The Next Financial Crisis Will Make Marx Popular Again Lombardi Letter 2018-05-07 14:14:21 communism communist revolution karl marx economic collapse mortgage rates interest rates inflation soviet union capitalism The entire western economic model could disintegrate. One more financial crisis In the hyper-developed and economically lopsided West, and the ideology of communism could inspire new revolutions. Analysis & Predictions,Inflation,News,Stock Market Crash,U.S. Economy,U.S. Politics,World Politics

The Next Financial Crisis Will Make Marx Popular Again

Next Financial Crisis Will Make Marx Popular

The Next Financial Crisis Could Revive the Idea of a Communist Revolution

I don’t get the two- to three-percent inflation rate. How does it affect the average person? More importantly, how is correcting for inflation going to prevent a financial crisis?

Ask the average person if they qualify for a mortgage (a regular one, not a subprime version of a mortgage substitute). Even at current interest rates, few have the income to afford a mortgage.


Yet, the Federal Reserve and the Wall Street financial press are up in arms about rising inflation. Not a year ago, the same bunch were waxing poetic about inflation’s failure to launch.

Should the Federal Reserve—encouraged by the big banks—feel encouraged to raise interest rates, it will trigger a major financial crisis. It might be as deep as the one from which the world has not yet fully recovered.

Wall Street Has Seen Recovery While the Great Recession Continues on Main Street

The Great Recession—and the financial crisis which preceded it—remains the first major global economic retrenchment after the fall of the Berlin Wall. And it was the single worst economic event since the 1929 crash and related Great Depression.

But it’s far from resolved. For all the financial successes and Wall Street records of the past few years, there has not been a recovery to compensate for the economic collapse since 2008.

Now, the Dow Jones seems stuck between its record high and a momentous shift of investment sentiment toward higher-yield Treasuries.

Meanwhile, the Federal Reserve is itching to raise interest rates. It fears inflation from too much job growth. Whatever the job numbers might be, they still reflect years of stagnation.

Recovery means returning to the point before the financial crisis of 2008. And, to be clear, the crisis is far from over. Global finance may have survived and thrived, benefiting a fraction of the few. Its unpleasant effects, however, continue to fly over the income distribution like a Stuka bomber, ready to strike and destroy what little was salvaged from the real economy.

The Average Worker Has Reached a Tipping Point

The impact of the Great Recession on average household incomes was devastating. Whatever recovery has occurred has only just begun to fix it. Yet, income distribution has become more polarized while relative poverty rates have increased.

The evidence for this comes from the fact that, at the current rates of wealth accumulation, by 2030, the top one percent of the population will own two-thirds of the world’s wealth.

More interesting is the fact that, even after Wall Street crumbled in 2008, the richest one percent kept getting richer—by as much as six percent a year.

This was much faster than for the rest of the world’s population (99% of it, to be sure), which has only gained three percent. (Source: “Richest 1% on target to own two-thirds of all wealth by 2030,” The Guardian, April 7, 2018.)

Overall, the average person has been, proverbially “screwed.”

Of course, some smart economist will present a typically dry economic analysis. He or she will pay homage to the “invisible hand” of the market.

The Entire Western Economic Model Could Disintegrate

The visible fist of inequality will continue to strike, prolonging economic suffering.

Many economists and even fewer financial analysts (you can count them on the invisible hand’s invisible fingers) have contemplated the alarming shadows that inequality and uneven income distribution cast.

The shadows don’t simply prophesize a financial crisis; they warn that the entire Western system could fail.

The world has falsely believed the narrative proposed—and later retracted—by University of Chicago political scientist Francis Fukuyama. He described the fall of the Berlin Wall in 1989 and the eventual collapse of the Soviet Union and its Communist system as “the end of history.”

But has history ended? Better still, has communism ended?

Communism Never Died, Because Communism Never Existed

We have been told that communism, the antithesis to the invisible hand and capitalism, is dead. In fact, there’s no evidence that it ever ended, because there’s no evidence it was ever achieved.

In other words, under the right circumstances, communism still retains the ability to inspire and organize political experiments.

What is communism anyway? In truth, nobody has ever seen it. Even communism’s most famous theorist, Karl Marx, explained communism as an egalitarian and stateless society that would be achieved through socialism.

Communism understood through the lenses of the Soviet Union and of China is a meaningless exercise.

The Bolsheviks who won the Russian Civil War, following the 1917 Revolution (itself the product of extreme economic discontent, which boiled over the point of tolerance after Russia’s entry in World War I), used the myth of communism to color the system they created.

But it was merely one interpretation of Marx’s thought. The West, afraid it could spread, described it in mythological terms. Depending on your role in society, it was either frightening or awe-inspiring.

