[quote=rhare]But, there is no mystical equilibrium. Given a sound money (ie. one that is not manipulated - gold/silver are an example), and free exchange between individuals, each person will tend to look out for themselves. Some will make mistakes, some will be swindled, but the majority will be diligent about their money and property. Note this is a natural human behavior to protect ones family and property.
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No mystical equilibrium??? But rhare, you then fully explain that there is 
I would conquer: there IS absolutely a mystical equilibrium. But it’s really not mystical at all. This is exactly why…what is happening is happening…and its about time philosophy got back into the public conversation. For if we do not understand the economic workings of nature, we will forever stumble over ourselves trying to invent a manmade economic system for ourselves that is flawed. As is quite evident.
Remove all humans and their doings from this planet and it’s all there to see. Energy and matter: life, always in its destructive-creative evolution; always striving for perfection; always striving for it’s most “economical” state. Not perfect, but always striving to be perfect. All of which can be broken down to perfect mathematical equations. All happening without human intervention. Anyone notice?
Point: it’s not a fixed, hard-coded system.
Enter humans (not the whole, the individual): left alone to build and produce and improve his life, unaware of the extremely delicate and fundamental natural economics of self interest (survival), risk/reward and supply/demand, could be what you call the mystical equilibrium. For these are the keystones and building blocks that maintain a self-balancing economic system. Not balanced…but always striving to be balanced.
Unfortunately, philosophy has escaped popular conversation today and is not in our consciousness as it was during the founding of the USA and our constitution; for the constitution was built around these silent, delicate principles of “natural law” and “natural rights”. There is very little in the constitution beyond the instruction to keep individuals free and trade free. They understood.
For all you socialists out there, that feel there is a need to “fix” and “construct” and “hard-code” economic activities, and while you are doing so “take” earned private property from one individual to give to others out of “fairness”, (or whatever justification you manufacture) is dead wrong. And history shows you this over and over. We are not robots…where our parts are shared at the determination of some higher authority (you?).
Point: a hard-coded economic system is bound to fail…as it eventually gets stale and slows and becomes unproductive. More hard-coding will not fix the problem (but it may pacify the current economic symptom–politicians take note!!!).
Our once relatively free economic system has been inching out of balance for quite some time as we add more and more hard-coding, and put into place “conniving” inventions like the federal reserve/fractional lending/unions…etc, that tinker with the delicate risk/reward and supply/demand equilibrium, and have literally stopped it from relatively small, de-structive, re-structive, re-innovating, re-balancing efforts for decades. Our educational system comes to mind (what a lethargic black hole that is).
Want to see more hard-coding?? Just look at the tax code!!! For we are far over extended…way, way over extended.
Nature will be balanced…because nature is a mathematical equation that must add up. Unfortunately, we have been using future earnings (debt) to make our economic equation work today…be we can only reach so far into the future.
If we understand this we may be able to work faster to put into place freer markets by reducing government overhead which increases productivity and wealth generation, which increases tax proceeds, and have a somewhat softer landing back to the equilibrium. We need streamlining and like NOW. But I’m not optimisitic about that. Not when a majority of people do not understand the basics of the natural laws of economics…and the conniving manmade systems we installed years ago are still in place…and we are installing more.
My hope is when nature decides to hit the reset button, we do not have the socialist democratic party at the helm who have about 6% combined private sector experience…and no philosophical understandings of our constitution. For their only solutions will be hard-coded solutions, which are totalitarian by nature (that is not a pun). All for our own good of course.
Can’t wait for that high speed rail here in IL so I can visit Detroit MI !!!
PS: some interesting reading http://en.wikipedia.org/wiki/Natural_and_legal_rights
I agree with alot of what you say. However, you are not taking into account a finite planet with finite resources. A completely unfettered market must grow exponentially forever. This is not possible. As humans we reproduce and grow our population. Because of our mastery over our domain we have extended life expectancy by over 2X in the last 200 years or so(a blip on the time scale of the planet). People who would have died fom any number of diseases or medical problems are alive and using up resources today. Population is probably the underlying main problem we face today. We have learned to sidestep our own population constraints set by mother earth through the use of oil and the massive farming procedures coupled with the advances in the medical field.You must take this into account when discussing these problems. Without controling the population number we will use up all of our resources in short order(on the planets time scale) and then we will forced to reduce the population through starvation and lack of energy. When this happens all of the sociallist vs free market BS will go by the wayside and mean exactly what it means today , nothing.
I think you are strectching a bit by calling nature a mathematical equation unless you want to bring in chaos theroy. Nature does what it does and the species that can survive will, the rest will die out.
When nature does hit the reset button it will not matter one bit whos in control (I even think we are helping her push it right now). There will be nothing left of society as we know it today, the complex systems that are in place will be lost and the “control” will revert to local communities. Those local comunities will not tollerate the social systems you are talking about.
