Sunday, December 20, 2015

Guaranteed Basic Income as the Perfection Of Neofeudal Serfdom (should I raise the drawbridge or sell pitchforks to the mob?)

Common sense says raise the drawbridge and let the crowd move on to the next donjon but the profit potential from retailing perforators is a strong lure....

There I was, reading Magic, Maths and Money's post on Mill and whether one could sell oneself into debt-slavery: selling himself for a slave, he abdicates his liberty; he foregoes any future use of it beyond that single act. He therefore defeats, in his own case, the very purpose which is the justification of allowing him to dispose of himself.(Mill, 2015:V.11)
when out of one of the feedreaders comes a post from Charles Hugh Smith's Of Two Minds blog:

Central Banks Have Pushed the Middle Class Down into Neofeudal Serfdom
December 21, 2015
The injustice of central-bank enforced neofeudalism cannot be suppressed like interest rates.
In traditional feudal systems, serfs were the landless peasantry who worked the land of their feudal lords in exchange for protection. In our present-day neofeudal system, serfdom has a different definition: present-day serfs own little or no productive capital and have few opportunities to ever acquire any.
The Marxist term wage-slaves describes those who, lacking capital, have only their labor to sell. This describes the vast majority of people in both capitalist and socialist systems, but what makes the present system neofeudal is the central banks: by extending essentially unlimited credit at near-zero interest rates to financiers and corporations, the central banks have given the top .01% the ability to outbid mere savers for income-producing assets (i.e. productive assets).

Just as the feudal-era serf had no choice but to enslave himself and his family to the manor-house lord, the modern-day serf must indenture himself to banks to "own" a car or home or "buy" a college education.
As I outlined in The Flaws in Basic Income for Everyone, all the guaranteed basic income schemes being proposed as solutions to automation are merely institutionalized serfdom as they sentence the unemployed to the marginalized political status (equivalent to powerless serfs) of state dependents while stripping them of purposeful work and the opportunity to acquire the means of production and productive capital.

Guaranteed basic income is thus the perfection of neofeudal serfdom.
The central banks are the critical enforcers of this neofeudal system. Without access to unlimited credit at near-zero rates, financiers and corporations would not be able to outbid savers for productive assets.

Here's an example that illustrates how central banks have created a neofeudal system. In an economy not suffering from extremes of central-bank financial repression, home mortgages in recent decades were around 7.5%. This rate of interest (coupled with strict lending standards) was high enough to make credit-fueled bubbles difficult to inflate, so homes cost $100,000.

Those who had saved $50,000 had an advantage over financiers who were borrowing the full $100,000. The base operating costs of buying the home as a rental (investment) property was roughly $4,000 more annually for the financiers than for the savers: the savers' $50,000 mortgage cost around $4,000 a year (not including property taxes and other expenses of ownership) while the financiers' mortgage was around $8,000 annually.

This difference was large enough to make the property unprofitable for the financiers to buy and rent out, and large enough to make it a risky bet to buy the home and hope appreciation exceeded the annual expenses....MORE 
All of which reminded me that back in September 2008, during the very height of the financial crisis, yours truly was facing the same moat/retail dilemma and thinking:
...It appears there will be a decade long wealth transfer from savers to bankers. To reliquify the big banks balance sheets, the powers that be will let the banks borrow cheap from the Fed or at artificially low shorter term rates, then turn around and lend at higher rates to the Treasury. There is probably a carbon trading angle here too. You just watch....
Well, the carbon trading angle didn't come to pass but the bank balance sheets were looking healthy enough that by September 2015 I was saying they were the only market sector that mattered if the bull market was to continue.

From those long ago days of ought-eight, here's Music to Hunt Bankers By (the rondo from Mozart's Horn Concerto No. 2):

And as noted back then: "Pardon me, I catharted. Better now. Still trying to fit into Hunting Pink though."
Some things never change.