Principles of Fascist Economics

Discussion in 'The Pavilion' started by Macrobius, Sep 10, 2012.

  1. Macrobius The Old Usager

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    From a two part comment at The Phora:

    http://www.thephora.net/forum/showthread.php?t=83978 ['The New Terrifying Normal']

    which in turn discusses: http://pjmedia.com/victordavishanson/the-terrifying-new-normal/

    Clear reference to these two posts intended:

    http://stumbleinn.net/forum/showpost.php?p=354172&postcount=18
    http://stumbleinn.net/forum/showpost.php?p=354173&postcount=19

    It is hard to answer a question that assumes the economy *has* to do well, or that there is some solution to the economic which is as pleasant (for White Americans) as it was in the past. The economy has clearly moved to a different operating point (loosely, and equilibrium, though not in the technical maths sense of that word). The same thing happened in 1933-1937 and only the war economy of 1941 finally kicked us back to 'good' equilibrium.

    These things don't really have causes -- they are more like emergent properties of a complex dynamical system. We *might* be able to do something to change the system operating point, but unless we get some leverage on the problem, it is more than likely to be pushing a boulder uphill, only to have it roll back to 'where it wants to be'.

    One problem is that current media/academic analysis is proscribed from discussing the obvious. By obvious, I mean simply applying the equations and concepts of an undergraduate Macroeconomics course, in the most straightforward way, and drawing conclusions.

    The economic pundits (Paul Krugman, say) talk a lot about the part of the story, Aggregate Demand (as determined by the equilibrium of the IS-LM model, or http://en.wikipedia.org/wiki/Mundell–Fleming_model if you want to be a hair more complex). What is said is perfectly correct, and indeed the simplest Ec 101 sort of models in fact tell the whole story -- the deafening silence from the Liberals on 2/3s of that story is the only interesting thing about it.

    -- Aggregate demand (AD) is down, because 4-6% of the entire population has stopped working and given up.
    -- We are in a liquidity trap, and monetary policy no longer does what it used to
    -- Economies can stay in this state indefinitely without activist fiscal policy (Japan has been stuck in a similar state since 1991).

    All this is very true. Now, about Aggregate Supply and the side of the story you never here from liberal pundits: Aggregate Supply (AS) has to equal AD in the medium run, in which wages and prices are somewhat flexible, esp. the latter. It's not an either/or thing (though persistent deficit of demand -- 'a general glut' as it has been known for 200 years now -- is quite possible, and takes 1-2 decades to work itself out of the system naturally). I don't think we're ever going back though, because of the Supply Side.

    Summary: (1) AD can heal itself in 15 years, even with bad policy. Sooner if we have a war. (2) What about AS?

    AS is an equilibrium point that AD is attracted two, and it is defined by equality of two relations: (a) the price-setting relation and (b) the wage-setting relation. You can do the analysis either way, because AD *has* to end up in the same place AS does, in the medium run (a few years at most).

    Here is the point seldom observed (by pundits, but dead obvious): the price setting relation is that the real wage in the medium run must conform to the markup businesses charge for their goods (businesses have to cover their wage costs by marking up the goods sold):

    1/(1+mu)= W/P, where W is the average wage, P is the price level (deflator), and mu is the average markup.

    FACT: W/P has been dead steady, with small oscillations, for White men and actually everything else, since the Oil Shock of 1973, Unlike the old story ('because of technological progress, you will be better off than your parents') the middle class is just holding on. The elite are filthy rich, and the poor have entitlements. The middle has managed -- by putting the wife to work, mind you -- to break even for 40 years. That time is ending.

    Conclusion: the price setting equation can't have changed (mu, the markup for goods, is the same now as in 1973, and that part of AS can't shift). We could have a general deflation and real wages *could* drop, but they haven't. The pain has been, instead, in the wage setting relation of AS:

    W/P = F(u,z) ... 'Your real wage is F U'

    [real wages are some random function of unemployment and other state variables in the economy]

    This equation means that when times are rough (if u is high enough, for long enough), then people will accept lower real wages. However, people are so leveraged up, they would rather collect unemployment bennies or do *anything* but sell their house at a loss. Prices don't drop, wages don't drop, people just say screw working and do something else. Everyone is worse off (esp. those still working and paying for the party). W/P is going nowhere -- and hasn't for 40 years -- and it won't until the Boomers finally die off or become unsustainable by their children (the coming crisis). So the wage setting relation will shift along the horizontal W/P-fixed-markup line, to higher unemployment, u* -- permanently.

    The price setting relation is a horizontal line that hasn't moved, yet u has moved permanently. This can only happen if the AS curve as a whole moves left -- forcing AD to move with it.

    Notice the causation here: it is unemployment that is causing 'deficient demand'. There are lots of goods people would *like* to buy, and people willing to make them, but it won't happen because, in the end, the persons who refuse to work don't have money to employ the others -- a vicious cycle.

    This gets us to the core problem: the long term. The long term is given by a scaling ratio (that governs the employment of capital to produce goods), and it has permanently shifted. The scaling relation is the variable Y/AN -- national income (total monetary value produced by labour, of course), divided by the 'efficiency of labour' (how much one can ), and the size of the population.

    Y is down, for sure.

    A is also down (better educated, White workers are retiring, to be replaced by assorted ill educated Whites whose capacities to do anything has been destroyed by a Marxist school system, and assorted lazy muds)

    N is up -- illegal immigrants, 'fatherless' children, more people collecting entitlements including boomers, the whole nine yards.

    Y/(AN) is the Victorian formula for progress and beating Malthus: even though N goes up geometrically, raise A faster (using progress and technology), to raise Y even faster than N, so per capita well-being outruns the 'hungry 40s' and potato famine. Technology can do this forever, and one day we'll all live like kings and have robots doing our work for us (yay, progress!).

    But it isn't working that way, is it. Businesses like to keep Y/AN constant -- having it going down is exceeding painful in terms of retooling. Y does indeed tend upwards with N (our anemic 'recovery' is driven by population growth, and the simple need for basic services and goods that implies, which certainly helps). Efficiency per worker (A) is the killer. Are we, per capita better off? No. Y/N, the well being of the labourer and his family members, as a way to split up the pie -- just sucks. Why? A, worker efficiency at applying capital (technology) to his task, has to be down -- it's the only explanation that fits the facts. It has to be down enough to depress Y/N. Summary: Technology is not keep up with the non-labouring anchor baby production rate, so the per labourer cut of the pie is smaller. White Man, your family is larger than you thought -- and a lot blacker if you add up all the mouths you have to feed. You've got parasites. More than a few cowbirds in your nest.

