Wednesday, August 31, 2011

The Marxist at UBS and His Confusion

George Magnus, Senior Economic Adviser at UBS is a Marxist. FT has given him space to write an article which includes such gems as:
Marx analysed and explained insightfully how and why capitalism would succumb to recurrent crises, and especially big ones after a credit bust.
Let's be clear about a few things. The current financial crisis was caused by the on again, off again, money printing by central banks, such as the Federal Reserve.

Austrian business cycle theory fully explains the crises. Indeed, if one understood ABCT, you could have seen the current crisis coming in real time. (See here, here, here, here, here, here, here and here.)

Marx theories were a combination of bad economics, mixed with bad political theory, all wrapped with a Hollywood happy ending: communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, shepherd or critic.
As far as Marx's so called forecast of the crumbling of capitalism. He saw it first developing by the proletariat taking political control. In the Communist Manifesto, Marx and Frederick Engels wrote (My emphasis):

We have seen above, that the first step in the revolution by the working class, is to raise the proletariat to the position of ruling as to win the battle of democracy. The proletariat will use its political supremacy to wrest, by degrees, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, ie, of the proletariat organised as the ruling class, and to increase the total production of forces as rapidly as possible.

Once the proletariat is in charge Marx/Engels see 10 steps the proletariat should generally implement to put the world on the road to bliss, including, as first steps, a graduated income tax and a central bank:
Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
Thus, the Federal Reserve can be seen as Marxist-lite. The quantity of credit in the economy is controlled by the Fed (via control of the money suuply), but the recipients of the credit are not as directed by the Fed. But it is the contol of the quantity of credit that results in the business cycle, as money supply is first increased and then the money growth is slowed or stopped entirely.

In other words, it is the Marxian notion of a central bank controlling credit activities that is at the heart of the Fed. And these central bank activities are what cause the business cycle. So to Marxists like Magnus who claim capitalism is failing and that "Marx-is-relevant school", the response should be, "Yeah, we know what Marxist central banking is all about. It's not capitalism. It's government control. Further we have been there, done that with the Fed and it sucks."


  1. Keynesianism is clearly Marxist-lite aimed at the same sort of pseudo-intellectual people with the same totalitarian control-freak tendencies. Further, the baseless present-day hysterical defenses of Keynesianism mirror almost exactly the "progressives'" defense of everything Stalin back in the 1930s.

  2. Is he really that stupid?
    These people who claim to own me and my earnings need to be jailed just like any mugger/rapist.

  3. Good Article. Marxism is evil. It has failed. Time to move on.

    Now analyse the other side. The old money / feudalists / plutocrats. The regime that Marxism was against.

    That system was crap too. If it was so wonderful, Marxism would not have a foot hold.

    My theory is that the problem is not who runs the ruling class or what ideas the ruling class has.

    My theory is that the problem is that there is a ruling class.

    But even if you reject my theory.

    Until the bankers are jailed, the debt written off, the current crop of politicians and powerful families flushed out and replaced and the system cleaned up, the system is broken.

    It does not matter what ideas guide the system.

    The underlying system is broken and corrupt. Evil and stupid rules the roost as the talk show guy said.

    And the current system needs to cut way back on spending and live within it's income.

    I am not willing to discus new political and economic ideology until I see a lot of people in jail and no budget deficit for 5 years in a row.

    This peasant is no fooled by lofty ideas and big talk. I want to see some action. Talk is cheap.

  4. I always liked this quip of Rothbard's:

    "There is one good thing about Marx: he was not a Keynesian"

    Full interview here

  5. You mean a statist is blaming the free market for the problems that statism has created? I'm shocked. SHOCKED!

    Marxian central banks are not the only plank in the Communist Manifesto that America has adopted, to varying degrees.

    1. Abolition of private property and the application of all rents of land to public purposes.

    Bureau of Land Management (Zoning laws are the first step to government property ownership). Eminent domain, property taxes.

    2. A heavy progressive or graduated income tax.

    Misapplication of the 16th Amendment, 1913

    The Social Security Act of 1936

    Joint House Resolution 192 of 1933

    State "income" taxes.

