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Too Successful?

Der Spiegel devoted a recent issue of their magazine to the subject of climate change and, in the process, posed the question of whether capitalism is responsible. One look at the chart below from the lead story would suggest an affirmative response.

This is, of course, another case of attempting to find a single root cause where there may, in fact, be many contributing factors, a point that is fleshed out in this comment:

Ironically, both Adam Smith and Karl Marx wrote that capitalism must be controlled and regulated by governments because a system dedicated solely to the amassing of wealth would destroy itself. Unchecked capitalism, as evidenced by global warming, provides an example.

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On Root Cause

My engineering background is no doubt responsible for the discomfort that is experienced when listening to others talk about root cause (i.e., in the peer reviewed world of hard sciences, you can’t just say you’ve found the root cause) and the latest example of this comes from the White House via this Friday Funny at reason.com.

Other examples in the world of economics and finance involve “the lack of aggregate demand” being the proximate cause of our recent malaise and you can take your pick of many root causes (which are highly dependent upon your world view and who signs your paycheck) for the worst financial crisis since the Great Depression that, almost uniformly, reject the view that, as so eloquently noted by Pavlina Tcherneva in this item at New Economic Perspectives, “We live in a casino economy driven by serial asset bubbles”.

Our Possible Futures

From time to time I’ve wondered how Mankind could possibly evolve into anything like what you see on just about any episode of Star Trek given how we seem to be reversing course in many ways in recent years. Others are apparently wondering about the same thing.

From the archive at The Cagle Post.

Paul Krugman and David Stockman offer up some thoughts on Sen. Rand Paul’s much debated “Audit the Fed” bill. First, from the Nobel Laureate via this item at the NY Times.

Here’s my current thought: in some sense money is a really weird thing, which can look to individuals like a real asset — cold, hard, cash — but is ultimately, as Paul Samuelson put it, a “social contrivance” whose value is more or less conjured out of thin air. Mainstream macroeconomics acknowledges the weirdness — in particular, makes heavy reliance on the ability of central banks to create more fiat money at will — but otherwise treats money a lot like ordinary goods. But that intellectual strategy doesn’t come naturally to many people, so there’s always a constituency for monetary cranks.

Yes, anyone who questions the longevity of the world’s latest fling with a pure fiat currency is a monetary crank and, given the staunch defense of the Fed in this latest round of commentaries by the mainstream financial media, that is clearly the consensus view.

Enter David Stockman, former Reagaon Budget Director and monetary crank who teaches us (or, at least, me) a new word in this piece at his Contra Corner blog.

The reason to be fearful about the economic and financial future is that we are in the thrall of a mainstream consensus that is downright meretricious.

Folks, this whole chorus of Fed governors—–yesterday’s lineup included Richard Fisher and Charles Plossner—-defending the sacred “independence” of the Federal Reserve is downright Kafkaesque. Rather than protecting the Fed from meddling politicians, it is the American public that desperately needs protection from the depredations of an unelected monetary politburo that runs the entire financial system.

The outpouring of anti-”Audit the Fed” commentaries is something to behold, as should be clear when looking at today’s links post. I rarely read comments on news stories or blog posts, but I’ve been making an exception for this subject since you can really get a good feel for the vast Krugman/Stockman divide when doing so.

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