discussion of this article

vngelis said…

The bosses for years claimed that we were in a massive boom which was based on a credit bubble. Now the bubble has burst they claim the ...recession is over.

Unemployment continues to rise and so does government debt. Exports aint up either.

The Chinese are moving away from the dollar which is having an impact on the dollar as it is starting to head downwards again having surpassed $1,000an ounce.

Once it becomes common knowledge that only through printing more and more money leading inevitably to hyperinflation that that is the only 'exit' from the crisis, the third wave will hit and very soon as a matter of fact.

Wed 09, September 2009 @ 23:45

bill j said…

The bosses didn't just claim there was a boom. There was a boom. At the end of the boom there was a recession. There is now a recovery from the recession.

Its what is known as the business cycle.

Alternatively, you I presume, would assert that there never was a boom, there always was a crisis, then there was a crisis, and now there is not a recovery, there is still a crisis.

That is what is know as the theory of perpetual crisis.

Just in May this year, three months ago, at a time when Japan, Germany, France, Brazil and China, had already moved out of recession, various theorists of perpetual crisis, Richard Brenner, Peter Taaffe, Chris Harman, Hillel Ticktin and so on said there were "no signs" of recovery. In fact they claimed that the world economy was in a "Great Depression".

Richard Brenner was perhaps the boldest of the catastrophists, he claimed that the recovery would not even start until 2011 and that quantitative easing "would not work". This was at a time when quantitative easing had already worked.

Profits in the second quarter rose at their fastest rate in five years.

It remains to be seen what will happen next, but most likely, given the extent of the inventory contraction, there will be a pretty strong revival as that contraction goes into reverse.

But I'm sure you won't notice it come what may.

Thu 10, September 2009 @ 16:55

vngelis said…

You could be right. We might be just experiencing another turn of the capitalist wheel. On the other hand if the continued rise in unemployment and the continued crisis in the USA which saw more than a million on the streets against Obamas tax increases are signs that the recession is over, maybe there never was a recession after all, as it was just a ploy for the bankers to get money off the state for free.

Tue 15, September 2009 @ 22:22

bill j said…

Make up your mind!

Wed 16, September 2009 @ 16:34

vngelis said…

The proof any analysis is based on what happens next not what is in my mind.

Your mind is set. The recession is over (whatever that may mean). California is issuing IOU's, 2 odd million were on a demo in Washington against further tax increases and commercial real estate is about to go belly-up like sub-prime mortgages did. If the US cant get out of recession no one can, as most export markets are orientated towards the US. Generally I have a problem with capitalist bicycles. They dont always go round and round. Sometimes they grind to a halt or break apart. Already they are talking about 10-20% cuts in the public sector around 700k to 1.4million people added onto the dole office... Are you now a proponent of jobless recoveries?

Thu 17, September 2009 @ 01:00

bill j said…

But according to you capitalist bicycles only break apart. I got a new bike a couple of years ago, really cheap, Chinese, very light and well made, and its going fine.

I should remind you that a couple of months ago you claimed that this was the great depression, that a recovery would never start, that the decline would go on forever, in fact it had always been going on forever, as there wasn't really a boom before it, in fact all there ever is is capitalist crisis. That's not an original position, indeed you repeat it here, but that doesn't make Marxist catastrophist, Marxist or true.

You're now confronted with a different picture. It turns out it's not the Great Depression. In fact the world recession really only lasted 4 months, from November to February 2009. By the second quarter, Japan, Russia, Brazil, China, Germany and France were already recovering, and the pace of decline in the USA and UK was much diminished. World industrial production has been increasing for four months, re-stocking of depleted inventories has begun and its likely that this quarter there will be a synchronised and pretty strong recovery. Profits are recovering as the writes offs associated with the sub-prime collapse have stopped. In fact banks are paying money back to the government - including the basket case Citi.