    We call it "paying your fair share".

    3. Abolition of all rights of inheritance.

    Federal & State estate Tax of 1916

    Reformed Probate Laws

    Limited inheritance via arbitrary inheritance tax statutes.

    4. Confiscation of the property of all emigrants and rebels.

    Government seizures, tax liens

    Public "law" 99-570, 1986

    Executive order 11490, sections 1205, 2002 which gives private land to the Department of Urban Development

    Crime/Terrorist Bill, 1997 Imprisonment of "terrorists" and those who speak out or write against the government

    FBI/IRS confiscation of property without due process.

    Asset forfeiture laws used by DEA, IRS, ATF, etc...

    5. Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.

    Already covered

  6. 6. Centralization of the means of communications and transportation in the hands of the State.

    Federal Communications Commission (FCC)

    Department of Transportation (DOT) mandated through the ICC act of 1887

    Commissions Act of 1934

    The Interstate Commerce Commission established in 1938

    The Federal Aviation Administration,

    Federal Communications Commission,

    Executive orders 11490, 10999, as well as State mandated driver's licenses and Department of Transportation regulations.

    7. Extension of factories and instruments of production owned by the state, the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

    Corporate Capacity

    The Desert Entry Act

    The Department of Agriculture

    Department of Commerce and Labor

    Department of Interior

    Environmental Protection Agency

    Bureau of Land Management

    Bureau of Reclamation

    Bureau of Mines

    National Park Service

    IRS control of business through corporate regulations.

    8. Equal liability of all to labor. Establishment of industrial armies, especially for agriculture.

    Minimum Wage

    Social Security Administration

    The Department of Labor

    The National debt and inflation caused by the communal bank has caused the need for a two "income" family.

    Woman in the workplace since the 1920's

    The 19th amendment

    The Civil Rights Act of 1964

    Socialist Unions

    Affirmative action

    The Federal Public Works Program

    Executive order 11000.

    9. Combination of agriculture with manufacturing industries, gradual abolition of the distinction between town and country, by a more equitable distribution of population over the country.

    Planning Reorganization act of 1949, zoning (Title 17 1910-1990)

    Super Corporate Farms

    Executive orders 11647, 11731 (ten regions)

    Public "law" 89-136. These provide for forced relocations and forced sterilization programs, like in China.

    10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production.

    We are taxed to support "public schools," but are actually "government force-tax-funded schools " Even private schools are government regulated. The purpose is to train the young to work for the communal debt system.

    The Department of Education

    The NEA

    Outcome Based "Education" These are used so that all children can be indoctrinated and inculcated with the government propaganda, like "majority rules", and "pay your fair share". WHERE are the words "fair share" in the Constitution, Bill of Rights or the Internal Revenue Code (Title 26)?? NO WHERE is "fair share" even suggested !! The philosophical concept of "fair share" comes from the Communist maxim, "From each according to their ability, to each according to their need. This concept is pure socialism.

  7. A few counter-points:

    Marx did not invent the idea of central banks. They were around long before he came onto the scene.

    Central banks are useful - indeed required - for the merger of the successful takeover of the state by the corporate oligarchy to form the corporate/fascist state which is (as best I recall) the terminal stage of capitalism accurately foreseen by Marx.

    Marx got this part right. His prescription, however, leaves much to be desired.

    There is little to distinguish Marxism from Fascism, indeed Hitler called his party the National Socialist Party. In reality, they are distinguished by who exercises the powers of coercion.

    In Marxism, it is the state and its functionaries who are supreme. In China, many of the state's functionaries have become fabulously wealthy, but this does not make them capitalists - only well-connected thieves.

    In Fascism, it is the state that is overtaken/subsumed to the needs and desires of the capitalist/financial elites. Again, functionaries can become fabulously wealthy, but that does not make them capitalists - only well-connected thieves.

    Consider that a fascist state will have aspexts of a communist state, just as a communist state will have aspects of a fascist state.

