Search Results for : financialize


How Intel Financialized and Lost Leadership in Semiconductor Fabrication

Naked Capitalism has the post How Intel Financialized and Lost Leadership in Semiconductor Fabrication.

Yves here. Get a cup of coffee. This is an extremely well documented account of how Intel chose pumping up its stock over defending a core business.

A side-note of little interest to anyone but me, Morris Change was Vice President at the division of Texas Instruments where I worked from 1969 to around 1973.

Responding to the opportunity to manufacture chips for fabless firms, in 1987 Morris Chang, a Taiwanese native with electrical engineering degrees from MIT and Stanford and 25 years of work experience at TI, launched Taiwan Semiconductor Manufacturing Corporation (TSMC) as the world’s first “pure play” foundry.

Since I retired in around 2007, I had no idea how far Intel had fallen behind.

Use this link to search of other mentions of finacialization on my blog.


Fmr. Goldman Sachs Trader Supports Robin Hood Tax As A Way to Move Away from Financialized Economy

The Real News Network has the video interview Fmr. Goldman Sachs Trader Supports Robin Hood Tax As A Way to Move Away from Financialized Economy .


You may remember this tax from my March 2010 post The Robin Hood Tax Song.

This tax is such an unmitigated good, that there is no reason to consider this tax before touching earned benefits like Social Security and Medicare.

With such an obvious solution to revenue raising and to definancializing the economy, why would anybody look to any other action before implementing this one?

So when anyone tries to tell you that there is no other solution than cutting Social Security and Medicare, you just give them the old Bronx Cheer and/or the Razzberry.



In Quest of a Multipolar Economic World Order

Michael Hudson has posted the article What Flavour Oligarchy?. It features a video and a transcript.

In this second round of conversation, Professor Michael Hudson and Pepe Escobar discuss the emerging economic world order which they define not so much as a conflict between nations, but a rivalry between two competing models of the economy. The finance capital driven model of the West with a domination of the FIRE sector, versus the mixed economy model represented by China and Russia which seeks to rein in rent seeking, combined with public banking and state funded infrastructure to support market compliant industrial development. In Professor Hudson’s view, this model was advocated by classical economists, from Mill, Ricardo, to Henry George; and is largely responsible for the West’s past successes.


This could be the best two hours you have watched in in a lifetime.

Alanna: So Michael, what about one city that it’s desperate that could be educated, that there is an alternative with clarity about a land value tax system and a public bank. For instance, the city of Baltimore that desperately needs a new economy. Can you give us some hope that we could focus on a city level and begin building a template for how cities and like Sao Paulo where Pepe is born, from the cities that desperately need change? Michael, can you give us some sort of template?
We know the federal government is hopeless for us now for we, the people. Texas is having a vote to form the Republic of Texas, to secede. There are other growing secessionist movements in the United States. Could we imagine that there could be an implosion away from centralized control to a regional and city level. Michael, give us some hope.

Michael Hudson: I can’t give you hope. I am all in favor of public banking and I’m on Ellen Brown’s board of directors for her group. However, supposing you had a public bank in Baltimore and the public bank said, we want to provide credit for Baltimore people to be able to afford homes. They would still have to out create enough credit and enough debt to outbid what commercial banks are lending other people that want to buy houses there. So, you can’t have an Island of efficiency and public banking in a system that basically is still financialized. The problem is systemic.


Michael Hudson: Finance Capitalism vs. Industrial Capitalism – The Rentier Resurgence and Takeover

Naked Capitalism has posted the article Michael Hudson: Finance Capitalism vs. Industrial Capitalism – The Rentier Resurgence and Takeover. Here is the original article on Michael Hudson’s Web site.

This explains so much of what I have been trying to explain by this whole blog that I have been writing for 15 years. It goes way beyond the mechanics of Modern Money Theory. This is a long article, so I have tried to extract some of key points. Even that makes a long post.