    The two states of the economy (good and bad) represent two equilibria -- the one that can be supported by Whites, and the one that Immigrants can support. The only thing business can do to compensate for low output of the latter per worker, is to employ more capital -- but that takes investment [buying more computers was part of the 2010 economy]. Essentially, replace actual service with a call center and a lot more computers, programmed by fewer Whites or worse by lots more H1-Bs.

    It should be obvious why the AS side of the AD=AS relation is never explained (even though they have to tell the same story), or why the long term growth implications of Y/(AN) scaling are never discussed. A -- 'the technology level of American Society' -- is going down, due to mal-education, less efficient labour, and a decline in technological (engineering) culture. Obama and Romney are both specialists in making this trend continue, exactly as it has since the early 70s, and esp. since 2000.

    Insanity is electing the same parties over and over, and expecting different results every time.
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  2. Macrobius The Old Usager

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    In this second part of my post, I'm going to highlight some of the factors affecting 'the recovery' by referring to the profit equation of Kalecki, 'the polish Keynes'. These factors affect both Marxist economies (such as Kalecki managed) or Capitalist ones (as Keynes did). There are flaws with this analysis, but I think on the whole they give some insight into what the factors are governing the distribution of income in this country. The chief factor not considered is the presence of a large idle class of transfer payment recipients, but I will add that in, since it is easy to do.

    http://en.wikipedia.org/wiki/Michał_Kalecki

    Kalecki's famous 'profit equation' is P = Cp + I (the profits -- of the Capitalist class) is equal to its own consumption + investment. This is an accounting relation, not a way to get rich. It means whatever profits the capitalist class (the 0.1%) has, it spends on consuming luxuries or invests. [Part of the deficiency of the equation is that the Capitalist class can and does also buy gold coins and buries them in its properties, or very similar modern versions of the same -- a popular Roman custom in bad times, and increasingly popular in ours, in whatever guise].

    Scrolling down the page, we note two other formulae:

    P + B = k*(W + M)

    Profits and money spent on administrative overhead (cute secretaries and useless PM drones, say), must balance the cost of wages and materials, up to a factor k equivalent to the markup of goods sold (1+mu, in the last post). We argued the key fact that markup hasn't actually changed -- so k is constant.

    Notice the capitalist, for fixed wages and markups (fact!) can only make more profit by cutting overhead -- downsizing, outsourcing. Or by jacking up the relative price of materials (M) to labour (W).

    The effect of this on Labour's pie (wage share of national income, Y) is explicit:

    alpha = 1/[1+k*(1+j)]

    k is business markup/multiplier (fixed as we've noticed), and j is M/W -- the ratio of cost of goods going into labour's product, If oil or copper or irrigation water prices go up, labour's share of national income must decline.

    Key conclusion: If the cost of materials goes up, and k is fixed, the share of national income for the workers goes down! So the comment above about resource scarcity -- not just oil though -- was spot on.

    The key formula governing the change in national income (and hence our well being) is:

    Delta-Y = Delta-I/(1-alpha)/(1-q)

    alpha is the share of national income held by labour. q is the fraction of the Capitalists' income spent on *consumption* [Cp above]. Delta-Y is a change in national income (GDP), and Delta-I is a change in investment.

    Capital is sitting on the sidelines now so Delta-I has been negative and is anemic, alpha has gotten worse (resource scarcity), and yet national income is going up. The cause must be that Capitalists are consuming a larger fraction of their income than previous -- cutting into capital to maintain their lifestyle, in the face of declining profits, perhaps.

    So, how does one modify these equations to see the effect of transfer payments to a large idle class? In many ways, this class is like slaves, only without contributing any profit to the capitalists. In effect, they are a form of Capitalist *consumption*.

    Kalecki's analysis doesn't include a government sector, but it doesn't really need it, and adding one in can be left as an exercise for the reader. The government's role in transferring wealth can be mocked up by having the Capitalist spend money on idle slaves for his amusement (which amounts, economically, to the same thing). Wages of the slaves are 0 (as for all slaves), but unlike the slaves of yore, these have not product, and contribute no profit -- it is a form of patronage that amuses the Capitalist, such as maintaining writers or artists about the castle (only the results are rather less aesthetic, reflecting the vulgarity of taste of our modern Capitalist class). Nothing more, nothing less.

    Why would Capitalists keep a large quantity of idle pets about (not that questioning what a man spends his wealth on is really possible, in Economics)?

    P = Cp + Ct + I

    (The profit of the Capitalist is his own consumption, the money he spends on muds for his amusement, and investment in productive capital goods such as factories and machine tools, that actually help make shit). It's clear a man could go broke, funding Ct.

    Clearly, the role of Ct -- transfer payments -- is to *change* the social aspect of the Capitalist class's profits, by making it more 'consumption like' and less 'investment like' (ever a Marxist goal -- Marxists prefer high consumption to high investment in infrastructure, a point I've made elsewhere).

    The more complex version can be modified by comparing Ct to B -- the cost of maintaining cute secretaries and useless sycophantic managerial drones:

    P + B = k * (W + M)

    Obviously, Ct (consumption of the gigantic population of idle and entitled slaves) is just another way of cutting into profits. However, since the Capitalist class clearly wants fewer managers, and more idle slaves about, it is best to break B into two terms:

    P + B' = k*(W+M) + Ct

    The key move here is *not* to include Ct as simple overhead on the left hand side. That is because B' (the part of the constant term imputed as overhead) is an accounting notion of fixed money paid *to make stuff you can sell*. The idle class adds no such value. It would be a drag term like 'cost of materials' except it doesn't involve the markup factor, k.

    Now, we can see the effect on *labour* by the introduction of this term, by fixing up alpha:

    alpha = 1/[1 + k(1+j) + ell]

    where ell is the ratio of Ct/W [fraction of transfer payments to the non-wage earner vs. W, total income earned by wage earners].

    We thus learn that alpha is not currently effect by k (the price structure of markup/profits in selling goods). However it *is* adversely effected by (1) scarce resources costing more, j and (2) a worsened (increasing) ratio of benefits to non-labourers, vs. wages, ell.

