Hi DK,

To be honest, I personally do not think this is such a bad idea of the Argentinean President.

After all, if you consider that most of those 'pensionado's are from the middle class of a country's society, who have worked a large part of their lives to build up the country's economy as it is at the moment.

Most of the time they have built up their pension together with the company they have worked for and have earned less money during their working years just to attain this.

And if you also consider how many pension funds all over the world have irresponsibly acted on the stock market the last seven years, yes, then I believe this is another argument in favour of making sure that pensions funds in ones country are backed up by government.

In my humble opinion this has nothing to do with communism, but everything with the responsibility of the pension funds and where they have not taken that responsibility properly serious in the past.

If the majority of such funds are not able to oblige to such a basic rule, then Government has the right to take measures.

But it still is the question whether the Parliament in Argentina will give its approval to this proposal. They will surely discuss the pro's and con's like is a normal procedure in a 'Real' democracy.

But then one can ask the question with these open economic markets today: what is a 'Real'democracy at the moment?

And what (large) role does the (generally silent) middle class play in it?

First comes a thesis, which was capitalism in a particular time frame.

Then comes antithesis, which was communism.

Then comes the synthesis, which I think is happening now.

Then again is born a new thesis...

This is the way evolution advances forth...

Thus spake our dear Hegal...who remained mostly un-understood in his life time. Like me lol.

Hi Harb,

You mentioned, somewhere in your book, a rocket.

Well, you have now one successfully orbiting the moon :)

Congratulations!

Thank you, Miekuse!

Dear DK

What's happening now is a purging of excess debt which means deflation, extended global stock market declines, slowing economic growth, decline in commodities, accelerating bankruptcies...on and on. The free market is blamed and we move toward national facist tendencies.

The IMF estimates that the total global derivative contracts outstanding is $1.125 quadrillion and the global GDP is about $50 trillion. Both those numbers are so large they make no sense. But if you loosely calculate a lowly 1% yield on $1.125 quadrillion, it would take $11.25 trillion just to pay the interest. That's one-quarter of the global GDP.

Does any one in their right mind think that is going to work! And the central banks are now trying to monetize this. OMG is right. At what point do soverign nations themselves default?
We already have Iceland as an example.

This all reminds me of the old saying, "If you give monkeys paper and pencils, they will create literature." This is what happens when "You give monkeys paper money and digits on a computer."

Haha....well you just have to laugh.

DK, you write:

""This new concentration of power, instead of making this better, could make things worse because the knowledge to understand capital allocation within the context and operation of free market economics may not exist amongst government bureaucrats just as the knowledge to run government or to understand the full ramifications of public sector policy and solutions may not exist within the private sector.""

That's why our government in the Netherlands is already attracting 'bureaucrats' that have that knowledge from experience in the financial sector.......

Talking about synthesis eh Harb? :)

I'm reposting a part of my post # 29 on the open thread and directing it towards you DK.

"DK Matai has some of the best posts on economics I have ever read anywhere. I just don't feel that my input on his threads would be received as legitimate and so I hold my tongue there as I do with my brother.

Last week or the week before a prominent economist came out and said, when asked, that he did not know why this crises was happening. That no body really could say for sure why we are where we are. Many can speculate but none can conclusively state why the economy has faltered the way it has. After that I noticed a rash of talking heads in the main stream news media outlets jumping on his band wagon and regurgitating the idea that no one knows for sure....blah blah blah blah blah.

I firmly "believe" that the economic "crises" is a direct effect of nature. The environment. I'm not talking about some airy fairy "Gia" earth energy principal. I'm talking about sankara (effect) of action (karma). To me karma is not an ethereal idea. When I drop a stone on my foot it hurts. There's no magic hoodoo there. Release the stone = action (karma) ---> foot hurts (oww!) = reaction (sankara).

No difference with the planet and the economy. We rape, pillage, plunder and disregard the very limited supply of what our "limitless" growth economy depends on and (you getting the picture.......?) There is no turning back to the days of John Wayne and "Father Knows Best". We can't wish or deny our way out of this one. The economy will continue to go south as long as we continue to allow industry and our own action lifestyles to continue (business as usual).

I have visited this site everyday since I stopped posting nearly 2 years ago. I still read everything (almost). I read the altruistic posters, the ones that care about our planet, our way of life and our "sisters" and "brothers".

I can't help time and again wondering how many of us went shopping today and brought things home in plastic bags. I know it sounds petty but I'm talking about the survival of my daughters here. It's not about me anymore.

Sorry in advance for taking up any unnecessary space."

