At its most basic; any exchange of anything- either for money or by barter. Does not have to be for monetary profit, although it will normally arise as a result of the mutual self-interests of the parties. It obviously requires division of labour and/or resources to be worthwhile. It can however be enforced by a third party at a value that the third party determines.
Society and urbanisation
We are not seeking to define the society and urbanisation merely to state that both are dependent on trade and on labour and resource division regardless of what system is implemented to allocate or enforce them.
A faith based system with two components,
§ physical money (usually but not essentially state mandated legal tender) which allows non-barter exchange transactions without a banking intermediary. In this case the parties must physically encounter each other to make a transaction and almost all transactions will, on one side, be for non-money items.
§ Banking IOUs known as bank accounts, which allow promises to pay between parties to be exchanged for other promises to pay through the banking system intermediaries.
In this case the originating parties do not have to meet, and the true parties at any one moment are unknown to each other, e.g. an employer has a liability to pay salaries and bank account from which it will make its salary transfers, it does not know the ultimate borrowers from the bank that will “fund” that account, only the bank intermediary. The employer makes the transfers, and the employees become the depositors who are now no longer owed a salary by a known employer but are owed the same amount indirectly via the bank by the combination of borrowers, until they in turn transfer the IOU to another party when they purchase good or services.
Unfortunately most definitions are loaded by the political bias of the writers and too often accompanied by the word exploitation on the one hand or free market and open competition on the other. I will try to be as even handed as possible in mine.
In its purest form capitalism would be any activity which involves individual or private interests, as opposed to state ones, in production.
The wide definition of private interests just makes it a meaningless concept as under this definition even peasant ( though not slave) labour is capitalism, even if they own nothing else, as long as the peasants are free to select the amount of work they provide. This is not as crazy as it seems; in theory I could start with nothing and sell you consulting without any investment in anything other than my time. I could even charge you an exorbitant fee and gradually accumulate large amounts of resources. ( i.e. I could be a strategy consultant); equally I could do so just for subsistence.
With the above definition, free-trade and capitalism are synonymous. Indeed freedom is its key.
So better to specify capitalism as the use of certain privately owned resources, above and beyond one’s own labour, to accumulate more resources.
But in this definition of capitalism, freedom, free-trade and capitalism are no longer synonymous. Our starting position has allocated certain resources to the players, and does not require that all players start with anything like the same level of resources. Thus the freedom of some players is more limited than the others. Furthermore, in this case, trade can happen without any accumulation of resources so we can have free-trade without any capitalism. It is harder to have capitalism without trade; although one may own capital in the form of a sheep or a tin-mine, if no-one else wants the wool, meat or tin, there won’t be any trade, and no capital accumulation.
A process that can be considered to have started in the mid to late 18th century, as a product of technological innovation, whereby the production of and increasing number of goods and services became automated – i.e performed by machines rather than people.
Essentially the accumulation of resources from money related activities such as investment, banking and speculative activity rather than from physical production.
Consumerism should not be considered the same as Capitalism; although it may well be difficult to make a success of the latter without someone providing the former!
While the division of labour inherent in advanced societies means that members of such societies need to be consumers of at least some things, consumerism as generally defined is considered to exclude the basic needs, and to refer to those purchases above and beyond such basics. Clearly it is only possible to have consumerism where there is an excess of resources accumulated. So it is certainly compatible with capitalism.
In theory, at an individual level, capitalism could lead to substantial resource accumulation without any consumerism, if all resources are reinvested in the production process. However at society level we are back to my original statement that it is difficult to accumulate substantial resources if there are no buyers for your services…
The history and the astrology
So let’s take a look at history. Trade and capitalism in its most basic sense has been around a very long time, in fact it is how families tend to operate, whether or not money is involved in the transactions, so it’s an integral part of the human condition. There is little point in looking for an astrological cycle to match it to – unless we are also looking for the end of the human race: an interesting exploration I am sure but one I propose I leave for others to pursue.
The same problem applies to money, especially physical money- it has been core to the effective functioning of society and urbanisation- an exact date for its invention is not available.
We can however take a look at the modern evolved versions of the above.
In its modern sense, capitalism has been bound up with industrialisation. Indeed when economic historians talk about a crisis of capitalism this is to what they are really referring, basing their start date with Adam Smith’s Wealth of Nations of 1776. And by association the same applies to many other astrologers. It is obviously a key point, what planetary activity triggered the process of industrialisation?
The industrial revolution is generally considered to start with Hargreaves and Arkwright’s inventions of the 1760s. Astrologically that corresponds with a grand earth trine between Pluto Neptune and Uranus, (though even Uranus was not identified until 1781). That might not sound particularly significant; it was, however, the first and only grand trine involving these three planets that occurred between the Pluto Neptune conjunction that determined the beginning of the Renaissance in 1399 and that which determined the modern and oil era in 1891. The planets, signs and degrees are thus important for the industrial age.