    The Capitalist class and the idle recipients of wealth transfer function in more or less the same capacity. Both are non-productive pets, to some extent, of the system. The role of the Capitalist is, of course, to provide private investment. However, to the extent he doesn't do so, he becomes another parasite, adding consumption, without providing any value or profit besides his only ability to collect monies without producing.

    If we make less stuff, I guess we shall all have to share what we have.
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  3. Man Against Time Black Hole Melchizedek

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    I have my own thoughts about fixing our economic sewer, encouraging efficiency, generating aggregate demand, boosting productivity, and increasing real wages, although I am too lazy and perhaps not sufficiently trained to express these ideas with mathematical equations. Instead, I would have to rely on what I know of social sciences like economics, history, and political science, along with ideology and common-sense.

    The middle-class is being slaughtered because technological innovation, trade policy, immigration policy, monetary policy, education policy, and deindustrialization (if we can use that term for the loss of the manufacturing sector) have all contributed to, in effect, 'reset' our economy to a setting where only a much smaller middle-class can be maintained and where staggering fortunes could only be reaped by a relative few (think before the twentieth century, or perhaps even the initial phases of the so-called 'industrial revolution'). A key difference between now and then would be the large amount of inflation that the current large lower (part-working, part-welfare) class currently has to deal with vis-a-vis the old large lower (part-working, part-pauper).

    If you look at the economic situation of many major American cities today, particularly when you consider factors like crime-rates and gang-controlled areas, large cities in 2012 really are not all that different sociologically from large cities in 1840, except demographically (racially). In 1840, large American cities like NYC, Philadelphia, Baltimore, and so forth, were largely economically unproductive, crime-ridden, gang-filled, poor immigration hubs where people basically just lived and 'got by.' This situation gradually changed over decades as economic productivity spread throughout the cities because of increased manufacturing capacity and better wages won by more sophisticated trade unions. Shortly before WW1, tight-knit NE city neighborhoods were far better places in which to live, work, and raise families than seventy years prior, when the industrial revolution was first kicking off and a middle-class was virtually non-extant in such areas. Today, after deindustrialization and the flight of whites and capital, these places have reverted, unable to generate middle-class consumers (or 'participants in the economy') once more.

    Fortunately, the middle-class consumers that were generated during this period of, say, circa 1875-1975, still exists. Largely, they have relocated to suburban areas and live in a state of virtual economic limbo. They are unable to achieve any further upward mobility because of the current state of wage depression, taxation, increased standard of living costs, and so forth. They are also barely able to hold on; clinging to one job and hoping for the best, or fighting desperately for another which they hope can provide the same as the previous one. Many of these people are just one step away from potentially falling back into the economic cesspit that they or their parents once escaped. In sum, there is very little prospect for them of their economic lot actually becoming better, but the possibility of them slipping downward on the economic ladder is certainly present and perhaps always right around the corner.

    Meanwhile, an exorbitantly rich class of people is largely alienated from these concerns. However, the rich have always existed and always will exist. Regardless of whether the little people are doing great, fair, or poorly, they will always do well. Accordingly, it would be a waste of time for the ultra-rich to be the focal point of any policy discussion, so back to salvaging the middle-class. After all, a large and healthy middle-class of consumers is what makes a large capitalistic system function properly.

    The unionized tradesmen and manufacturing occupations that provided so many middle-class individuals with a living are now more or less deleted from the economy (really, shipped to another country as part of the global economy). Specialized occupations which require academic training and which can provide a similarly competitive or perhaps superior wage still exist, but there are not enough of these jobs for the large number of people who are/will effectively be displaced by the occupations that were removed from the economy. The removed jobs, however, do have replacements. They have largely been replaced by lower-level 'service' jobs. The abundance of factories or plants have been replaced with an abundance of shopping centers, restaurants, casinos, stadiums, megasuburbiaschools, hospitals, and other places which provide/produce 'services.'

    Some writers, thinkers, economists, politicians, whatever, have made the argument that we need to create incentives to bring these 'good' jobs back. But all that makes a job 'good' in the eye of an economist is the wage - it has nothing to do with the nature of the job itself. Keep in mind that, historically, these lost jobs that we now look back upon as 'good' were not originally 'good.' Originally, they were really shitty jobs, and they were really not made to pay well until unionizing and government forces coerced employers to make them 'good' in terms of pay, working conditions, and so forth. The 'service' jobs which have replaced these 'good' manufacturing jobs are 'bad' by comparison because they do not pay as well, the workers do not receive comparable benefits, and so forth. The owners of the companies that provide these new 'services,' like the Wal-Marts and what-have-you, however, make a killing, because they are set up to rip everyone off as much as possible within each segment of the new globalized economic framework. The obvious answer is that someone needs to step in to make jobs of this type respectable, whether these forces come from government, unions, or both, so that they are attractive to all of the people entering the economy to become teachers, doctors, lawyers, psychologists, sociologists, [insert over-leveraged college degree here], etc., because there are not enough of these occupations for all of these college motherfuckers. Until this imbalance is resolved, and until you can obtain a legitimate 'career' in these other parts of the economy, our current college->degree->career economic model will continue to be over-leveraged, will continue to contribute to unemployment, and will continue to be economically wasteful (think of the people who simply train, and retrain, and retrain, ultimately doing nothing or very little, under our current model).

    Of course, this would only work to alleviate the wage/employment problem, and not the productivity of goods problem. Someone could easily criticize this by saying that it really fixes nothing because the country will still not be 'making anything' any longer. However, if we're simply working in free-market principle terms, it should not matter whether a good or a service is produced so long as which ever you produce is in demand and yields profit, and if it is more economically productive/profitable to focus on services, then why bother focusing productivity on old goods?

