Tag Archives: #economics

A True and Just Economy

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In today’s world economists are trained to work with mathematical formulas.  They think habitually in terms of textbook standards and customary assumptions.  Generally in their view, economic order is based on the objectives of a corporate society.  Few economists give attention to civil order or societal well-being—except within the context of this consciousness.   

However, there is actually an economy of the United States that is grounded in the lives of real people.  This is and will always be a living reality, inherent in the entrepreneurial spirit, hard work and productivity of ordinary Americans.

It will survive despite being damaged, and we ignore it at our peril.

This real and essential economy has been subverted and submerged by the single-minded profit-making zeal of large-scale corporate enterprise.  And it is with no little irony that we have seen the corporate world itself subjugated by the wizards of high finance.

It is important that we distinguish the principles of free enterprise, which are essential to a productive economy, from the predatory forces that have corrupted economic order in the interests of power and greed.

It is also necessary to recognize the complexity of our predicament, which is more than simply economic.  A broad range of disruptive forces are contributing to the disintegration of social and economic order.

It is on this storm-tossed sea that Americans must learn to navigate—to regain our balance and sustain our integrity.

Despite the near total destruction of the real economy, the financial elite have managed to stay afloat by co-opting the political order and misrepresenting their motives to everyone else.

It is not realistic to expect this to continue. Without the vibrant consumer economy, which they have themselves demolished, the financial elite has no firm foundation upon which to operate.

The mirage of economic strength is nothing more than an empire of debt.  And, without productive jobs there will be no consumer economy of any significance.

Ultimately, the world of high finance requires a productive economy to fuel its activities.  One can commandeer a vehicle, but it cannot operate without fuel. Or, to put it another way, when a parasite kills its’ host it must find another.  And there is no other.

With all its myopic delusions and pompous posturing, the financial class is self-destructing.  And the consequences will impact all of us.  Whether the transition is short and violent or takes a long time, we cannot wait to organize safe communities and to build self-sufficient lives.

Working people, including the small business owners we will increasingly depend upon, need to start thinking in new ways. Ordinary Americans have been pushed into a corner.  But, in the long run the deepening crisis has a silver lining.  It will engender valuable lessons, creative opportunities, new ways of thinking.

Big business may or may not survive, or it might go away and then come back. Either way we need to find ways to take control of our lives.  And, it will be in local communities and networks of communities that we can assert our economic independence and survive.

This will necessarily depend on a willingness to work together despite our differences, and an ability to respond constructively to the unexpected.

As long-time readers know, we have been discussing the importance of agreeing on shared values and commitment to trustworthiness, if we are to navigate successfully through new and unexpected difficulties.

Whether or not the titans of high finance and big business crash or implode, we must take control of our lives and forge a genuinely American future.  No one is going to do it for us.

Safety, dependability, and self-respect are to be found in local communities—when we make it so. To reach out to our neighbors, friend and stranger alike, is to affirm the most essential of American principles.

It is time to rebuild the foundations.

Tom

You may watch for the next post on or about August 30.

Where is the Baseline?

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When we begin to think strategically about the future, there are a number of imposing challenges and baffling questions to be addressed.  I offer one here for your consideration.

Bigness has been a hallmark of American culture and has been said to reflect the spirit of the nation.  As an expression of raw power, massive engineering projects have fascinated Americans – and the rest of the world – for a long time.

Great ships, long bridges, tall buildings and world-changing inventions have transformed the material world throughout American history.  Many of us recall the awe we felt as we watched Neil Armstrong step onto the moon – live on television.

In recent decades we have watched huge banks and corporations grow ever larger, crushing the small businesses we used to favor on Main Street, USA and dispersing our jobs to distant places.

Eventually corporate America decided it did not need Americans at all.  Jobs were moved across the sea to places that had less interest in protecting the safety and comfort of working people.

We were told this would be good for us; that the cost of living would fall.  They said we could buy the things we need more cheaply – with the money we no longer have.

And then we became accustomed to “big-box stores” filled with cheapened goods manufactured somewhere far away by some other struggling people.

With the success of big business, the wealthy elite have become ever wealthier, and an ever-larger portion of personal wealth has been effectively removed from the consumer economy.

Bigness was supposed to be more efficient; it is not. It was supposed to improve the standard of living for ordinary Americans. It has done the opposite.

