In a clip from a longer interview with WSJ’s Simon Constable, Dr Nouriel Roubini claims Karl Marx was right about capitalism eventually destroying itself. While not quite yet at the breaking point, Roubini observes, we are headed down the road to disaster as predicted by Marx.
Roubini echoes my view that debt reduction and restructuring is the only way to restore real growth to the US and other economies. Breaking up a few zombie banks and cartels probably would not bother him either. But let’s focus on Roubini’s somewhat provocative comment that Marx correctly predicted the present global debt bust and economic deflation.
When I hear people talking about Marxism in reverent tones it makes me nauseous. Marx was not right at all about class being the key determinant of human action. Yet despite America’s pretensions to being a free market, democratic society, the Marxian world view won the battle for ideas in the 20th Century. The New Deal and Great Society efforts to increase the scope of government in America all stem from the socialist ideas of FDR and his political heirs in both parties.
So much of our economic discourse in America today is entirely Marxist in nature — a reference to both Karl and Groucho Marx, as noted above. The legacy of FDR and the two world wars was to kill the American republic and put in its place a cheap imitation of France with platonic regulators pretending to moderate the bad old ways of greedy private business.
The Cold War in particular left Americans more Marxist in their economic thinking than we care to admit. We discarded the focus on individual liberty and the rule of law espoused by Thomas Jefferson and Andrew Jackson as the drivers of economic activity in a free, democratic society. Instead we have modern day robber barons, faceless corporate managers openly allied with corrupt politicians in Washington and guarded by phalanxes of vicious lawyers.
The fact of our intellectual reliance upon the work of Karl Marx to benchmark our economic success show humans to be creatures of habit, not reason. Marx embarked from a position of dialectical mysticism borrowed from Hegel and then attacked the classical economists, the enlightenment thinkers such as John Staurt Mill and Adam Smith who elevated the role of the individual. Those who laud Marx disparage all things American.
Ludwig von Mises writes in his book Human Action, that Marx stigmatized the economists as “the sycophants of the bourgeoisie.” He notes that Marx was “the son of a well-to-do lawyer,” and Engles, “a wealthy textile manufacturer, never doubted that they themselves were above the law and, notwithstanding their bourgeois background, were endowed with the power to discover absolute truth. It is the task of history to describe the historical conditions which made such a crude doctrine popular.”
Not only was Marxism crude, but it missed most of the major developments of the 20th Century. Revolution occurred not in bourgeois Germany but in brutal, backward Czarist Russia. More important, the class-centric view of Marxism proved incorrect in a world of greater openness, mobility and individual choice. The act of conscious choice driven not by greed, but the desire for betterment; of human action as von Mises coined the term, rejects Marxist class determinism.
But with the world facing global recession or worse, and the children of the New Dealers demanding blood and higher taxes from the greedy capitalists, the question put to Roubini still comes: has the growth possibility of the “capitalist” world, as we inaccurately label the socialist western economies, reached a logical limit as predicted by Marx? I do not believe so.
Nations which adopted Marxist or other types of authoritarian systems have performed abysmally, while nations that focused on individual freedom and openness thrive. The US and EU have lessened their prospects through over-reliance on government and public debt. The answer in both cases is debt reduction and restructuring, and shrinking the size of the public sector.
Since the end of WWI, the nations of the global economy have faced a difficult paradox: the greater openness of trade and finance have created serious economic imbalances, shortfalls in employment and growth in public debt. John Maynard Keynes was no free trader, as we have discussed previously in this blog, precisely because he feared the destabilizing influence of large trade and financial flows.
The fact that advances in technology cause unemployment in older industries has nothing to do with Marxism or any of the political narratives of the 19th or 20th Centuries. Nor does the fact of global over-capacity confirm the Marxist dialectic as to the inevitability of world socialist revolution. What these ills do point out is that the world needs to revisit not tired Marxism, but the Keynesian concept of a competitive currency system and thereby better govern global flows of capital and commerce.
All nations, regardless of supposed economic creed, now face a more basic series of choices: how to balance employment and economic stability with economic openness and the relentless pressure of competition and new technology. The future is not about class warfare as Marx predicted, but is about maximizing the potential and opportunities for every individual.