DK unlike many posters to your threads, I don't find the numbers mind boggling. The numbers are just that. Numbers. It's pure math.

What fascinates me is the almost "junkie" like denial that we have when discussing this issue towards the environmental variable.

It is in the end why we find ourselves in the economic condition we find ourselves in. It's the environment dumby. (Not meaning to call anyone specifically a dumby).

Anyway DK, after holding my tongue for some weeks concerning the economy these have been my thoughts.

As for Switzerland, I think the jury should remain out on any conclusions regarding their actions. These people are a shrewd bunch.

Dear LPB,

As for your concern #7:

I would advise you then to read the latest book of Thomas Friedman who thinks that U.S.A. can lead the way for the whole world (again) by going "Green" en masse:

http://www.thomaslfriedman.com/

This economic crisis may be able to take care of the fact that so-called ‘established interests’ like oil, nuclear energy and military interests, will fade away and pave the way for going green in a natural way.

Moreover, when Barack Obama will be elected in U.S.A., he will no longer lend his ear to those so-called ‘established interests’.

In the meantime the ‘ordinary’ citizen of the world can BE the change he/she so desperately wants by him/herself. There is nothing more one CAN do at the moment than be that change him/herself and hope for a synchronistical outcome :).

Peace: Please Enter Awareness Consciously Ecologically

What is so nice about synchronicity is that one always gets information on that what one is focussed on, so after walking my labyrinth yesterday I happened to overhear a conversation on our television in a documentary about solar energy.

I learnt that more and more people are already thinking and innovating green. Numerous initiatives are taken all over the world as regards solar energy.

Germany is a good example in Europe and Spain is already using more and more solar panels.

One very interesting project I saw is the idea of making large round solar panel islands in the sea, to gain solar energy and at the same time, with part of that energy, one will also be able to turn salt water into fresh.

Moreover, now that flat (television) screens have become more affordable, solar panels can also be made in those same factories, i.e. flat screens, only larger.

And Thomas Friedman's latest book in which he advises U.S.A. to go green en masse will certainly have influence too.

It is certain that oil supplies will eventually die out and there is still not enough security around the storage of nuclear waste.

So those two possibilities are not so lucrative for innovators and investors anymore.......

Mieke:

In response to your post # 9 I paste this from the same # 29 post on the open thread.

"To put a grass roots global movement on the scale of the Manhattan Project into action to stall and reverse the environmental destruction WE have and are at this very moment, and the next, causing, would as a byproduct shift our politic (a true mandate of the people) and our economies in a more positive direction."

I very much agree with you.

Well LPB, then I am back again at Harb's comments #2 where he says that: "a new thesis is born and this is the way evolution advances forth..." :)

And Harb, YOU are understood: it IS all in the Scheme of Things!

India will be top priority in my presidency: Obama
----------Today's Tribune (Newspaper)

On reading the obove news a spontaneous response came from within me: "Yes, it will be great because IT WILL BE THE UNION OF (global)MIND AND HEART.

PS: USA, representing the whole of West represents global mind/intellect to me and India, representing the whole of East represents global Heart. One is the center of intellect/reason, the other of intuition/wisdom, meeting both will really produce a wisdom-based global way of life includng economy.

Thank you, Mieke for #12. YOU understand but because you have seen things from the same perspective.

A little 'research' for my understanding ;)

'Tragedy of the Commons'
"Many readers will be familiar with the Tragedy of the Commons, an influential 1968 article in Science magazine. The article re-frames the argument that not only do economies work best through self-interest and private ownership but that cooperative principles and its evil step-sister, regulation, ruin everyone's property and cause destruction of the economy.

The article's author reduces his argument down to the old village commons, shared by all the village farmers. It is in the interest of each farmer to place as many animals on the commons as possible, yet this action will destroy the commons and harm the entire village. However, organising the farmers and giving each farmer a set number of animals or equal portion of land will penalise the good farmers by limiting their potential and constrain the entire village's economy. And if every farmer agreed to leave the commons alone, a thing of incredible value has gone to waste. Obviously, only private ownership of resources can ensure its best and most efficient use.

This was a good working metaphor for the capitalist system. Then came Northern Rock and Lehman Brothers and huddling down with the village farmers and the cows until it all goes away suddenly seems appealing." (ShareCrazy.com)

Article here:-
http://www.sciencemag.org/cgi/content/full/162/3859/1243
Welcome to the Tragedy of the Anticommons.

