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 Professor of Economics and Head of Economics, History and Politics at Kingston University London, 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 private debts accumulated globally, 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, 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.

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