Today, Lau­ren and Demetri raised the issue of the pos­si­ble polit­i­cal fall­out from the aus­ter­ity pro­grams being imposed on the periph­eral coun­tries of Europe, under the novel head­ing of  “From Zom­bie Bank­ing to Zom­bie Government”.

About Steve Keen

I am a professional economist and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous debts accumulated in Australia, and our very low rate of inflation.
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4 Responses to From Zombie Banking to Zombie Democracy on Capital Account

  1. David Colquitt says:

    Steve, two of my favourites also. Never miss an episode. Good inter­view with you. Per­haps unre­lated! GDP is made up of goods and ser­vices. I assume ser­vices includes finan­cial ser­vices with all the exotic prod­ucts. On the site US DebtClock.org, apart from the obvi­ous, there is an item, credit and cur­rency deriv­a­tives. Cur­renly at 790 tril­lion $US and increas­ing at the rate of a Tril­lion $US per day. Would you care to com­ment on its significance?

  2. Steve Hummel says:

    Simul­ta­ne­ously bail out the pub­lic and the Banks with ser­ial large infu­sions of inter­est free credit 75% of which is man­dated to reduce indi­vid­ual debt. After peo­ple have 50% equity in their homes stop the large cash infu­sions and instead insti­tute a citizen’s div­i­dend in per­pe­tu­ity as per below to both work­ing and non work­ing indi­vid­u­als which enables every­one to approx­i­mate a mid­dle class lifestyle, thus quickly and even­tu­ally almost com­pletely elim­i­nat­ing the need for con­sumer finance. This will have the effect of free­ing us from wage slav­ery, plac­ing the indi­vid­ual con­sumer in con­trol of eco­nomic pol­icy with his finan­cially non-extortable suf­fi­cient pur­chas­ing power money-vote, mak­ing tech­nolgy humanity’s ally instead of its enemy, and once again as per below greatly reducing/completely elim­i­nat­ing the need for income and wel­fare taxes by the var­i­ous lev­els of government.

    Insti­tute equiv­a­lent reg­u­la­tions to the Jubilee Shares and Loan ideas that Steve has sug­gested to con­trol speculation.

    Cut 40% of the Defense bud­get imme­di­ately and cre­ate a bal­anced aca­d­e­mic com­mit­tee whose man­date it is to find ways to fur­ther reduce the bud­get by another 20% within 2 years.

    Replace the Fed­eral Reserve (or what­ever any country’s cen­tral bank is referred to) with a national credit office whose man­dates are: 1) Dis­trib­ute a div­i­dend to every cit­i­zen co-capitalist based on the value of the cap­i­tal appre­ci­a­tion accu­mu­lated over the last 3 cen­turies as a result of tech­no­log­i­cal inno­va­tion and process. Said div­i­dend is indi­vid­u­ally to approx­i­mate the total­ity of all pay­roll deduc­tions due to taxes of any sort plus the dif­fer­ence between total wages and total prices cal­cu­lated in every monthly period of time. 2) Cal­cu­late a gen­eral retail dis­count for the same period based on the equa­tion of total cost of con­sump­tion over total cost of pro­duc­tion in order to negate any infla­tion­ary effects for con­sumers. 3) Fund the basic oper­a­tional costs of gov­ern­ment at all lev­els with inter­est free credit and do the following:

    Pass a Con­sti­tu­tional Amend­ment that requires each Con­gressper­son to run spe­cific ref­er­en­dum elec­tions on any gov­ern­ment spend­ing other than basic oper­a­tonal costs that will spec­ify the tax­a­tion costs to indi­vid­u­als BEFORE they are allowed to ear­mark them in the Fed­eral, State or local budget.

    Man­date that a new non-sectarian, non-specific reli­gious per­sonal devel­op­ment uni­ver­sal human val­ues and pos­i­tive Life stages study/deep eco­log­i­cal sen­si­tiv­i­ties cur­ric­ula is estab­lished in the pub­lic school sys­tem begin­ning at the first grade level.

  3. spadijer89 says:

    For the record, none of the coun­tries you referred are a “Democ­racy”. If you want to live in a Democ­racy, move to Switzer­land (the wealth­i­est coun­try per capita in the world, with wealth being defined as finan­cial and non-financial assets) or Liecht­en­stein (the coun­try with the high­est GDP per capita – PPP). What is fre­quently referred Democ­racy is actu­ally “gov­ern­ment by career politi­cian”. At no point have the peo­ple been ever asked whether they expressly con­sent to rep­re­sen­ta­tive gov­ern­ment over (direct) Democ­racy, nor can the peo­ple ignite con­sti­tu­tional amend­ments inde­pen­dent of the leg­is­la­ture. Any argu­ment relat­ing to the fact peo­ple are silent about the issue (so called “implicit con­sent”) must prove the peo­ple are not oper­at­ing under a prisoner’s dilemma which allows them to con­clude doing noth­ing is the most “ratio­nal” option, what­ever their first-order pref­er­ences may be.

