The Myth of Human Progress and the Collapse of Complex Societies

> Capitalism can't be fixed with a few patches here and there, it must be abolished and trying to appear moderate makes you no different than the crew members of Pequod who played into Ahab's mania.

This may sound silly but is there a common definition of capitalism? It seems rather woolly compared to say, Marxism. Capitalism seems to me to be something we have been doing for tens of thousands of years. Saying "no capitalism is what Marx said it was so that he had something to be against" is kind of backwards. (that may not be what you are saying, but its what I got from the article)

To my mind the biggest difference between capitalism and communism (as practised) has been the use of price as a signalling mechanism (see the way China moved away from a centrally planned model).

Otherwise capitalism seems to have covered a vast vast range of practises over centuries, but perhaps can be boiled down to trade or trade with price as a signalling mechanism.

If this "definition" of capitalism is right, then it seems that it gets fixed often.

BTW, I am in favour of massive change, including the dunking of captains, the fundamentals of our society are creaking and there is a new approach needed. Its just that the next workable approach is not an approach anyone has so far tried, and probably not thought of, (although much more open transparent decision making and information is almost certainly going to be involved thanks to the Internet).

So chucking Ahab overboard when we do not know what course to set after is a bad idea, but chucking him overboard if he threatens to sink the ship is a good idea. We are just disagreeing on whether this current bout of mad behaviour (whatever it may be) is a threat to the ship or not.

Thank for the reply anyway.

Firstly, the Fed is purchasing agency MBSs at market rates. They are pushing prices up since they are bringing demand to the market, but they are otherwise bidding competitively. The idea that these MBSs are basically worthless doesn't make sense when there is a large market for them.

Secondly a lot of the MBSs (which are all government guaranteed) are newly issued, so it can hardly be said they are helping TBTF banks decant their toxic assets leftover from the financial crisis.

Thirdly, the Fed actually eventually made a profit on the toxic debt they acquired during the bailouts. The current MBS purchase programs are far less risky. Furthermore, the US Gov has guaranteed the future cashflows of all these MBSs... so I think TBTF banks are a sidenote on this whole issue.

The Fed made $90B in profits in 2012, but they were only able to do this by printing $85B per month in QE. In other words, they're printing profits...something you and I are not allowed to do legally. The bigger question is: If they're printing $1T/yr, why are they only making a measly $90B/yr in profits?

The word "guarantee" gets tossed around a lot, but it's misleading:

Fannie and Freddie's "implicit guarantee" only means that the government will lend these GSEs funds to ensure timely payments of principal and interest to mortgagees (not MBS investors!), at rates slightly above the government's own borrowing rate, up to the "conforming loan limit" which is $417,000 in most areas. So it doesn't entirely eliminate default risk. And it doesn't reduce servicer risk or interest rate risk at all.

Only in 2013 with QE3 did The Fed start buying Ginnie Mae MBSs with an "explicit guarantee" that entirely eliminates default risk. (These securities still have issuer/servicer risk.) But The Fed is still buying non-Ginnie MBSs as well.