Some dreaded it; others dreamed and hoped through it.

Yet, communism has never achieved the kind of political reality that has capitalism or bourgeois society. There was a goal of communism, but the best that those who led revolutions in its name could do was devise a path. In Russia, there was a Marxist-Leninist path, say from 1917–1928, followed by a Marxist-Stalinist one.

It culminated with a Marxist-Gorbachevist route, which led to a dismantling of the road to communism. But it did not end the idea of communism.

The Soviet Union collapsed because the political system that it created failed. Thus, communism retains its pure nature; it remains a dream or a goal.

This is how China can cope with the contradiction of its nominally Communist-inspired political nature and its hyper-capitalist society. In the current Chinese understanding, a brand of society running on free enterprise will lead the path toward communism.

200 Years After Marx Was Born, Communism Is Gaining Popularity

In the hyper-developed and economically lopsided West, the ideology of communism could yet inspire new constructs.

Revolution or revolt could be one of its tools. But electoral systems could also work, because the generation of millennials has become deeply dissatisfied with capitalism.

And 200 years after the birth of Karl Marx (May 5, 1818), his Das Kapital and Communist Manifesto are becoming more relevant than anyone would have dared think since 1990.

This is despite the identity politics that have stripped the current Left (the Democratic Party in the United States and countless similar parties in Europe and Canada) of any appeal.

The CIA, perhaps to ensure that socialist dreams be buried the way of the USSR, instigated the Left’s drift into talking about “political correctness” rather than income equality and class struggle. (Source: “Karl Marx 200th anniversary: The world is finally ready for Marxism as capitalism reaches the tipping point,” The Independent, May 4, 2018.)

Communism Is the Only Antidote to Capitalism in Its Present Stage

Marx predicted that capitalism would have to reach a peak before a socialist revolution could successfully lead to communism.

Therefore, Russia 1917-1918 was not the ideal place for a revolution, but, in Marxist terms, the United States in 2018 could be. All it will take to test that theory is one more financial crisis.

Indeed, the next financial crisis could produce far deeper economic and political consequences than the one in 2008.

The recent economic recovery, and especially the tax reform that has only made the already rich richer, will not pass undetected. The social fabric won’t resist another financial crisis. It will be torn apart.

The Dow Jones has set new records since the recovery began in 2009. This has given the impression that wealth has spread, and that society has improved since the subprime disaster.

Instead, what has been dressed up as progress has been nothing but the market pushing and establishing itself as the dominant force in society. The market has absolute power.

This means it has reached beyond the usual buying and trading of shares. It has acquired a power that extends beyond the economic realm.

The market is all-encompassing; the United States and its satellites (Europe, Japan) have achieved the dreaded “late-stage capitalism.”

Capitalism Survived the 2008 Crash, But It Won’t Last Beyond the Next Financial Crisis Unscathed

The world appears to have survived the last economic collapse—and a small fraction of billionaires has even managed to thrive.

The next one will produce social and political turmoil. Multicultural societies will break along racial lines as the economic glue that holds everything together will melt.

The exacerbation of geopolitical tensions has all but restored a state of Cold War between the United States and Russia—still the two powers with the ability to destroy the world several times over.

It may be a distraction tactic away from the class war that has started to brew in America’s inner cities. Homelessness is rampant in some of America’s richest communities.

Not miles away from the millionaire and billionaire homes of Hollywood celebrities in Los Angeles, the number of people unable to afford a mortgage—let alone rent—has increased 75% in the past six years alone. (Source: “L.A.’s homelessness surged 75% in six years. Here’s why the crisis has been decades in the making,” The Los Angeles Times, February 1, 2018.)

Not too far from there, in San Francisco—home to the world’s tech billionaires—it takes a salary of $400,000 a year to enjoy a middle-class lifestyle. (Source: “San Francisco workers who make less than $90,000 a year are moving into dorms with shared bathrooms,” Business Insider, March 5, 2018.)

It’s Mostly About Inequality

The problem, at the root, comes down to rising inequality. A lucky few are becoming richer and, as they move to key urban and suburban areas, they drive up the price of property and the cost of living. Yet, we are told there was no inflation.

The Federal Reserve has fallen under pressure to boost interest rates, exacerbating the already exorbitant cost of rent and home ownership.

The tax cuts announced in December 2017, meanwhile, represent both a terrible mistake and a huge lost opportunity. Tax cuts were desirable, but President Donald Trump and Congress approved them for the wrong Americans. They gave tax cuts to those who did not need them.

The people who could have benefited, the middle class, got very little. Their tax break amounts to a few hundred dollars each in annual tax savings—and for a limited period at that.

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