Large corporations have destroyed millions of small and medium-sized businesses, as well as the millions of decent jobs they once created.  Indeed, we now know that with very few exceptions large corporations are net destroyers of jobs.

In the last decade the American middle class, once the engine of American economic ascendancy, has in many ways ceased to exist.  With their role as “consumers” crippled by job losses and “hidden” inflation, many who were once in the middle class are now unable to envision a better future or even to afford a new mortgage.

You know whereof I speak.  A massive and unresponsive government dominates the economy, consuming the national wealth while producing nothing itself.  Huge impersonal corporations, for which honesty and responsibility serve no intrinsic purpose, show little concern for the consumer economy, much less the social and economic integrity of the nation.

As Americans we should be well-practiced at asserting our views, but we have allowed this situation to reach an extreme.  Indeed, we have fed it with our own rampant materialism and couch-potato lives.  And now it has morphed into a monster.

This is not a problem that can be legislated away.  How are we to turn it around?

Will economic catastrophe force a rational re-ordering of things?  Or will individual foresight, ingenuity, and determination forge a new economic course?  Americans should know how to “think-out-of-the-box.”

Whether we face the chaotic state of collapse, or the confusion and disorder of a long grinding depression, it is apparent that ordinary Americans must find a way to build the foundations for effective governance and a renewed economic order.

But – where do we start?  Here in the 21st century, where is the baseline?

I suggest that our local communities are the only place where we have the power and potential to take initiative, to make things happen.

I am not an experienced entrepreneur, but many of my readers are.  Many of you are inventive; most are smart.  It is time to put our creative imagination to work to figure this out.

Survival is not a new concept; neither is creating wealth from scratch.  These things are difficult and time-consuming, but they have been accomplished successfully over and over again for centuries.

This time is special.  We need community.

The unity needed for rebuilding begins with individual initiative – each making the effort to bring others along with us, teaching, serving, sharing knowledge, skills, and energy – building a future with a safe place for everyone.

Tom

A note to readers: This blog posts regularly; please watch for the next post on or about December 12.

Unexpected and Unsuspecting

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The future confronts us with an impenetrable complexity.  And the future is now.  Hidden within this new reality is an unexpected menace that we can only barely imagine.

In the densely interconnected world of digital networks, instant communication, and global markets we find ourselves arriving in what appears to be a seductively attractive frontier, but which in fact masks entirely new dimensions of danger.

It is a new and unpredictable world, and it hides hazards of unimaginable magnitude.

Exponential population growth and digital connectivity, along with warfare, fragile commercial distribution systems, and the global transmission of deadly diseases, are all contributing to rapidly intensifying complexity.

However, it is the immensity and density of digital networks that is most difficult to comprehend.  And it is here where we are learning that complexity itself can behave in very strange and disturbing ways.

Complex systems are capable of spiraling out of control suddenly and inexplicably.

Living as we do in the instability of today’s world, I think it important that we understand this.

In his book, “Ubiquity”, science writer Mark Buchanan writes that a natural structure of instability is in fact woven into the fabric of the world.

He writes that complex structures and processes – in geology, in rush hour traffic, in financial markets, and in the many intricate networks of human society – have a natural tendency to organize themselves into what’s called a “critical state,” in which they are poised on what he describes as the “knife-edge of instability.”

A critical state occurs when a system is poised for sudden change.

Some mathematicians and scientists now believe that a pervasive instability is a fundamental feature in nature – and in the structures of human societies.

Any event, even a small one, can have an effect that seems far out of proportion to its cause. A single grain of sand, for example, will cause a sand pile to avalanche. But it is impossible for us to know which grain of sand, which individual maneuver in heavy traffic, or which specific circumstance in the financial markets will trigger inevitable catastrophe.

What is the difference between something that is complicated and something that is complex?

James Rickards, who I introduced to you in the previous post, answers this question in his book, “The Death of Money: The Coming Collapse of the International Monetary System”.

Rickards explains: “Many analysts use the words ‘complex’ and ‘complicated’ interchangeably, but that is inexact. A complicated mechanism, like the clockworks on St. Mark’s Square in Venice, may have many moving parts, but it can be assembled and disassembled in straightforward ways.