Rich
We are told that after the 2nd world war, inflation in Germany caused people to have to use a wheelbarrow full of money to buy a loaf of bread. Now, 65 years later, Germany is viewed as the main powerhouse behind the Euro. What happened to their currency and the lifestyle of the average German in between? How did they weather this storm? Perhaps their story would shed some light on what we face and what life will be like for the rich, the poor, the working, the unemployed, the retired, while we go through the transition times ahead of us.
[quote=heterodox]We are told that after the 2nd world war, inflation in Germany caused people to have to use a wheelbarrow full of money to buy a loaf of bread. Now, 65 years later, Germany is viewed as the main powerhouse behind the Euro. What happened to their currency and the lifestyle of the average German in between? How did they weather this storm? Perhaps their story would shed some light on what we face and what life will be like for the rich, the poor, the working, the unemployed, the retired, while we go through the transition times ahead of us.
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Heterodox
Welcome to the forums. Your post is very good. You are off by one war on German hyperinflation. That was 1921-23 following WWI. http://en.wikipedia.org/wiki/German_hyperinflation_of_the_1920s#History It was an important contributing factor to the rise of Hitler and WWII.
Your question about Germany’s post war recovery is very apt. This is the only example of a fully industrialized nation that was completely destroyed and had to rebuild literally from ashes. The best account I have found is In The Ruins of the Reich, by Douglas Botting. The original title was From the Ruins of the Reich. You can buy a good used copy for less than $5 shipped. There are only three reviews at Amazon but they give a good sense of the book. http://www.amazon.com/Ruins-Reich-Douglas-Botting/dp/0413775119/ref=sr_1_1?ie=UTF8&qid=1307902236&sr=8-1
In the five years after the war ended Germans died by the millions, and if I remember correctly civilians deaths post war were comparable to all their military deaths during hostilities. Living conditions were extremely primitive, with massive deaths from malnutrition, cold, and disease. The official rations granted by the victorious occupying nations were below starvation levels, so people had to barter anything of value to survive. Sex was a leading service for trade, and cigarettes were the most valued currency.
It was the deliberate policy of the USSR, USA, Britain, and France to make the German people suffer a prolonged ordeal so they would never again start a war. The real German recovery only began three years later in 1948 with massive US aid under the Marshall Plan when the US realized that a stronger Germany was needed to counter the USSR as the cold war began. http://en.wikipedia.org/wiki/Marshall_plan
I have re-read this book recently for the same reasons you asked your question and found it very useful. There were also important differences to keep in mind. The biggest one was political. The German central government collapsed, but was replaced by hostile occupying victors. While they generally did a poor job of helping meet basic needs, they did have resources of food, coal, oil, and logistics that prevented the worst from happening. Most of the victors had been stretched to the limits themselves. The situation was made much worse by ethnic hostilities of civilian populations, and the massive dislocations caused by the millions of slave laborers Germany imported. It was the largest migration of people in human history, and took place in lands that were utterly devastated and in chaos.
This book is not pleasant reading, but it is very well written, interesting, and informative if you really want to know how a widespread general collapse plays out.
Travlin
PS – Poet posted while I was still composing. He is using a different perspective, but his points are all good, especially the demand for goods to rebuild after the war. For a while the USA produced 50% of Gross World Product. There was a lot of opportunity for a local country to pick up the slack in Europe.
[quote=heterodox]We are told that after the 2nd world war, inflation in Germany caused people to have to use a wheelbarrow full of money to buy a loaf of bread. Now, 65 years later, Germany is viewed as the main powerhouse behind the Euro. What happened to their currency and the lifestyle of the average German in between? How did they weather this storm? Perhaps their story would shed some light on what we face and what life will be like for the rich, the poor, the working, the unemployed, the retired, while we go through the transition times ahead of us.
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Heterodox
The times and situations are vastly different. Taking the time to compare is more an exercise in wishful thinking than anything.
I think the West Germans used their industrial and technical know-how, combined with free money from the Marshall Plan and low-cost loans, and their thrifty, highly industrious workers in the aftermath of the war, to rebuild their economy. But they also had major tailwinds.
In the wake of the destruction after war and the post-war occupation, there was a lot of demand for manufactured goods throughout the world. Outside of America, Japan, and Europe, there weren’t many producers. We also had a lot of cheap world resources to exploit back then, including really cheap oil from Saudi Arabia and the Arabian Peninsula, first struck in the 1930s.
Today, there are numerous manufacturing plants throughout the world that produce goods at far lower cost than America can deliver… Greater advances in technology, automation, and computing ability that magnify the productive capacity of fewer workers, a still-growing world population meeting finite resources (more expensive, more costly oil). And lastly, we have a huge problem with debt, military spending, and promised social welfare obligations that have been, are, and will continue to be a crippling claim on our future prosperity.
DemographicsGermany lost some 8% to 10% of their total population, both military and civilian population due to the war and they suffered further in the years after. Because of such huge losses in reproductive aged men, and because their economic prosperity came a little later, West Germany’s post-WWII baby boom was from 1955 to 1967, whereas ours started immediately after the war and started to decline after 1957.