Three things are worth noting. First, the earth trine makes it all too easy to wear out the earths resources; we are aware of that now and need to grasp opportunities that these planets provide us to employ technology to slow the process down. The upcoming square between Pluto and Uranus can potentially help by making us face some of these issues. Secondly Pluto was in Capricorn in the late 1760s as it will be over the next decade, so we can expect radical restructuring is everything that has been built since that moment; it is time to transform and renew and question some fundamental assumptions. Finally, the most critical times for the industrial era will be when all three planets are in hard aspects- i.e. not yet – Neptune has not completed its long sextile Pluto. The next critical point is 2059. So far there have been a couple of critical points – in 1821, when Pluto was square a Neptune/Uranus conjunction, a minor aspect in 1888, and another in 1932-33. Until 2059 then we still have some choices. So in the coming few years we are likely to encounter a mini-industrialisation crisis but not a complete destruction of our industrial capitalism world view.
What about consumerism? As readers of my oil chart exploration will know, I also date the current oil usage era to the 1891 Neptune Pluto conjunction and more specifically to the start of the sextile in 1950.
We don’t have a hard aspect between Neptune and Pluto yet. The sextile might be wide but it will return for one last dance in 2032. When is the next square? 2059. I won’t be terribly worried by then, but I suspect people won’t be in maximum consumption mode any more. Just as well as we at least partially eliminated the industry that was supplying it in the preceding paragraphs!
There is another side to the consumerism of the 1950s and that is personal credit. The Diners club card was a creation of the 1950s and the other cards followed, the possibility to easily buy consumable items on credit was born. The 1980s, after the Pluto Saturn Jupiter conjunction sextile Neptune, also saw the burgeoning of home equity withdrawal, particularly in the UK, and the corresponding increase in household indebtedness.
It does appear that this credit has reached a limit now. It probably has another phase to go through until 2032, but that will take a few years to get off the ground again. We do not have a crisis point in this area, but we have reached a maximum elasticity point as Pluto and Neptune have separated from their sextile. By itself this situation would certainly lead to recessionary conditions over the coming years but not a repeat of the “meltdown” we have seen.
However, the other side of consumer credit is of course the accumulation of resources through financial capitalism. And this certainly seems a likely area to explore given the events of the last few months.
Most references to financial capitalism refer to America and date its emergence to the 1890s. Before we return again to that infamous decade, though, we should note that Modern Capitalism by Henri Eugène Sée dates the introduction of modern financial capitalism to bills of exchange in the 13th century trade fairs. However these were discrete events and the major financial investment before 1400 was in state bonds, it was the creation of the bourses in the 16th century that created financial capitalisism in its broader sense. We can then, in practice, date modern coordinated financial capitalism to the Neptune/Pluto conjunction of 1399, (the first in Gemini and the beginning of the Renniasance). Even though it took until the end of the sextile in the 1530s to establish the first permanent bourse in Antwep, it was the Renaissance and the exploration that accompanied that period, that led to the trading need for larger scale financial capitalism. Later joint stock companies from 1600 (around the time of a Pluto Uranus conjunction trine Neptune) gave the world a new financial commodity to trade. Financial capitalism was not something that followed industrial capitalism, but something that not only preceded it, but enabled it.
Thus done, we can return to the authors who refer to the 1890’s. They are also right; financial capitalism as we experience it today was a product of the second Pluto Neptune conjunction in Gemini: the next level of development of the system. And it is the subsequent Pluto /Uranus conjunction of the mid-60s in the form of computerisation that has enabled its expansion this time in much the way the bourses did before. Furthermore, much as the age of exploration created trading demand in the first Gemini Pluto/Neptune cycle, it is the consumer age and its associated aspirations that has fuelled this phase of growth. So is financial capitalism over? The end of the banking system and stock markets perhaps?
No. As bad as things may look, we are not at a square between Pluto and Neptune. However there is evidence that we are at a crucial turning point.
The 1st August eclipse was conjunct the Sun of the 1891 Pluto Neptune chart, as we know from our review of Paulson’s chart. Now by itself that does not sound very exciting given that eclipses are at least twice yearly events. But if I say it is the only total solar eclipse at this exact degree since 1891 that is more interesting. Making it even more interesting is the lunar eclipse of 15th August, one of only a couple of lunar eclipses that have fallen within 2 degrees of a Neptune/Sun conjunction since 1891 and, even more significant, one of a pair (since the February 2009 eclipse will still be within 2-3 degrees of Neptune).
What we have seen then is an eclipse of credit inflation. We do have, astrologically, exactly what the media have been calling it, a “credit crisis.” But we have only demonstrated a consumer credit crisis, not one rooted in inter-bank lending/derivatives etc. What about the elements of financial capitalism that have had fingers pointed at them during the crisis?
