[americandream]

The below link exemplifies one of the tendencies in capitalism. It would pay to understand the system, even if only to be more efficient at making money rather than spout off like a loose cannon, especially those dunderheads who think that market penetration and nationalist zenophobia are one and the same thing:

http://www.cnbc.com/id/101814842

Encouraged by China's steady economic growth, signs of improving U.S. labor markets and easy monetary policies by the world's major central banks, global investors have been changing their erstwhile defensive posture in Asia-Pacific. Since the beginning of the year, the regional stock index has nearly caught up with American and euro area equity markets.

Barring major security upheavals in East Asia, it is possible that its relatively attractive equity market valuations will continue to bring capital from apparently expensive and fully valued markets in the U.S. and in the euro area.

[Pops]

Ya know, I just don't see the biggest, most abnormal central bank policy ever carried out simply morphing into a nice normal recovery and I don't think Asia is immune. Of course where capitalist place their bets has nothing to do with anything except where they think they'll make money and doesn't necessarily have anything to do with those of us not in the loop.

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Here is a picture showing the disconnect between consumer confidence and velocity of money ...




I'm no guru and definitely no investor but I'm not a goldbug either, having said that, it sure seems something is amiss comparing consumer sentiment rising but money not moving - it's under the mattress in other words. In 2000 there was the tech bubble, then the latest real estate scam peaked in '08 and right on schedule the sentiment number started moving back up in '10 but velocity number continued to fall.


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Maybe that is just an artifact of the explosion of the money supply? You can only buy so much stuff so you buy stock and drive the stock markets wild, and in turn the corps buy themselves and then a few factories in China (driving the equity markets there wild in their turn) and eventually just stick the rest of the bytes in an offshore account somewhere "for tax purposes."




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Here is another interesting picture and though I won't pretend to understand it it sure looks like there is a huge amount of paper caught up like a hairball in kitty's throat...




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And finally this last one, again I'm no guru but pretty well anyone can see that there is something different about this time. And again, since the two lines are related maybe they are simply, necessarily, inversely proportional: the bigger the money supply the less the turnover...




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I think the upshot is that when the central banks are handing out cash, the people in a position to be on the receiving end need to put it somewhere, anywhere to make the .0001% interest payments. That the money is now flowing circuitously to the east and pumping their equity markets should not be a surprise - why invest here, we're tapped out
.

[americandream]

@ pops

The charts quite nicely illustrate the predicament of capitalists this cycle and coupled with the nature of this cycle and the attempts being currently made to penetrate new markets, if anything emphasise the risk being faced by workers in the originally developed economies to employment flight by bosses/investors. (We should always distinguish between investment accumulation and speculative accumulation. Confusing those two tends to the blur the picture.)

So the charts tell us two things:

Money in greater circulation...or the means to store global value accumulation in greater print by world banks. Not unusual as value requires a medium of transmission and money serves that purpose. The fact that its momentum has fallen in our region says nothing other than the medium is not being maximised, velocity wise as far as consumers go. Not unnaturally, the excess is returned by capitalists to other use whilst:

They seek other venues to kick start consumer velocity. Thus, investors on the move (along with speculators piggybacking) in a bid to push out the edges of their existing markets (which are in the midst of a regional cycle I would need to add...the 2008 crisis was a regional crisis and if anything, amplified the globalising tendency).

Thus, whilst Western consumers still remain a part of the market dynamics, as labour, they will now incresingly face rivalry on the full global scale.

Thus I keep reminding people. nationalism is dead.

[efarmer]

Exquisite post Pops! The printing press, "money defibrillator" shocked the economy back to having a pulse and allowed it to go into Intensive Care in 2008.

The illusion of money intrinsically having value requires the regulation of it's supply to attempt to match it to the underlying fundamentals of the value such money is intended to convey. It also requires the regulation of how the money is used in the form of enforced protocol to keep the crucial match of paper to real value viable and to instill confidence in those who use it to transact trade.
One school of thought is that people are sitting on all of this real money and preventing it going to work to breathe life and therefore value back into what
the money is attempting to represent the value thereof, another is that the entities sitting on these vast pools of potential value do not see them as having much potential value, and so they sit on them to look good on paper to the regulators who are now back in operational mode after taking a powder while the investment banks did the experiment as to how long the lever arm could be made before it snapped off like a toothpick when used to apply power to the fulcrum and actually do some work.

[americandream]

Exquisite post Pops! The printing press, "money defibrillator" shocked the economy back to having a pulse and allowed it to go into Intensive Care in 2008.

