Obama and Philosophy

josef k. said:

Intriguingly, you find yourself here in theoretical company with none other than George Soros, who speaks of the financial crisis in his most recent book thusly:

"I find this the most shocking abdication of responsibility on the part of the regulators. If they could not calculate the risk, they should not have allowed the institutions under their supervision to undertake them. The risk models of the banks were based on the assumption that the system is stable. But, contrary to market fundamentalist beliefs, the stability of financial markets is not assured; it has to be actively maintained by the authorities. By relying on the risk calculations of the market participants, the regulators pulled up the anchor and unleashed a period of uncontrolled credit expansion."

Soros, of course, is not opposed to capitalism per se - but rather only unregulated capitalism, as embodied in the "market fundamentalist" doctrine of neoliberalism. Is it fair to read your own position as well in these terms?

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I'm not in 'theoretical' agreement with Mr Soros, as seemingly seductive as that illusion may be. No, I would more identify with communism and materialism [didn't, ahem, you once?]. I favour destroying the precious market and its 'stabilizing' Big Other authorities that Soros et al invoke to guarantee their world and their runaway egos . Soros is a 'qualified' neoliberal sociopath (someone who has ruthlessly and destructively practiced neoliberal finance capitalism (including holding entire economies to ransom via his currency speculation - off to the gulags with him ) for decades while nostalgically pining for a time when patriarchal capitalism was the order of the day, when he could exercise total control. It wasn't that they couldn't 'calculate' risk; they spend billions doing precisely this. It is that their very conception of risk was turned on its head (ie if some investment was deemed risky that meant higher potential returns could/can be made [the so-called risk/return tradeoff on which 'finance theory' is founded]; as we want higher returns, therefore we'll obviously invest in risky projects, flattering ourselves by covering our risk with dummy insurance products like CDS.

But there were other - imperialist - reasons for the runaway credit expansion.

waffle said:

Firstly, I stated that they were one of the principal culprits, having been facilitated by borrowing hundreds of billions of zero-interest based funds from the Japanese banking system between 2001-2006 (then freaking out when Japan returned to usury by raising its rates to 0.5%). The chief-culprit was total deregulation of finance capitalism, enabling a vast range of institutions from investment banks, stockbrokers, exchanges, hedge funds, traders, finance-instrument inventor-gurus, etc to act completely irresponsibly and unaccountably. Secondly, that wild-west ethos quickly colonized 'normal' finance institutions, from the Fannie/Freddies to the pension funds to the neoliberal ideologues within central banks and 'regulatory' authorities dictating policy.

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But also shorting the same bets in the opposite direction? There's plenty to be disgusted with, without misrepresenting hedge funds' role in the crisis, you know.

Chief-culprit? What about capital flows?

You're unsure because that wasn't what I was thinking, nor what I actually said. I wrote that its problem does not relate to the classic microeconomic stereotype of 'lack of competitiveness' (resolved by increased productivity via technical innovation/investment ['retooling']), but to systemic illiquidity and insolvency, for the reasons already outlined. Japan made this misrecognition mistake in the 1990s, at great cost.

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If GM get a better margin per car sold, they'll be better positioned to deal with falling demand and higher interest rates for their debt.

vimothy said:

But also shorting the same bets in the opposite direction? There's plenty to be disgusted with, without misrepresenting hedge funds' role in the crisis, you know.

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But it was such so-called 'hedging' via derivatives/swaps/options/futures that then 'justified' yet more massive credit expansion ("Look! See!? We've covered all our risks!") It's how a bubble works, insular 'fiddling while Rome burns"). BTW the hedge funds did have a central role: their are some 9,000 of them, all their owners secretly registered in such off-shore tax havens as the Cayman Islands, Isle of Man, Delaware etc, controlling trillions in capital flows.

Chief-culprit? What about capital flows?

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What about them? The onus is on you to educate yourself (as with the Chicago School's central involvement in Neoliberal Laboratory Chile in the 1970s) on the topic rather than asking stupid questions purely intended to derail the discussion ("But Mommy, WHY does the earth revolve around the sun? Gravity? That's stuuupid! The onus is on you to explain and prove everything to me, not on me to learn anything for myself!").

