Posts Tagged ‘Larry Summers’

Like What, Exactly? (3)

January 9, 2013 11 comments
1937 – The 9th Party Congress was called the "Rally of Labour" (Reichsparteitag der Arbeit). It celebrated the reduction of unemployment in Germany since the Nazi rise to power.

1937 – The 9th Party Congress was called the “Rally of Labour”. It celebrated full employment in Germany since the Nazi rise to power.

Part Three: Conceived in Nazi Germany, Born in the USA

The search for a solution to the financial crisis

You probably are not aware of this, but in 2008-2009, when the world market faced its darkest hours of the financial crisis, the attention of many mainstream economists, who were desperately looking for a way out of that mess, turned to the halcyon years of the early Nazi regime. Yep, that’s right — economists scrambled to study fucking Nazi economic policies. Most Marxists don’t realize this, but the template for their cherished “social state” was the Nazi policies of the Great Depression.

Really, I am not making this up. Have a look at this quite interesting article from the New York Times in 2009:

“Every so often, history serves up an analogy that’s uncomfortable, a little distracting and yet still very relevant. In the summer of 1933, just as they will do on Thursday, heads of government and their finance ministers met in London to talk about a global economic crisis. They accomplished little and went home to battle the crisis in their own ways. More than any other country, Germany — Nazi Germany — then set out on a serious stimulus program. The government built up the military, expanded the autobahn, put up stadiums for the 1936 Berlin Olympics and built monuments to the Nazi Party across Munich and Berlin.”

Read more…

Robert Kurz: The Road to Devaluation Shock and the Collapse of Capitalism (3)

August 25, 2012 3 comments


3. A society suffocating under the manufacture of overwork

If you are a regular reader of this blog, you are familiar with one of my favorite quotes by that buffoon of fascist state economic policy, Larry Summers, who, in response to a question posed by a reporter on reducing hours of labor as a solution to the horrific unemployment that emerged in the aftermath of the so-called financial crisis, gave this response:

“I think we got the Recovery Act right,” Larry Summers, the president’s chief economic adviser, said in an interview. “The primary  objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable  to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”

Rather than reducing legally mandated hours of work by even one hour, and thereby reducing the need for wasteful and expensive fiscal stimulus by the fascist state at a cost of hundreds of billions of dollars in new public debt, Summers declared the incoming Obama administration was committed to creating more work, compelling more production and inducing more wage slavery, even if this commitment plunged society into bankruptcy. No matter what the cost, unemployment would only be met by an attempt to expand wage slavery still further.

Not one member of the Marxist academy made an attempt to explain why this obviously insane policy was nevertheless considered to be a necessary one by Washington.

Read more…

How quantitative easing works — or doesn’t (Part Three: “works” defined)

November 2, 2010 Leave a comment

Whenever someone undertakes to explain “how quantitative easing works” the first question you should ponder is: how does this person define the term “works”. Remember, cyanide works, and so does aspirin — both will, for instance, cure a headache. How they work may, of course, have an impact on which you choose to treat a hangover.

To understand what is meant when we discuss how quantitative easing works (i.e., the meaning of the word works) we need to look at the role of the central bank.

In a  propaganda pamphlet that would make even Orwell’s Ministry of Truth cringe, titled Quantitative Easing Explained, the anonymous flacks for the Bank of England explain the goal of quantitative easing this way:

Stable inflation promotes a healthy economy: Low and stable inflation is crucial to a thriving and prosperous economy. The Bank of England aims to keep inflation at the 2% target set by the Government. The Bank uses interest rates to control inflation. It sets an interest rate at which it lends to financial institutions – Bank Rate. That influences many other rates available to savers and borrowers, so movements in Bank Rate affect spending by companies and their customers and, over time, the rate of inflation. Changes in Bank Rate can take up to two years to have their full impact on inflation. So the Bank has to look ahead when deciding on the appropriate monetary policy. If inflation looks set to rise above target, then the Bank raises rates to slow spending and reduce inflation. Similarly, if inflation looks set to fall below 2%, it reduces Bank Rate to boost spending and inflation.