That doesn't mean of course that all of the problems of the recession just disappear. Unemployment is still high. Unemployment is still increasing in much of the world etc. but it does mean that the patient is recovering, in other words it is no longer getting worse and in fact is getting better. It does mean that you catastrophists were wrong. Simple.

Thu 17, September 2009 @ 12:04

Arthur Bough said…

Bill,

I agree with most of your analysis. The one point I disagree with is the idea that we are shortly going to be facing swingeing spending cuts, even though that is the conventional wisdom. I don't beleive that will be the case for reasons I've set out on my own blog. The fact is that as even the G20 realise removing stimulus any time soon risks derailing the recovery. Given that the huge injection of liquidity will inevitably lead to a high rate of inflation, this provides a much easier solution for Capital. Inflation will erode the real value of Public Debt (and the other factors you have mentioned mean its financing is not going to be the problem its amde out to be).

Workers will pay for that, but they will pay as a result of wags failing to keep up with prices, and by their small savings being wiped out by that inflation.

On Vingelis, could I offer some advice. As you recalled I had a lengthy and largely pointless debate with him earlier this year. Pointless because as you note he refuses to accept any argument, or reality itself. In fact, I recognise his method as that of a well-known spammer I have met elsewhere. I may be wrong as there are no shortage of sad individuals populating the Internet engaged in such activity. He writes under variety of names. He choked up my blog with his spam and abuse under the names of BCFG (posing as a Leftist) and "The Sentinel", (posing as a BNP'er) as well as writing using other aliases.

I ran a simple track to identify that it was the same person writing under these various names. If you get your techies to run a check my guess is you will find he's based in Sheffield. It might save you a lot of time and wasted effort replying to his further posts.

Thu 17, September 2009 @ 16:03

bill j said…

I think I made the point above that the "necessity" for an attack on the public sector is not essentially economic. Debt is not that high as a proportion of GDP. Interest rates are very low so its in any event cheap. There are massive amounts of assets created by quantitative easing and the recession will not be as deep as they expected and the recovery probably better.

But that doesn't mean there is not a political consensus for these cuts and I think they will start them after the election.

As you say Vangelis doesn't listen. The reason its worth expending a little energy on him, is that he is nonetheless, an archetype for catastrophic Marxism. The economy is in perpetual crisis. When there is a recovery its not real. When there was a boom, it didn't really exist. When there is a slow down its the Great Depression etc.

Thu 17, September 2009 @ 16:54

Arthur Bough said…

Bill,

I think the "consensus" is a diversion. I could well be wrong, but I think that its setting things up so that there will be only a muted response to the limited cuts that are brought in. It also diverts attention from the real tactic of a bout of high inflation to reduce the value of the debt, which is needed for such a strategy to work. If every one expects inflation they will prepare for it, and the tactic won't work.

Logically, given the size of the Public Sector, the kinds of cuts being spoken of would be catastrophic even given the fact that the UK multiplier is calculated to be only around 1.1. Even given the strength of the recovery that both you and I seem to agree is likely on current data, slashing spending at an early stage would be bound to cause an unneccessary recession, because there is no possibility that private sector cobnsumption or investment could make up the shortfall in aggregate demand that would result. That would require that the money saved was transferred to the private sector, and taken up. But, that means tax cuts, which contradict the need to reduce the debt! It means that private companies use that freed up Capital to invest at a time when aggregate demand is being slashed, and so on.

Moreover, recent years have shown a gorwing confidence of workers to fight. Given that the main strength of the unions is in the Public Sector, and given the simemring anger over the bank bailouts, MP's expenses, and bankers bonuses, I think that any major cuts would result in massive industrial action, and because they would mean not just individual closures of schools, care homes and so on, but large numbers of such closures on a national scale the opposition to them from communities would also be overwhelming and capable of co-ordiantion.