    Anyway, this is only one aspect of our predicament with our new economy (which is a part of the new trade-dependent 'globalized' economy), and I did not even get into the areas where efficiency can be increased to a considerable degree and waste can be reduced tremendously, but that will have to wait because I have to go to sleep at some point. This may seem like it goes all over the place and like it lacks structure because it does-- I cannot finish it right now.
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  4. Anarch Record Maintainer - Schedule A

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    Tomorrow... I will post in this thread. From the perspective of Austrian economics, because Keynes is garbage.
  5. goosey Gach madadh air a’ mhadadh choimheach

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    o oh. Head for the hills. Anarch is going on an economic rampage again.
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  6. Man Against Time Black Hole Melchizedek

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    We would also be thrilled if you could enlighten us on the strengths of stickniggernomics.
  7. Anarch Record Maintainer - Schedule A

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    Got distracted watching Prometheus. Tonight I'll try to summon the motivation.
  8. Anarch Record Maintainer - Schedule A

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    Okay... Here goes. Everything derived from Keynesian economics is wrong, because economics is ultimately dependent on production and trade, which in turn hinge on the desire of consumers and the anticipation of those desires, correct or no, by entrepreneurs who in turn save part of their income and devote it towards the purchase of capital goods which combined produce consumers goods. Therefore it ultimately depends on the ingenuity of entrepreneurs, the unknown future preferences of consumers and the stability of a medium of exchange. In short, economics is derived from praxeology, the science of human action, and is not subject to mathematics.

    Currency is incredibly important in the whole structure of an economic systems. Person A wishes to trade a pair of shoes for half a dozen eggs, owned by person B. Person B has no desire for a pair of shoes, but he does desire a pound of butter, which in turn is owned by person C. Person C wants a pair of shoes. Therefore Person A exchanges his pair of shoes with person C's pound of butter, which person A then takes to person B and finally acquires the half dozen eggs. In this scenario, the pound of butter serves as a means of exchange, or currency. As the system of production and exchanges expands, a more useful currency emerges, one that is divisible, enduring (unlike butter), serves as a useful good (it must, or else it would not emerge as a medium of exchange) and whose supply cannot be easily conjured. Generally gems or precious metals fit the bill, and internationally, gold and silver have emerged as the primary currencies underpinning economies.

    As it is impractical to carry bars of gold or silver for monetary transactions, institutions such as banks tend to emerge, offering to store hard money in exchange for a fee, providing the owner of said gold with a receipt. These receipts may then be exchanged for goods, and economic agents, whoever they are, may redeem those bank notes for gold. Banks may loan out gold stored in money market accounts for customers, putting those who loan money in debt. Those who receive loaned money are required to pay that money back to the debt at a certain rate of interest over an above the original amount, both to cover the risk of failure - evaluated via credit ratings - and to generate additional funds.

    That the means of exchange, bank notes, hinge entirely on hard currency, is a constraint on the expansion of the money supply. Governments therefore are hostile to hard money. The removal of hard money as an institution and its replacement with fiat money allows governments and banks to print bank notes, unconstrained by the threat of a bank run which would expose the fraud and bring the entire system to its knees, to buy up capital goods without immediately inducing panic. Inflation is in fact inflation of the money supply, which is more effective than taxation for the requisition of capital (i.e. production order) goods. Inflation destroys the financial basis of an economy, because a currency supply cannot be immediately inflated across the board, but false currency must enter the market at a particular point - through bank loans and/or government expenditure, for example. In doing so, those first in receipt of what functionally is counterfeit currency (Class A) then have greater purchasing power than those whose currency is not counterfeit (Class B). Class A then exchanges its counterfeit currency for capital and consumer goods, artificially changing market conditions as the structure of production alters to account for the purchasing power and tastes of Class A, depriving Class B of both capital and consumer goods. Inflation, essentially, is theft.

    Fractional reserve banking is the first step in the transition from hard currency to fiat currency, and cannot exist without the enforcement of government. Under fractional reserve banking, Customer A deposits 25 grams of gold into his money market account at Bank Y. Bank Y prints receipts to the value of 100 grams of gold, issues a deposit note worth 25 grains of gold to Customer A, and then loans the remaining receipts out to customers B, C and D under the conditions of personal loans. Customers B, C and D are evaluated as having good credit ratings, and each considers himself an entrepreneur after his own fashion. Customer B employs his 25 grams of receipts in a profitable manner - he makes his 25 grains of gold back. plus another 10 grains. He pays five grains to the bank as interest and keeps five for himself as his rightful property. Customers C and D misjudge the future tastes of consumers, and, having expended their bank notes, have no means of paying back the bank. Factory owners E and F, who sold capital goods to customers C and D, don't particularly care, because they've got (what they believe) are fully functional bank notes. They return those notes to the bank in order to redeem them for gold, and the bank shits bricks because Customer A has decided to close his money market account and spend his original amount plus accrued interest on a holiday with his wife. The bank is bust. Not only is the bank bust, but it has effectively facilitated the theft of goods from factory owners E and F, which might have been traded for actual currency and placed in the hands of productive citizen G, who earned his money and was not beholden to creditors. The only saving grace of fractional reserve banking is that there is a hard limit (which in the past has been determined by law) as to how far the monetary supply can be expanded based on a certain quantity of hard money.

    To illustrate: at any given time, in both circulation and in the money stores of a given population, there are four thousand pounds of gold which back four hundred million reciepts (one reciept per gram of gold). Then government prints receipts, the counterfeited value of which amounts to two thousand pounds of gold. That money is put in the hands of government contractors, who in turn expend it on capital goods such as steel, food, etc., inflating the value of the economic activity of certain economic actors in the mining industry, farmers, etc., permeating through the economy. This cancerous effect disrupts and shatters the savings and confidence of genuine creditors, whose only legitimate response in watching the value of their currency, their store of value, evapourate is then to raise interest rates, soaking up both the fraudulent currency and genuine currency. Those industries and firms which have expanded on the back of the inflationary boom are dessicated as unprofitable enterprises, because they are unprofitable, they are founded on bad money. The longer and greater the boom, the greater the extent the economy is perverted and so the greater the magnitude of the bust. This is the exact meaning of Gresham's Law, "the bad money drives out the good".

    Fiat currency is but one step removed from fractional reserve banking. In an economic system dependent on fiat currency, there is not even the illusion of hard currency. The Federal Reserve prints cash and buys government bonds (that is, IOU's against its future income derived from taxation, complete with interest). That money is then expended, disrupting (as above) the economic structure, allowing for the requisition of government desired goods from the private sector (i.e., the productive economy). As the currency supply expands, the costs of living rise. As the costs of living rise, workers demand wage/salary increases. Those wage/salary increases eat into the profitability of capital, preventing its reinvestment, artificially shortening the chain of production, and the economic structure begins to dessicate. To prevent that, governments and central banks come under pressure to further expand the money supply, holding off the bust. Debts, once counted in terms of comparatively stable currency, are closed with freshly injected currency, freeing up creditors to reinvest in other lines of production that seem productive (yet probably would not, in the absence of a boom), further expanding the toxic effect of inflation, but delaying it. Sooner or later the system caves - and when it does, it caves in catastrophically.

