The beginning of the end

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61
So hewittr, in a world where we all save like mad and accumulate savings (I actually remember the days when I had several thousand dollars in the bank... oh so long ago!), where does all this growing pile of money come from?
In our lifetimes it's been coming from the printing press. We've gotten so used to high prices that it's hard to imagine low prices going down. Gold and silver backed money prevent the money supply from going exponential.
Just for you, I have changed my signature to another annoying one!
I knew I could count on you.
62

Nuh, sorry, still don’t get it… in YOUR Matrix, how does a growing pile of savings increase in size? If it’s gold backed, then savings must be limited by how much gold (an assuredly finite resource) there is?

63

Lionel:

Your fundamental flaw is that you call what we have in America "capitalism." What is going on now is far from true capitalism, let’s not confuse this.

 

You say that "deflation would be economically disasterous." Well I think we need some deflation now because we’re going to have "energy deflation" very soon. If you think deflation is disaserous, then I suppose you think inflation or completely flat money supply make sense? Just wait and see well we survive a world of declining oil production when we try to inflate our way back to growth. We will fail miserably. We need the deflation at this moment. But I will defer that decision anyway. It is best left to the markets to decide whether we need inflation or deflation, NOT the Federal Banking Cartel.

 

hewittr: Thanks for your efforts.

64

Maybe one of the problems we’re having is one of limitation of definitions. We’re so hung up about the descriptions of the applicable theories that it makes us go around in circles. We argue about the topic only to argue about the theory that consists of the topic. I’m not saying it’s a bad thing. I’m just saying that cooperation is meeting somewhere in the middle; kinda like accepting the whole even if you have to overlook some minor details within that whole. Maybe this is a utilitarian model of sorts but to argue after teasing apart all the components of any theory becomes tedious and could take the rest of your lives to come to the conclusion you would’ve made years earlier. I do advocate that we all examine theories but when it supercedes productive action, then I think all that "productive" arguing negates our very cause.

65

 

so many theories, so little time…

 

66

Mike,

Definitions, Definitions.

When I refer to Capitalism, I regard that I am referring to actual Capitalism as it is practiced in the world today, not some idealised form of Capitalism that doesn’t actually exist. Sorry if that wasn’t implicitly plain enough for you. I will take this on board; in my definitions I will have to make it plain that I’m talking about ‘Capitalism the Reality’ as opposed to ‘Capitalism the Religion’. Anything with an ‘ism’ in it is part of people’s belief systems, so I need to tread carefully. I have decided to change the text to:

"Capitalism (as practiced in the world today) is a system of enterprise in which the money for that enterprise is created as interest bearing bank debt, through the system known as Fractional Reserve Banking.”

Do you think that “granular and specific” enough? It’s starting to sound like something out of Monty Python.

Lionel

67
Re: [roeoz] 09 outlook
--- On Wed, 3/12/08, Dave Kimble wrote: "If China's economic growth goes down to 5%, the economy and the political system are going going gone and out of here." Why ? I know a lot of people say it, but why? Some clues here: http://globaleconomicanalysis.blogspot.com/2008/11/panic-in-china-over-jobs-econ omy-cotton.html A hundred million unemployed shoe gluers and toy makers would spell trouble for sure... This is interesting too: http://www.bloomberg.com/apps/news?pid=20601087&sid=aIYdewrRwOXc what else are they going to do with all those worthless $?
68

I like that (at least the "(as practiced in the world today)" part of it). The rest may be overboard. That is where (at least part of) the discussion belongs. Regardless of whether I agree/disagree with it, it is a big step towards clarity of your thought process. As some people have commented here, definitions can bring emotions along with them which can serve only to cloud critical and subjective thinking. But words and definitions are important; they are the basis for much of our communication. They can become even more (exponentially?) important when you take very in-depth analysis and move outwards towards large, almost philisophical concepts as you did.

I interpreted what you wrote to mean "An engine is a motor that uses a revolving crank shaft and vertically moving pistons to move a car forward"…I would look this up and find it to be wrong. But now it is clear to mean that you were saying (I think): "An engine is a motor which converts thermal energy to mechanical work. However almost all cars use a four stroke cumbustion cycle engine, so for the sake of this report, I’ll assume that this is part of the definition of the engine." This allows me to verify, for myself, whether a car really does need an engine or not and if so, does it need to be a 4 cycle combustion engine? Actually, I can verify it for myself either way, as I tried to with "capitalism", but the latter approach allows me to follow your thought process, then I can continue with your analysis…even if I disagree and find that a car can move using a rotory engine instead. I can clearly see your logic and can continue with your analysis.

Of course it’s entirely plausible that, to you, this is obvious and shouldn’t need defining, just as you wouldn’t need to define what the meaning of the word "the" is. In this case, I am not your intended audience, as your audience is of a higher understanding than I, so I should just BE QUIET!