The bosses and the State must know this too, and I ask why would they risk such large scale unrest, and the possibility of suffering a serious defeat, when they have a much simpler option for dealing with the debt. It would only be necessary if there were serious capacity constraints holding back Capital accumulation. But there aren't. There is 2.5 million unemplyed, and the piotential to make up specific skills shortages through immigration. There is oceans of Money sitting in financial institutions as a result of Q.E., and the massive cash reserves that soem states and some large companies built up over the last decade, and "crowding out" is not going to occur given Q.E. and near zero interest rates. And there is a lot of under utilised capacity.

Given all of that it is not in the interest of Capital to stifle the recovery for purely "political" reasons.

Fri 18, September 2009 @ 11:56

bill j said…

Very good paper on corporate profitability here from Morgan Stanley;

http://www.morganstanley.com/views/perspectives/files/US%20Corporate%20Profitablity_McVey.pdf

shows that rates of return have bottomed much higher than in previous recessions and that because of low interest rates;

""Borrowing rates have fallen in tandem with the 10-year yield since the early 1980s. The 10-year bond—which is used as a bellwether for pricing corporate fixed income new issues—is now yielding just 3.7% versus 15.3% in 1981. Lower rates have been a major tailwind to the earnings of non-financial corporations for years. In fact, non-financial companies only spent 1.4% of sales on interest expense in the third quarter of 2008 versus 3.1% in 1989 (Exhibits 11 and 12). "

Fri 18, September 2009 @ 18:42

vngelis said…

Since we wrote a few months back, California issued IOUS and the biggest car companies on earth went bust. We have also had Obamas bailout. A collapse isn't overnight (although recent info from the press does state that all ATM's were going to close if Brown didn't offer bailout money). The general tendency isn't up but cuts, defaults and IOU's. Ireland, Iceland and California come to mind.

Now if I rack up debts in my business and the line of credit continues for a decade or more, I may believe that I am involved in a boom or that everything is allright. The difference is whether we are dealing with a patient on critical life support or one that has just gone into hospital with the flu.

My question was based on whether you now believe that a jobless recovery can recover the worlds largest economy which can then soak up exports from other countries?

PS

I only ever post under my own name and I aint based in Sheffield but in North London and I have never posted on Boffys blog under any other name nor would I have any interest in posting in such a manner. What I say I can say openly.

Sun 20, September 2009 @ 20:02

vngelis said…

This analysis states Ben Bernanke is just making it all up.

http://www.globalresearch.ca/index.php?context=va&aid=15292

The capitalists talked everything totally down to get the bailout money. Having got it they are talking things up. During the 1930's Depression not all sectors collapsed simultaneously. They are deluding themselves if they think the recession is over, for gold has now gone back to what it was prior to the US elections, a sign that the dollar is being dumped and fast, by the Chinese.

This is forcing Obama into trade wars. A number of US states have voted also to refuse the central governments tax demands. A break up of the USA is now on the cards due to the crisis.

Sun 20, September 2009 @ 20:28

bill j said…

"A break up of the USA is now on the cards due to the crisis."

Yeah. Right. Convincing.

Sun 20, September 2009 @ 21:01

James said…

In the US, some commentators (e.g. Paul Krugman in the NYT and Mike Whitney on Counterpunch) are arguing that the current recovery is tenuous--that it relies solely on the rebuilding of inventories and the massive government stimulus. When these two things fade, we could see a "double-dip" recession--so the argument goes. There's still massive over-capacity in the system.

What do you make of those arguments?

Mon 21, September 2009 @ 07:50

bill j said…

Its likely that for the next 18 months or so the inventory swing - worth -8% of GDP in the last quarter, will guarantee outsize growth. If history is anything to go by then then deeper the recession then the sharper the recovery, this recession was deep, so it is likely there will be a sharp recovery. It is the change of inventories that impacts on GDP, so in other words, if firms simply stop reducing their inventories, then growth will accelerate by 8% annualised.

The fiscal stimulus still has a way to go, of the US governments $800bn package thus far only around $100bn has been expended. In addition there is the ongoing reflationary effect of low interest rates. China continues to buy huge quantities of US treasuries and this will enable the Fed to keep interest rates at very low levels really as long as they want. Inflation is very low or falling.

