a diary in itself! The person who says it cannot be done should not interrupt the person doing it. Chinese Proverb.
Who can open the oil taps now?
Recession may come, but will it go? Your typical recession is due to imbalances in the financial system that find no other resolution. The recession itself provides the resolution, taking some of the fantasy wealth off the table and allowing the remainder to resume functioning. At that point the recession ends.
But when a recession is caused by real, rather than symbolic problems, then the real conditions have to change. If they cannot change, the recession does not end. Ever.
That was 1. A) & B).
2. Under the fractional banking system, banks are allowed to loan money they don't have. This reduces stability by creating a positive feedback loop--which is sought. This is the methedrine rush of Capitalism, the giddy feeling that everyone is getting rich that comes when easy loans create economic activity leading to more easy loans. And, like ordinary street junkies, everyone likes this. But when there is trouble, the same feedback loop amplifies into (a very methedrine-like) panic and depression, as loans are called in to pay loans that are called in made with money that never ever existed in the first place.
The cure for this is to reduce the amount of loans banks can make with money they don't have. This is done by raising the fractional reserve, the amount of assets they have to show per amount of loan they make. Everyone finds this makes finance boring. How can you get rich? They don't like it.
But. If you're right about that, doesn't it mean that rather a lot of common economic wisdom is a load of horse manure?
- Jake Ceterum censeo Chicago esse delendam
These are many, and have been well documented here.
In particular, it assumes as "Value" something that is in fact its complete opposite - a "Claim over Value" created by Banks and based upon a small amount of "Regulatory Capital".
I think that's a bit strong. Conventional economic analysis is based on a coherent set of assumptions about the way the markets behave. If you're happy with the idea that the strong, smart, criminal, hard-working people will control everything, the analysis works just fine. It's only when you apply concerns about equity and compassion that the system breaks down.
Do you think that the multi-millionaires who own (not "hold mortgates on") several mansions in various countries will be in trouble in a real estate market collapse? They will simply hold on to their property. Do you think that the CEOs of the defense industry will be in trouble if there are revolutions about food? They will simply adjust their factories to make more machine guns. Do you think that the rich in your town will care if there are street riots (as recently advocated by our foremost American talk show host, Rush Limbaugh)? http://www.upi.com/NewsTrack/Top_News/2008/04/25/limbaugh_says_hes_dreaming_of_dnc_riot/4093/
No, they will simply call in the SWAT teams to break heads. "Let them eat cake" is, I believe, the motto of the capitalist leadership...
Gaianne:
Can a sustainable economy have a form of money--abstract markers or tokens of real economic value, a medium of exchange? We should not assume the answer is yes, but we might well consider what constraints a yes answer would have to meet. It must be simple and transparent enough that corruption and cheating are not easy; so much is clear. But more, the systemic purpose of money is to move goods and energy from where they are to where they are needed, and to meet this purpose money must flow readily through all levels and parts of the system without accumulating or clogging up.
This gets to the nub of the problem that was the focus of a recent workshop I attended in Seattle.
Credit (aka "Time to Pay") - and not "Money" - is necessary for the circulation (ie exchange) of "Money's Worth" in goods, services, energy etc.
The problem is that we are used to seeing Money as an Object, and specifically as an IOU. Our Money consists of interest-bearing Debt aka Bank-created Credit.
Some - CH Douglas's Social Credit was such a proposal - saw the solution as the issue of Money as Credit by government directly with suitable mechanisms to address inflation. "Community Currencies" - such as LETS - are based upon a money as Credit created within a closed community.
But Credit is in fact only a small part of the financial system. It is the bloodstream, not the body. While Credit is implicit in a monetary system, it need not - indeed should not be used as money, interest bearing or otherwise, because credit alone is not enough.
IMHO Money exists only in the transient moment of exchange and is implicit in a monetary system. A monetary system exists wherever a barter network/ clearing union incorporates "trade credit" from seller to buyer.
I think Money is best described as "Dynamic Value". The analogy of money = Dynamic Value with kinetic energy is almost exact.
Credit is necessary for the deployment of "money's worth" to create productive assets. ie "Property" of different types, such as land, knowledge, buildings, machinery.
When created to acquire existing assets (eg through mortgage loans) the result is everywhere and always asset price inflation.