Supplying more money why it is needed: The money supply needs to keep growing at a steady rate to keep pace with the expansion of the economy, and to ensure inflation remains close to the Government’s 2% target. Money in a modern economy comprises both cash and bank deposits. Normally, the amount of money grows each year. In the past, there have been periods when money has expanded too rapidly. Too much money circulating in the economy eventually resulted in too much inflation. But if the economy weakens sharply, as it did in the final months of 2008, the problem is different. There is a risk of too little money circulating, not too much.

According to the Bank of England, the supply of currency has to be managed as the economy grows to ensure that the prices of goods rise each year by approximately the official target of 2 percent. When, as at present, the economy is severely contracting — not expanding — central bank intervention is required to keep prices from contracting as well. The primary function of the central bank, therefore,  is not to keep inflation close to the official target, but to ensure that prices never fall.

However, in the present circumstances, conventional monetary policy tools have failed in this task; so the Bank of England is now trying to directly flood the economy with cash:

Same target a new tool: When the Bank is concerned about the risks of very low inflation, it cuts Bank Rate – that is, it reduces the price of central bank money. But interest rates cannot fall below zero. So if they are almost at zero, and there is still a significant risk of very low inflation, the Bank can increase the quantity of money – in other words, inject money directly into the economy. That process is sometimes known as ‘quantitative easing’. The Bank’s Monetary Policy Committee (MPC) meets each month to discuss economic developments and the outlook for inflation. At that meeting, the MPC votes on Bank Rate. It may also decide whether to inject money directly into the economy, and if so, how much.

So we can define the word “works” to mean that quantitative easing, if it is effective, will force you to pay more for everything you purchase. Or, to put it another way, if quantitative easing is successful, your present income will no longer be sufficient to support your material standard of living — you will be 2 percent poorer each year that Washington can achieve its target rate of 2 percent inflation.

In other words, to say quantitative easing works is actually to say YOU WILL WORK — and you work longer and harder each year,  just to maintain the same standard of living. Which should be no surprise to you, since only Wall Street Bankers assume We, the Sheeple of the United States, are so dumb as to not notice that higher prices mean we must work more hours or be paid more for the hours we already work in order to buy the same amount of goods.

At the same time, successful quantitative easing implies that these increasing hours of work, and even higher pay for a given amount of work, must not result in more real goods per hour of work. The additional hours of work put in by the population must consume more of the existing output of society than it adds to it, otherwise there is no inflation.

If, for example, the productiveness of the society should increase by 4 percent in a year, the amount of work actually performed must increase by 4 percent + 2 percent or 6 percent each year to achieve the target inflation rate of 2 percent set by the central bank.

The very idea that a central bank (the big ones are the Federal Reserve Bank, the Bank of England, the European Central Bank and the Bank of Japan) would have as its mandate to actually make society less productive, to make work less productive, is so astonishingly bizarre and conflicts so radically with common sense that few people even appear to notice it. The term productivity holds such an honored position in the national economic myth, it appears patently absurd to think reducing productivity is Washington’s actual goal. Only occasionally do we get a glimpse of its effect on hours of work as seen in this snippet from Bloomberg Business Week:

If there was little surprise in much of the speech, however, [former Obama Economic Policy guru Larry] Summers did offer up one new insight into why unemployment keeps going up so sharply despite the stimulus spending. He argued that productivity has remained stronger at this point in the recession than it has in similar downturns in the past, meaning employers can get by with even fewer workers than might otherwise have been expected. Summers added that the phenomenon is not well understood. Here’s his take:

“The economic contraction has caused significant job loss. It is noteworthy, however, that the higher than forecasted job losses do not appear to be primarily the result of weaker-than- expected GDP. Rather, it appears that a given level of output is being produced with fewer people working than historical relationships would have led one to predict. In economists’ language, there is a significant residual in the Okun’s law relationship: the unemployment rate over the recession has risen about 1-to-1.5 percentage points more than would normally be attributable to the contraction in GDP.

To put the point a different way, normally in economic downturns, productivity decreases as firms keep workers employed even as the amount of work declines. This pattern of deteriorating productivity has not been a feature of the current recession. In fact, productivity has increased in this recession, as it did in the last.

One potential explanation for this phenomenon, though by no means a dispositive one, is that the greater financial pressure on firms in this recession has led them to shed cash flow commitments at an unusually rapid rate by laying off workers and leaving jobs vacant. Perhaps an expectation that the recession would be lengthy has also contributed to this behavior.”