If GM get a better margin per car sold, they'll be better positioned to deal with falling demand and higher interest rates for their debt.

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Not if they don't even have the funds to produce anything at all. And 'better margin' is neoliberal-speak for redundancies and wage cuts, then cosily threatening the remaining staff that unless they 'get with the programme' and work harder as 'team players' the same fate will befall them too, the present scenario.

waffle said:

But it was such so-called 'hedging' via derivatives/swaps/options/futures that then 'justified' yet more massive credit expansion ("Look! See!? We've covered all our risks!") It's how a bubble works, insular 'fiddling while Rome burns"). BTW the hedge funds did have a central role: their are some 9,000 of them, all their owners secretly registered in such off-shore tax havens as the Cayman Islands, Isle of Man, Delaware etc, controlling trillions in capital flows.

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Hedging and hedge funds are not the same thing. Hedging as you understand it here was not principally undertaken by hedge funds. And neither explain the bubble we have just experienced.

What about them? The onus is on you to educate yourself (as with the Chicago School's central involvement in Neoliberal Laboratory Chile in the 1970s) on the topic rather than asking stupid questions purely intended to derail the discussion ("But Mommy, WHY does the earth revolve around the sun? Gravity? That's stuuupid! The onus is on you to explain and prove everything to me, not on me to learn anything for myself!").

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Capital flows is at least 50% of what's just happened. At least.
Where is your argument? Beyond the bullsh*t, what is there? Why is Chile important? Chile is irrelevant.

Lenin's tomb on Obama:

But honestly. The real source of urgency in this campaign has nothing to do with Obama's lacklustre policies, or the (Small) Change You Can Believe In. It is the threat of another four years of elephantine extremists and pachydermic psychos in the White House. On that index, the election is fundamentally, structurally about despair, and panic. The least worst option in the choice between Obama and McCain is a return to 'normal' after years of giddy ruling class plunder. A plunder which was accomplished largely by terrorising the public with one crisis after another, by megaphoning selected portions of bin Laden's cavebound ramblings, by persuading a majority of the American public that a threat from Saddam was imminent and that he had something to do with 9/11, by arresting tupperware terrorists on spurious charges of conspiracy, and so on. Obama, with his modest reform package and his soothing bromides, personifies that desired sense of normality, and I suspect he understands this perfectly well. To be sure, he is conventional and conformist, and he is more socially conservative than most liberals would like. He is aligned to the interests of Wall Street, whose luminaries are bankrolling his campaign, and he will almost certainly be on the case of privatising social security in part or whole at some point. He is an American imperialist, and will be up to his knees in blood in no time at all if elected.

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http://leninology.blogspot.com/2008/09/no-we-cant.html

josef k. said:

Intriguingly, you find yourself here in theoretical company with none other than George Soros, who speaks of the financial crisis in his most recent book thusly:

"I find this the most shocking abdication of responsibility on the part of the regulators. If they could not calculate the risk, they should not have allowed the institutions under their supervision to undertake them. The risk models of the banks were based on the assumption that the system is stable. But, contrary to market fundamentalist beliefs, the stability of financial markets is not assured; it has to be actively maintained by the authorities. By relying on the risk calculations of the market participants, the regulators pulled up the anchor and unleashed a period of uncontrolled credit expansion."

Soros, of course, is not opposed to capitalism per se - but rather only unregulated capitalism, as embodied in the "market fundamentalist" doctrine of neoliberalism. Is it fair to read your own position as well in these terms?

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Used to write grants to his foundations all the time. He's quite the science benefactor. Saw him on TV and actually liked him [as an old crank who hates everyone, not as a capitalist], but not as much as I like T. Boone Pickens.

swears said:

http://leninology.blogspot.com/2008/09/no-we-cant.html

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Privatizing industries is exactly what Obama is against, especially after this current crisis proved that, had we privatized social security when Bush wanted to, it would have been wiped out by the market crash this September and it'd be long gone today.

This is why he got elected. His policies are not Hillary "universalize healthcare" obviously implausible. His healthcare plan makes sense, and doesn't penalize people who already have reliable and decent coverage.