The economy as a whole has suffered. Debt-fueled housing costs in the United States are so high that if all Americans were given their physical consumer goods for free – their food, clothing and so forth – they still could not compete with workers in China or most other countries. That is a major reason why the U.S. economy is de-industrializing. So this policy of “creating wealth” by financialization undercuts the logic of industrial capitalism.
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Another reason for deindustrialization is the rising cost of living stemming from conversion of public infrastructure into privatized monopolies. As the United States and Germany overtook British industrial capitalism, a major key to industrial advantage was recognized to be public investment in roads, railroads and other transportation, education, public health, communications and other basic infrastructure. Simon Patten, the first professor of economics at America’s first business school, the Wharton School at the University of Pennsylvania, defined public infrastructure as a “fourth factor of production,” in addition to labor, capital and land. But unlike capital, Patten explained, its aim was not to make a profit. It was to minimize the cost of living and doing business by providing low-price basic services to make the private sector more competitive.
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Under a regime of “burdenless taxation” the return on public investment does not take the form of profit but aims at lowering the economy’s overall price structure to “promote general prosperity.” This means that governments should operate natural monopolies directly, or at least regulate them. “Parks, sewers and schools improve the health and intelligence of all classes of producers, and thus enable them to produce more cheaply, and to compete more successfully in other markets.”Patten concluded: “If the courts, post office, parks, gas and water works, street, river and harbor improvements, and other public works do not increase the prosperity of society they should not be conducted by the State.” But this prosperity for the overall economy was not obtained by treating public enterprises as what today is called a profit center.
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For a century, public investment helped the United States pursue an Economy of High Wages policy, providing education, food and health standards to make its labor more productive and thus able to undersell low-wage “pauper” labor. The aim was to create a positive feedback between rising wages and increasing labor productivity.

That is in sharp contrast to today’s business plan of finance capitalism – to cut wages, and also cut back long-term capital investment, research and development while privatizing public infrastructure. The neoliberal onslaught by Ronald Reagan in the United States and Margaret Thatcher in Britain in the 1980s was backed by IMF demands that debtor economies balance their budgets by selling off such public enterprises and cutting back social spending. Infrastructure services were privatized as natural monopolies, sharply raising the cost structure of such economies, but creating enormous financial underwriting commissions and stock-market gains for Wall Street and London.
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Even if China and other Asian countries didn’t exist, there is no way that America can regain its export markets or even its internal market with its current debt overhead and its privatized and financialized education, health care, transportation and other basic infrastructure.


January 26, 2020

Found this article “Creating Wealth” through Debt: The West’s Finance-Capitalist Road – Michael Hudson, Peking University, School of Marxist Studies, May 5-6, 2018. This is what can be taught in Chinese Universities by USA scholars that cannot be taught in the USA.


Author: How elites sold out American workers and how to fix it

The Hill channel on YouTube has the video Author: How elites sold out American workers and how to fix it.

Author Matthew Klein discusses his new book, Trade Wars are Class Wars, in which Klein explains how today’s trade conflicts are caused by governments promoting the interests of elites at the expense of workers.


For years, I have been trying to get people to understand this. One thing not mentioned in the interview is that countries used to negotiate with each other on tax laws to prevent the wealthy from fleeing one country to go to another country that charged them less in taxes. George W. Bush put a stop to the USA’s participation in these negotiations. Biden could get these talks started again, but I bet he won’t.

The Jain Family Institute channel on YouTube has the video Trade Wars Are Class Wars: Adam Tooze, Michael Pettis, & Matthew Klein in conversation. There are echo problems when Michael Pettis speaks.


Even just half way through this second video, I find the situation explained with much more insight than I have been able to figure out on my own.

Watching this second video to the end, I notice that all the people involved in the video fail to recognize the overhead on the USA economy due to the financialization of the USA economy. If you remove this overhead, then people in the USA don’t need increased wages to have a higher standard of living.

We have to restore the laws against usury, we have to change the tax advantages of financialized enterprise, we have to restore laws against monopolies and trusts. If we were able to do that, and then have the Federal Reserve Bank (Federal Government) payoff the private debt burden and prevent the debts’ rebuilding, then we could compete in trade in the international arena. If restoring anti-usury laws made it unprofitable for the credit card companies to make a profit the way they do now, there would be less of an incentive for them to entice people into credit card debt. If public colleges were free, student debt wouldn’t get built up again. If the tax cuts to the rich were rescinded and replaced by tax cuts to the not rich, the need for the not rich to borrow money to pay taxes would go away. This is all laid out by MMT proponents like Stephanie Kelton and particularly Michael Hudson.

Undoing Joe Biden’s bankruptcy reform laws would also take the incentive out of financializing the economy.

Making it illegal for vulture capitalists to rob private pension plans of the companies they take over, would also slow down that pernicious process. The vulture capitalists make their money by buying companies, stripping the assets, and putting the proceeds into their own pockets. If we could put the brakes on the takers like Mitt Romney, it would go a long way toward solving our economic problems.

Perhaps the boo discount code YETWC will prove useful in purchasing the book.

Reading Trade Wars Are Class Wars is essential. I am half way through the book. I am sure I’ll have to digest a lot and think about what I have read a lot before I will fully appreciate it. I am learning that even some of the recent economic miracles in China and Germany were won on the backs of the lower classes.