While we — the great unwashed — may think of productivity as a measure of real output per hour of work — how much can be produce in so many man-hours of work — this is not at all how companies measure it. To put it simply, a company measures its productivity by the amount of profit it can produce with a given amount of wage.

Thus, in another article we find:

Of course, there’s the dark side to productivity. Efficient and flexible companies are more likely to shed employees quickly in response to a falloff in demand — real or expected — than they would have been in the 1970s and 1980s when they tended to hoard labor in hopes of an eventual recovery.

“Nowadays, (companies) seem to anticipate a decline in output and lay off workers ahead of time,” said Brookings Institution productivity expert Barry Bosworth.

That may keep productivity high, but with a far different human toll than output-driven productivity of the kind seen in the late 1990s when improvements in information technology led to entire new industries and employment opportunities. Employment grew then, just not as fast as output. The reverse is happening now: the economy is contracting, just not as fast as employment.

It is a common mistake to confuse these two different measures of productivity, but they are not the same and have no relation to each other. Since companies operate to maximize profits, they continually try to squeeze more output from the existing work force. In times of expansion, they hold the rate of growth of their work force to below the rate of growth of demand for their output; and, in times of contraction, they try to reduce the work force more rapidly than the demand for output contracts.

During a contraction, however, and under certain definite conditions, this impulse can lead to an economic death spiral as companies continually eviscerate their work force to shore up profits. When the demand from this work force is the most important source of demand for the goods produced, slashing the work force must result in the progressive collapse of demand for the output itself.

The evidence of this collapsing demand would be generally falling prices — the much dreaded deflation of the economy. Inflation slows, and then stops altogether and reverses, as falling prices invade one after another sector of the economy. Soon, the economy as a whole is engulfed in raging deflation as companies frantically slash the work forces ahead of the drop in demand created by the previous round of layoffs.

The deflation, of course, only signals that profit can no longer be the motive force for the production of goods. But, for capital this amounts to a death sentence, since the motive for capitalist activity is profit.

By the time quantitative easing becomes necessary this death spiral is already approaching like the Mother of All Storms on the horizon. Monetary and fiscal policy have already broken down, and things have truly progressed beyond the point when just any central bank can reverse the process. Policy tools have collapsed because the deflation threat is no longer a national problem but a global one for which there is no national solution.

If the deflation can be avoided, there is only one central bank capable of the scale of intervention necessary to prevent it. It is capable of intervening not because it is a national central bank, but because it already functions as the global central bank: The Federal Reserve, because it controls the world reserve currency, and can, as a consequence, impose inflation not just on the sheeple of the United States, but also on the populations of every country engaged in international trade.

The Freudian Messiah…

October 28, 2010 Leave a comment

You progressives are doomed…

Here: Obama: “Heckuva Job” Summers

The most disturbing moment of John Stewart’s interview with President Obama was when Obama claimed the soon-to-exit director of the National Economic Council, Larry Summers, had done a “Heckuva Job.” It was a statement both profoundly wrong and politically stupid. On so many levels, it was an awful thing to say just days before the election. It is a moment that has honestly made me question Obama’s judgment and basic intelligence.

No! That is not the awful thing.

The awful thing thing is the absolute servility of progressives to the Democratic Party.

What he came to do…

September 22, 2010 Leave a comment

Larry Summers as seen by Michael M. Thomas:

I think Summers, with a deftness that would be admirable were it not so repellent in its long-term effects, in what it has cost this nation, saw that change was talked about, but not initiated. The talk was talked, but the walk was never walked.

That’s what Summers came to do, in my opinion, and that’s what he did. If, in November, he actually leaves the White House, he can with pride and justice flaunt a banner that reads “Mission Accomplished.” On few mortals is such greatness showered.

Now that he has eaten all the food in the fridge, trashed the house, and killed the dog, Larry Summers decides to return to Harvard…

September 21, 2010 Leave a comment

Team Messiah under increasing fire from progressives…

January 10, 2010 Leave a comment

L. Randall Wray calls on the Messiah to fire Summers, Bernanke and Geithner:

There is a growing consensus that it is time for President Obama to fire Treasury Secretary Timothy Geithner. While he is at it, he needs to clean house by firing Larry Summers, by banning Robert Rubin from Washington, and by appointing a replacement for Chairman Bernanke. It is time for a fresh start.

