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In response.. February 10, 2009

Posted by olvidadorio in Economics.
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.. to @jagalicious (and thank you for your input) :

if fed ties “printing money” to concrete assets cf. sweden 1990s. & pipes toward production, may avoid harsh too many $s chasing 2 few goods that is, avoid classic inflation.

Sweden 1990s definately looks like the type of intervention that I would prefer (basically nationalizing  banks).
Piping towards production would be a very, very good idea for the afore consumption-reliant states. But how? There would have to be quite a bit of investment (credit!), but with banks being nationalized they could be forced to extend credit!
An additional problem is that consumer demand is a lagging trend, that is, we won’t be seeing the real slouch until after a few months, exactly in time to dampen producer’s spirits who already have to deal with plummeting prices and overcapacity all over the world (wave to China). [Oh glumm, glumm 🙂 ]
It is not really clear whether the US would be able to actually retrieve the value put in to save the banks, as in the case of Sweden 1990s. If the current crisis is changing the global economy fundamentally, then less value will be retreivable. The intervention will have been much larger, also proportionally, after all this goes through, including the feds humungous swap-lines, as well as structural changes all around the world, Sweden was more-or-less an isolated case. But the model is well worth considering as far as I can tell.

so werg, will human nature change enough to invent a better model than money as a medium of exchange?

No, I really don’t believe that human nature will change any time soon (hey, by definition that won’t happen — and I’m convinced that evolution via selection is rather broken among us humans at the moment). The question would be whether the form of money we employ today is truly connected to human nature!
I don’t think so. Sure, the concrete form of coins or similar tokens of value has been around for quite a long time and in many cultures. It’s just dead useful, as long as you have a mercantile society! However, those tokens used to (have to) have society-independent (material- or production-) value! This is no longer the case. Ever since those italian merchants developed modern book-keeping we’ve been messing around with our underlying monetary system, changing it all the time. Nowadays it’s not about money — it’s all about credit! And I’m quite sure that our monetary system will continue to change!

Even though I can’t foretell in which direction, I know which direction I’d find interesting: Make banking and money-issuance a peer-to-peer process along the lines of ripple.

In our current system the role of the bank is more and more superfluous. Clearing is done electronically, there is no need for physical institutions. They aren’t absorbing risk as the should, they hand out credit which in the end needs to be guaranteed for by the whole society anyway. Hence credit procedures must be standardized which leaves little room for actual contribution. The whole sector of investment-banking has kind of bloated (though initially potentially useful system of distributing value to initiative).

Banks and credit-based money have for long been the social method to make people work, even if their work is not directly connected to satisfying basic needs, by giving them buying power via money. Of course all this is totally based on people’s confidence in the currency’s value. To maintain economic confidence in pieces of paper and numbers on hard-drives, such a system necessitates continuous growth and — almost all over the world — big government debt.

Personally I believe that a market-economic system less based on perpetual growth would be better. Changes in such directions need crises, though. Hence my heightened interest. 😉

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Comments»

1. Nic - February 11, 2009

maybe you missed your crisis by a heartbeat last year:
http://zerohedge.blogspot.com/2009/02/how-world-almost-came-to-end-at-2pm-on.html

2. jag - February 11, 2009

First a point of clarification: I meant the economic crisis was needed, not the war (gack!!!). Along a similar flavor as you, I’ve been bothered by the fact that value, or how much money something costs, is no longer tied to concrete factors, but things like speculation in commodities markets, whether the CEO has cancer, etc.

“Personally I believe that a market-economic system less based on perpetual growth would be better.”
Sign me up!!!

Thanks for being interested in this situation, and letting me write about it also. I see the common consumer and investor as having failed to protest, as many rational people were saying about some finance practices, “hey, this looks like finance on margins, which caused bank crashes in the 1930s.” Lots of people protest about capitalism, aka market economies, but thoe who go with market economies don’t seem to protest fairly salient malpractices. We just try to make money too.

3. olvidadorio - February 12, 2009

@Nic. Wow. It makes sense though that something like that happens. What I always do wonder about is how they can stop those sort of things by just stopping the trade… Somehow seems peculiar.

@jag. Whew– I am relieved! 😉 Well, ya never know, do ya, but I apologize for that misinterpretation. So we agree! Yeah!
I thank you very much for your interest as well. You probably have much more diverse contacts back in the US — do you think people are getting pissed? And also, do you think folks are getting critical (there’s a critical difference there).

It is really tough to mobilize people to protest about economic subtleties — though I’ve heard several times of people going into tax-boycott in the US. A quite crippling form of protest, self-mangling almost, but possibly effective and frightening. But you see how it works: tie it in with personal greed and people are much more willing to fall for it!

4. jag - February 16, 2009

I’m disconnected with attitudes of people in the States about banks and the crisis, in terms of, people in my family and people I know are, how to say it, know more than the average person about how money works, so they are more focused on taking action than being angry.

If you want some perspective on attitudes maybe there is some info at WESABE, which is an online finance community of folks aimed at helping themselves–by brother, Gabriel is the director of marketing.
http://www.wesabe.com/
or other finance communities
http://twitter.com/ramit

Online communities might be a good mechanism for making protest effective. That is, picketing banks or the government with “You are the problem” etc., doesn’t seem to be targeted enough. If you got 10 million people to rush the Whitehouse mail server, or boycott certain banks for publicized bad practice, maybe things woud change. Online communities also facilitate economic education too.

Yesh, greed gets us all the time. Hobbes and Machiavelli seem to be alarmingly correct about human nature.

5. olvidadorio - February 18, 2009

Thanks for the links, looks quite impressive!