Here's where I get conservative-sympathetic for a minute: when it comes to a healthcare system that can afford transplants, high tech surgeries, and other cutting edge EXPENSIVE medical procedures, the U.S. seems to be leading many other countries. Universalizing healthcare the way it's been done in Canada and France, for example, would completely wipe out this lead. People come in droves from Canada just to get pacemakers and etc. here.

I don't think the old solutions work anymore.

vimothy said:

Hedging and hedge funds are not the same thing.

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Your rather bland remarks here aren't particularly helpful, and suggest someone with the mind of a precocious child intent on infantilist insult. Do you really imagine I don't know the difference, after what I've written here?

Based on your contributions here, it is clear you know next-to nothing about hedge funds, much less about political economy or economic history, and are determined to preserve your astonishing ignorance, preferring a twisted 19th century normative dogma over analysis and critique.

Hedge funds do anything to make a fast buck, from standard saving/borrowing to private equity 'investment' to derivative specultation to market speculation. One of the more criminally minded even 'bought', for next to nothing, the national debt of one of the world's poorest countries (just before it might have qualified for debt relief) and set about systematically threatening it, by the most corrupt methods imaginable, to pay up, with woeful subsequent effects on the country's struggling population. But these are the slimeballs you like to worship and defend, as always.

Hedging as you understand it here was not principally undertaken by hedge funds.

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The precocious child constructs yet another strawman. Hedging is undertaken by almost every company that is subject to 'market risk' of some kind. What you don't understand is that neoliberalism itself created much of this risk in the first place. Exchange rate deregulation in the 1970s created/massively boosted the 'exchange rate risk' forex futures market, for instance, where as a result export companies bought/sold currency forward to insure against, to 'hedge', their foreign currency exposure. Your sacred 'free market' creates these unnecessary risks, just as it created the sheer, unhinged insanity of the $500 trillion derivative bubble.

And neither explain the bubble we have just experienced.

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And another strawman. It is somewhat difficult to engage in rational discourse with someone who resides in a world of pure fantasy constructions.

Capital flows is at least 50% of what's just happened.
At least.

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This is utterly meaningless gibberish.

Where is your argument? Beyond the bullsh*t, what is there?

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Your knee-jerk, self-righteous hysteria is revealing itself. How would you be even capable of seeing any argument when you were solely preoccupied with constructing imaginary strawmen?

Why is Chile important? Chile is irrelevant.

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Yet Another ....!! This must be one of your records here.

Chile in 1973 was mentioned upthread in the context of a remark Josef K made about Lenin. Most serious economic and political commentators acknowledge that Pinochet's Chile in the 1970s was the first country where neoliberal ideology was practiced/implemented on a massive scale (later being imposed as The ideology in numerous other countries, including Western ones). There's nothing mysterious or controversial about this. You're simply behaving, as always, as a right-wing crank hopelessly blinded by simple-minded market dogma and ideology, engaging in a guilt-ridden lashing out at anyone with an understanding of the real issues because your sick, pathological ideology has just been rendered (yet again) totally bankrupt.

Your rudimentary, clipped-minimalist posts on these topics are tedious, predictible, anti-intellectual and socially destructive, comprising nothing more than the incoherent and reactionary babbling of an autistic troll.

A Note on the origins of the present meltdown

In debt-based finance capital economies like the US and Britain it is no longer just the worker-as-worker who is exploited via productivity-based surplus labour value, but also, with declining rates of profit and opportunities for real new investment, the worker-as-risk-taking-consumer via post-neoclassical sorcery finance/credit expansion, as the current property bubble collapse that triggered the system-wide financial meltdown increasingly makes painfully clear.

Unsurprisingly, that bubble - and therefore the present crisis - had its origins in geopolitical economy: the funding of the invasions of Afghanistan and Iraq following 9/11. How could this be?

The madness began when the Bush Administration/Federal Reserve reduced interest rates from over 6 percent to a historical low of 1 percent (as the US also did just prior to the invasion of Vietnam in the early 1960s in order to fund that war) between 2001-2003, following both the dot com bust and 9/11 to fund as cheaply as possible their foreign illegal war adventures, with foreign central banks as per usual picking up the tab, having nothing much else to do with their dollar earnings due to US restrictive practices, anti-currency market distortions, and gangster bullying of those countries' dollar-recycled investments (from Saudi to China). Alas, when those foreigners began noticing these cheeky upstart paper thingies called Mortgage Backed Securities (ostensibly invented to create what finance capitalists mistakenly call 'liquidity'), complete with implied Fannie/Freddie GBM 'guarantees', that were opportunistically offering higher yields than dull and boring 1 percent Treasury bonds, they began snapping them up, so flooding mortgage providers with billions, so many billions as to become multi-trillions, in dollar loot to lend out, so pushing up house prices even faster in an already low interest market.