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FLASH: KOREA BARBECUES SHORTS AT THE OPEN

Mon Aug 15, 2011 8:18pm EST 2

__________________

Korea’s Kospi Index Rallies 3.8% Following Monday’s Holiday, Nikkei Rises 0.5% (story developing)

SOURCE: CNBC

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Howard Schultz Wants to Hide the Afikomen from Politicians

Mon Aug 15, 2011 7:21pm EST 3

Starbucks Corp Chief Executive Howard Schultz is winning support for his call to withhold political contributions from U.S. lawmakers until they strike a ”fair, bipartisan” deal on the country’s debt, revenue and spending.Schultz recently led the world’s biggest coffee chain through a painful but successful restructuring that returned it to growth. In his letter Monday, he also challenged fellow U.S. business leaders to do their part by hiring workers to give the national economy a much-needed jolt.

Read more: http://www.foxbusiness.com/industries/2011/08/15/starbucks-ceo-urges-halt-to-political-donations/#ixzz1V8wCmLvS

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FLASH: Bernie Madoff Just Had His Last Conjugal Visit

Mon Aug 15, 2011 7:18pm EST 5

Ruth Madoff is reportedly divorcing her Ponzi-scheming husband after more than five decades of marriage.

British newspaper the Daily Mail, quoting the author of a book about Bernard Madoff, reported that Ruth Madoff wants to end her marriage in an effort to reconcile with her son Andrew.

The couple’s only other son, Mark, committed suicide in December at the age of 46. At the time, friends attributed Mark’s suicide in part to his anguish at being associated with his father’s crimes.

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FLASH: Warren Buffett Made a Few Trades as of June 30th

Mon Aug 15, 2011 7:15pm EST 1

Warren Buffett’s Berkshire Hathaway has added stakes in Dollar General [DG 32.19 0.53 (+1.67%) ] and Verisk Analytics [VRSK 32.21 -0.01 (-0.03%) ] as of June 30, compared to its reported holdings on March 31.

The relatively small size of those stakes, Dollar General at $48 million and Verisk at $68 million, however, indicates that Buffett himself did not pull the ‘buy’ trigger.

He has said that his stock moves are usually in the billions of dollars, not millions.

Other changes listed in Berkshire’s just-released 13-F filing with the SEC:

Berkshire’s MasterCard [MA 335.00 6.93 (+2.11%) ] stake increased between March 31 and June 30 by 189,000 shares to 405,000 shares. That’s an increase of 88 percent. The increased stake is worth $136 million at today’s close, also an indication that it wasn’t a Buffett decision. (New portfolio manager Todd Combs is my best guess.)
Berkshire’s massive Wells Fargo [WFC 25.02 0.89 (+3.69%) ] stake edged 3 percent higher with the addition of 9.7 million shares. Its 352.3 million share stake is valued at $8.8 billion at today’s close.
Tonight’s 13-F also reveals a 5 percent decrease in Berkshire’s holdings of Kraft Foods [KFT 34.68 0.28 (+0.81%) ], bringing that stake down by 5.7 million shares to 99.5 million. It’s worth $3.4 billion tonight.

SOURCE: CNBC

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HERE’S WHAT OLD MAN BUFFETT WAS DOING DURING THE MARKET CRASH

Mon Aug 15, 2011 7:12pm EST 8

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FLASH: Paulson Cuts Bank of America Stake in Half

Mon Aug 15, 2011 7:10pm EST 3

Billionaire investor John Paulson, whose flagship funds have lost roughly 30 percent this year, cut his position in Bank of America in half in the second quarter.

FULL STORY HERE

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Stocks End Higher, Erasing Last Week’s Losses

Mon Aug 15, 2011 4:07pm EST Comments Off on Stocks End Higher, Erasing Last Week’s Losses

Stocks logged their biggest three-day rally since Mar. 2009, fueled by a handful of M&A news and as investors shrugged off some disappointing economic reports. The major indexes wiped out all of last week’s losses following S&P’s downgrade of U.S.’s credit rating.

MAJOR U.S. INDEXES

.DJIA

11482.90

213.88

+1.9%

.NCOMP

2555.20

47.22

+1.88%

.SPX

1204.49

25.68

+2.18%

The Dow Jones Industrial Average ended up nearly 200 points, led by BofA[BAC 7.76 0.57 (+7.93%) ] and Chevron [CVX 99.10 3.24 (+3.38%) ].

The S&P 500 and the Nasdaq also closed sharply higher. The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled more than 10 percent to trade near 31.

Despite the robust gains in the last three sessions, all three major indexes are still significantly lower for August.

All 10 S&P sectors closed higher, led by utilities, energy and financials.