    Now, please consider which the U.S. best resembles. To help in this, one might wish to ask "For whose interests does Congress really work?

  8. @Anonymous 3:31PM

    Nowhere do I say Marx inventend central banks, merely that he was in favor of them---and said so in the Communist Manifesto.

    As for any internal final stage of capitalism that Marx foresaw, this would simply be an internal contradiction in communism, since it is clear as day that in the Communist Manifesto Marx and Engels state the move toward Communist bliss is done, as I quoted in the post above, by political means and not some " terminal stage of capitalism accurately foreseen by Marx."

    That said, central banks are seen by Marx and Engels as Marxist political goal in the steps toward communist bliss. The current financial crisis,caused by central banking, thus, should not be viewed as a failure of Capitalism, but a failure of early stage Marxism.

  9. State terrorism requires a central bank since violence is not supported by productive people. A counterfeit currency racket is primary to the terror State which Lincoln, Marx, Woodrow Wilson, Stalin, FDR, Mussolini, and Hitler understood.

    Ending the Fed will help end the Democracy Mob's parasitic political violence.

  10. @ Wenzel - Marx foresaw the culmination of capitalism as the merger of the powers of the state with those of the corporate/financier class to which it is made subservient. That is where we are today, IMO.

    It should come as no surprise that Marx wanted to place a central bank to be at the service of the State. After all, that's the very essence of Communism - state ownership of the means of production and all not being inconsistent with such.

    Your contention that the current financial crisis is caused by the central bank is reducto ad absurdum. In fact, it was the capture and merger of the powers of the State by the corporate/financial elite (including its regulatory and money-printing powers via the Central Bank) that had at least as much to do with the current financial crisis than the FEDs policies.

    Accelerated money printing and collapse of credit standards was a means to affect more looting.

    Consider: a Central bank does not nessitate widespread fraud in issuance and trading of financial and security instruments. It does not pass legislation exempting banks from FASB (accounting standards) that allows them to keep a phony set of books. It does not look the other way in the case of Madoff and even larger frauds perpetrated by the financial class. Nor does it burn SEC case files and investigatory records. It does not legislate person-hood for corporations and then equate their speech with that of individuals. It does not limit market competition in health care, drugs and treatments. It does not permit the use of GMO's and ignore trillions of dollars of theft of public monies be it outright, or through corrupt government contracts and procurements. It does not fail to investigate a multitude of financial and other crimes under the jurisdiction of the Executive and overseen by Congress that are perpetrated by the well-connected.

    That is not to say the FED didn't contribute, aid and facilitate things - just as does a fence does by providing liquidity for the fruits of the thief's crimes.

    I don't know enough about Austrian theory to know if there is something therein that blinds them to the genesis and nature of the corporate-criminal syndicalist state and to project them onto a central bank in a Horse-Cart fashion. Not that there isn't plenty that the central bank has to account for - like debasing the money supply and shoveling trillions to its crony banker buddies and owners.

    The FED is a tool of the corporatists and financiers who are now also the statists. Not the other way around.


  11. @Anonymous 5:02

    Do you like to watch yourself in the mirror pontificate? Why don't you back up your babbling with exact quotes from where Marx supposedly says this or that. Wenzel has direct quotes from the Communist Manifesto to backup his point. Yours sound like they come form a third rate revolutionary waiting for Woody Allen to overthrow Staten Island.

  12. @ baby G. That's almost funny.

    Wenzel's relevant quote that caught my attention was not pertinent to the end stage of capitalism, but to what Marx theorized (incorrectly) to arise therefrom. No need for me to refute something that wasn't pertinent to begin with.

    Might I also remind you that ad hominem attacks are deplored most by those Austrians against which they were mostly hurled, as Mr. Wenzel has aptly demonstrated.

    I doubt Wenzel needs you to run defense for him.

    My main points (the second which you choose to ignore while leveling your ad hominem) are:

    1) Marx came closes to predicting the end causes of capitalism (monopoly/corporatism), and,

    2) The current situation share far more in common with Facism, than with Communism. My opinion and one you need not share.

