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There is an easy way to break the loop and that's for the fiscal and monetary authorities to sidestep it by having the Central Bank create the money to fund direct productive investment by the government.

However, in order for this to be politically feasible, let alone thinkable for the authorities, the financial system and the real economy must remain in a seizure for a few more years.

The problem with this is that, like any complex system, prolonged starvation actually damages the productive economy, eventually beyond repair. As money to spin the wheels of the real economy remains scarce, it will slowly be stripped/scavenged/liquidated and the longer the crisis lasts the lower the attainable level of activity will be when it resumes.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Fri Jul 16th, 2010 at 04:29:55 PM EST
[ Parent ]
Migeru:
As money to spin the wheels of the real economy remains scarce, it will slowly be stripped/scavenged/liquidated and the longer the crisis lasts the lower the attainable level of activity will be when it resumes.

considering how much of the 'real economy' consists of humiliating, underpaid makework creating stuff people don't need and persuading them they want it, perhaps there's a silver lining to this.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Fri Jul 16th, 2010 at 05:28:51 PM EST
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There is definitely a debate there around the sense and content of real activity.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jul 17th, 2010 at 01:39:40 AM EST
[ Parent ]
Repeat after me: finance is the brain of the economy...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sat Jul 17th, 2010 at 03:55:23 AM EST
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"Those whom the Gods would destroy they first make mad."

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jul 17th, 2010 at 10:51:27 AM EST
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Little is likely to change so long as political power remains concentrated in the hands of today's economic elites. This is because the basic order of a society is created by the ruling elite to suit their needs. They will adapt the system as best they can to prolong its usefulness, but the present system has built to such a crisis that collapse is the most likely.

The only way out is for a new elite to create a superior system. Such a system should be sustainable and provide social justice. This is eminently possible, but there is no reason I can see to that it is more likely that such a system will in fact emerge than that we will see a far more dystopian outcome.   Given the rampant lack of concern for others characteristic of so many of the leading political and financial sector figures and given the habits of mind and heart for billions of people that tend towards submission to arbitrary authority, we could just as likely, if not more likely, go down the path of a decades long collapse of what currently passes for civilization while the climate tips into a super interglacial period and population collapses to a small fraction of what we have today.

Significant resources are required to change the political agenda in any way. Until and unless individuals with such resources embrace such a plan because they do not want their descendants living in the more likely dystopia the outlook is grim. And if one or more such individual does emerge it will be difficult to be certain they are genuine.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jul 17th, 2010 at 01:59:33 AM EST
[ Parent ]
[ARGeezer's Crystal Ball of Doom™ Technology]

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sat Jul 17th, 2010 at 03:57:01 AM EST
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Thank you for correcting my omission.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jul 17th, 2010 at 10:51:56 AM EST
[ Parent ]
One should separate desirability from sustainability. North Korea is undesirable but clearly sustainable. Feeding, clothing, housing and treating the whole human population is desirable but might not be sustainable (a discussion about the ability of Earth to maintain 7 billion humans would ensue, but that is not my point here).

My point is very simple: sometimes people confuse what they like with what is possible.

Do I like the current direction of things? Certainly not, but it has been a sustainable model for my whole life. Do I think it is sustainable in the future? No, but if it collapses only in 40 years, they it would cover virtually my whole life.

This all being said, I think it will collapse sooner, and we might see a strong down-step before 2020.

So, what to do to avoid it? My thesis: nothing can be done. Collapse is a natural.

Lets see potential alternatives:

  1. A top-down alternative: trust the government, trust the EU, trust the elites. Well, clearly it is where the cancer is most installed. Getting there (ie, changing the top brass) is impossible: there is almost absolute control of the propaganda machine.

  2. A bottom-up alternative: A bottom-up alternative is completely dead for a century or so. Political alternatives (Marxism, old-fashioned social-democracy) are top-down by approach - their proposal is to have control of the state (top-down thus): Which they will not get. Other things like suggesting that people should form a local cooperative to pay to a common pot for communal support (e.g., housing costs) is something in terminal decline. In fact, the current system is precisely defined by the destruction of local community bonds (atomization, self-centeredness and greed).

A grim picture...

This leaves space for individual/family solutions. If collapse happens, be prepared. If you have some degree of preparation then you will have a possibility of influencing your neighbours (who will take note of your relative success). That will be a sound base for community building.

Seems too pessimistic? Just think roaring 20s and then the 30s and early 40s.

Of course you might believe that the human species learns with its past mistakes and a repetition (with the added issues of resource constraints, by the way) is impossible because "we have learned". If you believe in such non-sense then there is not much I can say. Only to suggest that humans are not omnipotent and omniscient gods, in fact they are closer to Baboons than to gods. As a species we do not learn from our past mistakes (or we will forget what we have learned in a couple of generations)

by t-------------- on Mon Jul 19th, 2010 at 04:24:18 AM EST
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