With Gordon T Long & Charles Hugh Smith

24 Minutes, 17 Slides

Why has classical capitalism devolved to crony-capitalism/crony-kleptocracies?

In this 24 minute video Gordon T Long and Charles Hugh Smith discuss through the aid of 17 slides the rapid advancement of Crony Capitalism in America. The facts are undeniable, but why is it becoming so obvious and undeniable? Why is it accelerating without any apparent 'checks and balances'? Where have the safeguards against this happening gone?

Understanding Why This Is Happening

1. Those who control most of the wealth are willing to risk systemic collapse to retain their privileges and wealth. Due to humanity's virtuosity with rationalization, those at the top always find ways to justify policies that maintain their dominance and downplay the distortions the policies generate. This as true in China as it is in the U.S.

2. Short-term thinking: if we fudge the numbers, lower interest rates, etc. today, we (politicians, policy-makers, money managers, etc.) will avoid being sacked tomorrow. The longer term consequences of these politically expedient policies are ignored.

3. Legitimate capital accumulation has become more difficult and risky than buying political favors. Global competition and the exhaustion of developed-world consumers has made it difficult to reap outsized profits from legitimate enterprise. In terms of return-on-investment (ROI), buying political favors is far lower risk and generates much higher returns than expanding production or risking investment in R&D.

4. The centralization of state/central bank power has increased the leverage of political contributions/lobbying. The greater the concentration of power, the more attractive it is to sociopaths and those seeking to buy state subsidies, sweetheart contracts, protection from competition, etc.

5. Any legitimate reform will require dismantling crony-capitalist/state-cartel arrangements. Since that would hurt those at the top of the wealth/power pyramid, reform is politically impossible.

6. Understood in this light, it's clear that central bank monetary policy -- zero-interest rates, asset purchases, cheap credit to banks and financiers, QE, etc. -- is designed to paper over the structural problems that require real reform.

Japan is a case in point: the Powers That Be in Japan have put off real reforms of the Japanese economy and political system for 25 years, and they've enabled this avoidance by pursuing extremes of fiscal and monetary policy that have eroded the real economy and created long-term structural imbalances.

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