PDA

View Full Version : Marx was right. Wall Street Journal Interview


Florian
08-14-2011, 01:05 PM
http://online.wsj.com/video/roubini-warns-of-global-recession-risk/C036B113-6D5F-4524-A5AF-DF2F3E2F8735.html

From the interview with Dr. Roubini:

"Karl Marx had it right. At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually rational...is a self-destructive process."

sugarkang
08-14-2011, 01:19 PM
http://online.wsj.com/video/roubini-warns-of-global-recession-risk/C036B113-6D5F-4524-A5AF-DF2F3E2F8735.html

What do you suggest we all do?

Florian
08-14-2011, 01:24 PM
What do you suggest we all do?

I have no idea. Bury your head in the sand?

But you have already done that, haven't you?

Ocean
08-14-2011, 01:35 PM
http://online.wsj.com/video/roubini-warns-of-global-recession-risk/C036B113-6D5F-4524-A5AF-DF2F3E2F8735.html

From the interview with Dr. Roubini:

"Karl Marx had it right. At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually rational...is a self-destructive process."

I just wanted to add the rest of that paragraph because it illustrates something very basic that keeps being forgotten or dismissed:

From the point of the businessperson: "My labor costs are someone else's labor income and consumption."

Past a certain point, redistribution of income and income inequality becomes self-destructive. It collapses aggregate consumption, and capital, which in itself is nonexistent, implodes.

sugarkang
08-14-2011, 01:36 PM
I have no idea. Bury your head in the sand?

But you have already done that, haven't you?

No. But I did watch the video. He basically repeats the Krugman mantra. Aggregate demand, balance sheet recessions, liquidity trap. We need to spend. Gotcha. Sounds like a great solution. Only, there's no political will and Democrats didn't make the case. So, we're stuck.

Florian
08-14-2011, 02:02 PM
No. But I did watch the video. He basically repeats the Krugman mantra. Aggregate demand, balance sheet recessions, liquidity trap. We need to spend. Gotcha. Sounds like a great solution. Only, there's no political will and Democrats didn't make the case. So, we're stuck.

Stuck in the mud, deep in the mud, but I thought he did a good job of explaining how the US got stuck in the mud and how Obama had nothing to do with it.

So there, Tea Partiers and assorted Republican nutcases.... It takes an immigrant from the Soviet Union to set you straight.

apple
08-14-2011, 08:09 PM
Past a certain point, redistribution of income...becomes self-destructive.

Alright, who hacked Ocean's account?

Ocean
08-14-2011, 09:03 PM
Alright, who hacked Ocean's account?

For a long time I've been suspecting that I have an evil alter ego that betrays me when I'm distracted. ;)

But, nah, what I meant is redistribution from labor to capital, from working and middle class to the wealthy.

TwinSwords
08-14-2011, 10:27 PM
For a long time I've been suspecting that I have an evil alter ego that betrays me when I'm distracted. ;)

But, nah, what I meant is redistribution from labor to capital, from working and middle class to the wealthy.

Yes.

Like this:

http://img836.imageshack.us/img836/387/inequality4.png

ledocs
08-15-2011, 10:04 AM
This is it, the locus classicus refutation of supply-side garbage as promulgated by the likes of Gregory Mankiw (see the response to Mankiw's advocacy for abolition of the estate tax at my blog.)

...I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Source: Warren Buffett

http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?hp

I have written this exact thing many times, but I don't have Buffett's cred. Man, it's just mind-boggling the crap that people will believe, people who don't know shit from shinola.

TwinSwords
08-15-2011, 10:20 AM
Thanks very much for posting that, ledocs.

I'll just supplement with Buffett's common sense solution:

I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

ledocs
08-15-2011, 11:25 AM
Nouriel Roubini was born in Istanbul, Turkey, to Mizrahi Jewish parents.[1] When he was age two, his family moved to Tehran, Iran, and later he lived in Israel. From 1962 to 1983 he resided in Italy where he attended Bocconi University in Milan, and then he moved to the United States to pursue his business doctorate in international economics at Harvard University.[1] He is a U.S. citizen and speaks English, Persian, Italian, and Hebrew. Currently, he is unmarried and lives in Manhattan.[6][7]

Source: English Wikipedia

I like Roubini a lot, of course. His analysts led me astray in 2010 on the dollar-euro rate, which I am forced to track, due to my living circumstances. I get abstracts of his newsletter, but I am not inclined to become a paying client, because of the fact, for example, that their dollar-euro forecast was so far off in 2010. I think the service is fairly expensive, also. On the other hand, I did sell all of our US stock holdings at the close last Wednesday, a difficult decision for me, because I had stupidly bought some stock mutual funds or a balanced fund weighted 60% stocks recently, but now I am much more comfortable with taking a relatively small loss, having heard this interview. I will now wait for DOW 8000 or for the stabilization in asset prices that could arrive per Roubini, but which I do not expect, before putting any money into stocks.