I’m sure that I’m not saying anything you don’t already know…I am stating it to convey that I don’t fault anybody here for speaking up when critical words or concepts appear ill-defined, and I don’t like condescending tone used when people take definitions seriousy…not emotionally…but seriously. Often times there is good, sound reason for this.

Sorry for the long post, but I felt that in addition to the socialism vs. capitalism, etc. debate, another discussion was forming which debated the value of the use of definitions vs. meaningful discussion. Both have value, and both should be applied. This also makes it easier to disagree on Facts vs. Opinions vs. Beliefs, and still work together to find SOLUTIONS!..my opinion.

Thanks for your contributions to this discussion lionelorford. I’m not trying to be difficult or nit-picky. After all, 50% of "Peak Capitalism" is Capitalism! (Perhaps optimism vs. hope was a bit too much, and served to convolute productive discussion…but we can agree to disagree on that one I think;)

Sorry for contributing to the launching of this thread way out into left field from talking about "Obama Bonds".

69
Nuh, sorry, still don't get it.... in YOUR Matrix, how does a growing pile of savings increase in size? If it's gold backed, then savings must be limited by how much gold (an assuredly finite resource) there is?

Matrix

Your thinking is static. Savings are not limited by the money supply. It is by production that we create more value out of labor and natural resources. Production drives prices down thereby allowing consumers to buy more things with less of their earnings. America was once an agrarian economy. Through automation and improvement in farming techniques, it now takes very few farmers support an entire nation. Manufacturing went through a similar cycle. Now it takes fewer workers in manufacturing to support a nation at a higher standard of living than ever before.

I don’t live in a Matrix; I live in the real world; it’s been a lifetime study. The common thinking here is that money is wealth. If that was true, all we would have to do is produce money to become wealthy. Inflation creates an illusion of wealth, which is why it is so popular. The reversal in our standard of living came by substitutiong debt for savings and consumption for production. Inflation destroys every nation that took that route.

As for the defintion of deflation, a decline in prices can come by production or by a collapse in credit. The current deflation is due to a collapse in credit accompanied by a stagnation in production.

 

70
I will take this on board; in my definitions I will have to make it plain that I'm talking about 'Capitalism the Reality' as opposed to 'Capitalism the Religion'.
As I tried to explain above, the form of capitalism practiced today is a pseudo form of capitalism. It is that form of capitalism that has peaked. Lionel's theory is just another form of pseudo capitalism.
71

[quote=hewittr]I don’t live in a Matrix; I live in the real world
[/quote]

The ‘real world’ IS the Matrix…

72

LaFanze and anybody still reading this string,

You are correct - definitions are important, accuracy is very important and generalisations must be noted as such. When putting forward an argument, particularly when addressing an audience to whom it may represent a major shift in their world view and hence tend to be hostile towards the argument, it is important not to leave any great gaping holes in your wall of argument. Such holes are used by people hostile to what you are saying to attack you rather than your argument.

In this case, I was attacked for a lack of accuracy in using the term Capitalism to mean the Capitalist monetary system, which I thought was pretty self evident in the context of what I was saying. This was used to try to discredit me, by saying "this jerk doesn’t even know what Capitalism is" but nobody actually was able to say that the intent of my argument was wrong. The person making this slur really does have a different concept of Capitalism in his/her mind.

Here is a really quick summary of what I’m trying to get across:

In order to conduct commercial enterprise, you need a system of trading tokens - known as money. The Capitalist money system arose as a means of creating new money to enable the growth of commercial enterprise that was not feasible if the amount of money in circulation had been limited to the available precious metals.

The primary problem with Capitalism is that because new money is created as interest bearing debt, the money supply must continue to grow or else the system collapses. This is what renders us dependent on exponential growth in a clearly finite world.

Going forward, we need a monetary system that is not dependent on growth, which implies that new money must be created without interest.

We need a monetary system where the amount of money in circulation is controlled to match the needs of the economy. New money would be created to allow the economy is expand (eg to roll out a vast infrastructure of solar power and electric rail) and withdrawn from circulation as economic activity recedes following a growth phase. Money is nothing more than trading tokens that need to be created and destroyed as required. The key imperative is to prudently manage the supply of these trading tokens to achieve a stable economy. Capitalism fails miserably in this regard.

Going back to "the gold standard" is not a solution - it simply doesn’t meet the fundamental requirements of managing the supply of money for a sustainable economy. It is a solution proposed by those that believe "we can’t trust Banks and particularly governments, but gold is physical an irrefutable - we trust gold". Unfortunately there is no power in gold that can manage our trading tokens for us - we have to do that through sound government.

We can only achieve such sound government through raising the level of understanding of the electorate, so that they are able to vote for prudent government at the ballot box.