    This is what Quantitative Easing has prepared you for. The only way to properly increase standards of living is to intensify capital investment, producing more and better goods at lower cost, thereby increasing the purchasing power of currency. Inflation will only achieve the opposite, and the only way to stop inflation is the dissolution of central banking and the restoration of a 100% gold standard.
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  9. Man Against Time Black Hole Melchizedek

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    The post is a good summary of economics, although I disagree with the conclusion.

    We know, just from common historical examples, that inflation (even relatively widespread) and bubbles can occur in a gold currency economy. Implementing a gold-backed currency in a modern nation-state with a modern economy would also be, as a practical matter, extremely difficult, unless each promissory note was backed by such a relatively minute amount of gold that the entire point of having a gold-backed system would be defeated.

    While my opinion is of course subject to new information and potential ultimate revision, I am still convinced that the best method is a fiat currency tied to units of production or "labor" which is printed and issued by a *responsible* government apparatus. How to ensure that the government apparatus remains responsible is, of course, another matter, but it would not be too difficult to legally code in sufficient checks and balances to ensure reasonableness. To my knowledge, while this has been arguably attempted and worked on as a goal, the attempts have always been ultimately defeated by central banking cartel interests. However, the economic growth generated by working but incomplete models in post-Civil War America until the advent of the Federal Reserve, or even peace-time NS Germany, speak for themselves. BILLY_BOATROCKER can serve as a great reference for this information.

    Within American history, the primary argument supporting a central bank has had uniformity and stability as a theme. In the American context, this argument is a correct and reasonable one. We saw what happened after Andrew Jackson buried Biddle's bank without providing an adequate replacement, which resulted in the rise of a plethora of state banks with ubiquitous and differing types of promissory notes, resulting in hyperinflation and separate but more localized panics. This concern, however, does not support the institutionalization of a *privatized* central bank, when a governmentally controlled and operated central bank would suffice. Now some free-market thinkers would contend that an unchecked government-operated central bank would naturally welcome corruption, stupidity, and irresponsibility, but that is why you need legally enshrined checks and balances.

    No system will be perfect, but it is silly and simply counter-intuitive for a central government to pay interest on its own notes from its allegedly 'own' central bank which it can simply print and issue to itself in a more efficient manner. Of course, the more conspiratorial mind would say that the interest rate is not present to actually rip-off and profit from the central government, but is present to permanently affix debt to the populace in order to, in a sense, put a gun to their head for the perpetuation of their productivity. If someone is always paying something off, someone will always be working, and it will keep the government in business every bit as much as it kept the city mafia in business. Anyway, I'm just rambling now, but I personally do not see bringing back the gold standard as a winner -- it will not work with intellectuals, policy-makers, or even the people themselves, and it naturally appears to be regressive. The truth is that, with the way technology is going, fiat currency probably is not even in the future, we will most likely have some "Mark of the Beast" *gasp!* electronic system. But who knows.

    @billy_boatrocker
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  10. Anarch Record Maintainer - Schedule A

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    It would be easy enough to accomplish. Simply replace present currencies with new currencies. It's been done before. There is enough gold - the US treasury owns over 8044 tons of gold.

    Such a thing is an oxymoron. I have explained exactly how and why fiat currency issued by any organisation precludes it from being responsible. Government and banking institutions have been the most powerful opponents of hard currency because it prevents them from enriching themselves willy-nilly and expanding their power at the expense of productive society. That idea is about as intelligent as handing a woman a credit card and letting her loose in a shoe store. And what units of production? The only means by which we can measure the efficiency and effectiveness of production is against consumer demand, which requires currency to be the measuring stick of what is 'socially valuable' (an oxymoron, considering all praxeological preferences are entirely contingent on the individual).

    You can write all the laws you want, but without an extraconstitutional break on the expansion of power, government will simply not stop expanding itself. Where there is a will, there is a way, and government's will is the enhancement and expansion of its power.

    On the contrary. Banking cartel interests, encouraged by the interests of the state, very much are opposed to hard money.

    The post-Civil War US and peace-time NS Germany are two entirely different kettles of fish. The post-Civil War US was based on a 100% gold standard, despite attempts to institute a bimetallic currency. NS Germany's economic model, on the other hand, was completely unsustainable Keynesian economics http://reason.com/archives/1999/08/01/nazi-economics

    Central banking is capable only of giving the illusion of stability. It does not, in fact, induce stability, any more than a centralised command economy brings prosperity.

    And were any of these localised panics as catastrophic as the 1929 bust or the global financial crisis? I thoroughly doubt it. It is far easier to legislate a requirement for a 100% gold reserve than anything else. Shit, provided currency is even notionally backed by gold, the omnipresent threat of bank runs would still serve as a sufficient break on the artificial expansion of credit. And 'legally enshrined checks and balances'? Cool theory bro, but it's done absolutely nothing to stop the expansion of Federal Government power in the United States or anywhere else - and given the catastrophic damage that has been brought on by currency mismanagement and the damage which is still yet to come - but inevitably will come - why should Government be trusted with something as crucial as the foundations of the economy? Government manages to fuck everything else up.

    Actually, unless you're a bank or a government or a whinging leftist who thinks you're entitled to what you haven't earned (I'm not calling you one, I speak of a type of abstract citizen), 100% gold standard currency in a free market is perfect. Everything else brings higher costs of living, progressive impoverishment, misery, socialism and inevitably slavery.

    Of course it is counter-intuitive. But it does at least provide the illusion of the Emperor wearing clothes, but the fundamental facts don't change, that's true. It's functionally called theft.

    I would not disagree with this assessment.

    Until the system totally breaks and people start shooting the debt collectors. Stranger things have happened. Governments have declared themselves bankrupt and refused to pay their creditors before. The worst that happens if governments have a bit of difficulty trying to sell bonds in the near future. It's no epic crisis.