The illusion of money intrinsically having value requires the regulation of it's supply to attempt to match it to the underlying fundamentals of the value such money is intended to convey. It also requires the regulation of how the money is used in the form of enforced protocol to keep the crucial match of paper to real value viable and to instill confidence in those who use it to transact trade.
One school of thought is that people are sitting on all of this real money and preventing it going to work to breathe life and therefore value back into what
the money is attempting to represent the value thereof, another is that the entities sitting on these vast pools of potential value do not see them as having much potential value, and so they sit on them to look good on paper to the regulators who are now back in operational mode after taking a powder while the investment banks did the experiment as to how long the lever arm could be made before it snapped off like a toothpick when used to apply power to the fulcrum and actually do some work.

Not quite. Money is always based on human surplus value. Without that value (transformed sentient energy), there would be no commodification and thus no exchange. If you will note, America is now blatently importing Chinese surplus value by relabelling Chinese manufactured but American designed goods, as "American".

The notion that money, as exchange in capitalism, is valueless, is someones cruel joke.

[efarmer]

Why was the money supply increased beginning in 2008 so dramatically then?
Does this mean that the central bankers knew they had not monetized all of the probable human surplus value and therefore had an ace in the hole, or did they just print money not tied to human surplus value to patch a systemic blowout with cruel joke money?

[americandream]

Why was the money supply increased beginning in 2008 so dramatically then?
Does this mean that the central bankers knew they had not monetized all of the probable human surplus value and therefore had an ace in the hole, or did they just print money not tied to human surplus value to patch a systemic blowout with cruel joke money?

They were simply accessing a store of surplus value for an emergency. Have you never wondered at the contrasting treatment of China, which still declares itself "communist" and Russia which is not.

[Pops]

Why was the money supply increased beginning in 2008 so dramatically then?

Because the we were entering a depression caused by: a) over exuberance, b) bank fraud & c) a commodity bull run. Pumping out money to keep the economy from locking up tight was seen as the solution.

To the extent that goosing the money supply propped up the system somewhat, it might have been a good thing. But instead of handing out checks to regular folks who would have turned around and spent the money and stimulated the economy (as Roosevelt did in the 30s), it was given to the very banks and financiers who were guilty of the fraud initially.

So not only did we preserve the institutions that caused the credit markets to freeze, we co-signed their accounts then handed them virtually unlimited further credit at effectively negative interest rates. The result (aside from Geithner getting a cush post-government job) was the reflation then inflation of our equity markets, the transfer of millions of homes into rental CDOs (yep, just like before) and the business goodwill from hundreds and thousands of Mom & Pops to the 1% – and as AD mentioned initially, the export of of the cash advance to foreign equity markets and tax havens.

It was effectively a much bigger heist and wealth transfer than Reagan's Trickle Down or the No Tax Pledge of Norquist put together - it was probably more akin to the privatization of the USSR. In effect it was the culmination of the neoliberal agenda.

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The day of the industrial capitalist is over, we are now post-industrial. Perot's giant sucking sound was the flushing of the government's interest in the worker and middle class. Currency and the economy as a whole no longer gives a crap about "surplus human value." Not any more, we are moving away from that definition of money. Uber is valued at $18.6 billion and it is merely an idea, a bet with free money on an idea.

The $80 trillion (or whatever number) of crisscrossed hedge bets - just invented money, have nothing to do with capital+labor=value. ADs day trades have no more to do with actual value in the real world than me designing a vanity logo for a wealthy housewife's ego-boutique. It is increasingly an imaginary economy using imaginary currency to make side bets on the real economy. "Finance" is only a few percent of GDP but it's profits are approaching half of all profits in the US economy.

Here from a pinko socialist rag:

Since the Second World War, the capitalist world has seen two main political-economic policy regimes: Keynesian democracy, predominating between 1945 and 1973 and forming the last stage of corporate industrial capitalism; and neoliberal democracy, predominating between 1980 and the present, and constituting the formative stage of financial capitalism; the years 1973–80 represent a transitional period between regimes. The Keynesian policy regime was characterized by countercyclical macroeconomic management by an interventionist, regulatory state committed to achieving full employment and higher incomes for everyone. This regime responded to the Depression of the 1930s, the major crisis in corporate industrial capitalism, when the system had to compromise with labor in order to survive, by using state authority to stabilize accumulation and partly to democratize economic benefits. The convention is that Keynesianism entered into crisis in the 1970s characterized by stagflation—high rates of inflation coinciding with high rates of unemployment—which automatically brought about its demise. But stagflation merely precipitated the rise of long-gestating, anti-Keynesian interpretations of economy and policy, by Friedrich von Hayek, Milton Friedman, and other representatives of neoliberalism. The successor, the neoliberal policy regime, revived late-nineteenth-century, free-trade liberalism by withdrawing the nation state from macroeconomic management in the interest of the working class, but re-intensified state intervention on the side of finance capital. The neoliberal regime responded positively to the globalization of economy, society, and culture of the late twentieth century. Indeed the neoliberal regime helped to organize the emergence of a particular kind of globalization that benefits the newly reemergent, super-wealthy, financial-capitalist class, mainly living in the leading Western countries, especially the United States, but operating transnationally in terms of investment activity.