Looking at my subsequent post Polarisation, Then a Crash: Michael Hudson on the Rentier Economy you get to see Michael Hudson explain the role of the overhead in stifling our economy.


China Takes Step Against Securitization, Consumer Borrowing With Suspension of Ant IPO

Naked Capitalism has the post China Takes Step Against Securitization, Consumer Borrowing With Suspension of Ant IPO.

Another reason for China to take a dim view of personal borrowing is that the government prioritizes wage growth and improving living standards as its basis for legitimacy. There’s no reason, as in the US, to use consumer borrowing to mask stagnant worker wages. And the Chinese may even have recognized that overly financialized economies have lower rates of growth than ones at a more modest level of financial “deepening”. The IMF found that Poland was at the optimum level, but argued that more finance might not create a drag if the sector was well-regulated.

Another example where the Chinese government regulates capitalism better than the USA Government does. Are we supposed to be angry at China for controlling corruption better than we do? Or are we going to impose sanctions until they let corruption take hold of their economy, too?


Michael Hudson: How an “Act of God” Pandemic Is Destroying the West

Naked Capitalism has published the article Michael Hudson: How an “Act of God” Pandemic Is Destroying the West: The U.S. Is Saving the Financial Sector, Not the Economy.

When reading this article always remember that Hudson is talking about private debt owed by money users. This does not apply to public “debt” owed by money creators like the Federal government. In the USA, there are no money creators like the Federal government. Only the federal government can create money.

China is using an age-old policy common ever since Hammurabi and other Bronze Age rulers promoted economic resilience in the face of “acts of God.” Unless personal debts, rents and taxes that cannot be paid are annulled, the result will be widespread bankruptcy, impoverishment and homelessness. In contrast to America’s financialized economy, China has shown how natural it is for society simply to acknowledge that debts, rents, taxes and other carrying charges of living and doing business cannot resume until economic normalcy is able to resume.

What angers our oligarchs so much about China is that China can figure this out, but our oligarchs hate this solution because it works.

If we can’t take our blinders off to see the obvious, our downfall is nobody’s fault but our own.


Sanders and Varoufakis Announce Alliance to Craft ‘Common Blueprint for an International New Deal’

Common Dreams has the article Sanders and Varoufakis Announce Alliance to Craft ‘Common Blueprint for an International New Deal’.

After arguing in a pair of Guardian op-eds last month that a worldwide progressive movement is needed to counter the unifying rightwing “that sprang out of the cesspool of financialized capitalism,” former Greek Finance Minister Yanis Varoufakis announced in Rome on Friday that he and Sen. Bernie Sanders (I-Vt.) plan to officially launch “Progressives International” in the senator’s state on Nov. 30.

This is a very hopeful sign. As the oligarchs frequently point out that if a single country tightens the rules, then international capital will just move to a country where there are friendlier rules (meaning no rules). Only a fairly uniform international set of rules can solve that problem the oligarchs rightfully warn us about.

I have previous posts that talk about how such international cooperation was under way until George W. Bush put a stop to it. See International Tax Competition and Coordination.

Here is a search for all the posts where I may have touched on the subject – Search results for “international tax”


The Century of the Self – Part 1: “Happiness Machines”

YouTube has the video The Century of the Self – Part 1: “Happiness Machines”.

The story of the relationship between Sigmund Freud and his American nephew, Edward Bernays. Bernays invented the public relations profession in the 1920s and was the first person to take Freud’s ideas to manipulate the masses. He showed American corporations how they could make people want things they didn’t need by systematically linking mass-produced goods to their unconscious desires.

Bernays was one of the main architects of the modern techniques of mass-consumer persuasion, using every trick in the book, from celebrity endorsement and outrageous PR stunts, to eroticising the motorcar.

His most notorious coup was breaking the taboo on women smoking by persuading them that cigarettes were a symbol of independence and freedom. But Bernays was convinced that this was more than just a way of selling consumer goods. It was a new political idea of how to control the masses. By satisfying the inner irrational desires that his uncle had identified, people could be made happy and thus docile.

It was the start of the all-consuming self which has come to dominate today’s world.

Originally broadcast on 29th April 2002.

I have read that these propaganda techniques had started in the run up to World War I. This video puts many details to what I could remember of my past readings. In fact I found mention of this idea in a previous post Chris Hedges Interviews Noam Chomsky (1/3).

Thanks to Sep Ebrahimzadeh for posting the video as a Facebook comment on one of my posts.

I now better understand the context of what I alluded to above and can recommend some resources for anyone else who might be curious:

There’s a book titled Propaganda by Edward Bernays (Freud’s nephew) including its excellent introduction by Miller. In this book Bernays described how and why he saw the populous as irrational and easily manipulated.

