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Hemsley Hawes's avatar

My suspicion is that what is missing from vighis critique of capitalism is the necessary condition of a decentralized banking system.. what we are seeing, what we are experiencing is in some sense the inevitable result of the disappearance of local /main Street banks. Through very conscious regulation of the banking industry involving very onerous and expensive administrative requirements that favor ever larger banks, our government is chasing small local banks from the field. Hardly a "natural" feature of capitalism per SE. What this does, what theses regulatory policies do is "sovietize " are banking structure, ie take it further and further in the direction of one central bank for the whole economy which inevitably grants access to loans to a limited number of businesses. The further we go in the OTHER direction, ie more and more local banks doing business with and giving access to loans to local mainstreet businesses, the more and more vibrant, resilient, and optimal our economy becomes. Communists everywhere like centralizing control. Their critique of capitalism always involves taking a dire view of allowing citizens to freely associate and freely do business with each other. Communists believe this kind of thing leads to corruption and oligarchical control and monopoly. Competition is bad. It is in the best tradition of conservatism I believe to express faith in the productive potential of human beings to overcome any "problem" presented them. A captured government that controls the process of credit formation and shuts out of participation of the economy all but the elite who have captured it is the problem. Not capitalism.

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dissonant1's avatar

I've read some of Vighi's other stuff and he always makes well-reasoned arguments backed up by facts. His argument that the pandemic narrative served to continue the current debt-driven global financial system from 2019 on seems to make sense. I mean, everyone knows we have a system now that is both driven and encumbered by debt, and which is stressed by continued automation, where the U.S. economy dog is wagged by the Fed and the leveraged financialized markets. That all fits.

What makes Vighi's argument interesting and brings it into question is what is happening now with the Fed. Their tightening of the money supply and raising of rates hits a few groups of people the hardest: 1) Foreign holders of U.S. debt (primarily Treasury Bonds) and dollars, including our biggest trading partners and a host of emerging market countries; 2) the offshore dollar market (primarily the EU and EBC), and 3) Highly leveraged domestic corporations (aka "Zombie companies"). Now why would the evil Fed be all gung-ho about using COVID to sustain an untenable ponzi-scheme of an economic system but then all of a sudden turn around and now put that system at grave risk and maybe even collapse it?

I would submit that the Fed effectively could not do anything to stop Congress from their spending binges. But it can act independently of Congress to control money supply and lending rates. Still, why is it doing this? Could it be to separate our economy from the EU and emerging market instability and potential collapse? Could it be to spite Davos? Could it be to clear out the corporate dead wood (and dead money) from the system? Could it be to constrain Congressional spending? I think and hope all of these. Yeah they are playing a dangerous game but these are necessary steps to ensure long term viability of the U.S. and world economy.

Also, a point: It seems Vighi has a quite negative view of Capitalism (which seems to obtain from his reading of Marx). I'm not saying he has Marxist leanings but that he is latching on to some of Marx's criticisms, that is all. I would disagree in the sense that what we currently call a Capitalist system and markets in the West are actually controlled by the oligarchs and large corporations and is thus constrained and artificial on many levels - it is not free trade by a long shot. So any criticisms he makes of Capitalism need to (IMO) need to be seen in that context. Thanks Mark for the interesting post!

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