The agricultural surplus and full employment

Ever since some ancient farmer realized he could produce more if he plowed with a horse and collar rather than an ox and harness civilization has been blessed with an agricultural surplus and challenged to maintain full employment.  When the definitive social history of the world is written it will probably focus on the distribution of the agricultural surplus.

ox-plough-253406_1920work-horses-207167_1920

The big question is who is to entitled to benefit from this surplus.  Should it be shared equally or should most of it go to an elite.

For most of history the elites have answered the question in favour of themselves and enforced the decision with force.  For them the challenge was to leave the workers enough food to maintain sufficient population to produce the goods and services needed by the elite.  Certainly there were times, the medieval plague being one, when a declining population allowed the workers to claim a greater share of the agricultural surplus and to escape some of the most onerous hardships.

With industrialization three things happened to change the traditional model.  The demand for labour increased so that workers could claim a greater share. The quantity of goods and services produced increased so there was more to share.  And the elite figured out psychological tactics were a more efficient and less messy way of maintaining their privileges.  The work ethic and tying the distribution of goods and services to jobs are more effective than soldiers.

Major issues with the agricultural surplus are who is to benefit and who decides how it should be used.  Clearly the ancient Egyptians had an agricultural surplus and used it to build the pyramids.  As there is no evidence they had money the decision to build the pyramids was probably made by very few and maybe even one person.

In our own civilization the decision making is at two levels.  At the lower level we as individuals decide how to spend our money and so make decisions about the use of the agricultural surplus.  As our money supply is created by the banking system making loans, bankers have an even greater say in the disposal of the agricultural surplus.  They make loans according to their interests and their values.  As most of them are business orientated they will probably make loans for oil or mining before they would for a new opera house or art gallery.

At least until recently it has been in the interests of most business people for the general population to be willing to work long hours for little money.  Thank you for the work ethic and looking down upon people who do not work and especially those on welfare.  What is in the interests of  business people is not necessarily in the best interests of the people working for them. It could be we have been conned into believing in the work ethic.

So long as we maintain this committment to the work ethic a full employment will be a major economic and political goal even if we might be happier without it. If we had a universal basic income, many people would be able to devote their lives to activities which do not make a profit.

This blogger believes the current economic crisis is long-term and based on resource depletion.  Yes, we still have lots of energy and mineral resources in the earth’s crust but we have mined those that are most accessible.  Those that are left are so difficult ands expensive to extract they have limited value.

If this is true then we are in for an extended declining economy and it will be a major challenge to adapt.  There is even a possibility the agricultural surplus will go down. Adapting will require us to get over the hang up of full employment and will require something radical such as a basic guaranteed income.

If past trends hold the long-term equilibrium is likely to be a small and rich elite supported by a small and poor worker class.  Getting there will involve a lot of human suffering and probably extensive stench.  This writer would like to see population at a sustainable level and a great deal of equality.

 

Please help promote this weblog

Please send the link to this post to your friends and social media.  Promoting a weblog can be difficult.  I get some referrals from LinkedIn.  I used to get quite a few from Reddit but I have been “shadow  banned” for linking to my own weblog.  Self promotion (and free speech?) are serious offenses on Reddit. I figure my strength is in the thinking that goes into the posts and I thank you for helping.  (r/economics   r/libertarian   r/economiccolapse  r/Degrowth )

Why your savings and pensions are at risk

The fractional reserve way of creating money means a lot of people are at risk of losing all or part of their savings and pensions.

If there is too much money supply in the economy then we have inflation and people with savings or pensions lose some of their purchasing power and those who owe money benefit because they repay their loans with less purchasing power.  Now you know why governments and the people who speak on their behalf promote mild inflation.  This is at least unauthorized taxation if not theft.

pexels-photo-2105902If you have deflation, then people who are owed money win because they are repaid with more purchasing power than they loaned.  The borrowers lose because they have to repay with more purchasing power.

To be fair to everyone we need to manage the economy so that just the right amount of money is available at all times.  At a time when the economy is on a down trend, this is very important as too much money puts us in danger of hyperinflation.

Getting this amount right has long been a challenge to central banks although the common sense answer is fairly simple.  The money supply should vary with the quantity of goods and services we want to exchange and it should be flexible up and down.

The wrench in the simplicity is the fractional reserve way of creating money.  When banks make loans they must (or should) keep a fraction of the amount on reserve for when the depositor wants his/her money returned.  As the amount is only a fraction banks are at risk of a “run” if depositors lose faith.  And because of the fractional reserve there is a multiplier effect involved.  Does not this sound like a set up for a crisis?  The mechanics of this process are a little complex although I have always found it easy to understand. To figure it out I suggest you Google “fractional reserve” or look at my free e book Funny Money: Adapting to a Down Economy or look at the essay Going to Market on this weblog.