'The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives'
New book by Michael Heller

Review:-
'The Gridlock Economy' is in no way the sequel to the Communist Manifesto but author Michel Heller says that maybe, in many things, the 'commons' is the way to go. Private ownership of such things as drugs, patents, and the broadcasting spectrum rather than common rights has stifled innovation and damaged the economic system.

An example: ‘Drug maker Bristal-Myers Squib announced that it would not investigate "more than 50 proteins possibly involved in cancer." The patent holders, it explained, "would either not allow it or were demanding unreasonable royalties." Why wouldn’t these patent owners agree with Bristal-Myers Squibb to cure cancer now and divvy up the profits later?’

Heller compares this practice to tollbooths on the Rhine in the Middle Ages, ‘Merchant ships paid ( to the Holy Roman Empire) a modest toll to safeguard their transit. But after the empire weakened during the thirteenth century, freelance German barons built castles on the Rhine and began collecting their own illegal tolls. The growing gauntlet of ‘robber barons’ tollbooths made shipping impracticable. The river continued to flow, but boatmen would no longer bother making the journey’

The author points out that today you can still see the picturesque castles, ‘bunched so closely together that you can easily bicycle from one to the next.’

Heller, a professor of property law at Columbia Law School in New York, writes that the book began with his observations in a trip to the newly refounded Russia. The Soviets had little use for private property and in the conversion to capitalism, strange ideas of property arose. A building would be ‘privatised’ to one party, the lease to the shops in the building to another, and the right to occupy the shops to yet another. Newly minted capitalists were soon opening stalls along streets of empty shops because no-one could work out to whom the rent in the shops must be paid.' (ShareCrazy.com)

Das Kapital:

Is Capitalism Metamorphosing toward Communism?

Il buono, il cattivo, e il brutto

The Good, the Bad, and the Ugly

D.K. Matai

October 22, 2008

The global financial crisis, the Great Unwind, is leading to more aggressive governmental policies and actions in major countries across the world. The central governments of sovereign nation-states are extending their powers as they become the effective controllers of the free-market economic engines within their own national domains. Financial institutions -- banks, insurance companies, and pension funds -- are the primary hubs of all financial intermediation. Therefore, mass nationalization of banks, insurance companies, pension funds, and the like allows governments to be able to control bankers', insurers', and pension fund managers' capital allocation process, the quantum of assets they hold, the investments they make, the loans they provide, and the way in which they assess the value at risk and its profitability.

Argentina's Blatant Expropriation

In the most dramatic and drastic governmental intervention since the global financial crisis began, Argentina's government has announced that it is seeking to nationalize the country's entire private pension funds industry in order to protect retirees from the slide in stock and bond prices. This newly proposed measure by South America's second-largest economy, confirmed in a speech in Buenos Aires by Argentinean President Cristina Fernández de Kirchner, has been rightly criticized as a move to shore up government coffers to try to head off a fiscal crisis in 2009. Kirchner has characterized the move as protective and inspired by bank bailouts in Europe and the United States. "We are making this decision in an international context in which the leading countries in and out of the G8 are protecting their banks, while we are protecting our retirees and workers," she said. In contrast, the opposition leader, Elisa Carrió, said that the government was trying to "loot the funds of retirees."

President Kirchner has signed a bill to end the private pension system and to move all funds to the state-run social security agency, ANSeS. According to the plan, all the assets in individual accounts would be transferred to the state's "pay as you go" system, and affiliation to the state system would be mandatory, effectively putting an end to the current private/public dual system. This latest move will be a major blow to the country's isolated capital markets, further dampening consumer and investor confidence. Following the announcement, the Buenos Aires stock market, the Merval, plummeted nearly 11 percent. The nationalization, which is subject to approval by the Argentine legislature, puts property rights at risk and threatens the rule of law in the country. It may be the first time a major Latin American government has sought to expropriate such a large amount of cash in such a blatant way.

The Argentinean private retirement system, set up in 1994 to help bolster capital markets, owns about 5 percent of companies listed on the Buenos Aires stock exchange and 27 percent of shares available for public trading and has a total value of nearly US $30 billion. In addition, the government proposes to take control of ten funds, including units of UK-based HSBC and Spain-based BBVA, pending legislative approval. The move is expected to give the government breathing room as falling commodity prices drive down tax revenue from agriculture by as much as US $6 billion next year. Commodity prices have fallen as fears of a global slowdown have grown. Argentina is one of the world's top five exporters of beef, soy, corn, and wheat, and falling prices for those commodities have diminished the government's main sources of revenue. The country spent much of its windfall during this decade's commodity boom paying off debts and subsidizing fuel and other consumer items to stimulate rapid growth. Now it may face a struggle to pay US $20+ billion in debt obligations and other payments due next year.