Hedge funds for example? The first so called hedge fund is generally credited as being set up by A.W Jones in 1949, close enough to the Neptune Pluto sextile to tie it in with that cycle. However the hedge fund “industry” did not really start until 1966-68- naturally at a critical industry turning point when Uranus and Pluto were in conjunction – many of these disappeared with the 1973/4 Pluto Saturn square.
However, it is not hedge funds per se that present a problem it is their competence and their strategies. And, in fact, it was the derivatives industry which led to the hedge fund boom of the last two decades and particularly the last few years, so it is to derivatives history that we turn for further inspiration.
Derivatives of some sort, like money and borrowing, have a long history; indeed interest itself is essentially a derivative, albeit a simple one that no-one even stops to consider. But the earlier ones were transparent at least to their counterparties and are not directly relevant. More recently it could be argued that the establishment of the Chicago Board of Trade on 3 April 1848 (incidentally a day of a partial solar eclipse) was a key moment in modern derivative history. The true modern era, however, dates from 5 periods post 1950: 1965/6, 1973, 1982, the early 1990s and 2000. Let’s deal with the derivatives themselves first. In 1973 Black & Scholes proposed their options pricing model, and on 26 April of the same year the Chicago Board Options Exchange began trading standardized, listed options with regulation in the form of the Commodity Futures Trading Commission. Astrologically the period was characterised by a grand trine between Saturn, Uranus and Jupiter, and a wide trine between Neptune and Jupiter.
Then on 30 September 1982 Liffe was established, and on 1 October CBOT launched its first options on futures contract for U.S. Treasury Bond futures, corresponding to the Pluto Saturn conjunction.
The relevance of the dates 1965-6, early 1990s and 2000 is that the greatest advances in the volumes of financial capitalism in general and derivative trading in particular have come because of technology. While I don’t intend to detail computing history in this post, 1965-6 is mentioned as it represents the core, although not the beginning, of the harnessing of computing power, the early 1990’s as the birth of the internet and e-trading and 2000 the year that LIFFE became a fully automated exchange. It is these advances that have enabled not only the growth of trading but also the use of program trading, algorithmic trading and the invention of numerous derivative products through quant models etc.
Finally, in relation to the hedge funds and derivatives trading we need to consider the related dimension of leverage. As already stated borrowing has a long history most of which we can ignore. Unfortunately I am unable to track down the dates for when leverage for derivatives and “hedging” became significant, but it is likely to be a product of the low interest culture of the mid -1990s onwards, in the US and elsewhere and it really appears to have taken off post 2000/2001.
Keen observers will note that we are currently experiencing a long Saturn Uranus opposition with a trine to Jupiter and next year’s conjunction involves Neptune and Jupiter, all of which resonates to the 1973 developments. The 1982 events, on the other hand, resonate to the Pluto Saturn cycle – i.e. the implications of this have yet to be fully revealed and will follow in 2009-11. The growth of derivative creativity increased as Pluto sextiled Uranus in 1997 and finally the growth in leveraged derivatives dates to the Jupiter Saturn conjunction square Uranus in 2000 followed by the Saturn Pluto opposition in 2001. We are looking at more than one cycle here and of course major problems arise because so many of these cycles are converging in the period 2008-2012.
It was the Neptune aspect to the August eclipse that resonated to the financial unwinding of the consumer credit problem via the banking system. However, while that is not over yet, (remember the February eclipses at a similar degree), what we are seeing now is the impact of the Saturn Uranus opposition closing out any excess misguided post 2000 leveraged derivative and hedge fund activity. It is time for a spring clean, and with the long opposition plus the coming Pluto aspects, this facet of the crisis is only just beginning. However deducing the medium term impact of this on individual markets cannot be done without reference to those individual markets, something I am addressing gradually elsewhere. It is not a simple case of fund liquidating and asset prices falling in the medium term – though the short term effect might indeed be so– it depends on the destination of the funds once a fund is liquidated.
In conclusion then, we are looking at significant but not terminal points in the history of industrialisation and consumer credit and we are looking at a big shake out in the hedge fund and derivative markets and other over-expanded elements of financial capitalism. The changes as Pluto transits Capricorn will not be easy but we still have chances to make industrial and even some elements of financial capitalism work if we don’t try to bury the problems and acknowledge the flaws in the applicability of some of the fundamental assumptions of neo-classical economic theory. I suspect we won’t do so, I have less faith in humanity than most astrologers, but one can hope.
Sources: all accessed 25/10/2008
Modern Capitalism. By Henri Eugène Sée http://books.google.co.uk/books?id=pIyO2-Hx9AMC&pg=PA18&lpg=PA18&dq=financial+capitalism+history&source=web&ots=rGz0x-j7rI&sig=9-xV21s7sMz12TeAu8nowY4ggNE&hl=en&sa=X&oi=book_result&resnum=8&ct=result
A brief history of the hedge fund: Jim McWhinney