The French election and politicians telling the truth

The cover story in this week’s Economist is about the French election and the reluctance of politicians and the electorate to deal with a serious economic situation.

The truth is that it can be very difficult for a politician to tell people the truth especially if the politician thinks people don’t want to hear the truth or if he thinks people will vote against him if he does tell them the truth.

The truth is that probably we are going into a period of economic decline.  In the long-term we would be better off if the political debate were to be about how to cope with that with a minimum of human suffering.

However, most of us. most of the time, think and act in our own short-term interests as opposed to the long-term interests of ourselves let alone the whole community.  It would take a brave politician to put this to the test.

More stimulus spending: This time it will be different

Today’s Economist has  a report on an article arguing in favor of more economic stimulus.

In this article we have a couple of high-ranking economists arguing that under current circumstances stimulus spending will be self-financing in that it will bring in higher tax revenues.  This time it will be different.

This sounds like the frustration of drowning people who don’t know what is happening to them.

I have a theory that economists were the theologians of the twentieth century.  Their debates were as relevant as the medieval debate over how many angels could dance on the head of a pin. Their role was to provide legitimacy to our economic activity during the golden years of prosperity and to our excessive use  of resources.

Now that we are having to deal with the consequences of our using up the most accessible resources, they don’t have a clue as to what to do.

If you are in the water over your head and you want to survive you should at least try to tread water.  Treading water in the ocean of economics will  require some major changes in economic thinking.

The cashless society

A news report on the Huffington Post tells us Sweden is close to becoming a cashless society.

The desirability of a cashless society depends upon the color of the hat one is wearing.

If I were a chief of police I would not be too keen on it because  it would make a lot of crime difficult and that would reduce my empire.

If I were a tax collector I would like it because all transactions would be recorded and the underground economy would become taxable.

If I were a dictator I would love it. Just think of the potential for social control where every time a person  participated in a transaction their location would be recorded on a computer.

However, I am just a person interested in the economics of money and banking and I see the cashless society as raising the question of just what is money.

I have tried to look at that question in an essay “LETS go to market:: dealing with the economic crisis” which has been posted on this weblog.

Topsoil and civilization

A book review in last week’s The Economist reminded me of the book Topsoil and Civilization by Tom Dale and Vernon Gill Carter and published in 1955.  These guys attempted to analyze the entire field of world history from the point of view of man’s relation to productive soil.

Their conclusion was that all previous civilizations have risen on virgin topsoil and have declined when the topsoil was depleted.  Their book was a plea for soil conservation in the United States because they feared to same was happening in North America.

This is a very  interesting book with what is probably a serious warning which we should heed.  It also points out a fundamental of economics that  to have civilization we need a surplus from primary producers..

You can get an electronic copy for free from The Soil and Health Library based in Australia.

This book was published 57 years ago and it appears history has proven them wrong.  It could also be “not yet.”

We have lived through the golden years of prosperity during which we put huge amounts of oil energy and technology into the topsoil.  Have these permanently restored the topsoil to its prime condition?  Also some parts of the world that depleted the topsoil have been able to exploit other energy and mineral resources untouched by earlier civilizations.

I urge you to read this book and then ask: Are we exempt?  Are things different this time?

Following are some quotes from Chapter one.

Civilized man was nearly always able to become master of his environment temporarily. His chief troubles came from his delusions
that his temporary mastership was permanent. He thought of himself as “master
of the world,” while failing to understand fully the laws of nature.

Let us put it this way: civilization is a condition
of mankind coacting with an environment in such a way that progress results. Regardless
of the forces that stimulate cultural progress, both civilization and the enjoyment
of civilization rest on a surplus production by those who supply the necessities
of life. By surplus production, we mean a surplus above the actual needs of the primary
producers. A surplus production of food, clothing, shelter, and other necessities
by farmers, herders, fishers, loggers, miners, hunters, trappers, and other primary
producers is necessary before civilization can start. Furthermore, such surplus production
must continue on a relatively stable basis if civilization is to keep advancing.
The primary producers must supply a surplus before artisans, designers, engineers,
scientists, philosophers, writers, artists, and other civilizers can exist and function.
Few people ever advanced civilization while they had to produce their own food, clothing,
and shelter directly from the earth.

A common error has been to consider these resources
as static. The proponents of the standard formula, “capital plus labor plus
raw materials plus management multiplied by technology equals production,” have
nearly always considered raw materials as a constant. But they are not constant.
Soil fertility, usable water, forests, grasslands, beneficial wildlife, and other
resources have not remained a fixed item in any region. They have decreased in most
areas occupied by civilized man. In many of the older countries they have almost
disappeared. And with their decrease has nearly always come a decline in civilization.

Women in the boardroom and real power

An article in this week’s The Economist discusses the “problem” of so few women in the boardrooms of European companies.

It may be that there are so few women in the boardroom and at higher management levels because women are smarter than men in that they don’t want the stress and responsibility.

I figure that if you look at society as a whole rather than just the business world we live in a highly matriarchal society.

Most women realize that the real power is in values and relationships and this is where they really dominate.  When little girls play with dolls they learn that they can have relationships in which they have total control over the thoughts and actions of the other  party.

It is a lot less stressful to leave business to the men and put the pressure on them.  That is smart.