[Pops]

Further down it the link above is this, the central problem with the US economy:

The Keynesian response to recession is to stimulate the economy through fiscal and monetary policy. Tell consumers to go out and buy that new appliance, and set teaser rates low, so they can buy on credit. Yet in a disarticulated economy, the Keynesian multiplier does not work—spending in one area does not translate into employment and incomes in other linked areas within a primarily national economy. Instead, it is more a case of a leaky multiplier. So what is the result of going out to spend? Even more consumer debt in a recessed United States and a boom in the already overheated Chinese economy. Keynesianism as we knew it has been rendered obsolete by over-globalization. There is no effective policy response to crisis in disarticulated economies, and that is the more basic reason that recession lasts.

[Subjectivist]

Pops when everything broke in late 2008 and the "rescue" spending was passed I expected it to be in a form like you did. At the very least I thought every mortgage debt would be reduced by X ammount equal to the monies given to the banks. That would have deeply cut consumer debt and in some markets would have gotten people above water on their loans by restoring equity between resale value and debt owed.

That niether party pushed for this approach is what convinced me our culture is on the downslope into Oligarchy. As the old southern saying I heard goes,
"Them that has, gits more"

[AgentR11]

Simple movement from cash/bonds to equities. Up until recently, China's central bank was managing a very tight range of permitted currency trading; a practice that essentially guaranteed both safety and some yield. They took the brakes off, a little, and now the currency can move in unanticipated directions removing the "safe" part; so, if you still want exposure to China, and safe has been deleted, equities gives you better potential yield to go along with your newly acquired risk.

I also understand that there's been a bit better grasp of some potential oddities in collateralized lending; where inventories of metals worth X end up being used to secure multiple loans from separate sources, loans that greatly exceed X in aggregate... Not unlike five different folks telling a bank they own a particular house worth 200k, and then all getting mortgage loans for 200k.

There's also been some changes to make it easier for foreigners to buy and sell on China's equity markets, so there could also be money that had wanted to participate all along but up till recently, didn't feel it was worth the hassle.

I do find it odd that the cnbc would attach any negative perspective to Japan pulling itself out of a deflationary cycle. Yes, some pain is to be expected, but sustained deflation will relentlessly annihilate an economy, there is no surviving such a thing.

Article does mention something that I don't think many on the Western side of the Pacific grasp, SK and China are inextricably welded at the hip now in trade; makes you wonder when the nuisance cost of NK will exceed the asset value of NK as a buffer to the PRC... China, Japan and the Korea's have had such a long and brutal history... it'll be interesting to watch the slow power of greed and wealth overwhelm ancient national obsessions.

especially those dunderheads who think that market penetration and nationalist zenophobia are one and the same thing

Other than 6, who seems to be reading from a propaganda sheet for Western governments, I can't think of any poster here that is both even interested in market penetration, and is also somewhat nationalist or xenophobic.

[ralfy]

Related:

"The myth of the money multiplier"

the-myth-of-the-money-multiplier-t67257.html

"Top Derivatives Expert Estimates Size of the Global Derivatives Market at $1,200 Trillion Dollars … 20 Times Larger than the Global Economy"

http://www.washingtonsblog.com/2012/05/ ... arket.html

[americandream]

Pops

The amplification of human surplus is an essential element of capitalism so these developing mechanisms for piggy backing on value are to be expected and aren't out of the ordinary...in fact, these mechanisms have run side by side with the emergence of urbanised labour since the early days of capital and the rise of the banking system. They in essence merely represent that constant drive to commodify and consolidate. To expect anything else of capitalism is, frankly, naive.

As for my personal involvement in this system, to understand the system is to ensure that one is not exposed to it's arbitrariness.

[radon1]

people are sitting on all of this real money

"Real money" do not exist. Money do not exist anywhere outside human minds. Any material representation of the money, whether paper, or coins, or gold bullions or digits on the screen is nothing more than a form of materialization of this purely mental concept. Like 9 and IX are different forms of the material representation of the mental concept of "nine". In other words, money are subjective; they are not "real", or objective, as various recognized "schools of thoughts", from classic economics to austrian to even marxist, postulate.