–L. Randall Wray

85,000 more unemployed: Why do Larry Summers and Christina Romer still have a job?

January 8, 2010 2 comments

How much longer will the Messiah get away with his bullshit pretense that shorter working time is not feasible?

Had the labor force not decreased by 661,000 last month, the jobless rate would have been 10.4 percent, say economists including David Rosenberg at Gluskin Sheff & Associates in Toronto and Harm Bandholz at UniCredit Research in New York. “The actual unemployment rate is higher than shown by the official numbers,” Bandholz said.


… Emergency Unemployment Compensation (EUC) benefits [ ... ] jumped from 3,594,253 (11/07/09) to 5,143,410 (12/19/09), up 43% in just over a month! The increase in EUC more than offset the decline in continuing claims and we are now at a new record when combining all measures of unemployment benefits. Economists were pointing out that continuing claims and initial claims were falling as a bullish sign, however what was happening was that those benefits were exhausting for people who used up that benefit, leading to the decline in the numbers which is proved by a record (52.24%) exhaustion rate.

Mish’s Global Economic Trend Analysis

Why beat a straw man when you have Larry Summers?

November 16, 2009 Leave a comment

“I think we got the Recovery Act right,” Larry Summers, the president’s chief economic adviser, said in an interview. “The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”

Thank GOD for Larry Summers!

Isn’t wonderful, when you need an easily identifiable buffoon to ridicule, that you spot Larry Summers across the room? There you were mercilessly beating a straw man, and in walks the real thing!!!

Do you need any more evidence?

We have stated previously that unemployment is not caused by recessions, it is not caused by slow economic growth, it is not caused by the steady improvement in productivity. And, of course, on this account we must be insane, because every discussion of the problem of unemployment by pundits, politicians, business leaders and economists returns to these problems and the pressing issue of how they can be contained and eventually reversed in order to spur the creation of jobs.

The Messiah wonders aloud “how we can work together to create jobs and get this economy moving again.”

This induces a flurry of proposals from economists:

Mark Thoma informs us that he,

“expect[s] structural unemployment to be higher than it was, particularly in the next few years. We had too many resources in housing, finance, and automobile production, and it will take time for the economy to make the necessary structural adjustments … the new target rate of unemployment will rise above the 4 percent level it was at before the recession.”

It’s the new normal, don’t you know. He proposes,

“job training that promotes a better match of worker skills with available jobs, programs that help workers move to places where jobs exist, and programs to induce firms to locate where there is an oversupply of workers, e.g. Detroit, can mitigate some of the impact. Extended unemployment compensation can also cushion the blow for workers during the adjustment period.”

Someone need to tells Mark that there were no plantations in Detroit in the 1840s. Black people became the majority population there because they moved there to find work – and the jobs almost immediately started leaving.

Mark, if you ever happen to read this: FUCK YOU! And stop letting your wife cut your hair – it looks simply awful!

Robert Waldmann over at Angry Bear blog – which should be renamed the Slightly Miffed Wimp Ass Liberal – thinks we just need to further complicate the tax code – because the IRS is just not big enough. He proposes to take tax revenues that don’t even exist yet, and may possibly never exist, and use them to fund the very companies that are already moving their operations to China and Brazil where an economic recovery is already well underway.

I think that there should be a combination of subsidies for new hires funded by revenues from cap and trade (I’m a member of the Pigou club) and an increase in the progressivity of the tax system (not just because I always want to increase the progressivity of the tax system).

Robert, the proper spelling is S-W-I-N-E club, not Pigou. (The OU is silent) And, to be a member you have to believe that anyone who supports a shorter work week also believes there is only a fixed amount of work to go around.

The idea is that there is a fixed number of hours of work demanded and it is better if everyone works part time than if some are unemployed.

Oh. Okay, you qualify.

Another proposal we found interesting, of course, was that of Saint Paul Krugman.

Paul’s sudden conversion to the gospel of shorter work time, unfortunately, is badly marred by the fact that he refuses to acknowledge Tom Walker’s almost continuous monologue on the subject for years – occasionally interrupted by the nay-sayers and the economic field’s equivalent of anti-European Know Nothingism – a slur on the know nothing movement, of course, since at least they split over the issue slavery, while that appears to be the preferred mode of life for the economist.