The housing crisis which was at the root of it all, seems to have bottomed. And the write offs seem to have peaked. In fact there are now write ons - for example Barclays who its estimated have made at least $8bn so far from their steal of Lehmans, there will be more of this if house prices begin to rise. Notwithstanding the ongoing hit from non-residential construction, financial profits will likely recover from here on in, as indeed they have done from the turn of the year on.

So if that's the likely course for next year i.e. 2010, what about the year after that? Consumer debt remains elevated, but while interest rates are low, affordable. In addition as that Morgan Stanley paper I posted shows, corporate debt, while a higher nominal amount that historically is actually cheaper, owing to low interest rates.

Nonetheless, notwithstanding all this, it is likely that in 2011 growth rates will slow as the inventory effect and stimulus falls off. What will determine how much of a fall off, will be whether unemployment has started to fall, investment has begun to recover and profit rates, which remain at very high levels for the trough of a recession have started to grow.

We'll know more in a couple of weeks when the Q3 gdp figures come in. They will show a strong recovery worldwide.

Mon 21, September 2009 @ 11:57

vngelis said…

According to this report todays Californias unemployment rate is now officially equivalent to 1940.

http://www.nytimes.com/2009/09/19/us/19calif.html?_r=2

Now taking into account the central role of California in the US economy, the centre of the arms, computer and housing boom industries you are arguing that rising unemployment, low interest rates and consequently cheap money in the form of government lines of credit will restore the economy back to a 'sound' footing.

In other words the Chinese will continue to buy US govt debt indefinitely even after Obama places taxes on their exports. Consequently the US bailout will work as we have only spent less than 10% of the money.

Mon 21, September 2009 @ 21:03

bill j said…

Whereas you're arguing that California is about to break away from the Union. Hmm.

Tue 22, September 2009 @ 09:27

vngelis said…

In a downward spiral one gets economic fragmentation. Various US states have voted to be able to go against what the Federal government imposes. Why would they do that and why now?

Tue 22, September 2009 @ 22:21

bill j said…

Don't know why you're asking me, it was you who said;

"A number of US states have voted also to refuse the central governments tax demands. A break up of the USA is now on the cards due to the crisis."

You at least have a claim to originality. Well done.

Wed 23, September 2009 @ 00:03

vngelis said…

The dollar is being dumped in China, Iran and elsewhere. Sustaining a collapsed economy by printing $ whose value is constantly reducing cannot get you out of a crisis. In a downward spiral it may become every state for itself. There would be no other economic imperative to get states legislatures to vote against the federal government and the implications of Obamas bailouts.Yugoslavia, Russia broke apart from a massive economic crisis. America will not be different.

Wed 23, September 2009 @ 23:15

bill j said…

So how soon will this happen? By Xmas? Or some unspecified time in the distant future, or maybe round a corner, but a corner which may be near or far away? What's your feeling?

Thu 24, September 2009 @ 08:44

bill j said…

Oh and the dollar isn't being dumped. Chinese purchases of US treasuries are at record levels.

But no problem. These are just facts. I'm interested in timescales. How soon do you think the break up of the USA will be? This year, next year, when?

Thu 24, September 2009 @ 14:04

vngelis said…

According to this report China is dumping the $ and fast

http://www.washingtonsblog.com/2009/09/3-signs-that-china-is-moving-out-of.html

Iran has stopped trading oil in $

http://tinyurl.com/nzf3lf

Whilst the $ will lose its role as the reserve currency, an event as significant if not more when it lost its gold standard.

http://tinyurl.com/ljkxv4

The collapse of the $ and the break-up of the U$A will happen in our lifetime

Thu 24, September 2009 @ 23:48

bill j said…

So you don't really believe this cobblers then? I thought you were a serious catastrophist. This year, next year, in fifty years, what's the difference? None evidently.