    That I have this opinion does not make me a Marxist as you allude. In fact, there is precious little - other than the presence of the corporate/financial class subverting and absorbing the powers of the State to their own ends, that distinguishes a fascist state from a communist state, and I do not have sympathy for either.

    "National Socialist Party". What could be more clear than that? Re-read the second word in the quotes. There's only three so it should not be too hard to find.

    I doubt you'd like to make the case that TARP was imposed for the benefit of persons not ranked among the financial/banking interests.

  13. @anon 5:05 what you describe are the unintended consequences of Progressivism which is nothing more then Marxist ideas integrated into a capitalist system. Progressivism made the state an interested party in private contracts which has led to the corporatism and crony capitalism that we have today. What the Progressives failed to anticipate was the self interest of the state. What we are watching today is the collapse of the Progressive state.

  14. @ Anon 7:25

    I repeat, Wenzel gives us an exact quote which is damn relevant, and yet nothing from you. Give us a quote to your claim. I do notice that now it's "Marx came close" where before you wrote, " the terminal stage of capitalism accurately foreseen by Marx."

    Your a damn Marxist propagandist, who squirels into a new hole when flushed out of another.

  15. The failure of the Fed is indeed yet another in a long line of failures of Marx. He also predicted that as soon as nations industrialized, the working classes would rise up and overthrow the governments all over the world. We have seen how accurate that has turned out.

  16. The Marxists slaughtered about 100 million people during the 20th Century, impoverished their lands for years to come, enslaved and brainwashed 2-3 generations of Russians,East Europeans,Asians,Latin Americans and now are trying to tell the confused West Europeans and the indebted bleating Americans how bad Capitalism really is.

  17. Okay, so if the FED's money printing - which I think we all deplore, and which Wenzel claims is the source of the current financial crisis - is a marxist/socialist inspired plot by a marxist/socialist institution (FED) as most commenting here seem to believe, then would someone explain why the money flow has been TOWARDS the major banks and financial/corporate elites?

    Seems that if the FED is a commie institution it would be directing the flow of their debauched dollars towards unions, retirees, Medicare and Social Security. [For the record, please refrain from inferring that I am advocating this position.]

    The actions of the FED leading up to and during the present financial crisis seem to argue in favor of the FED acting at the behest and to the benefit of the banking/financial elites. Which seems to rather clearly place the FED in the fascist (national) socialist mold, rather than the communist (workers) socialist mold.

    I find it fascinating that advocates of the Austrian school - as represented here at least - seem unable to grasp the differences between fascism and communism. One being corporate totalitarianism the other being workers totalitarianism, though in practice the latter is totalitarian rule by mundane functionaries who graduated at the top of their special education class.

  18. @ anon 8:34 - Much of the architecture of the Progressive movement has been co-opted by the corporate/banking/financial class. To anyone familiar with regulatory capture, this comes at no surprise. Refer to FDA throttling innovation and competition and suppressing new drugs, SEC burning investigatory and case files, etc., ad. nauseum.

    But relevant to the FED, it would be absurd to argue it was a result of the Progressive movement (ref attendees at Jekyl Island).

  19. @Anon 9:51: As for the idea of co-oping Progressivism by the corporate/banking/financial class is quite laughable given that many in those groups were proponents of progressivims exactly for that reason.

    Are you kidding about the FED? The idea of central bank was central to American Progressivism at the time. The Progressives believed that a central bank would be able to utilize the knowledge of economic experts who could manage the money supply to avert or lessen economic downturns. It should be noted that fractional reserve banking as practiced in most parts of the world is not a concept that aligns itself well with capitalism since it violates property rights of the depositor.

    Progressivism has been a fraud from day one.

  20. @anon @2:05. Wilson and Sen. Carter Glass were the useful idiots who carried the water for the banking/financial interests in getting the FED legislation passed. It was not too long thereafter that Wilson lamented his decision, as did Sen. Glass if memory serves.

    They and others aligned with the Progressive movement were useful fools acting on behalf of the corporate/banking interests who wrote and were behind the Act.