This 4 hour BBC documentary starts from shortly before Bernays and Freud’s time and connects the dots all the way to Raegan/Tatcher and Clinton/Blair’s era (which is largely where we are now)

The fourth part of the series describes how the “left” parties in America and England abandoned their principles and adopted the business-marketing style of governance in an effort to win votes and get reelected. Robert Reich’s short speech at the end sums up the problem succinctly:

The issue is a difference of idealogy between today’s corporate Democrats who have a Freudian view of their voters and the Democratic Socialist view of rational involved citizenry.


September 11, 2018

I have now seen all four episodes of “The Century of the Self”. Somewhere along about episode three it lost its way. I don’t feel that episode showed any understandinng of how to improve the political situation for progressives. I was singularly unimpressed with Robert Reich’s opinions at the end of the fourth episode.

Remember that this documentary was first aired in 2002. I think I have learned a lot more about reality than I knew in 2002.

With the economic collapse of 2008/2009, I am now much more educated on what the “free market” has managed to do with all that freedom. The economy has been financialized. More profit is made by charging for moving money around than is made by manufacturing to satisfy consumer wants and needs. The “free market” doesn’t care about providing consumers with enough income to buy stuff. The free market only wants to squeeze consumers by getting them to borrow more money. This way, the rich can profit more from interest payments on the borrowed money than they can make by selling actual goods. Whatever goods need to be made can be made by cheap foreign labor to which the corporations have outsourced the work. Why should corporations bother to pay USA workers higher wages, when you can keep all that money for themselves? If the workers don’t have the money to buy stuff, just shrink the size of the corporation to meet the size of the market. This shrinkage has the tendency to raise the value of the corporation that is left concentrated in the hands of the 1%

The rich have found that corporations can make more money per share of stock and raise the prices of shares of their stock, by using corporate assets to buy back the corporations shares. The companies make less total money, but with fewer shares outstanding, the people who own those remaining shares get a bigger share of the shrinking economy. Imaginary measurements are enough to dupe the uninitiated into thinking the economy is growing. These uninitiated just cannot understand why they aren’t getting their share of the supposedly growing economy.

Ultimately, the strength of the USA depends on the productive capacity of the economy. We can keep that strength by overspending on military power for a while, but eventually their won’t be enough of a domestic economy to support the military spending. The USA empire is approaching its ultimate collapse (which might not be so bad for the rest of the world). However, we don’t need to overdo that collapse.

The documentary focused all its attention on what people could be sold in terms of consumers goods and political ideas, and too little analysis of the economic consequences of the decisions people are being fooled into making.

Walter Mondale showed how foolish it was to sell a political program based on raising people’s taxes. Robert Reich isn’t going to have any more success in selling a program that way. We have to focus on the economic destruction of our society that is going on with the current policies. The economy has changed enough since Barack Obama got elected for people to see the harm they suffer from too much corporate power. It’s not so much that government power is so good as it is how damaging corporate power is when it has no controls over it.

The 99% don’t need their taxes to be raised, but the 1% certainly do. It is less about their paying their fair share as it is about transferring great wealth from the 99% to the 1%. This gives the 1% great powers over the country that they should not have, as evidenced by what they have done with all the power they have accumulated.

We need a better understanding of the damage that occurs when functions that the government should be doing are privatized so that even more resources can be taken from the 99% and given to the 1%. Progressives need to recognize the harm that can occur from too much government power, but they need to explain how much worse it is to turn that power over to the corporations. Maybe there needs to be more focus on the damage that occurs when too much power is concentrated in the hands of any single group.


Trump’s Idea of Running Government Like a Business is Bad for Citizens

Naked Capitalism has the article, Trump’s Idea of Running Government Like a Business is Bad for Citizens, based on The Real News Network’s interview with Michael Hudson.

The idea of running it like a business is to screw labor. To pay labor as little as possible, and to get as much money for themselves — the businessmen — as possible. So, when Kushner says, “Let’s run government like a business,” what he really means is, let’s run government for business.

In general, a business’s purpose is to make a profit. Selling something is one way to do it. Speculating in commodities or other company’s stock is another. Whatever the business, the main purpose is to make money. In the old economy selling something was the where most profit in the economy came from. In today’s financialized economy, the most profit is made via financial transactions.

In the days of making things and selling things, it was not a zero sum game. A manufacturer would take raw materials and turn them into something more valuable to sell.

In today’s financialized economy it is a zero sum game. What ever one business gains, it comes from someone else’s loss. There is very little of value being created.