7 Nov 2017 3:39 pm
Karl Marx and Pierre Joseph Proudhon popularized the term "capitalism" - contrary to popular myth, classical economists like Ricardo and Smith did not use the term "capitalism," even though it was implied in their works.GeorgeWashington » 06 Nov 2017 5:12 pm » wrote:
I’ll give it a shot...
Capitalism is a political and economic system in which governments favor certain industry cartels through legislation and welfare from the public treasury
Production of commodities for exchange instead of use, private accumulation of capital, private ownership of productive property, and wage labor as the primary system of employment are the four mainstay pillars of capitalism.
Before I continue, I am obligated to correct two common myths:
1) that a central bank is anathema to capitalism. I don't know why this libertarian myth has run rampant in the past few years, but it is patently false. The stated purpose of central banks is to stabilize the monetary system (which in turn will stabilize the entire economy - I will not argue that central banks are particularly successful at this job), while in reality central banks act as hit-men for the ruling class, which earn their profits by exploiting the "time value of money" (another capitalist creation). The lie behind the TVM is that idle money in the present is worth more than money in the future. I will not spend time debunking the TVM for now, but suffice to say, it is a tenet of capitalist economics.
2) that a central bank "prints money out of thin air."
Before I debunk this myth, I must point out that I am not arguing central banks don't increase the money supply.
I am arguing that the money doesn't come out of nowhere ("thin air").
This is the critical flaw in Austrian economics, and why it should be fully rejected.
Money is simply a representation of value in a capitalist system. The value, in the end, must come from somewhere. Value cannot be "created out of thin air." It is mathematically impossible.
When the central bank expands its balance sheet by buying securities from the primary banks, the banks are expected to loan out the money at interest. The interest that is to be returned to the bank (based on the principal) represents the increase in money supply.
In reality, many things can happen:
Perhaps the increase in M2 (most widely used metric of circulating money) will lead to an increase in inflation, which robs savers and helps debtors. In this case, the debtors "win" and the creditors "lose."
Perhaps the debtors (people with student loans, people with mortgages) will pay exorbitant interest over the lifetime of those loans. This represents the future value of the debt holder being robbed to pay for the creditor. In most cases, the debtor needs to work/labor to pay off the interest, so money is not being "created out of thin air," but on the backs of the DEBTORS.
Infrequently, the debtor will default, resulting in a net loss of money supply. In this case, value is "destroyed" and no money is being created at all. (Note here that I am assuming we apply a "fair" or "equitable" standard of dealing with defaults, which is to write off the bill completely. Of course, back in reality, the debtors are hounded for the rest of their lives to pay back the money, showing you how powerful the creditors/banking cartels are)
Either way, the point is VALUE must be created to offset the debt, or the increase in debt will lead to default (which will backfire and hurt the Treasury bond holders the most).
But in the standard case, where the debtor/person who loans money from the banking institutions pays back the principal + interest in full, the process of "printing money" means that future (unrealized/unfulfilled) value of labor will be robbed to satisfy the holders of capital (which, in this case, is the money lent out) and pay back the interest. It is this process whereby money is "created."
I literally cannot stress this part enough. The "print money out of thin air" argument fails to incorporate the entire life cycle of money lending and creation.
To summarize my argument:
1) Money is simply a representation of value. If the amount of "value" stays the same, while the money supply increases, inflation will result.
2) Central banks indirectly loan money to the primary banks (BAC, JP Morgan Chase, Wells Fargo, etc.), which then loan out the money to consumers and businesses. Wages and profits are then used to pay back the interest on those loans - it is this source of value that is used to "expand the money supply."
Back to the main topic:
We live under a neoliberal capitalist system today. Anyone who says, "we live under a socialist system because our government spends 40% of GDP!" is lying or ignorant of what socialism is.
Now I want to address a point that you and CP like to bring up, since I feel there is room for error in your analysis.
The "free market" and "capitalism" are minor distinctions as a truly unfettered market never lasts for long - the most powerful players gobble up the small and then use the state to limit access to markets while ensuring the continuity of certain privileges. In fact, this was a central paradox in Marxist economics - competition tends to eliminate competition, resulting in oligopolies and monopolies. There are many reasons for this, including "sunk investment costs" and scaling economies, but I won't write an essay. This phenomenon is easily observable in the real world - Walmart overtakes mom and pop shops by undercutting them and then raising costs once they're out of business, mergers and acquisitions increase profit margins due to less competition, etc.
Initially, a group of competitors might engage in what is considered a "free, competitive market," but it almost never stays this way.
Another fact: Only a retarded mouth-breather like Termin8tor thinks the "the librul left" as opposed to the titans of industry are primarily responsible for weeding out the competition. The imbecile can only stick to talking points on tax cuts, since the subject is the true extent of his " knowledge." Eat **** you stupid moron.