I expect global recession or near-recession and a steady decline in US stock prices over the next year or two. Stock prices are inflated because of very low interest rates, obviously. Retirees like me then stretch for yield in order to earn more than two percent on a long-term Treasury or CD, just as investors earlier bought mortgage-backed securities in a stretch for yield.

Florian
08-15-2011, 01:06 PM
Thanks for the correction. There was something in Roubini's accent and the mistakes he made that made me think he was Russian, but on listening to him again I see that I was wrong.

I didn't sell off this time, because I had already gone bearish on American and European stocks in December. And besides, I know from sad experience that you should never sell in a market rout.

ledocs
08-15-2011, 01:34 PM
And besides, I know from sad experience that you should never sell in a market rout.


"Never say never." It clearly depends upon whether you sell at the beginning or the end of the rout, if and when things are going to stabilize and at what level, and so on. It would have been better to sell before the most recent rout, that's for sure, and that's what I ought to have done and might well have done, had I been paying more attention. I am going to formulate some lessons learned since October 2008 for myself and some new rules for investing and try to stick to them. Marc Cuban also had some interesting things to say about investing in that same WJS series of interviews.

Roubini was not really agreeing with you on this point, either. He seemed to be saying that it made sense to sell stocks now, because downside risk is much greater than the risk of missing the first part of a new rally. "You can always buy in again in two-three months, if things have stabilized at a [slightly] higher level." I agree with Roubini on the first part of this analysis, not on the second (buying back in at a higher level), but my disagreement about the second part has to do with my personal circumstances, about which he is of course completely ignorant.

I came very close to predicting the bottom of the last market rout in 2008 in another online group. I said Dow 6000, it got to 6050. On the other hand, I never thought that that would be the beginning of another huge bull market over the next three years or so.

Ocean
08-15-2011, 01:43 PM
This is it, the locus classicus refutation of supply-side garbage as promulgated by the likes of Gregory Mankiw (see the response to Mankiw's advocacy for abolition of the estate tax at my blog.)



Source: Warren Buffett

http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?hp

I have written this exact thing many times, but I don't have Buffett's cred. Man, it's just mind-boggling the crap that people will believe, people who don't know shit from shinola.

Thank you, ledocs.

That was a good article reminding us of the reality behind all the bullshit and idiocy we have to hear around here. If this article came from someone with lower income, we would be hearing that the reason they write it is because they're "jealous".

sugarkang
08-16-2011, 02:58 AM
Sigh. Here you go, socialists. Here's how it works (http://techcrunch.com/2011/08/15/screw-the-rich-heres-how/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29).

miceelf
08-16-2011, 07:20 AM
Sigh. Here you go, socialists. Here's how it works (http://techcrunch.com/2011/08/15/screw-the-rich-heres-how/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29).

Really? he lost me at "tax the rich into the middle class", as if that's remotely related to what anyone is actually proposing.

sugarkang
08-16-2011, 07:32 AM
Really? he lost me at "tax the rich into the middle class", as if that's remotely related to what anyone is actually proposing.

He's just being hyperbolic, but it isn't even the point. You know that I've advocated taxing the rich more in our previous exchanges, but there's a general misunderstanding of how "rich" people acquire wealth. Most of it's in capital gains, but a lot of them are in tax-free municipal bonds and other shelters.

The only reliable way to really "stick it to the rich" is to inflate the dollar. Krugman wants that. But even that has its own consequences. I'm all for trying it if you can get the political will. Doubt it, though.

This whole "tax the rich" business is the left's version of "Obama's a Muslim!"

miceelf
08-16-2011, 10:34 AM
The only reliable way to really "stick it to the rich" is to inflate the dollar. Krugman wants that. But even that has its own consequences. I'm all for trying it if you can get the political will. Doubt it, though.