Lionel

73

[quote=lionelorford]
Going back to "the gold standard" is not a solution - it simply doesn’t meet the fundamental requirements of managing the supply of money for a sustainable economy. It is a solution proposed by those that believe "we can’t trust Banks and particularly governments, but gold is physical an irrefutable - we trust gold". Unfortunately there is no power in gold that can manage our trading tokens for us - we have to do that through sound government.
We can only achieve such sound government through raising the level of understanding of the electorate, so that they are able to vote for prudent government at the ballot box. [/quote]
So far paper money has been tried and inflated away 3800 times…according to the CC.
The concept of a long term stable honorable government is a lovely dream, but just a dream.
As to your other point [quote=lionelorford]
We need a monetary system where the amount of money in circulation is controlled to match the needs of the economy. New money would be created to allow the economy is expand. [/quote]
What we need BIG time is an economy that does not expand !
If your objection to gold is it restricts growth, then it is an excellent sort of money. :wink:

Cheers Hamish

74

Then maybe I misunderstood the movie to be meaning the Matrix was the virtual world. Whatever, I like "reality" better. So many claim to be realists without a full understanding of reality. A realist looks at the world with neither optimism nor pessimism; it is what it is, and he has no delusions of changing it. Rather, his objective is to navigate through it.

75
This was used to try to discredit me, by saying "this dickhead doesn't even know what Capitalism is" but nobody actually was able to say that the intent of my argument was wrong.

I do remember telling Lionel that he doesn’t know what capitalism is, and I’m sure I did not call him a dickhead or any other pejorative. Maybe he is referring to someone else. I’ve explained real capitalism in other posts on this thread, but he is ignoring me.

We can only achieve such sound government through raising
the level of understanding of the electorate, so that they are able
to vote for prudent government at the ballot box.

The historical experience of this country since the Constitution proves that a centralized government cannot be restrained by the electorate. Government is a means of force. A vote for the candidates selected for us by the political parties limits our choices to candidates who support the means of force. Maybe some day, commoners will lose faith in our current form of government by force, but that ideal is nowhere in sight.

Going forward, we need a monetary system that is not
dependent on growth, which implies that new money must be created
without interest.

Growth is a natural outcome of a market society by means of voluntary exchange. Its antithesis is government, which feeds from the wealth produced in a market economy. It doesn’t change by changing the label to "we the people."

Money is nothing more than trading tokens that
need to be created and destroyed as required. The key imperative is to
prudently manage the supply of these trading tokens to achieve a stable
economy. Capitalism fails miserably in this regard.

Again, he is fixing blame on capitalism when it is government that has destroyed capital. His is an impossible ideal when government assigns itself the monopoly over money.

The primary problem with Capitalism is that because new
money is created as interest bearing debt, the money supply must
continue to grow or else the system collapses. This is what renders us
dependent on exponential growth in a clearly finite world.

So many errors in his logic. The problem facing the world economy is the exponential growth of the money supply. Clearly, human innovation has outstripped population growth since the day when Malthus predicted society will outsrip the food supply. We cannot know what the limits to growth are through the market process. Our immediate concern is on how successful the governments around the world are in restraining the market process. It is here where the neo-Malthusians are conflating the limits to government growth with the limits of the market economy.

If the masses fall prey to the government propaganda that our economic calamities are due to a failure of capitalism, then we can expect an economic depression worse than anything in recorded history. The question is how much will the masses be made to suffer before they realize that government is not the solution; it is the problem.

76

gyrogearloose and hewittr: once again, thank you for carrying the torch.

Lionel, gyrogear is absolutely correct when he says that we need a monetary supply that cannot be expanded much. Gold serves this purpose. Likewise, the possibility for abuse of gold is much less than that for fiat money for the simple reason that gold truly encapsulates a lot of human labor and energy. You can’t print it. Paper money does not have this level of integrity, but relies on our trust of our leaders. And look at how miserably they have managed the dollar, let alone all the other fiat currencies. The corruption they invite eventually destroys them from the inside, and oftentimes, gold comes back once again to supplant paper.

I believe that your propositions might sound good in concept, but you fail to acknowledge the abuse that a faith-based system invites. No matter how hard we try, there will always be political wolves trying to game the system. They can try to game gold, but I think alchemy is pretty much discredited by now, so I say "let them try."

Anyone who puts blind faith in their government will soon be owned by it. Government is a necessary evil, but always an act of force. And it isn’t forcing you to personal liberty and prosperity, that’s for damn sure.

 

Mike

77

Come here often Mike. The word "torch" reminds me of Lady Liberty. She needs as many carriers as she can get.

My sense of Lionel is that his faith in the force of government is unrevocable.

78

OK Guys - this is absolutely my last on this string.

