Have you read my paper? http://escholarship.org/uc/item/42p5m46m
You are right, but they didn’t last time either.
Yes, they have been. I don’t have comparative data for last time, but the crude proxy in my paper suggests they are doing a better job now, but then I would point out that we didn’t have WW I this time.
Short answer is I don’t know. The experience last time suggests that once a sense of crisis was generated by the stock market collapse, elites came around. In summer 1932 Ben Graham (later called the “Dean of Wall Street”—Warren Buffet is his most famous protégé) wrote an article in which he stated one third of the NYSE was worth less than the cash they had on hand. That is, had private equity shops and the LBO existed back then those companies would have been bought, their employees dismissed and the physical assets liquidated, while the new owners would walk away with that cash they had bought for 90 cents on the dollar. Had this happened unemployment would have risen in 50%. And most of the rest of private businesses been wiped out. The state, would have had no choice but to act to prevent this by nationalizing all at-risk business in a controlled bankruptcy procedure that would wipe out the shareholders. Much of the capitalist elite would cease to exist. Face with imminent risk of social death elites flocked to FDR and his “New Deal” as their last Best Hope. A massive bull market began (the greatest in history) in anticipation of their Savior. It was completely irrational; Wall Street later came to hate FDR. But in times of crisis human beings cling to life rafts, and FDR with his jaunty style and willingness to do what we necessary (he effectively ended the gold standard by presidential order—ending 200+ years of intra-elite argument, with the stroke of his pen). That simple act established the bottom and began 40 years of Democratic dominance. It shows what the right person at the right time can do. But the timing is everything. The grey champion must arise here: https://www.youtube.com/watch?v=76cHROrZFNc
If the capitalist crisis hypothesis is valid then the stock market has a “stealth” overvaluation. And so yes, investors will be dangerously leveraged.
They vote for the other side in times of trouble, that’s not the problem. The issue is getting the capitalist elites to back off. Only financial collapse can do that.
David Horn Wrote:I don't see elites factoring in the decline in economic activity that too little disposable income is already creating.
You are right, but they didn’t last time either.
Quote:So far, they've been good at squeezing more profits out of companies by squeezing the working class hard: offshoring, automation and the use of contractors being the most prominent.
Yes, they have been. I don’t have comparative data for last time, but the crude proxy in my paper suggests they are doing a better job now, but then I would point out that we didn’t have WW I this time.
Quote:The real question, and you may have a better handle on this than I do: when does this start to affect revenues enough to make squeezing ineffective? In other words, when does the merry-go-round finally stop?
Short answer is I don’t know. The experience last time suggests that once a sense of crisis was generated by the stock market collapse, elites came around. In summer 1932 Ben Graham (later called the “Dean of Wall Street”—Warren Buffet is his most famous protégé) wrote an article in which he stated one third of the NYSE was worth less than the cash they had on hand. That is, had private equity shops and the LBO existed back then those companies would have been bought, their employees dismissed and the physical assets liquidated, while the new owners would walk away with that cash they had bought for 90 cents on the dollar. Had this happened unemployment would have risen in 50%. And most of the rest of private businesses been wiped out. The state, would have had no choice but to act to prevent this by nationalizing all at-risk business in a controlled bankruptcy procedure that would wipe out the shareholders. Much of the capitalist elite would cease to exist. Face with imminent risk of social death elites flocked to FDR and his “New Deal” as their last Best Hope. A massive bull market began (the greatest in history) in anticipation of their Savior. It was completely irrational; Wall Street later came to hate FDR. But in times of crisis human beings cling to life rafts, and FDR with his jaunty style and willingness to do what we necessary (he effectively ended the gold standard by presidential order—ending 200+ years of intra-elite argument, with the stroke of his pen). That simple act established the bottom and began 40 years of Democratic dominance. It shows what the right person at the right time can do. But the timing is everything. The grey champion must arise here: https://www.youtube.com/watch?v=76cHROrZFNc
Quote:Will the capitalists be massively overextended when it does?
If the capitalist crisis hypothesis is valid then the stock market has a “stealth” overvaluation. And so yes, investors will be dangerously leveraged.
Quote:We have a 40-year pattern of this steadily gaining speed, and the LMC and much of the MC is firmly on the side of capital. They blame the politicians.
They vote for the other side in times of trouble, that’s not the problem. The issue is getting the capitalist elites to back off. Only financial collapse can do that.