At some point in our lifetime, you might as well say whenever. Or if you were on Ricky Lake "Whatever". Or "Whatev" its contemporary shortening. Joke.

Fri 25, September 2009 @ 09:53

Arthur Bough said…

Bill,

You are right to focus on the importance of timescales. Not in relation to Vingelis who I warned you is just a spammer who will write any unsubstantiated cobblers to prolongue a pointless debate, but in terms of understanding where we are and where we are going.

Although, we both beleive that we are in the boom period of a Long Wave, I think you place the beginning of that upswing from the early 90's, whereas I place it from around 1999. I'd argue the low point then in Gold and raw material prices, the preceding debt blow 0ff of the Asian currency and Rouble crises were symptomatic of what has been seen at the end of Long Wave downturns previously. I'd also argue that because wea re still in the Spring Phase of the cycle, we have an explanation for the fact that wages have not begun rising rapidly yet - still large reserves of exploitable labour - whilst raw material prices have continued to rise - new supplies with lower marginal costs have not yet come sufficiently on stream to meet demand, which normally happens around 12 years into the cycle. "Whatev". We basically agree on the scenario.

I think that your analysis of current trends is pretty much correct, but again I would have a slight disagreement on timescales. I thought that the recession would end in the second quarter with growth resuming in the third. That was too pessimistic as figures show that growth resumed in the second quarter. I think the reason for that is that having massively destocked as the world economy simply stopped in the Fourth Quarter of 2008, by the second quarter that destocking had ceased, orders resumed, and that had a dramatic effect in reversing the decline. However, it does not look to me as though restocking occurred in the second quarter. Firms seem to have simply re-ordered to cover current demand fearful that it might be a false dawn. The same seems to apply to the take-on of labour. I expect that as actual re-stocking takes place from the end of the second quarter and into the third quarter we will see an accelerator effect pushing growth rates up for the Third Quarter, which may also be subject to a multiplier effect as the rest of fiscal stimulus feeds through.

But, I suspect that we might then see a plateauing effect for one or two quarters from the beginning of 2010 as that restocking is completed - a reverse accelerator. That is the importance of Governments NOT introducing cuts during that period. I think, however, that the growth in Asia and other developing areas with act as a locomotive dragging the world economy forward with US and UK performance lagging in relative terms, but still growing absolutely.

However, what we also have to bear in mind as Marxists is not just the immediate future, but the longer term, which comes upon you quicker than you think even when dealing with a 50 year cycle. I was watching Marc Faber, Editor of the "Boom, Doom and Gloom Report" on CNBC this morning. Faber correctly predicted the Dot Com Crash - not that he was alone. He basically takes an Austrian position, and his argument is that the methods being taken now to resolve the crisis will lead to more bubbles, which when they burst will mean that Capitalism collapses. He suggests a timescale of 5-10 years. A similar end result to that of Vingelis, but more intelligently argued.

I think his basic argument is false, and his timescales are wrong. We had asset price bubbles in the preceding period because the huge monetary stimulus pumped into the world economy from the late 80's onwards, was intended to counteract the effects of the Long Wave downturn - i.e. restrained demand. It did so in a period where China and other developing economies were able to satisfy demand for consumer goods with icnreasingly lower priced goods. The escess liquidity then found its way into asset prices. But, in a period of boom that money will increasingly find its way into end demand for consumer goods - in fact it already was doing so before this crisis as witnessed by hugely rising food prices, and a cocnern in the US and UK and europe with inflation that was prompting higher interest rates. The Velocity of circulation will rise as economic activity resumes, and prices will rise. Moreover, the capacity for China to continue to pump more and more ever lower priced consumer goods into the world economy is restricted. (That will only come about again when the next round of industrialisation in Africa develops new huge pools of exploitable cheap labour). Chinese wages are rising rapidly, production constraints are appearing, and it faces its own rising cost curve for raw materials etc. needed to manufacture those goods. That is one reason it will let the RMB rise to lower its costs of imports. It also needs to diver an icnreasing proprtion of its output to domestic consumption. The consequence will be a rise in consumer goods prices on the world markets, choking off the availability of liquidity to fuel further asset price bubbles.