    Then fuck them. The truth is not democratic, and if such people stand in the way of freedom and individual sovereignty, well... people used to get killed over issues like this. I mean, Britain and the American colonies didn't simply agree to disagree when the Declaration of Independence was thrown out onto the discussion table. It doesn't matter, though. Fiat currency will collapse, it must collapse, and when that happens, I suspect hard currency will seem much more practical.

    I disagree. Well, no, I don't. That'll happen, but then it'll go crunch, and we'll go back to basics.
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  11. billy_boatrocker Wartime Consigliere

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    Good thing Apster is not here. He'd booger this thread up like only he can.

    Some writers have said that the Founding Fathers failed because they did not institute a fourth branch of government, that being the Financial branch that would be responsible for the currency etc. That would have been one answer. I don't know if it would've been a good one. But I think almost anything would be better than the current set-up of Zio-Wasp controlled International Bankers who control all the money supplies of national governments.

    Books to read:
    The Lost Science of Money - Steven Zarlenga
    Guide to Kulcher - Ezra Pound
    Jefferson and/or Mussolini - Ezra Pound
    anything by Alexander Del Mar
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  12. Macrobius The Old Usager

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    A nice article on three heterodox economic schools (Neo-Chartalists, Austrians, Market Monetarists):

    http://www.economist.com/node/21542174


    POINT UDALL on St Croix, one of the US Virgin Islands, is a far-flung, wind-whipped spot. You cannot travel farther east without leaving the United States. Visitors can pose next to a stone sundial commemorating America's first dawn of the third millennium. A couple named “Sigi + Ricky” have added a memento of their own, an arrowstruck heart scrawled on the perimeter wall in memory of “us”.

    Warren Mosler, an innovative carmaker, a successful bond-investor and an idiosyncratic economist, moved to St Croix in 2003 to take advantage of a hospitable tax code and clement weather. From his perch on America's periphery, Mr Mosler champions a doctrine on the edge of economics: neo-chartalism, sometimes called “Modern Monetary Theory”. The neo-chartalists believe that because paper currency is a creature of the state, governments enjoy more financial freedom than they recognise. The fiscal authorities are free to spend whatever is required to revive their economies and restore employment. They can spend without first collecting taxes; they can borrow without fear of default. Budget-makers need not cower before the bond-market vigilantes. In fact, they need not bother with bond markets at all.

    The neo-chartalists are not the only people telling governments mired in the aftermath of the global financial crisis that they could make things better if they would shed old inhibitions. “Market monetarists” favour more audacity in the monetary realm. Tight money caused America's Great Recession, they argue, and easy money can end it. They do not think the federal government can or should rescue the economy, because they believe the Federal Reserve can.

    The “Austrian” school of economics, which traces its roots to 19th-century Vienna, is more sternly pre-Freudian: more inhibition, not less, is its prescription. Its adherents believe that part of the economy's suffering is necessary, an inevitable consequence of past excesses. They do not think the Federal Reserve can rescue the economy. They seek instead to rescue the economy from the Fed.

    These three schools of macroeconomic thought differ in their pedigree, in their beliefs, in their persuasiveness and in their prospects. Yet they also have a lot in common. They have thrived on the back of massive disillusion with mainstream economics, which held that the economy would grow steadily if central banks kept inflation low and stable, and that there were no great gains in the offing from fiscal expansion, nor any great cause for concern over financial instability. And they have benefited hugely from blogging.
    ...

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  13. Man Against Time Black Hole Melchizedek

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    I'll be able to reply to this thread in a bit. The weekend was hell.
  14. Macrobius The Old Usager

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    Well, as in some respects I'm a Keynesian (a rather radical, eclectic, and also amateur one, however) we have something to discuss. ;) I like to compare Keynesian economics to a chain around a dogs neck, connecting him to a tree. The dog runs around the tree, and chokes himself. It doesn't tell us much about the biology of the dog as an organism, but it does describe with some accuracy an artificial addition to biology that is relevant if you want a living dog at the end of the day.

    A more famous chain might be the chain that ties a baby elephant to its stake. A grown elephant can, of course, pull of the stake with major force -- but it never will, because it was trained as a baby. Our economic system has been based on fiat money and a floating exchange rate entirely for 41 years now -- longer than many posters have been alive. It may well be a chain that *could* be removed, but the political task of convincing anyone to do so, until things become so dire that change *must* happen, is an unsurmountable problem. And even then there will be no agreement, so we will be almost worse off, from the bickering and inaction that will follow. At least currently our illusion that the chain is real does bound and guide behaviour of both parties -- and that maybe a good thing, considering the alternative.

    However, I will tip my hand a bit: there is no reason the US Federal government cannot run deficits indefinitely, and in fact FedGov must do so, under the current system, unless it is radically changed. Hyperinflation will never happen -- unless we mismanage the system very, very badly. That is, it is not inevitable, just a possible consequence of incompetence. Our economic leaders (Krugman for the LibDems, Obama's bench, and Mankiw for Romney, say) are all more or less incompetent, though they all say interesting and relevant things from time to time. The Austrians are also incompetent, and also say interesting things from time to time.

    Fiat money and deficit spending, based on trust among Aryans and the National Interest (of Aryans) is entirely feasible. The chain -- while true enough -- is a psychological fact, not a physical one.

    I get the point, but mildly disagree that maths cannot be used. ;)

    The rest of your post seems to be a sort of history of money. I really don't have much to say as to the bulk of it (not sure I've read it carefully enough to even form an opinion). Here are some interesting things to contemplate, because the utter futility of resurrecting a bygone system that was destroyed from the bimetallism era to the end of Bretton-Woods, and is now a generation and nearly two in the past.

    - there was a difference between the 'gold standard' and 'free coinage'. Under the latter system, anyone could mine gold, take it to the mint, and have it assayed and coined -- being handed back a dollar. The bimetallism controversy was about when FedGov stopped doing that on demand for silver as well.

    - Free coinage was ended when Roosevelt did the gold confiscations (obviously). At that time, Federal Reserve notes were only about 20% of the currency in circulation. Silver certificates continued to circulate into the 60s (and I've seen one spent at a drug store in the past few years, by an old lady who ransacked her dresser to buy drugs she needed. A sharp eyed cashier swapped it for a 20 dollar FedGov note from her purse).

    - The gold standard proper arose after the Fed was organised, as was necessary. Thus there was 20+ years overlap between free coinage (and the 'Real Bills' doctrine) -- only.