Immigration emotions and economics

For us Canadians immigration is a difficult, personal and emotional issue.  Most of us have parents, grandparents or great grandparents who were immigrants. Even the native Indians are believed to have ancestors who came from Asia.

Immigrants enrich our lives by showing us there are different ways of doing things.  There is also the humanitarian aspect of immigration.  Canada is a large country with a relatively small population.  We should be welcoming people from parts of the world where conditions make life miserable.

A frequent argument is that we need immigrants to keep our economy growing and to support a growing number of retirees.;  It is also the argument used by people who worry our population is not increasing fast enough. This argument assumes unlimited resources and a potential for continuing economic growth.

Those of you who have read other posts on this blog will know I have problems with this line of thought.

It is possible that relative to other parts of the world we are well off.  It is also possible that with most of our economic history based and resource exploitation we have cherry-picked the easiest accessible resources

If this is correct more immigrants will mean more people wanting a piece of a pie which is getting smaller.  It will probably mean a better standard of living for the those immigrants from the poorer parts of the world but a lesser standard of living for those already here.

I sometimes ask why are we entitled to a better standard of living than others.  Surely everyone on  this planet should be equally  entitled to a North American middle class lifestyle.

This writer lives 15 miles from town in a valley with a  moderate climate, adequate rainfall and good neighbors.  We are far from the problems of large cities.  Shortly after we moved out here I started saying: “Now that we are here I don’t want any more people moving out here.”

A not so easy way to deal with unemployment

A columnist in The Guardian wants the British government to use the proceeds from quantitative easing to create jobs rather than to bail out bankers.

If only it were that easy.

As I see it our economy is currently faced with three problems – the deterioration of the resource base, the way in which money is created and the loss of the money supply.

Stimulus spending as advocated by this columnist will use up even more resources and bring forward an economic collapse.

We have to keep the banks solvent because our money supply is based on the loans they make.  When the banks lose money we lose part of our money supply and without money there can be no exchange of goods and services and that will mean even more unemployment.

Quantitative easing is intended to allow banks to make more loans and thus create more money and thus increase economic activity and thus get more employment.

It appears not to be working as banks and large corporations have lots of spare cash but don’t see business opportunities.  This is probably because of the deterioration in the resource base.

I believe there are serious problems in the way in which our money supply is created.  These and a proposed alternative are discussed in the essay “LETS go to market”

Making wise those who need wisdom

Here are some words of wisdom from John Kenneth Galbraith from his book The Great Crash 1929  (A paperback, written in 1954 and reprinted in 1997) pages 24 and 25.

Galbraith was writing about 1929 and I believe our current situation is quite different and probably worse.  However, the following thoughts may also apply to us.

Purely in retrospect it is easy to see how 1919 was destined to be a year to remember. … No one, wise or unwise, knew or now knows when depressions are due or overdue.

… the position of the people who had at least nominal responsibility for what was going on was a complex one.  One of the oldest puzzles of politics is who is to regulate the regulators.  But an equally baffling problem, which has never received the attention it deserves, is who is to make wise those who are required to have wisdom.

Some of those in positions of authority wanted the boom to continue.  They were making money out of it, and they may have had an intimation of the personal disaster which awaited them when the boom came to an end.  But there were also some who saw, however dimly, that a wild speculation was in progress and that something should be done.  For these people, however, every proposal to act raised the same intractable problem.  The consequences of successful action seemed almost as terrible as the consequences of inaction , and they could be more horrible for those who took the action.

…. The eventual disaster also had the inestimable advantage of allowing a few more days, weeks, or months of life.

To this I would add the observation that most of us most of the time think and act in our own short -term interests as opposed to our own long-term interests or the interests of our community as a whole.

Stock market or lottery?

The Buttonwood columnist for The Economist claims the stock market  “is not supposed to be a sophisticated version of the National Lottery.”

It may be that a lot of people get sucked into the lottery features of the stock market even though they may still believe the propaganda about participating in the economic growth of our society.  I am amazed at the number of (educated) people who don’t understand financial matters and who appear to not want to understand them.

Following is a quote from  page 49 of John Kenneth Galbraith’s The Great Crash 1929.  Investment trusts were a vehicle through which people could purchase a range of stocks and let an “expert” manage their money – something similar mutual funds and hedge funds.

Historians have told with wonder of one of the promotions at the time of the South Sea Bubble.  It was “For and undertaking which shall in due time be revealed.” The stock is said to have sold exceedingly well.  As promotions the investment trusts were, on the record, more wonderful.  They were undertakings the nature which was never to be revealed, and their stock also sold exceedingly well.

The European and world-wide economic crisis

Probably the best (and politically impossible) way to deal with the European and the world-wide economic crisis would be to write off all debt and start over with a new way of creating money – one that is not based on debt.  There is so much debt now that it is hard to see that it can ever be repaid.

If there is any such thing as funny money it has to be the money we now use which is based on fractional reserves and debt.  Throw in the interest which is charged on the debt-money and we have a ponzi scheme.  So long as there is steady economic growth it sort of works but as soon as there is an economic slowdown or decline it crashes.

I have tried to explain how money is currently created and some of the problems in an essay “LETS go to market: Dealing with the economic crisis” posted on this  weblog.  I also propose an alternative way of creating money based on the Local Exchange Trading Systems currently being used in several locations around the world.

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