This whole "tax the rich" business is the left's version of "Obama's a Muslim!"

But this assumes that the motivation is to stick it to the rich, rather than simply to include increased revenue, through progressive taxation, in the solution to our fiscal problem. His piece assumes the same thing. Which is why I find it pretty irrelevant.

Sure, if the goal of most on the left was to reduce the wealthy, then his piece would make sense. But the fact that increased tax rates wouldn't materially affect the wealthy at all, which he sees as an argument against doing so (because he assumes the motivation), is actually an argument FOR doing so.

ledocs
08-16-2011, 10:41 AM
"Why do you rob banks, Mr. Dillinger?"

"I go where the money is."

["It's not personal, just business."]

Ocean
08-16-2011, 10:53 AM
But this assumes that the motivation is to stick it to the rich, rather than simply to include increased revenue, through progressive taxation, in the solution to our fiscal problem. His piece assumes the same thing. Which is why I find it pretty irrelevant.

Sure, if the goal of most on the left was to reduce the wealthy, then his piece would make sense. But the fact that increased tax rates wouldn't materially affect the wealthy at all, which he sees as an argument against doing so (because he assumes the motivation), is actually an argument FOR doing so.

I agree with that. Also, I was puzzled by the fact that the article's quality is so poor, especially for someone who claims to be so accomplished as the bio shows.

sugarkang
08-16-2011, 11:07 AM
But this assumes that the motivation is to stick it to the rich, rather than simply to include increased revenue, through progressive taxation, in the solution to our fiscal problem. His piece assumes the same thing. Which is why I find it pretty irrelevant.

Sure, if the goal of most on the left was to reduce the wealthy, then his piece would make sense. But the fact that increased tax rates wouldn't materially affect the wealthy at all, which he sees as an argument against doing so (because he assumes the motivation), is actually an argument FOR doing so.

I'm a big Buffett fan. I've read his compiled essays. However, Arrington has a point.


Then I figured it out. As I wrote then, the super rich won’t mind at all if we “tax the rich” as it’s currently defined. That’s because people who are super rich don’t really pay taxes. They pay taxes on this year’s income, and capital gains on accumulated wealth. But the only “tax” that can ever touch what they’ve already made is inflation.

Whatever charts that TwinSwords put up (in another thread) is irrelevant. That's all money that the rich have accumulated so it looks ridiculously skewed. Not to say that the rich don't have that much money. They probably do. But to get it, you'd have to do it through inflation. But I bet the rich would move even quicker than the Fed and screw our economy more.

Back to taxes. All that's taxable is the year's income and capital gains. What's our GDP? $15 trillion. What's our debt? About $15 trillion. So, even if you took all the revenue for goods and services for the entire country, you could pay off the debt. That's if everyone in the country worked for free, spent zero money and gave it all to the government. So, realistically how much money do you think we can get from the rich? I'm going to ballpark it to $1 trillion. But I've seen projections that show government spending way outpacing that.

I'm all for taxing the rich. I really am. But I've said it many times before. It won't meet the shortfall. The S&P report said that the cause of the downgrade was spending, no tax increases and political brinksmanship. But what's underneath all of that? It's spending. If you don't have crazy spending, you don't have a credit rating problem.

All I'm saying is that the left's anger is not matched to reality. There were only two possibilities for Congress. The first, is the Tea Party's game of chicken. The second was Obama's $4 trillion deal (that I supported). Either way, it was going to result in major cuts. And you don't have to take my word for it. Krugman was yelling at Obama in his columns, calling him a moderate Republican.

So, what is everyone angry about? This is a lot less about tax rates and Tea Party antics. It has everything to do with the economy being in a slump and people wanting to assign blame. If the economy picked up tomorrow, we wouldn't have a fiscal crisis. Even without raising taxes. The way it is now, raising taxes on the rich won't make up the shortfall in revenues caused by the economic slowdown.

miceelf
08-16-2011, 11:16 AM
Back to taxes. All that's taxable is the year's income and capital gains. What's our GDP? $15 trillion. What's our debt? About $15 trillion. So, even if you took all the revenue for goods and services for the entire country, you could pay off the debt. That's if everyone in the country worked for free, spent zero money and gave it all to the government. So, realistically how much money do you think we can get from the rich? I'm going to ballpark it to $1 trillion. But I've seen projections that show government spending way outpacing that.