    I always find it fascinating when people advocate a return to the gold standard, to ask them if they are for free coinage, and if so, whether just of gold, or of silver also. One smokes out a lot of persons who are simply retro-Republicans hankering for the H.L. Mencken era, which was pretty corrupt, not least with Babbitry. It's a fine era, but it was very short, and not part of the broader populism of the Free Silver era, or of Ezra Pound and his Social Credit writings.

    To be honest, gold as a commodity is not very 'hard' compared to US fiat currency. The latter is less volatile -- the only reasonable definition of 'hardness'. You can buy gold at vending machines in a few cities, but you will find you need to go to an ATM to get the harder fiat currency before you can do so.

    I tend to find the word 'counterfeit' overwrought. I prefer to say that an agreement among honourable Aryans does not deserve such slam words. It blames the paper, when we should blame the Jew banker instead: he will run his bank fraudulently, then when he runs up a personal debt, hide behind the corporate shield and welch on it.

    I disagree that inflation is an inflation of the money supply -- the later is endogenous, and determined even in a fiat money system by the willingness of banks to lend to creditworthy customers. That is, loans create deposits -- and it is the bank that creates fiat money, not the Fed. The latter passively accommodates the creation of loans and deposits by the banks, by supplying 'high powered money' (currency and reserves) in sufficient quantity to ratify the banking systems' decisions. The Fed has no more knob to create an inflation of the money supply by issuing counterfeit paper than the Great and Powerful Oz does.

    The money supply is whatever it needs to be, and it cannot be the cause of inflation (only a symptom of it).

    Inflation is caused, in a fiat currency economy, by excess savings, not excess money supply. The government can always remove excess savings (and control inflation) by raising taxes, if it wishes -- and it often does. No one in government finds cooling down the economy unpleasant. Rather, it is lowering taxes when we have deflation (which is what we have now, and the remedy for it) that is painful. That is the problem with the imaginary chain -- the government feels it must balance the budget, and thus sees lowering taxes as painful, because it would compel them to run politically infeasible deficits. Not least because Austrian Elephants in the Tea Party believe the budget constraint -- the chain -- actually exists, and something bad and fearful will happen to them if a Hitler takes power, runs large deficits, and uses fiat money to do it.

    Yes, there are many such chains. You should train yourself to ignore the chain. It is an accounting convention, and nothing more, combined with some rules. It will only choke you if you believe in it.

    I find 'bad money' a harsh, negative term. I prefer 'efficient money drives out less efficient'. Paper is more efficient than gold chips, for any number of reasons. Spreadsheets are driving out paper too.

    You have only half the story. The Fed prints cash, and receives it. The Fed buys government bonds, and sells them. You can think of cash (and reserves) as a sort of checking account -- a Federal reserve note is just a 'bearer check' for a fixed amount that can circulate. In effect, a 20 dollar bill in circulation is a check for 20 dollars from the Fed (a liability of the Fed, should you present it and demand ... well, nothing).

    A treasury bond is just a savings account at the Fed. If you buy one, you make a deposit (spreadsheet entry - ca-CHING!). If you sell one back to the Fed, you liquidate that deposit (ca-CHING).

    The Fed moves money back and forth between the savings account spreadsheet (its net position in government securities) and the checking account spreadsheet (its liability to give Federal Reserve Notes out). Neither of these increase the money supply in the economy -- only banks actually lending (credit) can do that.

    All you can do with Federal Reserve notes besides play with them and trade them is pay taxes to the Federal government.

    If you give the 20 dollar bill to the Fed, and it doesn't want to recirculate it -- *it will burn it*. You may 'pay your taxes', but the Fed just runs a spreadsheet. They will move 20 dollars into the US Treasury account at the Fed.

    The Fed does nothing to 'increase' or 'decrease' the money supply. The one thing it can do (in the realm of autonomous human praxis you seem to think highly of) is change the base rate of interest -- usury -- in the banking system.

    The currency level has nothing to do with the cost of living, unless banks make bad loans (subprime mortgages to Niggers, say). Making bad investments certainly costs real money that someone has to pay.

    Inflation occurs if the government fails to drain off savings (by failing to raise taxes when times are good). That is, government deficits do have a real consequence of inflation, when the savings rate is excessive. There is an accounting identity that ties the government deficit to savings in a fiat economy. You might not like that fact, but it's there, one of the chains in place --

    Here's a simple thought experiment: imagine a simple economy in which the only actors are households and government, and in which the only form of money is printed cash. All the cash is a debt of the central bank (it says so). The only way to save is to stuff it into a mattress. Ergo, the only savings is equal to some fraction of government debt. With a little more thought, taking into account the government buying things and paying taxes, you will find that the savings fraction and the deficit fraction are mirror images of each other, equal and opposite amounts.

    Hint: you can learn what net private savings will be this year (how much it will change by), by looking at how much of a deficit the government runs. The deficit (a negative number) must numerically equal the change in savings (positive), which you usually simply call savings, because it is a flow [how much you saved this year].

    If a government in a fiat money economy *fails* to run a deficit, then households will *have* to become profligate and run down their savings. That is, the Clinton Surplus destroyed the savings of the American Middle Class. [The FedGov looters took more from Whites than they gave back to the economy in any form, hence the 'surplus', duh...] Net deficits are good -- Surpluses, net looting of the White Middle class is bad. Watch that chain of yours.

    It doesn't really work this way. At least, the demands just put them back where they were. From 1970 to present, real wages were nearly the same (workers didn't fall behind, but they didn't drive inflation either). Inflation was nearly continuous in that period.

    Inflation has been about 2% average since 2000, and real salaries and wages have fallen (depends on your income percentile -- not for the very rich, which have exploded).

    There is another explanation for why wage share of income has fallen, which I will go into in a later installment, not this post, which is focused on answering Anarch.

    In any event, cost push inflation from wage demands is pretty much a myth as a driver of inflation -- the demand is simply to maintain a nominal or real wage (and 'demand pull' is not very important either). Most inflation has been driven by cost push from cost shocks, and bad investment / over-leveraging. And as I said, it *can* be caused by too high a government deficit when this is big enough to distort the acquisition of economic materials and services (during a war, notably). We are no where near that case to day.

    I wouldn't lump wage and salary together here. Salary, as overhead, is always competitive with capital, no matter how much it is. Every executive or PM you hire is less capital you can use to actually make things work. Wages, on the other hand, pay for actual productivity.