That again is consistent with the move from the Spring to the Summer phase of the Long Wave. However, the Summer phase is still a period of strong economic growth. What, as Marxists we have to be concerned with is what happens when that Summer Phase transforms into the Autumn Phase. On my timescale that is in around 15-20 years from now. It is at this conjuncture that in the past has seen big upheavals of wars and revolutions - usually the latter provoked by the former. As I wrote in my blog http://boffyblog.blogspot.com/2008/08/third-world-war.html last year, there are more similarities in the current Long Wave with the position leading up to 1914 than there are with the position leading up to the end of the last Long Wave in the early 70's. At the time of the latter the world economy was dominated by the US hegemon - as previous periods in the 19th century had been dominated by the British hegemon - and imperialist competition was constrained both by that, and by their common front against Stalinism. 1914 saw a world where British hegemony had broken down, and opened the door to economic competition giving way to military competition. The breaking down of US economic hegemony, and absence of a common enemy for imperialism to coalesce against, sees the world divided into three main economic blocs, which increasingly have different world views and global interests and ambitions, and which icnreasingly are developing their own independent military forces. Such a conflagration would likely spell the end of human civilisation given the nature of modern weapons. The current grabs for strategic global positions described in my blog, and which are there for all to see are very reminiscent of the period at the end fo the 1890's, and the current posturing over disarmament is also reminiscent of the many anti-war and disarmament conferecnes that took paplce in the run up to WWI, and which acted only to favour those powers that could quickly produce new more deadly weapons when the conflict began.

That is why it is vital that Marxists use the period of the current boom to recreate a Labour Movement armed with the means of creating a different world here and now. When you are young 15 years seems almost a lifetime, when you get to my age it seems like the blink of an eye.

Fri 25, September 2009 @ 12:38

vngelis said…

In response to Bill J.

You focus on timescales and the date of collapse of US imperialism in order to argue this may occur tomorrow or 50years hence because I dont provide a date and thus allegedly makes my arguments redundant. A marxist analysis isn't based on fortune telling.

In July 1916 if I recall correctly Lenin stated we wont see revolution in our lifetime...

Globalisation was always going to end in tears and a fragmentaion and collapse of the USA as the large transnational corporation have ceased production in the US and stopped paying taxes. The main line of division I see aren't between competing economic blocks but the contradiction between the transnationals and the old nation states which cant relocate lock stock and barrel to Asia. The American nation state is therefore obliged to raise taxes on its population to survive and impose taxes on US corporations based in Asia. Obama has started this. If they continue along that path China will nationalise US corporations and short of a shooting war the US will be unable to do anything about it.

I will repeat that the 1929 crash continued after it started, it didn't stop mid term and we didn't experience a new boom prior to WW1. The American crash continues to get worse, not better and unless they are able to get out of the crisis the rest of the capitalist world wont be able to do it for them, as most of the American economy is based on services ie parasitical, based on debt.

Without being able to extend the debt indefinitely and unless they are able to find another way of recycling their debt, the US worker wont be able to buy imports and the US standard of living will fall to the level of a third world banara republic.

Sun 27, September 2009 @ 15:55

vngelis said…

In case it was missed...

Will California become America's first failed state?

http://www.guardian.co.uk/world/2009/oct/04/california-failing-state-debt

US unemployment continues unabated in the month of September...

Sun 04, October 2009 @ 22:26

vngelis said…

Bill J wrote this below:

"We'll know more in a couple of weeks when the Q3 gdp figures come in. They will show a strong recovery worldwide."

The latest UK figures at show a 2.5% contraction not a 0.2% recovery.

Care to comment or are the figures biased?

Wed 07, October 2009 @ 22:02