But then the Bushies and the Fedies in their infinite wisdom saw the dollar currency exchange value dropping rapidly on world currency markets as a result of the debt-funded consumer import spending spree, takeups of Treasuries falling, inflation rising etc, and then panic-rammed interest rates back up again, from 1 percent back up to 5.25 percent over a short period, the period, from 2005-2006, when such a change provoked the mortgage crisis and the flight of speculative capital out of property and into stocks (and later, the flight from stocks into the seeming 'safety' of classical economic essentialisms: commodities, forgetting that they too create bubbles liable to burst, as the recent collapse in oil prices, barely even interrupted by the Russia-US-Georgia and Iranian skirmishs, again demonstrates). As the crisis grew, the infinite wisdom merchants tried to halt it using their old Friedman-monetarist sorcery trick - they slashed interests rates again, from 5.25 percent to 1 percent over the past year (In the Eurozone from 4.25 to 3.25; in Britain from over 5 to 3 percent). But nobody paid much attention, because the bubble had by then already burst, with the now paranoic banking system shutting down all credit. And all the King's horses and all the King's men ... This is now the (failed) 'strategy' Japan adopted in the 1990s, eventually abandoning usury altogether in 2001 by reducing rates to zero.

In short, the monetarist machinations of imperial war funding combined with a manically unregulated virtual finance capital have the effect of terrorizing and undermining both classical conceptions of 'the real economy' of production and rate of profit and the neoclassical supply/demand dynamics of exchange value.

Note on a note

I'm getting the oddest sense of déjà vu, waffles...

But anyway. Credit expanded on the back of the bubble itself, not because people could suddenly buy CDS. Bubbles are not new. Rising asset prices means more collateral to borrow against. Beyond a certain point, it is self-fulfilling. Cheap money -- caused in part by the (independent) Fed's asymmetrical monetary policy response to the dotcom bubble (and 9/11), and international capital flows from emerging market economies into the US -- inflated prices, which drove more cheap money. The ability to hedge risk (through whatever instrument) did not cause the housing bubble, or indeed, any of the other bubbles we have seen. Neither was the bubble a side effect of the wars in Afghanistan and Iraq. Download the Case-Shiller historical prices dataset -- the bubble clearly starts in the mid-nineties.

The idea that the US is somehow bullying emerging markets into purchasing dollar liabilities and thus financing US current account and trade deficits is faintly ludicrous. Many developing countries have built up huge foreign reserve holdings as a result of the crises in the 1980s and 1990s. Global foreign currency reserves are up something like $5 trillion since the turn of the century, with China holding dollar reserves of maybe 50% of its GDP. Why? Not because of US pressure (why would the US government want to be in such an unsustainable position?), but because none of the EM want to see a repeat of that particular problem, and because currency manipulation can be (very) good for you, if you are following an export-led development model.

But it's not all bad. I like the way that you refer to "debt-based... economies like the US", and not any other highly leveraged countries that actually have a lot of debt relative to GDP, like, for instance, Italy or Japan (nearly 200% of GDP!), or countries whose banking sector dwarfs the rest of the economy, such as the hedge fund that (once) was Iceland, whose combined banking sector assets were about 10 times GDP(!!).

I'm not sure something so overdetermined as the financial crisis has a "chief culprit" behind it, and you seem to confuse the fact that the housing bubble and financial crisis are related with the housing bubble having caused the financial crisis. Panic set in because US policy makers went from saying "everything will be fine" to "shit, we need 5% of GDP, right now, no questions asked, or the financial system is fucked". Combined with Lehman being allowed to fail and the 'bailout' of AIG being structured in such a way that senior debt took a 40% hit, investors lost faith and fear set in. US losses from the housing crash could be as much as $6tn -- but this would only cause a small reduction in consumption, relative to GDP, as only 1-3% of housing wealth gains are thought to go into consumption -- certainly not enough to explain the possibility of a 'great depression', the actual death of Wall Street and the near collapse of the global financial system.