Increasing Governmental Participation in the World's Financial Institutions

For many years, the financial sector of many countries has, for better or for worse, been run largely by the country's private financial institutions such as banks, insurance companies, and pension funds, with the government establishing the prime lending rate and leaving the rest up to free-market economics, intervening in the main only in cases of duress. Private financial institutions, as the crown and hub of free enterprise, have provided the vital function of financial intermediation.

What has been going on for the past several weeks in nation after nation has been a steep rise in intervention by governments to prop up shaky private-sector financial institutions, thereby shifting financial-sector power toward the governmental pole and rendering the delicate private-public equilibrium of the past increasingly obsolete. This new concentration of power into governmental hands, instead of making the situation better, could make things worse because the knowledge to understand capital allocation within the context and operation of free-market economics may not exist among government bureaucrats. The mandatory rules (read market skews) dictated by government to newly chastened or newly appointed management within financial institutions to maintain lending at a certain level or to come out of certain areas of financial operation altogether may indeed put free-market engines into a de-oxygenating and claustrophobic straitjacket.*

The upshot may be that, from the perspective of GDP growth and the capacity to service the national debt, most sovereign nation-states, alone and in combination, may well find themselves in way over their heads. The further withering of the private ownership vine and the drying up of the fruits of private business and innovation are in total opposition to the survival of traditional free-market economics as the necessary structural underlay of modern capitalism and private enterprise. The precipitous transformation of capitalism currently under way is really the forging of a double-edged sword, even more so in view of rising government debt as nation-states rush to save their financial institutions, all the while moving the world perilously closer to widespread drastic Argentinean-style solutions. Before going off the deep end, may the world's countries stop and think for just a moment so that they never have to look back in dismay and ask themselves, "Was nationalization a step too far?"

*Please see also ATCA's analyses "The Invisible Quadrillion Dollar Equation," "Why are the Markets Falling? Derivatives and Deleverage," and "Der Untergang: Switzerland," all available at mi2g.net.

the above over-editing hatchet job on D.K, Matai's brilliant Das Kapital article may contain many misinterpretations unintentionally and even with GOOD intention inserted by the ever-caffeinated and ever intrusive copy editor janie, whose temerity and thumb-twiddling joblessness have dragged her to even lower lows than before (don't ask)

my sense is that there will always be a delicate balance between private-sector control and public-sector control of certain countries' economies, with formal alternation events (elections, takeovers, or their similars) occuring at almost predictable intervals through the years, parallel, say, for instance, to the delicate balance between in the United States vis-a-vis voting Democrats into power for a few years, then Republicans again a few years later, then Democrats again, lurching down the road in a see-saw, zig-zag pattern, bouncing off the left wall and then the right wall

this seems to be a sort of common pattern in the conduct of human economic, political, social, etc, matters, given the not badhearted desire to please everyone at least part of the time

(trying again)

my sense is that there will always be a delicate balance between private-sector control and public-sector control of different aspects of certain countries' economies, with formal alternation events (elections, takeovers, or their similars) occuring at almost predictable intervals through the years, parallel, say, for instance, to the delicate balance in the United States vis-a-vis voting Democrats into power for a few years, then Republicans again a few years later, then Democrats again, lurching down the road in a see-saw, zig-zag pattern, bouncing off the left wall and then the right wall

this seems to be a sort of common pattern in the conduct of human economic, political, social, etc, matters, given the not badhearted desire to please everyone at least part of the time

This has little reference to the post by LKB in post # 7.
The focus on cost, productivity, efficiency (i.e., just the economics) of production seems to be a dominant theme in capitalist currencies. This seems fine as far as the consumers and economic progress are concerned in the short term. But several factors of production are either human and in some cases animals (as in dairy/meat/poultry industry). You can't suddenly ask a person to stop coming to office or an animal to reduce milk production just that the establishment is able to survive/make more profits. Each of these have a heart and mind of its own unlike other factors of production.
Also what about what economists called 'the negative externalities' of all this? does the company care for the medical and emotional turmoils of a fired person. is the company willing to forego its commercial gains for the sake of societal welfare (ex: BTH in the case of Monsanto). is the company equally concerned with all stake holders rather than just share holders. these are questions that directly leads to issues of environmental exploitation, labour and societal welfare for the longer term. the importance given to the brain/intellect at the cost of the heart has lead to a heartless model of consumption driven economic progress for many countries. that is a grave concern.