I didn't intend to have my next post focus on arbitrage and rentiers, but as I prepared to deal with several items I have put off in favor of sleeping the last few days, I just couldn't resist.

Last night, my wife was watching Market Warriors, a PBS show that seems to have been spun off from Antiques Roadshow. Various intermediate buyers/sellers comb flea markets and try to get the best price they can on the antiques they buy so in order to sell them at auction for a higher price. They have various constraints they have to abide by. In between the haggling, the narrator makes comments on the buying/selling process, negotiations and something about the items the participants have chosen.

They should have just called the show Arbitrage, as striped of the commentary, that is all the participants are doing. As they Marxists' M-C-M' equation says, they are using money to buy commodities to make more money. Watching stock or bond traders negotiate their deals would have been far more exciting and illuminating about the inner purpose of financial capitalism.

Which brings me to the latest Q&A with Michael Hudson about his book The Bubble and Beyond: Fictitious Capital, Debt Deflation and Global Crisis. In the Q&A, he ties the huge debts (especially private debts) we have developed since 1980, with the increasing amount of money the financial sector is siphoning off from the goods economy. The following excerpt summarizes our current march on the road to debt servitude:

But instead of supporting productive industry by extending credit to increase tangible capital investment, the banking system has extended credit mainly (about 80 percent in the United States and most English-speaking countries) to buy real estate and load it down with debt. The result is that rental income is used to pay interest to the banks rather than to pay taxes. This forces governments to tax wages, profits and sales. That increases the cost of living and doing business, on top of the interest charge.

In search of this loan market, banks have come to back untaxing real estate and deregulating monopolies, so that their economic rent can be paid to the banks as interest by customers eager buy these rights – and charge even higher rents or raise prices even further without making a new capital investment of their own. Instead of financing industry, U.S. banks don’t make loans for what can be produced in the future. They make loans against collateral already in place – including entire companies with high-interest “junk” bonds. The target company is obliged to pay the debt that the corporate raider takes on. The raider then is “free” to downsize and outsource the work force, squeeze the budget and hope to come out with a capital gain after paying off the banks and bondholders. The process is more extractive than productive.

While the financial industry has led the way in extracting economic rents from their customers and other sectors of the economy, other sectors are catching up.  Increasingly we see patents being used to extract economic rents, whether with the Apple-Samsung ruling or with patent trolls, rather than by actually innovating and creating more useful products. 

With artbitrage covered, perhaps PBS will come up with a new show that extolls the virtues of rent seeking.  I think Wealthy Looters would be a good title.

The question for us, though, is whether we want an economy that encourages invovation and spreading the wealth we all create as widely as possible or whether we want a rentier tollbooth economy controlled and milked by the wealthy.

• States Lacking Income Tax Get No Boost in Growth: BGOV Barometer from Bloomberg – yet another nail in the "cut taxes, raise income" zombie idea.  How many more nails do we need?
• USTR Gives MPAA Full Online Access To TPP Text, But Still Won't Share With Senate Staffers -It isn't corporate welfare at this point, it is corporations owning our government.  Full transparency is a key to fighting this collusion
• EU Commissioner Reveals He Will Simply Ignore Any Rejection Of ACTA By European Parliament Next Week – EU parliament will keep having to decide until the EU commission gets the decision it wants.  Not unexpected since they pulled this stunt with Ireland's 1st & 2nd referendums on the Lisbon Treaty
• Dutch Pirate Party Now At The Door To Parliament by Rick Falkvinge – Yay!  Go Dutch Pirates!
• On Bubbles, Facebook, and Playing for Keeps: 10 Questions With Clay Shirky – Clay Shirky tends to have some interesting ideas and he doesn't disappoint in this piece. Also, he is right that news.me is a useful tool for summarzing what links your friends on FB/Twitter are sharing
• File Sharing and the Greek Crisis – via Naked Capitalism – in the midst of an economic depression in Greece where many Greeks cannot get the medicines they need, the Greek government is trying to crackdown on file sharing sites. How is this action really helping the lives of Greeks?
• Yanis Varoufakis: Greece is Finished – Not a hopeful message

• Doug Henwood‘s Behind the News interview with Yanis Varoufakis, on the Greece & Euro Zone crisis. Turns out Yanis Varoufakis started work at Valve Software. When Doug stated that Valve was run along anarcho syndicalist, I went looking for more and found:
• The Valve manifesto – which is the first thing that comes up when you search for valve software anarcho syndicalist on google. Sounds like a human place to work and L loves their games, but that two of the founders are multimillionaires, at least, seems to limit the ability to apply their model to other, less well financed, businesses
• Copyright and “intellectual disobedience – Cool interview with cartoonist Nina Paley on free culture: “Intellectual disobedience is civil disobedience plus intellectual property,” Paley explained. “A lot of people infringe copyright and they’re apologetic … If you know as much about the law as, unfortunately, I do, I cannot claim ignorance and I cannot claim fair use … I know that I’m infringing copyright and I don’t apologize for it.”
• Also, the Techdirt summary
• The Scam Wall Street Learned From the Mafia – Matt Taibbi on more fraud by Wall Street banks: “But when added to the other fractions of a percent stolen from basically every other town in America on every other bond issued by Wall Street in the past 10 to 15 years, it starts to turn into an enormous sum of money. In short, this was like the scam in Office Space, multiplied by a factor of about 10 gazillion: Banks stole pennies at a time from towns all over America, only they did it a few hundred bazillion times.”
• Julian Assange’s right to asylum – Glenn Greenwald
• Washington’s 5 Worst Arguments for Keeping Secrets From You – a great list from Wired’s Danger Room blog
• Atheists, Muslims See Most Bias as Presidential Candidates
• Hark, a Vagrant: Idler – Remixing cartoons from very old illustrations