Best bit of all though --

In debt-based finance capital economies like the US and Britain it is no longer just the worker-as-worker who is exploited via productivity-based surplus labour value, but also, with declining rates of profit and opportunities for real new investment, the worker-as-risk-taking-consumer via post-neoclassical sorcery finance/credit expansion, as the current property bubble collapse that triggered the system-wide financial meltdown increasingly makes painfully clear.​

Ah yes, the poor prole, his surplus value long expropriated by the capitalist class, is now sufficiently damned as to be.... a capitalist investor, and no less exploited for all that! Brilliant...

Your sacred 'free market' creates these unnecessary risks, just as it created the sheer, unhinged insanity of the $500 trillion derivative bubble.

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As we've seen, fixed exchange rate regimes are partly to blame for the global imbalances that have driven this mess. I would just like to add, though, that your $500 (actually closer to $700) trillion figure is misleading (perhaps not deliberate, but I wouldn't want to insult your intelligence again) -- it is the approximate notional value (FFS) of all outstanding trades. Notional value = sum of the values of all underlying assets on all trades. This means that the same asset may be counted many times if it is the subject of different derivative trades. With the most popular derivatives, interest rate swaps, the underlying asset never changes hands and the notional value is purely academic. Gross market value -- the cost of replacing open positions -- is something like 60 times less than the notional value.

This is now the (failed) 'strategy' Japan adopted in the 1990s, eventually abandoning usury altogether in 2001 by reducing rates to zero.

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Er, not really. First of all, Bernanke may be reducing target rates, but he obviously isn't so myopic as to believe that 80 year old tools will be able to solve today's problems. That's why there has been a raft of other measures taken and the creation of a host of new tools for the Fed to use. Secondly, the Bank of Japan didn't have a strategy, period. It fucking sat there for seven years and watched the deflationary spiral kick in.

Most serious economic and political commentators acknowledge that Pinochet's Chile in the 1970s was the first country where neoliberal ideology was practiced/implemented on a massive scale

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Well then -- link to them. Friedman offered some advice to Chile and some Chilean economists were trained by the University of Chicago. That is all, yet you said, "Neoliberalism has its origins in that 'laboratory' that was Chile in 1973". Bit of a leap.

Padraig!

Talking of the origins of neoliberalism, have you read this Vim?

Nope. Cheers for the tip!

It's a rather sadistic, perverse fun witnessing neoliberal demagogues unflinchingly twist themselves into all manner of contortionist spin, and then, without even blinking, spinning the contortion into yet more spin ...

vimothy said:

I'm getting the oddest sense of déjà vu, waffles...

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Well, the homely is supposed to be uncanny. Return of the repressed.

But anyway. Credit expanded on the back of the bubble itself, not because people could suddenly buy CDS.

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Yes, you're right about déjà vu: another straw one, complete with an egg on your chicken.

Bubbles are not new.

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An amazing insight. All the way back to the East Indies Company, as old as capitalism itself. You have heard of trade and asset cycles, I gather. Capital is very fond of them. Couldn't even imagine existing, much less surviving, without them.

Rising asset prices means more collateral to borrow against.

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Yes, I think I can infer whereabouts you work, or at least, aspire to work: pedagogy for the oppressed - 'education' - as a pedantic schoolteacher.

Beyond a certain point, it is self-fulfilling.

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Capital has a 'mind' of its own!

Cheap money -- caused in part by the (independent) Fed's

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Independent!!! Of what? Capitalism? Hohoho. Like private banks are 'independent' of each other, and even of the whole economy! Let's just assume - as most economists are so eager to do - that the Fed is made up of Martians independently surveying the present economic devastation of the human prison-house, shall we?

asymmetrical monetary policy response to the dotcom bubble (and 9/11), and international capital flows from emerging market economies into the US -- inflated prices, which drove more cheap money.