These productive assets constitute "Capital" - which I see as "Static Value" (analogous to potential energy) which produces "money's worth" in units of production which have a Value in exchange.
These productive assets are the subject of the financial claims (legal protocols) of "Equity" (shares in a Corporation) and secured Debt (eg mortgage loans) which together constitute what some call "Finance Capital".
Note here that one of the great mistaken assumptions of both conventional Economics and Marxism is that only "Labour" and not "Capital" is productive. This anthropocentric assumption is as accurate in understanding the real world as was the assumption in Ptolemaic cosmology that the Sun goes around the Earth.
This anthropocentric assumption - that only Labour has Value - justifies taxation policies based upon Income, rather than upon "Wealth" and particularly upon the privilege of private Property over Commons that encloses that Wealth.
But to return to the point, I believe that it is possible to replace the "deficit-based" but "asset-backed" value units which constitute our deficit-based Money with entire new classes of "Redeemable Units" denominated in energy, and land rental value, in particular.
We may do this simply by using a new legal "enterprise model" - already in increasing use, simply because "it works" - to invest in these assets and to enable new "Units" of production.
These Units will be fungible (ie acceptable in exchange) and capable of circulating as "asset-based" currencies which are redeemable in "money's worth" which is relevant to most people (eg Kilowatt Hours; Square Metre Years), and which is why they will accept them in settlement of credit obligations.
This circulation requires credit = time to pay, and that credit in turn requires trust. This trust currently comes from a Bank guarantee (which is the true value a Bank provides as a credit intermediary)but could equally be a mutual/ community guarantee backed by a pool of "Community Capital" - resources in community ownership - rather than the bank's pool of "Regulatory Capital" in private ownership.
I believe that we may avoid Stagflation only if we are able to replace (finite) non-renewables with (infinite) renewables).
This requires massive investment in a "Green New Deal" - achievable by monetising energy on the one hand, and using "energy partnerships" on the other - to create the productive Capital necessary.
The US is capable of leading this global Capital creation - but not of "owning" it.
I see "stagflation" more as an ideological bogeyman (from the libertarian or the fat Wall Street side) than an actual phenomenon. There were once special circumstances and a limited reaction, nothing more. If the Fed would had worked as hard and relentlessly then...
If people are eager to cooperate and live in prosperity, what is stopping them to do that kind of cooperation in crises times? Is it some stupid disbalance of money distribution or circulation?
If we imagine that the civilization is catastrophically split into small groups of some 200-300 people, what would be the role of money within those groups? All exchange values and necessary activities could be sorted out without money tokens in small groups. Yet with money emphatically present, games of domination would start.
Valuation of goods is just one function of money. The other function (whether we want it or not) is status determination. With total mutual relations getting too complex in large societies, distribution of money gives power distribution as well, especially when power holders like that. This "lefty" me can be comfortable with some power inequality, determined somewhat by money as well. If we have to propose something different, we either have to define status determination independent of money, or make money work for just social relations.
But isn't it remarkable that money being the universal determinant of individual prosperity and influence in this civilization, easy or unfair money making is emphatically being left unchecked? Anyone with a heap of money is eventually in high respect, no matter how he got that money, and governments can allow hardships on any work but not on money manipulation... Something funny must happen with this.
Valuation of goods is just one function of money. The other function (whether we want it or not) is status determination. With total mutual relations getting too complex in large societies, distribution of money gives power distribution as well, especially when power holders like that.
I think you are confusing Money and Wealth here.
The money we use is not "Wealth": it is a claim over it created by credit intermediaries.
Sure - when Money is such interest-bearing Debt/Credit then it is "Wealth" in the hands of the account holder. However, I think most people can see - if they consider it - that such Money is mathematically unsustainable in a finite world, and indeed this deficit-based monetary system is slowly melting down around us now.
The function of Money should never IMHO be as a "store of wealth". It is "Property" in productive assets that comprises such a "store of wealth", and this is indeed concentrating in fewer and fewer hands as is inevitable in the current system.
Compounded money claims give actually even more power over other people or institutions, and there probably lie rich intentions. The common economy may meltdown completely, and predators would loose their profits and "imaginable wealth"; but who cares if they reach total power over the rest. Having most of material wealth and all population working for them, the top few hundred of world's rich won't need mass economy; cozy aristocratic friendship will do just fine.
