Masters of Peering through the Fog - Joseph Schumpeter

Sun, Oct 5, 2014 - 4:06pm

Oligarchic capitalism, crony capitalism, neo-fascism, globalism, or corporatocracy - whatever you prefer to call it, was predicted a long time ago - by Joseph Schumpeter.

Let's say that you (or I) wish to find an investment "guru". For the moment we can skip over the point I merrily keep repeating - that following gurus is a bad idea as it paralyzes growth and reduces effort and resources devoted to research. But instead we can define our exercise as studying a guru, not following one, yes? The study of the masters is and has always been a marvellous way to educate and develop skills whether in logic, or the painting of artworks, or any of a wide number of subjects.

So in this circumstance we want to find a guru to study. It must be a personage from the past, so that we can already verify the track record of our guru, and place him/her in the highest echolons of gurudom, and therefore worthy of our study.

A few weeks ago I wrote a blog post in which I gave a recommendation that Ed Seykota was an interesting person, and his book Govopoly a very interesting book to read. It's this essay: Is Anything Missing?

So Ed wrote about the situation of progress under capitalism, and the tendency for government to get bigger, monopolizing business, frustrating innovation and productivity, until eventually atrophy breaks the system. Well worth reading imo.

What if I told you that somebody else wrote on this very subject? I refer to Joseph Schumpeter born 1882 and died 1950. Back in the year 1942, or 72 years ago Schumpeter placed chapters in his book with the following titles:

The Rate of Increase of Total Output,

Plausible Capitalism,

The Process of Creative Destruction,

Sounds a little bit "dry" right? Well I suppose all economic books are that way to some degree or other. But take note that his term "Creative Destruction" has entered the lexicon of economics forever on the basis of his published works.

I looked this book up today on Amazon, and Wikipedia and laughed, because I found a similar critical comment of the book on both webpages. Here is the critical comment from Amazon:

QUOTE>> Dated and fatally flawed, but sweeping

By E. Husman on January 25, 2004

.... I wanted to read this book because I wanted to pursue the idea of "creative destruction" to its source. However, Schumpeter's Capitalism, Socialism, and Democracy (CS&D) was not what I expected. Though Schumpeter is frequently associated with the Austrian School of Economics, he left early on to pursue a different agenda.
CS&D is an extended defense of Marx's conclusion that capitalism would collapse on itself and be replaced with socialism, but without propagating Marx's errors. ..... In order to make his argument, Schumpeter introduces several ideas that will be at odds with common understanding. For example, many victims of one or two semesters of college economics will have noted that the atomistic theory of competition almost never holds true, so the seductive criticism that capitalism tends toward monopoly is easily accepted. Fortunately, Schumpeter makes a valiant early attempt at showing that this is not the easy argument that Marxists hoped it would be. Likewise, most of us have noted that democracy - except in Classical Greece and small towns in New England - is hardly ever practiced the way we were taught, where citizens guide public policy and politicians carry it out. Instead, Schumpeter reminds (or teaches) that democracy is commonly practiced as a competition among leaders for votes, and voters select the politician whose program most closely matches their idea of the "correct" mix of policies .... << ENDQUOTE

On Wikipedia this paragraph can be seen:

Quote >> According to some analysts, Schumpeter's theories of the transition of capitalism into socialism were ‘nearly right’ [11] except that he did not anticipate the obvious recent failure of socialism in Eastern Europe nor the role of technology to actually foster innovation and entrepreneurship in western society beginning in the 1980s. This was in contrast to Schumpeter's theory that technology would only serve to concentrate ownership and wealth towards large corporations. << EndQuote

Don't you just love the confidence (I almost said jingoism) of those people? ... the obvious failure of socialism ... transition of capitalism into socialism was "nearly right" ... or this one ... many victims of one or two semesters of college economics will have noted that the atomistic theory of competition almost never holds true, so the seductive criticism that capitalism tends toward monopoly is easily accepted ...

