If read carefully, you will note that the paper shows a motive for large holders of capital (e.g., banks) to actively drive down the savings rate. (Hmmm, the savings rate wouldn't fall would it?) As the savings rate falls, the dividends remain constant or grow.

An implication is that this "correction" we are experiencing will leave the wealthy even better off than they were before.

Rotwang - edifying and entertaining as usual.

Excellent analysis Rotwang (as usual)!

Seems to me there are some basic and common sense principals that were completely ignored despite the fact that any intelligent person could have (and many did) point out that where we are now is the logical outcome of granting far too much power to business leaders and the investor class (or as I like to think of them the predator class)and concomitantly glorifying the benefits of unfettered greed.

As you point out, it isn't as though this hasn't happened plenty of times before. It isn't as though this very outcome was not clearly foreseeable. Drunk with and under the complete spell of unfettered greed, those who should have been responsible were not. This would include policymakers, legislators, businessmen, bankers, investors and regulators.

Our system of government is predicated on the fact that power in too few hands always and without exception is a bad thing and ends up creating a tyranny or worse. The founders new well of the inability of rulers to restrain themselves from the abuse of power. We have failed to understand that this is equally true in all aspects of life and particularly the economy. Power corrupts! Absolute power corrupts absolutely! Making things worse on the economic front, businesses and corporations are intended to work as efficiently as possible and there are as few restraints as possible on the excercise of power amongst those in authority in businesses and corporations. Thus, lacking the more serious checks and balances of three branches of government, it is logical and true to point out that the abuse of power in business is far more likely and inevitable than it is in government and the present circumstances illustrate that better than any other thing I can think of.

Capitalism, left to itself, simply cannot restrain it's negative tendencies. It is impossible. Capitalism's logical conclusion is self-destruction.

As a system, it is essentially born and bred to have bipolar personality disorder. When the mania of boom times (or bubbles)take hold of capitalism it is exhilarating, everyone feels great, has lots of energy and takes risks that would otherwise be viewed as irresponsible or even insane. When those risks payoff the mania does not subside but in fact encourages us to take even more and greater risks as our confidence grows and our delusional belief that nothing will ever go wrong deepens. When the disasterous conseqences of those insane/irresponsible actions become clear and the mania suddenly disappears a dark depression sets in. A pall comes over the entire capitalist system which becomes sluggish and difficult to get moving again. The extreme high of the mania (bubble) is matched only by the extreme low and hard impact of the crash of depression.

Any competent medical professional will tell you that bipolar disorder can be successfully controlled. It can be and needs to be controlled through a combination of medication and therapy. If the bipolar patient is not medicated and getting therapy, the patient will experience serious and even disasterous problems with consequences that not only imapct the patient but everyone in their professional and personal lives. For the bipolar patient known as capitalism the medication and therapy is known as regulation. Ongoing Democratic Socialism of the kind all our close allies have is also a necessary method of controlling and regulating the inevitable downside of capitalism. Without this, capitalism will always end up taking off on a self destructive binge that results in a spectacular crash or series of crashes that not only have longlasting negative consequences, but that completely negate any benefit of the mania portion of the natural boom/bust cycle. Eventually, the cycle of mania and depression can end up leading to the death the bipolar patient.

What is absolutely clear is that capitalism is a system that requires significant regulation if it is to operate in a manner that remains beneficial to society while preventing it's penchant for self destructive excess. The highs and manias and bubbles of the Laissez-faire approach are not worth the inevitable catastrophic crashes it results in. This is a lesson our nation and the world learned as a result of the Great Depression and which we sadly unlearned over the last 25-30 years. We, as a generation have many challenges before us but one of the most important is that we must make sure that this never happens again.

I am absolutely convinced that the crash is not over by any means, that it is ongoing and that we are definitely entering a new depression. I fear our government's policies particularly toward the banking and financial sectors are inadequate at best, but more likely just wrong and serve to actually exacerbate the problems we have and will have in coming years. It seems clear to me that neither the new administration nor all but a very, very precious few in the media or the elite classes generally understand exactly how bad the situation is or the real nature of it. Nor do the understand that this catastrophe makes a radical reordering necessary and that attempts to simply tweak on the margins of the existing system which has so badly failed us is unacceptable and will not work.

Our elites in every category have failed us miserably and have forfeited any claim they once had to the power they wield in our society. It is not only the banks that are bankrupt. The leadership of our society is bankrupt, incompetent and culpable for the disasterous consequences that have befallen the nation and the world. This would include the business, government, media, journalistic, opinion leading, wealthy classes all of whom have either been actively involved in and profiting from the widespread fraud and unrestrained greed or who were morally complicit via their inaction and failure to do anything at all to prevent what they understood very well was going on. They have all utterly failed to lead the nation in a responsible manner and to keep us stable, secure and prosperous. Right now we are none of those things.

In short, capitalism in it's entirety has, once again and quite precitably, failed and spectacularly so. This inevitable failure not only requires extraordinary permanent changes in the operation of our economy but of our society in general.

We must radically and permanently change the power and wealth distribution in our society and return to a far more level playing field where the inevitable and impulsive greed of predatory wealth is once again restrained from harming itself and everything else on earth. We must radically change the general services, benefits and support we, as a society, provide for ourselves by way of education, infrastructure, health care, and more. We must once and for all time adopt as part of our creed that the purpose of our society is to benefit the citizens who comprise the society. It is not to benefit the rich and powerful nor is it to benefit the interests of corporations and other predatory institutions at the expense of humanity. The pursuit of profit for it's own sake instead of being harnessed for the benefit of humanity is a malignant thing as we all can see.