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Is there ... is that an echo I hear in here? [I like the condescending 'emerging market economies' bit. Japan, after all these years - and the second largest economy on the planet - is still an emerging market economy! Could this be due to its asswipemetrical status as a US client state still?].

The ability to hedge risk (through whatever instrument)

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Damien Hirst uses a hedge-clippers soaked in formaldehyde as his instrument. Netted him £100 mil in clippings the other week.

did not cause the housing bubble, or indeed, any of the other bubbles we have seen.

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Surely your barn is running low on straw at this stage? And manual workers.

Neither was the bubble a side effect of the wars in Afghanistan and Iraq.

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Correct, it was much much more than a mere side effect.

Download the Case-Shiller historical prices dataset -- the bubble clearly starts in the mid-nineties.

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That one ended with the dot com crash, or rather, would have ended with that crash, if the events and responses previously summarized had not immediately occured/coincided (9/11, imperialist military adventurism, huge interest rate reductions, etc).

The idea that the US is somehow bullying emerging markets into purchasing dollar liabilities and thus financing US current account and trade deficits is faintly ludicrous.

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The practice is indeed ludicrous. And its a requirement. It has been a consistent feature of US forpol these past 5 decades. You have perchance heard of the 'idea' of the dollar as 'world reserve currency'? And all oil transactions being denominated in dollars? And, and ... The US has been living off the 'credit' via recycled petro and export dollars by 'emerging market' (is this their condemned-to-always-be existential condition?) economies for that same 5 decades (inflating its exchange rate while keeping import prices low and oil prices constant as consumers were transformed from net savers into net borrowers, their corresponding buddies in 'emerging economies' doing the opposite).

Many developing countries have built up huge foreign reserve holdings as a result of the crises in the 1980s and 1990s.

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When hasn't there been a crisis? Gee, you even left out the 1970s ... mustn't have been any crisis satisfying your crisis criteria in That Decade (what with the enormous success of Pinochet's Chile an' all)! You appear to have this odd notion that any country other than SarahPalinLand is a 'developing' one (rather than one with a trade surplus with the US, of which there are too many to mention just now).

Global foreign currency reserves are up something like $5 trillion since the turn of the century, with China holding dollar reserves of maybe 50% of its GDP.

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Eh, not really. The US' 7 main trading partners (China, Japan, Eurozone, India, Taiwan, South Korea, and Brazil) actually hold a little over that amount in total, with all remaining countries holding about another trillion). China's dollar reserves are around 2/3 of (nominal) GDP and circa 1/3 of PPP GDP.

Why? Not because of US pressure (why would the US government want to be in such an unsustainable position?)

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So, um, the US would like to abandon the petro-dollar, then (maybe favour oil denominated in Euros?), it being obviously unsustainable in your estimation. Would like to remove all restrictions on petro-dollar and export dollar investments it currently enforces? I see. Maybe you might write to suggest this amazing idea to your nearest US Ambassador?

But it's not all bad

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There's always a weekend in Vegas.

I like the way that you refer to "debt-based... economies like the US", and not any other highly leveraged countries that actually have a lot of debt relative to GDP, like, for instance, Italy or Japan (nearly 200% of GDP!),

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FOREIGN DEBT. Japan's workers are among the biggest savers in the world (even with zero/negative interest); the US are the biggest borrowers, such increase since the 1970s almost exactly matching the real decline in wages. I notice you left out Britain, second to the US in total amount of foreign debt.

or countries whose banking sector dwarfs the rest of the economy, such as the hedge fund that (once) was Iceland, whose combined banking sector assets were about 10 times GDP(!!).

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Of Course. Another Friedman/Chicago School neoliberal 'laboratory' that began in the 1980s. "Let's just privatize EVERYTHING!!!"

I'm not sure something so overdetermined as the financial crisis has a "chief culprit" behind it, and you seem to confuse the fact that the housing bubble and financial crisis are related with the housing bubble having caused the financial crisis.

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Huh? Is this the final straw that broke the camel's back? I said, but you couldn't read, that the financial crisis was TRIGGERED by the property collapse, not caused by it. Neoliberal finance capitalism caused it.

Ah yes, the poor prole, his surplus value long expropriated by the capitalist class, is now sufficiently damned as to be.... a capitalist investor, and no less exploited for all that! Brilliant...

