Both Sides Now

Judy Collins (not Miller!) had a hit with "Both Sides Now", although Joni Mitchell wrote it and later recorded it. I still hear Judy's version in my subvocalized ear. A while back I wrote, again, about the situation with the Euro and ECB, making the assertion that a regime that only had Dr. Friedman without Dr. Keynes couldn't work. I doubt that I was the first to see this, although I did come to the conclusion unaided by mainstream pundits.

So, imagine my surprise when a front page story in the Times contains this tasty morsel:
"...Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, who are trying to find a way to save the euro while imposing legally binding fiscal discipline on the Continent's floundering southern economies."

Now, fiscal policy in the immediate context is punitive, but in the long run, it has to be supportive. Just, as I have pointed out more than once, here net Federal dollars flow in large quantity to the poor Red states from the hardworking Blue states. That's just a fact, one that the fat headed Red staters (I'm talking to you, Sarah) can't abide discussing. Europe, if it is to have a single currency, will have to have a centralized fiscal policy. That will mean the well-to-do few end up supporting, so some degree, the poor red headed stepchildren. All those folks, here and in Europe, who used debt to buy stuff saved capitalism. Without their demand for goods, capitalists would have died. They will soon enough, if their incomes are shattered. Without real demand (what economists call the desire for goods coupled with cash to buy; I demand a Ferrari, but don't have enough cash, so that's not real demand), production ceases. Production ceases, and only the Fat Men survive the ensuing Famine. The Right Wingnuts, Cameron being the species on display today, always refuse to accept such a simple and unavoidable accounting. It ain't rocket science.

As Eccles, quoted on the front page, makes clear, economics really is a zero sum game in the immediate and medium term. Again, often written, economic growth only sustains if it's measured on physical output, not financial manipulation. An argument is easily made that the "service economy" is just a skewed implementation of income re-distribution. After all, the highly paid services are only minutely consumer facing jobs. The vast majority are overhead, from a macro-economic point of view. And even outside of closely defined financial services companies, as well. GE got into a mess by shifting from production to money laundering, along with the Banksters. They are mending their ways.

How many hours of office "work" is an iPhone worth? In whose currency? These are the uncomfortable questions. To the extent that economies become disconnected from physical production the more difficult it becomes to value labour. In olden days when butchers bartered with farmers two facts controlled: 1) useful goods moved and 2) both parties were consumers. Barter, when one party is not a consumer and one half of the barter is a corporate service, is more difficult. There's another story about the plight of bond traders in today's edition, as well. Trading financial instruments is the ultimate expression of make-work; what in FDR's time would have been dam building and undergrowth clearing. FDR's implementation accomplished a good deal more Good.

Consumers buy Things, corporations buy services. The notion of a post-industrial economy is a myth, or a lie, depending on how annoyed one is. The Great Recession, not nearly done with, is proof.