Re: [A-List] article and notes

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

90% of market participants do not fully understand how the systems really works
in general or in specific detail, nor do they have complete or equal
information.  The Nobel economists this year were selected on their work on the
dysfunctional market produced by asymmetric information. For those who are not
actively involved, the market produces innovative new instruments and paradigm
every six months.  Yet such new instruments and trades are only the mechanics of
the market.  The structure of the economy is an expression of political power
rather than economic rationale.  The basic rules are politically written, all
market participants must observe the rules in order to play and survive or
prosper.  Market participants do not necessarily support or believe in finance
capitalism. Wall Street has its share of socialists, probably a higher proportion
that the working class.   Yet like members of the working class, Wall Street
socialists toil in a system they hope (or the smart ones know) someday will
fall.  There are as many (if not more) rednecks in the US working class as there
are in any other segment of the population.  Socialism does not find the
proletariat a fertile garden.  Since it requires a certain degree of intellectual
prowess to understand the system, members of the laboring class generally are too
exhausted physically to devote much of their attention to the mechanics of
finance.  Yet the basic rule of finance capitalism is not too complicated or
difficult to understand.  It is to privatize profit and socialize risk.
Structured finance is built on that principle, relying on the too big to fail
syndrome.  The biggest losers in the Eron bankruptcy are the employees who lost
all their pension denominated in worthless Eron shares.

Henry C.K. Liu

Mark Jones wrote:

> At 24/12/2001 12:36, Stan wrote:
>
> >  I have to admit that Henry's and Anne's posts have lost me, not being an
> > economist... Is there a user friendly glossary around for twits like me
> > to help us figure this stuff out, and a kind of Econ 101 that can put
> > this together?  I have more than just selfish reasons for this.  A number
> > of us here in NC want to put together a one-day workshop, aimed at
> > working class folks with, say, a 7th grade reading level, called Economic
> > Literacy, that *begins* to demystify this stuff.  That means we have to
> > become literate ourselves.
>
> This is a must-do I should have thought. Thanks to Anne and Henry, and also
> to Rob Schaap and others, we've managed to at least raise some key
> underlying issues arising from the Enron debacle. Gold and money,
> derivatives and financial markets, energy markets and spot traders v.
> energy monopolies, are interlocking sets of questions about the way the
> system works and what it has in store, but it's a bit like lifting the
> bonnet on a modern car and staring at the mass of tubes before trying to
> fix something with your Swiss Army knife--not very productive so far. I
> also have Stan's feeling that we are not doing justice to the Enron fall-out.
>
> Very big changes in the scenery are becoming apparent now the dust of 9/11
> is beginning to settle. But some of the machinery has come adrift from its
> moorings and there is still a lot of grinding and graunching from the
> imperial gearbox (sorry for laboured metaphor). So the final outcome of
> things like status-jostling between Russia and Iran in the Caspian, the
> permanence of the US presence there, the rapprochement between Russia and
> Nato, etc, may still not be discernible, and there is also the question of
> more terrorist outrages on nuclear power stations and the like, so maybe
> the current surface calm is just apocalypse postponed anyway.
>
> There obviously is some kind of social and economic revival going on in
> Russia (no depression lasts forever) but the emerging 'long view' of
> Russian history--the palpable sense now that the Soviet era was an
> interlude which contained, expressed and preserved many sometimes-hidden
> continuities in Russian life and culture--does not hide the equally facts
> of the drastic and qualitative diminution in the global importance of
> Russia; it is a revival of sorts from a  very low baseline, and probably no
> more than an inflection in a long-term decline. This is certainly true of
> Russian oil. The recent increases in Russian production (as shown in
> Laherrere's paper and also Colin Campbell's, both which I posted here)
> represent no more than a return to the normal trend of depletion following
> the cataclysm of the early 90's. Russian oil and gas are both in sharp
> decline and that is the basal fact for any appreciation of the strategic
> implications of Russian posturing and bullishness. (Also, it's wrong to
> compare Russian reserves with Saudi reserves by lumping oil and gas
> together; that makes nonsense of the whole idea of conventional oil
> reserves. In any case there is no logistical comparison between Russian
> oil, which comes from far away and from inhospitable places, to the oil we
> get from al-Ghawar. When Ghawar dies, western civilisation dies. And
> *that's* critical dependence if you like).
>
> Early next year I plan to post a series of papers on the theory of money,
> the money form of value, and the general question of fiat money, commodity
> money and gold as money and store of value. In all the discussion we have
> had so far there has been no reference to gold's costs of production, but I
> personally am not yet buying off on neoclassical ideas about value. Gold is
> a store of value because it is extremely expensive to produce, ie a lot of
> socially-necessary labour-time is congealed in every ingot. Gold does not
> decay, and is therefore a convenient store of labour-time. But it's
> physical charm and incorruptibility is not the source of its value. Today,
> there is a big disconnect between the value of gold and its price in the
> market, mainly because the market, as Anne and others point out, is rigged.
> When the price and value of gold reconnect it is going to have the
> explosive force of particles of matter and anti-matter colliding, but
> before we can understand what the implications of this are, and how the
> crisis will play out, there has to be a clearer understanding of how gold
> as money works in the first place.
>
> Finally, I asked Leo Panitch if the Socialist Register people would like to
> jointly host with the A-List an on-line seminar on the theme of state,
> democracy, crisis and socialism (broad enough?). Leo agreed in principle,
> but wants to consult. So in the same amicable spirit I am now consulting
> you all. Think about it.
>
> Now I gotta run, Chrsitmas is here, sorry for any logical disconnects in
> any of the above, have a good one.
>
> best to all as ever
>
> Mark