I do agree on the methods, but I really still am at loss as to WHAT should really change, in what direction any public outcry should actually thrust. One might say that the government should stop propping up prices, or at least settle for one straightforward policy, make it known and by that make prices for those so-called “illiquid assets” calculable. Also, I would like the government not to set up a huge “stimulus package”. I am just really afraid of the whole public debt thing blowing up in our face, big time.

HOWEVER, I’d be seriously amazed to actually see people protesting against runaway deficit spending! (On a big and politically effective scale that is.) Don’t want to be pessimistic, but it is a challenge.

Do you know the movie “Network” where Howard Beale gets people just to yell out their windows “I am angry!”?

6. 1mo - February 18, 2009

re: the best practices article

FIRST OFF:
overall, makes an interesting argument. Without significant knowledge of “inner workings”, I have no way of estimating the banking/economic side of the equation.

>He successfully predicted the collapse of the USSR. He was off by just half a decade.

hmmm. call that success if you will.

>Please don’t be too concerned, though, because, as I mentioned, this is just a theory. My theory.

My overall impression of the article is that he does indeed want to get as many people concerned as possible. hence I am rather put off by the quoted gimmicky sentence.

>people who try to predict big historical shifts always turn to be off by about half a decade.

oh come on… and not even funny, if that was the intent?

MY RANT:
overall, the hinted at comparision to the Titanic lags.
Active “impoverishing” of the masses to the point of grunting slavelabor is well in sync with long-ongoing brainwashing campaign of top hogs via the media. This is no “accident” waiting to happen. This is the implemantation of stark plutocratic tyranny via the slippery slope of well-bred ignorance and fear.

That it may, in a sense, be too late, that the majority of us are being herded deeper into the slaughterhouse of the plutocratic golden steak factory, yes. But that factory is hardly about to collapse.
Alas! even the sheep bleeding therein are firm believers in the vicious machine they feed.

7. olvidadorio - February 18, 2009

>FIRST OFF:
>overall, makes an interesting argument. Without significant >knowledge of “inner workings”, I have no way of estimating the
>banking/economic side of the equation.

I really like the take. I find it telling that he takes a really collectivist — a public plan management stance at crisis. How russian. 😉

>>He successfully predicted the collapse of the USSR. He was off >by just half a decade.

>hmmm. call that success if you will.

i would. Look, these types of social changes are huge. Predicting an earthquake within the range of a few years is kind of a success as well. And the important part is just to know that it’ll be coming, i would say.

>>Please don’t be too concerned, though, because, as I >mentioned, this is just a theory. My theory.

>My overall impression of the article is that he does indeed >want to get as many people concerned as possible. hence I >am rather put off by the quoted gimmicky sentence.

He may want people to develop some concern, but I wouldn’t aggree that his goal is to get people overly concerned. And in fact he is adding valuable information: We really don’t know whether or which parts of his theory turn out correct.

>>people who try to predict big historical shifts always turn to >be off by about half a decade.

>oh come on… and not even funny, if that was the intent?

hm… I actually found that funny! I know the feeling a bit, having been (aspiring to become) part of the hobby-predictor’s business for a while already.

I find your rant too negative! It seems to blend out our interwoveness and responsibility that we have within society and economy, which may or may not be a slaughterhouse. Yes, it also has become part of our conditioned nature which we cause and by which we are maintained. That there is power, and that there are interests to control people, and that there is disrespect is true — and I also aggree that in general the current system of power is probably not going to collapse soon. It is forms, which this power takes that are becoming rather unstable.
Fascism in the end, is the problem.

8. 1mo - February 18, 2009

agreed about an excess of negative emphasis in the hence aptly titled rant of mine 😉

suppose i simply felt that his theory was too sandboxed for my taste from the larger issues I scratched on so unsubtly…

so..my verdict: nice sandbox lecture. now to zoom out and pan!

summing up what I agree on from his best practices stuff in a quote I read somewhere else: “be a responsible steward of your energy”
goes for all of us, on all levels..

the following may be best answered by folks in your social hood:
what about the possible role of technology advances/differences since scenario 1 (russia), in terms of how scenario 2 (usa) may play out?

9. olvidadorio - February 18, 2009

Hey, thanks for not taking that too seriously! I was a bit worried there. 😉

Yes, of course, the lecture doesn’t really give a lot of “best practices” that seem truly applicable to western europe or the united states. It just doesn’t. (Next to finding some emotionally unstable, trigger-ready dudes to hang out with… Well, there should be enough of those in the states, for sure. Not that they’re necessarily the nicest of companies..)

Concerning technology.. I always have to think of the game “Fallout”.. This post-nuke-war scenario where there actually still is some kind of technological progress (e.g. the brotherhood of steel) but it’s really mangled. You see, as long as the industrial circulatory system, with all its lifelines, catering resources to production is still in place, there will be technological advancement. Once — or if — those lifelines break it’ll be Just In Time for (that is it won’t be long until) the breakdown of much of technological progress — as we know it.
Not nice, not nice at all. I wonder what would happen to the internet. I suspect it would largely go down. The internet is extremely energy-hungry, so we would probably wind up with a boiled-down, barebones version, no rich media for everyone etc.
It’s strange to say that these things would go, because once they were the beginning of an expanding future..

Please remember: The prediction of industrial failure holds in case of full-blown global collapse, which I do not expect. It’s just a good matter to think about.

This however also doesn’t mean that the internet won’t suffer from the downturn. It will! We might find that a lot of data that we thought was securely stowed on somebody’s server suddenly won’t be “at our fingertips” but instead on a harddrive on its way to the junkyard/renegade recycling plant.

10. Mark Herpel - May 21, 2009

Stick with gold, silver and community currency. Time banks are great also. Government paper is for tourists.

Mark
Community Currency Magazine


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