Firstly, there is a lot of stuff where one line has been taken from what I have said and this used to try to discredit my argument without considering that I have addressed the point concerned elsewhere. I am not interested in pursuing this type of pissing contest - you want to block out what I’m saying - fair enough, I can’t stop you. This issue of people’s attachment to their belief systems is a huge part of the problems we face because they mean that we maintain faith in those beliefs even when they are failing us.

The reason that fiat money systems are subject to inflation is that the fiat money is created by banks and returns a profit to the banks. There is always the temptation to generate an unsustainable amount of trading tokens in the good times as business is booming, creating demand for more trading tokens, particularly when every additional token returns more profit to the banks creating them. The problem is that constant real expansion of the real economy is not feasible, booms come to an end with a bust and way too many trading tokens having been issued. Also, the growth of real productivity is always limited, but the amount of trading tokens is unlimited.

It’s like a parent telling a teenager: "now there’s a fridge full of beer, a stocked up liquor cabinet and here’s bag of cannabis. Now, I know your friends are coming over while I’m away, but I want you to act responsibly or else you’ll have a hangover and I’ll be really pissed off" Clearly the short term gain is just too good to refuse.

I have absolutely no faith in governments. As a scientist, I try not to have faith in anything. No, we need to eternally vigilent of our governments and constantly calling them to account. This is the very essense of a functioning democracy. Governments are not a "necessary evil" - they are the only means we have to stand up for the common good against the forces of big money.

Our democracy is the only means we have to turn the gross mismanagement of out planet around and to save ourselves from catastrophic collapse. When government is not managing our affairs prudently, the answer is not to abandon government or seek to reduce their power - the answer is to fix the problem - to vote them out and elect a government who will act prudently. Obviously, this task can never be complete - it goes on indefinitely.

It’s just not true that all democracies are totally corrupt and do not represent the will of the people. The democracies of Western Europe, Britain, Canada, Australia, New Zealand represent the interests of their electorates very well indeed, including sound economic management to the extent that this is possible within a Capitalist, FRB fiat money system. Obviously, the same is not true of America’s system, in which I had lost hope (optimism?) that it could be turned around. The election of Barack Obama has restored my hope (optimism?) that it is possible for Americans to come together and claim back their democracy. Take heart America.

There are times when the amount of trading tokens in the economy needs to expand to facilitate expansions of productivity (eg the money expansion required to facilitate the building of the infrastructure needed to phase out our use of oil and coal), there are times when the supply of trading tokens needs to contract at times when economic activity is declining (eg following the build out of major infrastructure) and in the long term, a steady state economy is appropriate, requiring the supply of trading tokens to be in balance with the productive economy.

It’s all about managing those trading tokens and this is where the system is broken. It’s not that paper money is wrong, indeed without it, the extraordinary expansion leading to the modern world would not have been possible. The problems are that the interest bearing debt based money system only works in times of economic expansion and there is a short term advantage in generating an excess of trading tokens.

A gold standard does not address the need to properly manage the flows of trading tokens. It does not mean that trading tokens are supplied into enterprise that is in the common good and would almost inevitably see further concentration of wealth in the hands of a tiny elite. It doesn’t give a means of contracting economic activity as will be required in the future and I find it difficult to see how it solves the problem of banks being empowered to claim interest, which results in the requirement for exponential growth.

It’s advocates seem to think that you can have a steady state economy by simply fixing the supply of trading tokens. Sorry folks - I disagree whole heartedly.

Thanks to all respondents - the issues raised have been important in refining the argument of my book. Even when the views expressed are from a totally different belief system to my own, they are none the less views that will be present within my target audience - and these are the people whose minds I need to change. There is no point writing a book for those who already agree - that would be preaching to the choir.

I am curious tho - ‘hewittr’ are you real - or are you just a bear bater? The stuff you write is so extreme that I have usually thought "no-one could really think that - it’s just dillusionary right wing propaganda bullshit - I think he’s just doing a bit of bear bating". That is why I have stopped responding to your posts.

79

Maybe you (all) are disagreeing about the definitions and/or nature of "capitalism".

  1. When you reference "capitalism" do you presuppose that it is something tangible, say for instance, paper currency?

  2. Is "capitalism" just an ideal in which we attempt to apply, our current way of living, to, e.g. paper money & interest?

  3. Or, do we try to "change" our way of living to avoid or embrace "capitalism".

I think once we find out what the nature of capitalism is, i.e., what is necessary for capitalism, then we can try to understand whether or not our way of living reflects this.

Some do not believe fiat money or interest is a necessary component of capitalism. For example, while I do not hold any "capital" in terms of paper or investment money does not necessarily mean I do not have capital. I may have more than enough food, furniture, appliances, etc. to share. I may not receive paper currency if I cannot "sell" these items within a market when attempting to liquidate my assets, but I can still give my capital goods to those that have no money and when I cannot sell them at market. This I think is a crude example of capital-ism that does depend upon fiat money or interest to define it.