I guess they either wrote those comments before the last decade, or were/are a little blind to what is actually going on today.

Either way Schumpeter got it right, just as Seykota gets it right much more recently. In my humble opinion of course.

So what other chapters did he write which might have pricked some national pride and triggered the critiques mentioned above? Maybe these chapters struck the idealistic capitalistic core of some readers a little:

Monopolistic Practices,

Closed Season,

The Vanishing of Investment Opportunity,

The Civilization of Capitalism,

Crumbling Walls,

Growing Hostility,


A decade ago it was probably easy to say none of this will ever happen to the bastion of capitalism, eh? However we see what is going on now more clearly. And Schumpeter wrote his comments 72 years ago, and .. well ... that's what's going on now!

And how about a chapter called "The Vanishing of Investment Opportunity". What a great way to describe society today, from 1942!

The book? Here is one reference: Capitalism, Socialism, and Democracy [Kindle Edition] but there are many editions of course, and he wrote other books too which might interest those willing to take on an economic based tome or two. Imperialism and Social Classes sounds interesting and is full of comparisons between the Roman Empire and the development of modern states into empires. Lots of people today make that comparison, but seventy years ago during WWII, not so many I expect.

So was Joseph Schumpeter a guru worthy of study? I think so. Time seems to have proven many of his forecasts about society correct, and therefore what of his other forecasts? I leave that to your good selves to decide.

Well that's all for today.


Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

About the Author


Oct 5, 2014 - 4:25pm
Oct 5, 2014 - 4:28pm

Thrud but really second

AM, you make my mind hurt, my kids hate these posts cause I forward on to them and then want to discuss


Edit.....sigh I guess I really am third

but then again you win gold and lose silver and win bronze

Can't Happen Here
Oct 5, 2014 - 4:29pm



I'd add "unextinguishable debt" to the list, something that maybe the author didn't think we'd be dumb enough to do.

sierra skier
Oct 5, 2014 - 4:31pm


Just because I can.

Edit in: Investment opportunity today is a mess. Everything has been manipulated to push us into paper and away from real money. I think they are in the final process of pulling the rug out from under those who have their money tied up in their paper. Hopefully the tangibles and real money we hold will help protect us from the complete losses many will face.

Oct 5, 2014 - 4:41pm

AM Looking For A Guru

Look Me Up, I'll Tell You Anything You Want To Hear. LMAO Keep Stacking

Oct 5, 2014 - 5:29pm

WOW - BitCon

Down 20% in 2 days and it broke below $300 earlier today (has bounced a teeny bit since then to $310).

Down 35% over the last 20 days.

Ten months ago it was about $1150.

Game over.

edit: just changed the figures - it's not 7 days / 30 days but 2 / 20.

Oct 5, 2014 - 5:32pm


Seems like everything is going down except for the Dollar which is getting stronger. Maybe I should sell everything and hold onto those precious paper things, then again maybe not. Keep Stacking

Oct 5, 2014 - 5:48pm

TV Night at Zoltans

I saw this in passing on another thread. Was my pleasure to host everyone that night (seems so long ago). Biggest party I have ever had, even if it was via internet. Haven't posted in a long time because I wasn't sure what I could contribute. Silver Lease rates are a mystery now. Kitco continues to kick the can (latest version will be posted by the end of the week on their trustee in bankruptcy site).

Personally I am in my second year back at the "coal mine" since leaving the Gulch. These prices are a gift to the stackers. Enjoy and take advantage of with your extra fiat while you can. Remember to live and enjoy your lives as well. Will be watching the open tonight with interest to see what TPTB have in store for silver and gold. Expect a lagged opening time on silver, just a hunch.


PS Hat tip me please if you were there. Wonder how many of us are still around.

Oct 5, 2014 - 6:06pm

I was there

Zoltans couch

4 oz
Oct 5, 2014 - 6:09pm
Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

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Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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