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Capitalism hits the fan

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zuke

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This is one of those videos that it would take way longer to refute that it takes for him to rattle off his assertions. I am going to just highlight some things he says in the first ninth, and I think that should be enough to give you an impression about the quality of the video as a whole.

First of all, he states that this is a crisis of capitalism. Which comes from socialist phraseology. They think that the "contradictions" in capitalism create these sorts of downturn. This is just an overview but the idea is that the fact that the capitalist is exploiting the worker, who is also their customer, will create over production, as they are exploiting the people who they depend on to buy their goods, one day their won't be anyone with any money to buy their goods.

This is utter nonsense fort the very reason that worse systems don't ever seem to show these sorts of things happening. If capitalism is the new slavery, then why did slavery not have a crisis besides 1) slave rebellions, and 2) the emergence of industry and capitalism. Chattel slavery as a system plodded along for about 10,000 years without anything happening of this sort.

Also, the labor theory of value is utter non-sense (just look up the 9000 refutations offered by all ends of the political spectrum), and the wage-slave theory rests on this in many cases.

The next big point is that we are not in a financial crisis. Well, no, we are in a monetary crisis. In a way, he is wrong because this did start with the banks and the banking system. Read about the austrian business cycle to learn more about how central banking causes booms and busts.

A summary: Interest rates coordinate consumption over time. When a lot of people save money, that money goes into the bank. They are saying "I would rather consume more later than less sooner". The banks then loan that money out to people. In this way when people save, they contribute to projects that will be finished by the time they withdraw that money. An interest rate is the price of being loaned money. A high interest rate means there is not much money to loan out to people, and that most people would rather spend their money now than later. Since people don't want to spend their money later, their isn't any point in starting any long term projects. Interest rates signal this. If a bunch of people save their money, then there will be more money, driving down interest rates. This leads to more people starting more long term projects, which are often longer term.

So then we have central banks. They indirectly control interest rates by various mechanisms. When they artificially lower interest rates, they cause more people to start long term projects than their should be. During the building, everyone is happy because all these projects are being started and things look prosperous. When the projects are finished and it is time to start selling things, there aren't any customers because no one actually saved any money.

That is how depressions are caused. Not wage-slavery.

His next claim is that these depressions last long no matter what governments try. The only thing to end the last big one was war.

This isn't true, first of all there was a worse depression during the Harding administration (early 1920s). It lasted a year. Harding cut spending and taxes, and the depression ended, even though its conditions were worse than the "Great Depression". Second of all, world war II only helped America in one sense, we created two new trading partners out of Japan and Germany. Other than that free market policies embraced by Japan, Western Germany, and America helped create enough wealth to deal with the troubles of the depression. FDRs policies were not just ineffective, they made things worse.

He says that they have tried every fiscal/monetary policy available to them in Japan. Yeah everyone except the ones being used by Harding (free markets).

EDIT:

More, He just keeps rattling off fallacies.

Technological unemployment is nonsense. Computers don't cause unemployment of any important scale, poor educations systems do. Anyways, a society where machines could produce everything and no one had to do any labor is called a utopia.

World War II didn't benefit us because our "competitors" were destroyed. Capitalism is based on trade, even corrupted versions of it. So if we were the only producers in the world, what did we trade with them in order to get rich? Its like saying I am going to kill the only other guy on the island so I don't have to compete with him. Sure, you wouldn't, but you would also loose something of great value.

I mean this guys premise is that people who live in a wealthy area should only have to be able to push a button in a factory in order to afford that. America is a land of wealth, to live in a land of wealthy you need to be able to trade for it. That means getting educated and being able to do something that an impoverished foreigner or robot couldn't do.

Edited by Hairnet
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Also, just to tack onto Hair's second-to-last point, the professor states that there is nothing that can be done to fix the crisis quickly. It is not temporary, fleeting, or short, that no matter what government does, and indeed everything it has done, the problem cannot be solved quickly, they are doomed to fail, it is here to stay. While this is semi-true, his statement presupposes a “fix” defined as further interventionism, when actually it is the case that even if a depression is deep, if a policy repealing interventions and laissez-faire is followed, the errors can actually be worked out very quickly if the process is left alone to adjust as fast as possible (eg., 1920-21), but if the government does intervene (via monetary policy, bailouts, stimulus etc., everything he does mention that has and must of course fail), all it does is postpone adjustment process, lengthening depression, keeps the economy in the state of chronic depression we are experiencing.

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