Well, sure. It won't all by itself solve the entire problem in a year. I don't know of anyone who says otherwise.

In RL, most people who go bankrupt do so because they've lost revenue AND had an unexpected surge in spending (e.g., a health crisis). No one is claiming spending is part of the problem, but you also agree that revenue is part of the problem, and it's unclear what else to take from the article, other than "if you really want to soak the rich, give up, because you can't get most of their money away from them." Well, most people don't want to soak the rich.

sugarkang
08-16-2011, 11:26 AM
Well, most people don't want to soak the rich.

I don't think you do, but I think many out there do. Look at the title of this thread. I'd say definitely raise taxes on the rich and do cuts. But what happens if our deficit grows? Do we tax more from the rich? Even more? This is what Arrington's getting at.

From what I've read about the UK, most of the looters are not "needy." Transferring all the money from the rich to the poor to make their lives a bit more posh doesn't give the poor the requisite skills to participate in the economy. If we head down that path here, we'll have another generation of well-fed, undereducated non-participants in the economy. There needs to be a different solution.

stephanie
08-16-2011, 11:37 AM
Sure, if the goal of most on the left was to reduce the wealthy, then his piece would make sense. But the fact that increased tax rates wouldn't materially affect the wealthy at all, which he sees as an argument against doing so (because he assumes the motivation), is actually an argument FOR doing so.

This is exactly right.

stephanie
08-16-2011, 11:50 AM
So, what is everyone angry about? This is a lot less about tax rates and Tea Party antics. It has everything to do with the economy being in a slump and people wanting to assign blame.

Why people in general are angry has to do with the economy, of course. But when one looks at the trends -- the types of charts TwinSwords puts up being part of this -- it appears that the trend has been huge growth for the rich, and losses for everyone else. It's possible to dispute this, sure, that's a separate topic, the state of the middle class. But I think it's obvious there's a perception in the country that the middle class is struggling -- that's at the heart of some of the TP rhetoric (they like to claim that all of our government spending is for welfare for the rich and poor, however factually inaccurate that is and inconsistent with their policies aside). It's also at the heart of the anger by many at the refusal to raise taxes on the rich. It's not about blame, so much as the idea that the policies pursued over the past 30 years have disproportionately benefited the rich and burdened the middle class, and yet the smallest efforts to rectify this, through minimal increases in taxes, are fought in this disproportionate way, portrayed as some kind of radical demand.

That's why the argument that the increases would have a minimal effect is bizarre. Even that is too much, apparently. That's what causes the anger.

If the economy picked up tomorrow, we wouldn't have a fiscal crisis.

Obviously, yes. That's why the insistence that we must do something about the debt NOW (starting with the election of Obama, even though most ofthe people involved probably were saying that the deficit/debt was a non-issue during the Bush era and probably the Reagan era if old enough) was a BS issue, and why the left has responded by showing that the huge increase in the debt was not attributable for the most part to Dem policies, but always happens in a recession. Apparently you are agreeing with this, but it's the right who has been ignoring it since '08.

sugarkang
08-16-2011, 12:11 PM
This is it, the locus classicus refutation of supply-side garbage as promulgated by the likes of Gregory Mankiw (see the response to Mankiw's advocacy for abolition of the estate tax at my blog.)

Are you sure (http://old.nationalreview.com/moore/moore022803b.asp) about Mankiw being a supply-sider?


I would refer the White House to the third edition of his book Macroeconomics. In that book, Mankiw refers to Ronald Reagan’s supply-side advisers as "charlatans and cranks."

As far as bringing back the estate tax, I'm just going to guess that you favor it, like anyone else on the left. Only, it won't capture who you think it will capture. All rich people do estate planning through trusts. None of their wealth will be captured by the estate tax. All you will do is penalize the people who have died suddenly without having done any estate planning -- likely middle-class and lower. Good intentions fail again.

miceelf
08-16-2011, 12:51 PM
As far as bringing back the estate tax, I'm just going to guess that you favor it, like anyone else on the left. Only, it won't capture who you think it will capture. All rich people do estate planning through trusts. None of their wealth will be captured by the estate tax. All you will do is penalize the people who have died suddenly without having done any estate planning -- likely middle-class and lower. Good intentions fail again.