“The parts do not adapt to one another, and the clock cannot suddenly turn into a sparrow and fly away. In contrast, complex systems sometimes do morph and fly away, or slide down mountains, or ruin nations….

“Complex systems include moving parts, called autonomous agents, but they do more than move. The agents are diverse, connected, interactive, and adaptive. Their diversity and connectivity can be modeled to a limited extent, but interaction and adaptation quickly branch into a seeming infinity of outcomes that can be modeled in theory but not in practice.

“To put it another way, one can know that bad things might happen yet never know exactly why.”

James Rickards goes on to expound on the instability of today’s financial markets and global economy.  He writes: “Bankers’ parasitic behavior, the result of a cultural phase transition, is entirely characteristic of a society nearing collapse.

“Wealth is no longer created; it is taken from others. Parasitic behavior is not confined to bankers; it also infects high government officials, corporate executives, and the elite societal stratum.”

Today the financial markets and monetary system are again poised “on the knife’s edge of criticality.”

My message here is the importance of preparing for severe unforeseen shocks.  It is essential that we not panic when confronted with the unexpected.  We must remain steady on our feet when others are ready to stampede.

Only with a commitment to justice – and the self-discipline for ethical behavior and moral responsibility – will we hold our communities together and begin to rebuild.

Yes, the road to freedom requires courage, but getting there depends on responsibility.

Tom

Please look for the next post on or about October 20: Why the Bankers Are Trapped.

New readers can find a project description, a draft introduction to the forthcoming book, and several chapter drafts on this page.

When Money Dies

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Americans experienced a major financial crisis in 2007-8.  Some would argue that it began far earlier, and clearly it is ongoing today.  We may be more aware of this crisis than others because it confronts us daily.  In preparing for what is to come, we would do well to listen to those who saw it coming and who continue to warn of its’ inevitable consequences.

Beyond all the foolishness and greed running rampant in the financial world, one great threat hangs over our future more than any other: The greatest expansion of debt the world has ever seen.  This is in large part due to non-stop deficit spending by governments.  Corporate borrowing has recently exploded similarly.

However, we need to understand that this has been made possible by a credit-based monetary system.  Easy access to credit, which is money created out of thin air, has led to the belief that credit is wealth.  This fantasy has infected society from top to bottom.

When a credit-based monetary system functions the way central bankers wish, the money supply should expand only slightly faster than economic growth.  Enough additional money must be created to cover the growing cost of servicing the expanding debt.

But, since 2008 the central bank (which we call the Federal Reserve) has expanded the monetary base almost four-fold while the economy has grown very little.

They call this “money”, but it is mostly debt.

The arrangement is extremely profitable for banks and the wealthy elite.  It allows for all kinds of mischievousness.  And, it depends on inflation, which is a long-term problem for the rest of us.  If it sounds to you like a Ponzi scheme, you are not alone.

In managing the money supply to avoid the growing threat of another banking crisis, the Federal Reserve has facilitated repetitive cycles of booms and busts, each more severe than the last.  This has perpetuated major social and economic distortions and dislocations.  It has stifled any possibility of restoring normalcy to the lives of ordinary Americans.

The economy has not been permitted to return to a normal and balanced condition.  Nothing has been fixed.  Extremely low interest rates have encouraged rapid growth of corporate and government debt, so the situation has been steadily worsening.

At such extreme levels, there are only two paths forward: default or devaluation.

Debt must default and be liquidated before economic productivity can recover.  But, the immediate pain of bankruptcy is too great for the bankers and policy-makers to bear. Consequently, they are struggling to gradually devalue the currency in relation to the cost of goods and services.

The government hopes desperately to meet the nominal cost of Social Security, Medicare, and other long-term budgetary obligations without defaulting.  This means the value of the dollar must fall significantly.

By altering the method of measuring price inflation, rising prices have been masked and social security payments held to a minimum.  Only those who live in the real world know the truth.

The devaluation of currencies is taking place around the world as budget deficits grow. Central banks attempt to minimize the interest costs of huge debt loads, while at the same time trying to avoid the failure of banking institutions that depend on interest rates.