    What point is there in dis­cussing com­pet­ing eco­nomic the­o­ries when the agents selected to “imple­ment” them are done so through a process of “adverse selec­tion”? James Buchan­nan sum­marises the posi­tion thusly:

    [S]uppose that a monop­oly right is to be auc­tioned; whom will we pre­dict to be the high­est bid­der? Surely we can pre­sume that the per­son who intends to exploit the monop­oly power most fully, the one for whom the expected profit is high­est, will be among the high­est bid­ders for the fran­chise. In the same way, posi­tions of polit­i­cal power will tend to attract those per­sons who place higher val­ues on the pos­ses­sion of such power. These per­sons will tend to be the high­est bid­ders in the allo­ca­tion of polit­i­cal offices…Is there any pre­sump­tion that polit­i­cal rent seek­ing will ulti­mately allo­cate offices to the ‘best’ per­sons? Is there not the over­whelm­ing pre­sump­tion that offices will be secured by those who value power most highly and who seek to use such power of dis­cre­tion in the fur­ther­ance of their per­sonal projects, be these moral or oth­er­wise? Gen­uine public-interest moti­va­tions may exist and may even be wide­spread, but are these moti­va­tions suf­fi­ciently pas­sion­ate to stim­u­late peo­ple to fight for polit­i­cal office, to com­pete with those whose pas­sions include the desire to wield power over others?

    He who cap­tures the politi­cians’ cap­tures the laws of the land and he who cap­tures the law of the land cap­tures the nation.

    Curi­ously, Switzer­land – one of the world’s two democ­ra­cies where every­thing is decen­tral­ized – hous­ing (where prices have been vir­tu­ally a flat line) is man­aged thusly:

    * 20% deposit require­ment for owner-occupiers, more for invest­ment or hol­i­day homes
    * mort­gage and other costs for own­ing the prop­erty usu­ally can­not be more than 33% of your income
    * high cap­i­tal gains taxes and sur­charges on prop­er­ties sold after short own­er­ship peri­ods (<5 years)
    * prop­er­ties are sub­ject to both a wealth tax, proeprty tax and an imputed rent tax

    [But note this varies from can­ton to can­ton: the can­ton of Zug decided to have no income or cor­po­ra­tion taxes and realised land spec­u­la­tion runs wild in the absence of a land tax, result­ing in alot of wealth but also ris­ing rents and inequality].

  4. Frank says:

    Totally agree with Spadi­jer above. Fur­ther, the coun­try I live in has admin­is­tra­tion like the Berlus­coni and Papan­dreou gov­ern­ment: cor­rupt and totally use­less. It’s inter­est­ing that in this part of the world democ­racy is largely seen as some kind of roman­tic ideal espoused by naive Amer­i­cans, while what peo­ple really look for are strong per­son­al­i­ties to be their nom­i­nated lead­ers. It’s a kind of rivalry of auto­crats where elec­tion takes the place of back­stab­bing and rev­o­lu­tion — not exactly a great step from barbarism.

    This is one rea­son why for me the Euro­pean Union is a great idea. Frankly I’d be happy to see our local admin­is­tra­tion lynched and have a few spec­ta­cle wear­ing Ger­mans in Brus­sels run things instead. Vor­sprung durch technik.

    Fur­ther, regard­ing Greece, which is a kind of spe­cial case — they basi­cally ripped off the EU by cook­ing the books and in return the national gov­ern­ment is get­ting roy­ally shafted. They put them­selves in the sit­u­a­tion where they were either going to get stiffly shafted by the insti­tu­tional investors push­ing for gov­ern­ment default, or get rightly rogered by the tech­nocrats in the EU who want the eurosys­tem to work and don’t want a failed state hap­pen­ing as part of their project.

    I think the North europe and the Mit­teleu­ropa is well aware that the fun­da­men­tal prob­lem is struc­tural imbal­ance where the Greek islands are utter bas­ket cases (speak­ing in invest­ment terms — I’d rather live in Her­ak­lion than Ham­burg!) in com­par­i­son to the indus­tri­alised North / West. Now is the time to sta­bilise things but force the Greek govt to reform. This means no more inef­fec­tive gov­er­nance and liv­ing off Ger­man rein­vested trade sur­pluses for Greece. In the mean­time, while things sta­bilise and beyond, these coun­tries have to be pushed to struc­tural reform.

    Regard­ing credit flow, I think it doesn’t make sense to talk about Ger­man and Greek cen­tral banks. They are fed­er­ated into the eurosys­tem via the Target2 mech­a­nism. How this relates to cap­i­tal move­ment is also debat­able. http://www.cepr.org/pubs/policyinsights/PolicyInsight57.pdf

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