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Required to borrow funds on fictitious 'assets' and/or 'possible' future income. Required to take on risks formerly the domain of the corporate or Governmental/State sector. Required to substitute a defined-contribution pension scheme for a defined-benefit pension scheme (all risk passed to the contributor, while the pension fund managers do whatever they want with the funds without risk or responsibility or accountability, just enhanced fees and stock options). Required to bail out failed banks as the latter foreclose on their homes. Etc, Etc.

As we've seen, fixed exchange rate regimes are partly to blame for the global imbalances that have driven this mess.

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Hahahahaha. Hilarious. You do enjoy churning out this disingenuous shite, don't you? You do enjoy doing your duty (for the Big Capitalist Nameless Other).

I would just like to add, though, that your $500 (actually closer to $700) trillion figure

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No, all of the reports I've seen estimating the level of Derivatives at their peak came in around $500 trillion. Not to worry: they're now 'worth' less than $200 trill, soon to fall below $100 trill. A trilling spectacle.

is misleading (perhaps not deliberate, but I wouldn't want to insult your intelligence again) -- it is the approximate notional value (FFS) of all outstanding trades. Notional value = sum of the values of all underlying assets on all trades. This means that the same asset may be counted many times if it is the subject of different derivative trades. With the most popular derivatives, interest rate swaps, the underlying asset never changes hands and the notional value is purely academic. Gross market value -- the cost of replacing open positions -- is something like 60 times less than the notional value.

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I'm now convinced: you are a pedantic schoolteacher (Ecronynomics 101? Or pedagoggly of such?).

Shure, isn't the whole world economy notionally 'purely academic'! For the purely 60-times-less academic.

All this, and its not even Christmas!

craner said:

Talking of the origins of neoliberalism, have you read this Vim?

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Vimothy said:

Nope!

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It mentions Chile, you see.

vimothy said:

The Blind Chessman: Here, on one side, the dreadful guardians of the black iron prison, condensing their macro-geometry into these protomaterial jigsaw forms; the great King-Archons of this eon. The custodians of your reality. "The Forgotten Ones". And here, the sons of light, mustered in radiant battalions. I don't suppose you know what "manichaean" means yet?

Dane "Jack Frost" MacGowan: Yeah, it's somebody from Manchester. Are you trying to hypnotise me, ey?
​

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Have some more fun reading about Mr Friedman and Mr Pinochet:

Milton Friedman, “Letter to General Pinochet on Our Return from Chile and His Reply,” April 21, 1975.

Milton Friedman and the Economics of Empire
The Road from Serfdom
By GREG GRANDIN

Milton Friedman had no idea that his six-day trip to Chile in March 1975 would generate so much controversy ...

[ ... ]

Setting aside the struggles surrounding religion, race, and sexuality that give American politics its unique edge, it was in Chile where the New Right first executed its agenda of defining democracy in terms of economic freedom and restoring the power of the executive branch. Under Pinochet's firm hand, the country, according to prominent Chicago graduate Cristián Larroulet, became a "pioneer in the world trend toward forms of government based on a free social order." Its privatized pension system, for example, is today held up as a model for the transformation of Social Security, with Bush having received advice from Chilean economist José Piñera, also a Chicago student, on how to do so in 1997. Pinochet "felt he was making history," said Piñera, "he wanted to be ahead of both Reagan and Thatcher."

Friedman too saw himself in the vanguard. "In every generation," he is quoted in his flattering New York Times obituary, which spares just a sentence on his role in Chile, "there's got to be somebody who goes the whole way, and that's why I believe as I do."

And trailblazer both men were, harbinger of a brave and merciless new world. But if Pinochet's revolution was to spread throughout Latin America and elsewhere, it first had to take hold in the United States. And even as the dictator was "torturing people so prices could be free," as Uruguayan writer Eduardo Galeano once mordantly observed, the insurgency that would come to unite behind Ronald Reagan was gathering steam.

Today, Pinochet is under house arrest for his brand of "shock therapy," and Friedman is dead. But the world they helped usher in survives, in increasingly grotesque form. What was considered extreme in Chile in 1975 has now become the norm in the US today: a society where the market defines the totality of human fulfillment, and a government that tortures in the name of freedom.