    There is a point at which the labour share of production will cut into capital -- but you seem to be tacitly assuming the market was at some natural level of equilibrium, where capital was optimally employed, before labour made its demands. Feel free to prove that assumption of yours. ;)

    Again, only the banks can expand the money supply, not the central bank, nor the Government. Money is endogenously created, in a fiat economy. They've turned the only two knobs they have (take interest rates to 0% and QE to induce some actors to re-leverage). The alleged goal is to ignite inflation -- but since inflation only occurs when savings rates in the private sector are too high, QE cannot effect that and it will fail to do so. Over-leveraging will lead to damage to household finances down the road, instead, with no benefit.

    My, you do have a bad case of the elephant chains. The Austrian Jews have taught you well. Now break their spell, and become free again!

    QE will not help, because its primary effect will be to encourage households to leverage up -- that is, to take on risky investments, when their savings rate is too low. The correct (Keynesian) solution would be to lower taxes, and run a much larger fiscal deficit. Part of the reason that interest rates are at zero ('we are in a liquidity trap') is because the Jew bankers need to borrow money to unwind their high-leverage position, and naturally they would like that money to be free (0% interest). When banks have money, they charge you usury, when they need money, they want it free. Just like a Jew, eh?

    The reason this crisis will persist is because people still see the chain (or yank it). Until we let go, and stop obeying the Jew, there will be no solution for us Whites. We are being scared with all sorts of bogeymen, not least by the Austrians and the Pain Lobby (let's whip poor Whites and the 47% some more, the welfare cheats!), and more subtly by the Krugman sorts, who peddle a sort of half-Keynesianism.
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  15. Macrobius The Old Usager

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  16. Johnson HEIL HITLER.

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    I wrote a batch of excellent essays on Corporatism about seven or eight years ago when I cared about all the wrong things. Even the mighty Ixabert pines for them. Oh well. Someone get a viable Third Position movement going and the subject will be worth revisiting.
  17. Macrobius The Old Usager

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    You should link them. Sounds like Pavilion material.
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  18. Man Against Time Black Hole Melchizedek

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    I remember Johnson's Corporatist web-site. Maybe you could try the wayback machine, but I totally forgot the URL.
  19. Macrobius The Old Usager

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  20. Hawthorne Abendsen Number One Epic Sloth

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    http://en.wikipedia.org/wiki/Talk:Political_views_of_Lyndon_LaRouche/sandbox#Fascism
    Fascism

    According to LaRouche, the first fascist state was France under Napoleon Bonaparte. European oligarchical forces, he claims, intervened in the French Revolution to prevent it from becoming a republican, American-style revolution, and steered it instead toward becoming a bloodbath followed by a dictatorship. LaRouche calls this the beginning of modern synarchism, a revival of feudal-Venetian methods.

    Most contemporary definitions of fascism emphasize components such as racism, chauvinism, and authoritarianism. LaRouche, however, points to a specific economic policy as the foundation of fascism: it is a situation where the financial system has become insolvent, and rather than put it through a bankruptcy reorganization, the ruling powers attempt to prop it up by cannibalizng the workforce through radical austerity and forced-labor policies. LaRouche identifies these policies particularly with German finance minister Hjalmar Schacht, who LaRouche considers to be instrumental in bringing Adolf Hitler to power. With the collapse of the Bretton Woods system in 1972, LaRouche warned that key financial institutions of the world were committed to a revival of Schacht's policies, first in the form of intensified exploitation of the Third World, and increasingly with respect to the economic policies of the more wealthy nations toward their own populations. LaRouche is frequently described by left-wing writers and orators as a fascist. Journalist Dennis King used this thesis in the title of his book Lyndon LaRouche and the New American Fascism.

    Fascism is a difficult word to define, and has been debased since World War II by its frequent use of a term of general abuse. LaRouche himself frequently describes his enemies as fascists or proto-fascists.

    Most early definitions of fascism agreed on a number of elements: nationalism, militarism, contempt for democracy, the advocacy of some form of authoritarian rule, and economic corporatism. Organizationally, fascist movements are characterized by the use or advocacy of violence, lack of internal democracy and regimentation in the service of charismatic personal leadership. Racism, and specifically anti-Semitism, are often characteristics of fascists and fascist parties, but are generally not held to be essential elements of fascism.

    LaRouche does not openly advocate American nationalism or militarism. Operation Mop-Up, which consisted of violent physical attacks on left-wing meetings, is the genesis of most accusations of LaRouche being a fascist; however, the LaRouche network has not engaged in physical violence against its political opponents since the 1970s. The perceived abusive and demagogic nature of his political speech also leads to him being accused of being a fascist.

    Since the 1980s, a new set of theories about fascism has gained attention in academia. These include the work of Roger Griffin (fascism as a right-wing populist movement calling for heroic rebirth - palingenesis) and Emilio Gentile (the sacralization of politics). Using these and related theories, critics such as Chip Berlet and Matthew N. Lyons (see link below) have described LaRouche as a neofascist.

    According to Berlet and Lyons:
    "Though often dismissed as a bizarre political cult, the LaRouche organization and its various front groups are a fascist movement whose pronouncements echo elements of Nazi ideology....Beginning in the 1970s, the LaRouchites combined populist antielitism with attacks on leftists, environmentalists, feminists, gay men and lesbians, and organized labor. They advocated a dictatorship in which a 'humanist' elite would rule on behalf of industrial capitalists. They developed an idiosyncratic, coded variation on the Illuminati Freemason and Jewish banker conspiracy theories. Their views, though exotic, were internally consistent and rooted in right-wing populist traditions."[1]
    Chip Berlet & Matthew N. Lyons, Right-Wing Populism in America, p. 273.

    Several critics of LaRouche argue that his ideas about economics are not original and are similar to the policies of Germany under Bismarck; and the corporatism of Italy under Benito Mussolini, Spain under Francisco Franco, and Portugal under Antonio Salazar.

    According to research conducted by journalist Dennis King, LaRouche developed an intense interest in fascism in the 1970s, and began to adopt some of its slogans and practices, while maintaining an outward stance of anti-fascism. King generally claims that LaRouche's public statements do not reflect his actual views.

    As for moving from the left to the right, historically a number of fascists started out as socialists, and critics argue this is the case with LaRouche.

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