Friday, March 05, 2004

BonoboLand ? Auerback's Segacious Perception

BonoboLand ? Auerback's Segacious Perception

I thought I'd add a little more thought to my earlier post on Bonobo, and this blog, by posting a few paragraphs I e-mailed to others earlier this month. I am not trying to be offensive, only creating awareness.

"Globalism is dead" - Now, to explain what my cryptic remark was about. Many nations are already rejecting the classical school's "Washington Elite Consensus" of liberalized markets and free trade. This has been an ongoing historical event since Malaysia told the IMF what to do with its policies and went its own way. Now we have Brazil's Lula wrecking the FTAA talks in Miami, and still others rebelling in secret or public. There are many other failures of the "Elite Consensus" from the MAI treaty to recent rejections of CAFTA by some nations. The people and nations lining up against the "one liberalization shoe size fits all" of the IMF, World Bank and WTO is expanding rapidly. Economists, historians, and social philosophers like John Ralston Saul {Saul} are mounting a global attack against the post `73 insanity of classical economics and their beliefs in anti-Keynesianism, disguised as a pseudo-post Keynesianism and neo-conservatism. The truth of the matter is the classical school believes in three unprovable axiomatic math models - the neutrality of money - equilibrium - and corporate wages, prices, and profits. The two I am most concerned with here are the neutrality of money and equilibrium. Dr. Paul Davidson {Paul} has done the definitive critique of classical economics in these areas and I and many others agree. The historical evidence is mounting against the classical schools and the books and articles being published is overwhelmingly a massive critique of market liberalization and its failures.

Here's a further excerpt pieced together:

`Without a full understanding of the functioning of forward markets, all discussion of exchange rate policy must remain seriously deficient.' Egon Sohmen

... 13.`When there are many nations with steady depreciating and appreciating currencies, bankers have plenty of short and long opportunities to cover their forward commitments in other nations - until debt entropy...'

... Of the above quotes #13 is the one I wish to draw more attention to - how banks and other financial interests cover forward contract costs. U.S. law states that all long and short positions must balance at the end of each business day, as do many nations' laws. The trouble is even though these transactions may be in balance nationally they can be massively out of balance internationally. Herein lies one of the origins of the problem. Most all parties involved can, do and will book their long positions in strong currency nations, and most all their short positions in weak currency nations, thus pushing exchange rates further and further out of equilibrium the longer we have been and are on a floating standard, as mentioned above in the quotes. This disequalibrium, in turn, through the major shocks we've witnessed since Mexico, in the`90's, have added tremendously to overall capitalist system costs, and in turn creating overporduction and global deflationary pressures - real and feared. One of the flaws we must throw away, as Keynes also did and Paul Davidson does, is the classical school's misguided belief in the neutrality of money. The truth is obvious in the above that money is not neutral. It is often long term destructive through floating exchange's ever increasing disequalibrium and its associated increasing costs. Central bankers can only play a very crude market maker in such a massively imbalanced system. They often have to take great losses or pawn these losses off on their unsuspecting taxpayers. From the above you may be able to see why Japan is in such a deflationary quandry. The speculative realities between the lesser nations and the developed nations continues to push Japan's and others currency high/low when it needs to go low/high, yet the global currency competition situation and specualtion is now at such a critical stage nothing works as should - nor will it under the continuation of the classical school's other often deluded ideas of floating exchanges and never existing free markets. ...Link

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