[americandream]

people are sitting on all of this real money

"Real money" do not exist. Money do not exist anywhere outside human minds. Any material representation of the money, whether paper, or coins, or gold bullions or digits on the screen is nothing more than a form of materialization of this purely mental concept. Like 9 and IX are different forms of the material representation of the mental concept of "nine". In other words, money are subjective; they are not "real", or objective, as various recognized "schools of thoughts", from classic economics to austrian to even marxist, postulate.

Money is nothing more than a store of the sweat of your brow. Thus it is an exchange mechanism that enables you to buy the commodity you, as labour, crafted in an earlier era or manufactured, in capitalism, (with a variety of cuts to the capitalists along the way (from wholesale to retail.))

Capitalism of course, being based on human surplus value, utilises money well beyond its usage in earlier systems.

[JV153]

Money is always based on human surplus value.

Maybe you try reversing the object and subject in that sentence.

Edit: Radon1's line seems to fit my snarky comment above.

2nd edit: more to the point, it's amazing how language forms and limits our ways of communicating and understanding things.

[AgentR11]

Money is nothing more than a store of the sweat of your brow. Thus it is an exchange mechanism that enables you to buy the commodity you, as labour, crafted in an earlier era or manufactured, in capitalism, (with a variety of cuts to the capitalists along the way (from wholesale to retail.))

Isn't it more a case that money enables me to exchange labor that I'm skilled at for the product of labor that others are skilled at, even in the absence amongst those others of a need for the specific product of my labor.

The guy who picks my coffee beans has no need for the software and math doodles that I produce, but he likes the money I get in exchange.

[phaster]

Why was the money supply increased beginning in 2008 so dramatically then?

Does this mean that the central bankers knew they had not monetized all of the probable human surplus value and therefore had an ace in the hole, or did they just print money not tied to human surplus value to patch a systemic blowout with cruel joke money?

To answer your question, I think one has to first understand what "money" is. Basically "money" is a simple way to avoid the problems of barter!

For sake of argument say "pops" grows something on his farm which I want, but since I live in the city I produce nothing "physically" that can be used on a farm to grow crops (however since I live in a city I have developed a skill set that is in great demand in the area I live). To be able to "trade" in this case hopefully you'll see that "money" is a way for different parties with different skill sets a way to interact.

An economist defines "money" as having three traits that two interacting parties agree upon (and have trust in)

1st "money" is a medium of exchange
2nd "money" is a unit of account
3rd "money" is a store of value

So it does not matter if "money" is a dollar, a bit coin or whatever, all that really matters in the end in an a trading system the size of world is, the ability to exchange an individuals skill set/product quickly w/out issues associated barter.

Problems came up in 2007 because society as a whole realized it was fucken insane to have home growing as quickly as they were (in other words, the crash of 2007 happened because the 2nd and 3rd traits of "money" could no longer be trusted)

Since the fed is an institution made up of humans, it is understandable why they felt increasing the money supply (i.e. QE1, QE2 and QE3) is a fix to the economy, basically it is the tool they have and it seemed to have worked in the past. Problem is with so many players in the "global" market w/ access to so much credit "money" out there chasing a limited supply of product is of course going to going to give sticker shock to those especially at the bottom who don't have the skill set necessary to survive.

IMHO on the bottom of of the economic food chain, its akin to two people being chased by a bear (the one that runs faster does not get mauled)

In general, in an open "global" marketplace, that is for the most part an instant gratification society where greed is the predominant factor, it is inevitable that "bubbles" will occur in real estate, stocks and bonds. The trick is recognize this simple fact and devise a plan to survive the inevitable economic downturns.

[ralfy]

The global economy is dominated by financial companies, and they earn more only if more money is borrowed. The same goes for businesses that sell goods and services: more is earned only if more is produced and sold.

[americandream]

Money is nothing more than a store of the sweat of your brow. Thus it is an exchange mechanism that enables you to buy the commodity you, as labour, crafted in an earlier era or manufactured, in capitalism, (with a variety of cuts to the capitalists along the way (from wholesale to retail.))

Isn't it more a case that money enables me to exchange labor that I'm skilled at for the product of labor that others are skilled at, even in the absence amongst those others of a need for the specific product of my labor.

The guy who picks my coffee beans has no need for the software and math doodles that I produce, but he likes the money I get in exchange.

In other words, the medium captures the human surplus value transferred into a commodity, for the eventual exchange of that commodity.