Monetary economist and former banker, James Rickards, has written that “financial crises have supplanted kinetic warfare at the center of complex system dynamics. Financial crises in 1998 and 2008… are warnings – tremors ahead of a misfortune beyond imagining.” (“The Road to Ruin”, 2016, p.204)

The consequences of all this are profound and unpredictable.  We face a deepening crisis that will exaggerate all others, severely limiting the capacity of businesses to grow and create jobs, undermining our standard of living, and making it impossible to address pressing needs without worsening monetary instability.

The dependability of a productive, self-sustaining economy has been sacrificed to the tyranny of selfish interests.

Strangely, however, the wealthy elite have behaved like parasites that destroy their host.  They have wrecked the healthy economy upon which their profits depend.  And they have exposed themselves, as well as the rest of us, to the evaporating value of credit-based money.

Tom

Please look for the next post on or about October 6.  We will take a look at the problem of complexity, and the realities of financial markets and other systems that have vastly exceeded the human capacity to fully understand or control.

In This Time of Danger

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I have addressed my concerns to Americans for two primary reasons.  I believe we have entered a period of severe, successive and interacting crises that promises to be deep, grinding, and long-lasting.  And, I am concerned that the bitter divisiveness and disunity current among us will limit our ability to respond effectively to the danger we face.

Many of you know that the present disorder has been gradually escalating for decades. We now find ourselves with a pervasive loss of respect for civility and moral responsibility, (both public and private), a frightening loss of social coherence and stability, and a broad deterioration of economic well-being for ordinary Americans.

We now stand at an extraordinary turning point.  Do we want the United States to be preserved as a constitutional republic?  Are we personally prepared to rise above our differences to make this possible?

There are pragmatic solutions to these questions, but they will be extremely difficult.  I have never said it would be easy.  I have said I do not think we have a choice.

With closed minds and hardened attitudes our circumstances are becoming increasingly extreme.

We face a formidable array of complex crises.  The challenges are diverse, profound, and mutually reinforcing.  Some will impose themselves suddenly, others gradually, but all will ultimately converge as they impact upon our lives.

What is most extraordinary is the number and variety of crises that are emerging into view at the same time: social and economic, moral and material.

An abbreviated review is offered here to demonstrate this diversity.

1) Increasing social instability characterized by a dramatic loss of civility and unrestrained anti-social behaviors that include accelerating incidences of brutality and mass murder.

2) A banking and monetary system that favors the financial elite rather than the American people, and which has become dominated by self-serving individuals who appear incapable of recognizing that their risk-taking behavior threatens the well-being of everyone, including themselves.

3) Massive government, corporate, and private indebtedness, which constricts the economy and threatens to precipitate a significant devaluation of the US dollar.

4) Old and deteriorating infrastructure, which we depend on every day: bridges, municipal water and sewage systems, and the electrical grid.  These cannot be upgraded or replaced by national, state, and municipal governments that are hobbled by indebtedness and shrinking revenues.

5) An exponentially increasing global population.  With this comes rapidly increasing risk of war and global epidemics, as well as food shortages caused by falling water tables and the ongoing loss of arable farmland.

6) The rapid development of advanced technologies without a commensurate advancement of ethical maturity or a commitment to moral responsibility.

7) Degradation of the natural environmental systems that provide us with clean air and water, the consequence of population pressures and the long-term aggregate build-up of toxic substances derived from motor vehicles, household products, and industrial pollution.

8) Last, but not least, the loss of ethical integrity and moral responsibility on a massive societal scale.  This deterioration is overwhelming the values and norms upon which social stability depends.  It is a crisis weakens our ability to respond to all other crises.

During the past 100 years we have seen the emergence of integrated global systems that include transport, communication, and surveillance technologies, and an interactive global monetary system.  No crisis can take place anywhere without disrupting the whole interrelated system.

However dark the immediate future, we will always be presented with opportunities.  The most important opportunity for us lies in a disruption so broad and profound that it alters our perspective and challenges our assumptions.

We will find ourselves thinking differently to survive: How well do we actually know our neighbors? What are our priorities?  How important to our future is the idea and vision of America?

Local problem-solving will once again become paramount.  Safety and food security will depend on a diversity of local knowledge, skills and experience – regardless of our politics or religion or the color of our skin.

Discovering safety and strength in diversity will change us.

If we can build dependable communities we can also begin to talk – to identify shared needs and shared values, and to re-imagine a shared vision of the future that we can respect and believe in.

