With Gordon T Long & Charles Hugh Smith
24 Minutes, 17 Slides
Why has classical capitalism devolved to crony-capitalism/crony-kleptocracies?
In this 24 minute video Gordon T Long and Charles Hugh Smith discuss through
the aid of 17 slides the rapid advancement of Crony Capitalism in America.
The facts are undeniable, but why is it becoming so obvious and undeniable?
Why is it accelerating without any apparent 'checks and balances'? Where have
the safeguards against this happening gone?
Understanding Why This Is Happening
1. Those who control most of the wealth are willing to risk systemic collapse
to retain their privileges and wealth. Due to humanity's virtuosity with rationalization,
those at the top always find ways to justify policies that maintain their dominance
and downplay the distortions the policies generate. This as true in China as
it is in the U.S.
2. Short-term thinking: if we fudge the numbers, lower interest rates, etc.
today, we (politicians, policy-makers, money managers, etc.) will avoid being
sacked tomorrow. The longer term consequences of these politically expedient
policies are ignored.
3. Legitimate capital accumulation has become more difficult and risky than
buying political favors. Global competition and the exhaustion of developed-world
consumers has made it difficult to reap outsized profits from legitimate enterprise.
In terms of return-on-investment (ROI), buying political favors is far lower
risk and generates much higher returns than expanding production or risking
investment in R&D.
4. The centralization of state/central bank power has increased the leverage
of political contributions/lobbying. The greater the concentration of power,
the more attractive it is to sociopaths and those seeking to buy state subsidies,
sweetheart contracts, protection from competition, etc.
5. Any legitimate reform will require dismantling crony-capitalist/state-cartel
arrangements. Since that would hurt those at the top of the wealth/power pyramid,
reform is politically impossible.
6. Understood in this light, it's clear that central bank monetary policy
-- zero-interest rates, asset purchases, cheap credit to banks and financiers,
QE, etc. -- is designed to paper over the structural problems that require
real reform.
Japan is a case in point: the Powers That Be in Japan have put off real reforms
of the Japanese economy and political system for 25 years, and they've enabled
this avoidance by pursuing extremes of fiscal and monetary policy that have
eroded the real economy and created long-term structural imbalances.
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