Estate planning doesn't completely eliminate estate tax. And middle class and lower people will not be captured by any of the estate taxes proposed, given the very high floors for such tax proposals.

sugarkang
08-16-2011, 01:19 PM
Estate planning doesn't completely eliminate estate tax. And middle class and lower people will not be captured by any of the estate taxes proposed, given the very high floors for such tax proposals.

Why do you guys hate social security privatization so much? Honest question. Do you not see the Ponzi scheme? 35 year olds are paying for 65 year olds under the assumption that 30 years in the future, some new generation will pay for the current workers. What's to ensure that the current workers will have a support system in the future? We can barely plan 5 years into the future.

miceelf
08-16-2011, 01:41 PM
Why do you guys hate social security privatization so much? Honest question. Do you not see the Ponzi scheme? 35 year olds are paying for 65 year olds under the assumption that 30 years in the future, some new generation will pay for the current workers. What's to ensure that the current workers will have a support system in the future? We can barely plan 5 years into the future.

This is a change of topic, but that's fine. Social security has worked very well for nearly 80 years. As ponzi schemes go, that's pretty good.

Privatization is as best as I can tell intended primarily to shift risk onto the individuals, and shift some taxpayer money to the people who would administer the private plans, taking their cut.

Whatever uncertainties exist around the current social security system (again, it's worked fine for nearly a century), there are even more in a privatized system.

sugarkang
08-16-2011, 02:19 PM
This is a change of topic, but that's fine. Social security has worked very well for nearly 80 years. As ponzi schemes go, that's pretty good.
Sorry, it was indeed a poor transition. However, it's related as to the matter of fiscal deficit. One of the big 3 of our spending problems.

Privatization is as best as I can tell intended primarily to shift risk onto the individuals, and shift some taxpayer money to the people who would administer the private plans, taking their cut.
What about instead of paying social security for people 30 years older than you, how about the government set aside 10% of your own salary in an account that you can access when you're 65? Wouldn't that make a lot more sense? In 30 years, you don't know what the population will look like.


Whatever uncertainties exist around the current social security system (again, it's worked fine for nearly a century), there are even more in a privatized system.
So, it's the perception of safety. That's good to know.

miceelf
08-16-2011, 02:57 PM
What about instead of paying social security for people 30 years older than you, how about the government set aside 10% of your own salary in an account that you can access when you're 65? Wouldn't that make a lot more sense? In 30 years, you don't know what the population will look like.

Sure, except that the government (or some of them, anyway) will raid that. We had the model you describe for a long time. but those pots of money are pretty tempting- remember Gore's "lockbox."

it's not about perception. You are saying that the current system is full of uncertainty because people don't know what the population or the government will look like in 30 years. That goes double for the private market.

sugarkang
08-16-2011, 03:05 PM
Sure, except that the government (or some of them, anyway) will raid that. We had the model you describe for a long time. but those pots of money are pretty tempting- remember Gore's "lockbox."

it's not about perception. You are saying that the current system is full of uncertainty because people don't know what the population or the government will look like in 30 years. That goes double for the private market.

Except, most Americans save for retirement through their 401K anyway. Why not have a diverse group of assets: gold, US stocks, foreign stocks, commodities, etc. I don't think there's any better protection really. Fiat money managed by a giant government is the most unsafe thing I can think of.

Government can't raid it if it's taken out of your paycheck and put into trust for you. Basically, you own it. The government is more like a trustee.

miceelf
08-16-2011, 03:48 PM
Except, most Americans save for retirement through their 401K anyway. Why not have a diverse group of assets: gold, US stocks, foreign stocks, commodities, etc. I don't think there's any better protection really. Fiat money managed by a giant government is the most unsafe thing I can think of.

Government can't raid it if it's taken out of your paycheck and put into trust for you. Basically, you own it. The government is more like a trustee.

I guess. I am not sure that the majority of Americans have a 401K. Do we know that?

sugarkang
08-16-2011, 05:19 PM
I guess. I am not sure that the majority of Americans have a 401K. Do we know that?

I don't know about the majority of Americans. But of the ones who save for retirement, I believe that 401K stocks are most common.

miceelf
08-16-2011, 07:39 PM
I don't know about the majority of Americans. But of the ones who save for retirement, I believe that 401K stocks are most common.

That;s probably true. I just wonder how many americans that actually is, though.