If we fail to grasp the necessity of radically transforming our economy and our society we will be dooming future generations to exactly the same sort of economic cataclysm we are only entering into now. Our predecessors tried to spare us this fate via the New Deal, Fair Deal, New Frontier, and Great Society programs they established to blunt the excesses of capitalism. As time went on, progress on establishing more and greater such safequards occured in tandem with unprecedented prosperity for the common people of the nation as well as the predator classes. Over the past generation, the most powerful amongst the predator classes and their enablers in our political and governmental system managed to dismantle or eviscerate many of the aforementioned programs designed to protect us from the destructive excesses of capitalism. It is no coincidence that the prosperity of the common people began to stagnate and then decline in tandem with the halt of continuing social and economic progress and the dismantling of those mechanisms designed to ensure the prosperity of the common people. Thank God for the programs and safeguards that withstood the assault of the economic barbarians!

Now, it the task of our generation, to restore and rebuild the safeuards of the past and to institute new ones that will make the future of our children and grandchildren and posterity more secure. Some, but by no means all, of the essential new safeguards and supports we can no longer do without are:

1. A single payer national health care system the mission of which is to provide for, protect and maintain the health of every America. This system will be paid for with the tax dollars of our citizens and our businesses. The sole objective of this health care system will be provision of the best possible health care for all our people. We know this is the answer to the health care crisis. Any solution other than single payer will solve nothing and only prolong the excessive costs of the current system and it's failure to provide health care for our people.

2. A progressive system of taxation that requires the predator classes to pay their fair share in return for the many benefits society provides them with.

3. Restoration and encouragement and expansion of a strong system of worker run labor unions representing the common people with their employers and allowing them a voice in the workplace.

4. Establishing permanent indexing for minimum wages nationally so that the minimum wage will rise automaticaly with the cost of living in the future instead of being held hostage to the whims of polticians in Congress as it has been in the past. The negative effects of the depression of wages over the past 30 years is only now becoming apparent as workers who have been unable to save and who are barely making it are not in a position to bale out the predator class by spending more since they are so obscenely underpaid!

5. Investing in our public education system from early childhood through post-graduate level learning for the good of all our people, regardless of income. The health of our economy and of our democractic republic depends upon a well educated population.

6. Establishment of agressive/radical measures to reverse global warming to preserve the benefits of this nation for our posterity as it was preserved for us. America's natural resources, moderate climate, rich soil and abundant wildlife have been the foundation for our prosperity since the days of the pilgrims. If we don't preserve this for the future we will have failed completely in our obligation to do for them what was always done by past generations: passing along to the future an America better than the one we were given.

Automobile exhaust is the factor we can most easily control in combatting global warming and the gowing emission of greenhouse gases. The first and most effective measure must be mandating that all automobiles and most trucks be emissions free within 5 years. It can be done. We put a man on the moon in a similar time frame. It is simply a matter of political will.

7. Restoring American democracy by establishing publicly funded elections for all political offices in order to remove the influence of the predator classes from politics and level the playing field so that politicians do not depend upon the predators for reelection funds and the needs and concerns of the people are once again foremost in the minds of our elected officials. The corrupt system now in place will never and can never serve the public interest. It serves only the special interests of the powerful and wealthy and must be forever dismantled. The longer it is allowed to exist the greater is the peril to the liberty of the common people.

8. At minimum the Fairness Doctrine that served our nation so well must be restored for the electronic media. Also, all the major media conglomerates must be smashed and broken up so that no national corporation, international conglomerate or other concern or group of concerns can control the flow of information available to the public in the manner we have seen in the past 10-15 years. Media companies must remain local and regionally owned and operated. Diversity of ownership must be maintained if democracy is to be restored and thrive in America once again. A citizenry whose information is as truncated and controlled as that which corporate media now provides is a dangerous thing as we have seen very specifically in the debacle of the Iraq War and on other major issues confronting our nation in recent years.

The failure of our political and economic system as it has existed was inevitable. That need not be the case in the future. Unless we want another such episode like the one we are now enduring, but even bigger and more devastating, we must make sure that radical changes and measures are put in place to prevent it ever occuring again.

This all started with Reagan. Reagan would spin out these folksy stories about how there was too way much regulation such as OSHA demanding that employee work bathrooms have 6 rolls of toilet paper on hand at all times. People started talking about how government was the problem and all these regulations had to be eliminated. Wall Street jumped on board and looted the nation. Most of Reagan's stories turned out to made up.

Our current mess is a classic example of regulatory failure. A perfect storm of self-aggrandizement, neglect, and incompetence, have destroyed unimaginable amounts of wealth and will. Congress failed, the SEC failed, the Fed failed, and the CFTC failed. They all failed, and now you are paying the price.

I think you meant to emphasize "neglect." The Bush administration made it a priority to abandon regulation everywhere it could.

Unless they have oil, they are in worse shape than we are. Don't believe me? See how well the dollar is doing. It's not because we are so great, it's because they are doing so poorly.

When the euro began circulating in 2002, one euro was equivalent to one US dollar. It now costs $1.29 to buy a euro. That would seem to indicate, by your metric, that the EU has done about 30% better than we have for the past 7 years.

Nothing to add, Rotwang, except thanks for the post and the link to the Marxist archive. Looks like lots of light reading.