So while our first boomers started reaching age 65 this year (2011), the first Germany boomers won’t be 65 until 2020. Recession aside, demographically, they’re still in their so-called “peak earning years” while our boomers are moving out of them into their socialized Social Security and Medicare “peak collecting years”.
There are a lot of other factors, too, of course. But these are just a few that come to mind.
P.S. - Travlin opened my eyes with his post (see below). I didn’t know civilian deaths were so high after the war. I had read about punitive dismantling of factories and German patents made freely available to all Allies, etc. But didn’t know how bad it got with military administration and the privations suffered by the people. I guess the Germans can thank the Soviet Bloc for being enough of a threat that America had to make changes to ensure a stronger Germany.
Poet
[quote=heterodox]We are told that after the 2nd world war, inflation in Germany caused people to have to use a wheelbarrow full of money to buy a loaf of bread.
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It was actually the FIRST WW…
After WWI, Germany was forced to pay for reparations which sent it bankrupt, causing Hitler’s rise (it’s obviously much more complicated that that!)
The same mistakes were not made after WWII. In a nutshell, that answers your question.
Mike
EDIT: Just noticed Travlin’s excellent “nutshell” much better informed than mine! Thanks for the heads up on that book… must find a copy.
You are correct, websearch Bloomberg and you will see that more than $26,000,000,000,000, yes that’s trillion with a “t”, went mostly to the international banks during the bailout. That would have been enough to pay off every mortgage in the U. S. and more. If that happened our economy would be humming again, albeit with inflation in prices, but we have that already anyway.
The world is run by an international cartel of banksters and huge corporations who care not for anyone or anything but themselves. It is called “corporate fascism”.
Tuco Benedicto Pacifico Juan Maria Ramirez
Another excellent article by Steve Keen
http://www.debtdeflation.com/blogs/2011/06/11/dude-where%e2%80%99s-my-recovery/comment-page-1/#comments
A long way to go yet…See Fig 16
"Lotsa debt, but how did it arise? Somebody got all that money, unless people were sitting around burning trillions of dollors of currency.
Poor people? Nope, they’re still poor. The money isn’t there.
Middle Class? Nope, most of them live paycheck to paycheck, or maybe have a few months cushion.
Rich people? BINGO
"
Yes, Indeed, It all went somewere - a lot of it has been hoovered up by the rich. Ofcourse the world population has been expanding as well - population increase since 1970 would probably fit that 1970-now graph which apears in the artical quite well except for the 2008 onwards bit since i think population growth is still chugging along.
Anyway all those new folks have absorbed alot of the debt counjured money even though they are living paycheck to paycheck.
We could of just printed off a load of money for the extra people without necessarily leading to inflation, but we didn’t, we lent it to them. We can just print it off now to cover that debt - again without inflation.
There; that’s the money sorted.
Can we print off some oil and food, while were at it?
No.
Ahh, there’s your inflation!
Hi Chris, excellent job! It took time to see the obvious. There is no way without resetting the financial system. This means erasing all savings, private pensions so far…
Yesterday I meet 2 highly educated persons, refusing to think about the things on the horizone.
Maybe our german goverment has even started to print a “crisis currency” as it was done some decades ago. There were only 15 Billion Deutsch Marks hidden in a systems of caves.
Cheers.
Most early corporations were setup so that investors could pool capital to undertake projects that could not be funded by an individual. If the project went well then the investors collected a potion of those earnings, if they went badly the investors lost thier capital. No bailouts, no “protecting bondholders”, just risk and reward – seems like a pretty good system to me.
because I decide if I suceed or fail, and because its great to wake up every morning looking forward to “going to work”!
I would add to this that once the project was finished the corporation was disbanded. In other words the corpoartion was created to acomplish a certain project not to become its own entity with its own self serving goals. it was, in essence, a public servant.
My initial reaction to the housing crisis was to wonder why, as you say, banks did not agree to stop ARM rates and or lower interest rates to a place where homeowners could remain paying. Instead owners lost all those home, prices devalued etc. To lower interest rates on mortgages would “default on the legal contract” but wouldn’t banks have done better if they allowed that? Instead, govt. stepped in to soak up bank losses but with no results for the homeowners. I call for a semi-jubilee or a massive restructuring of mortgages which would have a direct impact on bottom lines of “joe six pack”. Why didn’t the TARP money go into programs like this?
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Really a great analysis…
I have found a website with very up to date and relevant debt advice. http://www.ncrdebtcounsellor.co.za/blog.html .
There is advice about budgets, day to day expenses and money management in general.
Really great stuff here. Definitely agree with Aaron. I’ve lurked around here for a while and really enjoy the way the data is presented. (Dumbed down so that I can understand!) I really liked this qoute as well. Borrowing and spending more money will never aid in reducing the debt. It will only continue to make things worse while hiding the truth of the current situation. Until this is realized, nothing good will happen.
When we hold this view, it is abundantly clear that adding more debt along the way only increases the burdens and is therefore ultimately counterproductive, although it does grant the gift of additional time to avoid facing the truth