Tom

Please look for the next post on or about 8 September:  “A Confluence of Crises”

Common sense…

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Farm 4-x

“Common sense is genius dressed in its working clothes.”

–Ralph Waldo Emerson

The Deeper Crisis

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We live in extraordinary times. Having entered a period of successive and interacting crises, we are challenged to pull together as a people, to clarify our purposes for safeguarding the integrity of our nation as a democratic republic, and to determine effective means for doing so.

I have commented here that we face a range of diverse crises, all emerging into view at virtually the same time. We have reviewed a number of them very briefly on this blog, and several at greater depth.

Some, like the continuing financial crisis, have impending implications. Others, like the unrecognized instability of complexity in today’s digitized world, remain hidden, but may well provide the trigger that sends things into freefall.

(See blog posts: February 6, “Why the Bankers are Trapped”; February 13, “Insolvency and Devaluation”; February 20, “A New Kind of Crisis”; and March 13, “The Hidden Dangers of Complexity.”)

I have placed emphasis on the coming financial storm because it hangs over us now, waiting for a trigger.

The too-big-to-fail banks are now bigger than they were before they helped bring down the economy in 2008. The federal debt has risen by 83% since that time. We see an increase of low-paying service sector jobs while our economy continues to lose higher-paying jobs.

The stock market has shot upward with no foundation in economic reality, and has now reached irrational valuations not seen since just before the 1929 panic and the dotcom crash of 2000.

The Bank for International Settlements (BIS), which is the central banker to the world’s central banks, announced recently that central bankers will be out of options when the next crisis hits.

Essentially confirming my points in the February blog posts referenced above, the BIS suggests that the major central banks have mismanaged the situation to a large extent because they don’t understand it. Previously “unthinkable risks,” they said, are coming to be “perceived as the new normal.”

The International Monetary Fund (IMF) also released a report recently, stating that “key fault lines” are growing across the US financial landscape, and that “new pockets of vulnerabilities have emerged.” The largest and most interconnected banks, the IMF concludes, “dominate the system even more than before.”

As imposing as this unfolding drama appears, in my view there is a more fundamental crisis. And, it is clearly visible behind all the others.

I have written here, (as recently as June 26), of the stunning loss of personal integrity – honesty, trustworthiness, responsibility – we have witnessed in recent years. A profound collapse of moral standards has taken place on a broad, societal scale.

This is the deeper crisis, and it may ultimately be responsible for the general deterioration that is dragging civilization to its knees. I say this because trust and responsibility are the basis for the sound functioning of human affairs, and lack of them has led to crippling disorientation and disorder.

Why has this happened to such a broad extent? Certainly we have lost the ethical and intellectual foundations that have contributed to stability in the past. But, why? We are intelligent people. What happened to good judgment? Where is common sense?

Have we walked away from responsibility believing that honesty and fairness limit our freedom? Has the daily bludgeoning of mass media warped our minds and stunted our capacity to think for ourselves?

Whatever the reasons, we are now reaping the whirlwind. For a world where many young people have grown up with little effective parenting, and many of their elders have lost any meaningful grounding in values or virtues, there will be no guidance available in the chaotic upheavals that lie ahead.

Analyzing and explaining the prospective dangers we face is beyond the scope of this blog and book. Rather, I seek to gather Americans around a constructive response that is rooted in our local communities, irrespective of unpredictable events.

Tests that require us to pull ourselves together and rise to our full potential might actually be the only antidote to the toxic cocktail of partisan negativity that is poisoning the American soul.

Stability requires and integrity demands a rational and compassionate response to the downward spiral of social and economic deterioration.

Tom

Next week: Responsibility, personal and practical

Honesty

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Coast 2-x

“Honesty is the first chapter in the book of wisdom.”

–Thomas Jefferson

“I am afraid we must make the world honest before we can honestly say to our children that honesty is the best policy.”

–George Bernard Shaw

Common Sense

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Leaves 2

“We cannot solve our problems with the same thinking we used when we created them.”
–Albert Einstein

“Democracy is finding proximate solutions to insoluble problems.”
–Reinhold Niebuhr

“Society is always taken by surprise at any new example of common sense.”
–Ralph Waldo Emerson

The aristocracy of our monied corporations…

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“I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.”

–Thomas Jefferson

“If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man.”

–Mark Twain