Says Paul:

The first-best answer — that is, the answer that economic models, like my old Japan’s trap analysis, suggest would be optimal — would be to credibly commit to higher inflation, so as to reduce real interest rates.

The second-best answer would be a really big fiscal expansion, sufficient to mostly close the output gap. The economic case for doing that is really clear. But Washington is caught up in deficit phobia, and there doesn’t seem to be any chance of getting a big enough push.

That’s why, at this point, I’m turning to what I understand perfectly well to be a third-best solution: subsidizing jobs and promoting work-sharing.

Boy wouldn’t you just love being Paul’s date for the prom? My first choice was Beyonce, but she won’t be born for another twenty years. My second choice is Harold, but we’re all still homophobic here in the Sixties. So, I thought, why not take you?

Paul is forced to touch the third rail of economics – work time – reluctantly, and simply because a combination of policy inertia and unconscionably high deficits make all other options unlikely.

Hint to Paul: That is the point of the exercise, buddy. The reduction of hours of work is forced on society because there is no alternative. Every other scheme to avoid such a reduction is cut off – every con game to restart the old normal; every collusion between Washington and Wall Street; every machination to push the consequences of over-work on to those who do the work – it all fails, and finally you will be compelled to limit working time on pain of catastrophe.

Did you think anyone had faith that you and your colleagues would voluntarily limit your blood sucking out of some sense of charity?

Listen Paul, you’re off our shitlist, but you’re still on Double-Secret Probation until you apologize to Tom Walker and Barkley Rosser for stealing their insights.


Can we be any more explicit in this?

Do we need to offer any more evidence than the words of the chief economic adviser to Barack Obama that, “The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”

The policy is to encourage unemployment, the primary objective of that policy is to compel more work, more product, and more wage slaves by pushing people to the edge of starvation. This is the official policy of the Obama administration – not our interpretation of that policy arrived at by deduction – the official policy!

Why unemployment is ignored by Washington…

November 9, 2009 Leave a comment

An interesting exchange with Larry Summers, the shithead who advises the Messiah on issues of unemployment:

summerssmallWhite House officials express confidence in the steps taken, saying the stimulus is spending money and creating jobs ahead of schedule, and forestalling far higher unemployment. They say they opted against direct jobs programs not for political reasons but because they thought such efforts would not produce long-term value. And they have not pushed the private-sector job-sharing idea — being promoted by Sen. Jack Reed (D-R.I.) — because they want to build real demand for workers, not just spread work among more people.

“I think we got the Recovery Act right,” Larry Summers, the president’s chief economic adviser, said in an interview. “The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”

Why would it be a concern of Larry Summers whether the problem of unemployment is solved by sharing the available work – and the available time off – or creating “real demand” for more work? As long as people were able to pay their bills and were satisfied with their real standard of living, why would Washington have a preference?

We’re glad you asked that question.

If, from Washington’s perspective, the problem of unemployment was a problem of people being evicted from their homes and going hungry, one would imagine any solution which dampened this pain would be considered by a democratically elected government responsive to those who placed it in power.

After all, the point is the well being of those who elected you, and by whose sufferance you remained in power.

But, suppose that government had its own agenda, the pursuit of which compelled it to feign concern with the condition of its constituents, but which, as a practical matter, stood in contradiction to the interests of its constituents. Suppose, in other words, that government saw it in its own interest that unemployment must be solved by creating more work, rather than sharing the available work – and the available time off from work.

As we have noted, a good deal of the artificial stimulus at work in the economy, which has produced the most recent uptick in economic activity, was nothing more than rapidly rising expenditures on military expansion.

That military expansion costs money which is being borrowed at an astounding rate. To service that newly acquired debt requires increasing tax revenues, which, if it not to be raised by increasing taxes, must be realized through increased economic activity.

Sharing work does not increase economic activity, it reduces it. If economic activity is falling, then tax revenues are falling, and debt becomes more difficult to service. If it falls fast enough and far enough, the accelerated military buildup cannot be maintained.

So to preserve his quiet military buildup, the Messiah and his henchmen have to get the economy growing and employment rising. And, any proposal to reduce work time must be avoided at all costs.

h/t Tom Walker


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