The other end of the wrench is  that interest is charged on the loans made by the banks.  Mainstream economists have given little or no thought to the consequences of this. Because all of our money is created by the making of loans, if all the outstanding debt were to be paid off at one time there would not be enough money to repay it all because of the interest.  The charging of interest on the debt/money means there is never enough money available to repay all outstanding debt. Inflation is built into the fractional reserve way of creating money.

The system works only so long as the economy and the money supply continues to grow.  An upset in either means crisis of which we have had many.

The relationship between money supply and economic output is expressed in a formula, MV=PQ, some times known as the quantity theory of money.  Money times the velocity at which it circulates in the economy is equal to a price index times the quantity of goods and services produced.

I get ticked off because this is frequently taken to mean there is a direct, proportional relationship between the money supply and the inflation rate or price level.   Can’t people see there are four variables in this formula?  Total output is an important part of this formula.  If it should happen to go down something needs to happen to another variable.

Our society has a strong commitment to economic growth and a need to keep it growing so that people will not suffer from unemployment.   Some desperate people are trying to stimulate growth by increasing the money supply. This may increase inflation but it will not lead to growth unless we can find inexpensive energy and mineral resources to support it.  I suspect the new American president has  his eye on parks and reserve lands to encourage more economic activity.  He will probably succeed in the short term to be followed by a major economic collapse.

This blogger thinks we need some major economic reforms, not only in our financial system but in our commitment to economic growth.  We need to minimize our production and exchange of goods and services so we are using fewer energy and mineral resources.

A lot  of people operate on faith in our financial system and ignore suggestions we need reform.  I think the risk is so great that prudent people will at least give some thought to these issues.  It is your savings and your pensions and your future that is at risk.

 

 

Please help promote this weblog

Please send the link to this post to your friends and social media.  Promoting a weblog can be difficult.  I get some referrals from LinkedIn.  I used to get quite a few from Reddit but I have been “shadow  banned” for linking to my own weblog.  Self promotion (and free speech?) are serious offenses on Reddit. I figure my strength is in the thinking that goes into the posts and I thank you for helping.  (r/economics   r/libertarian   r/economiccolapse  r/Degrowth )

Speaking for or about native peoples

Joseph Boyden is an author who has written historical fiction about Canadian and American indigenous people.  He has a little native blood in him and some media people have treated him as a spokesperson on native issues.  He has been challenged in this role on the grounds that he does not have enough native heritage. (Link onelink twolink three)

This blogger has difficulty with the idea that any one person can speak on behalf of indigenous people because they are individuals and represent a wide range of viewpoints.  Who speaks for Americans?  Obama, Clinton or Trump?

However, there are some who are qualified to speak about native people with varying degrees of knowledge and a lot of caring.  Boyden is one and the author of this blog is another.  Beware of natives who claim to speak for their people.  A lot of them are what I call “professional Indians.”  These are people who make careers, if not a living, by serving white people a lot of bull manure about some aspects of native life or culture.  Boyden is qualified to speak about natives because of the research for his books and I am qualified because my wife is a minister in the United Church of Canada and for four years we lived on a British Columbia coastal Indian Reserve.  Also I have an Indian name.  When I commented that there was a lot of teasing in the giving of Indian names to white people I was told it was a great honour to be given a name by the band’s hereditary chief.

Shortly after we arrived in the village they held a nomination meeting for chief and council.  Not being familiar with the concept I decided to attend and was surprised when three or four people, community leaders, joked about nominating me for elected chief.  After being there for a while and observing band politics I could see there might be some appeal to having a chief who was an outsider.

This band had an elected chief and council and four hereditary clan chiefs who took their positions seriously even though the clan system was getting weaker. The chief of the beaver clan was considered the village chief.   We were told chief and council make most decisions but the chiefs had the right to call a meeting and overrule them. The hereditary chief complained his children did not get jobs in the village because he was sometimes critical of council.  Ten years later we returned for a one-day visit to find the village was divided because the chiefs had tried to exercise this power.  During the day we visited two of the chiefs and were seen as being on their side.  That evening there was a dinner organized by chief and council and while most of the people at the dinner gave us a hug and said “welcome home” the organizers did not acknowledge our presence.  For four years they seldom held a dinner at which my wife was not asked to say grace and I expected she would be asked again.

Us Canadians are forever struggling with division of powers between federal and provincial governments.  Back in 1992 our leaders negotiated some revisions to the balance of power and these revisions were put to the people in a referendum. Under the accord, an aboriginal right to self-government would have been enshrined in the Canadian Constitution. Moreover, the accord would have recognized aboriginal governments as a third order of government, analogous to the federal government and the provinces. In other words, aboriginal governments would have been granted their own order of government, which would have been constitutionally autonomous from the federal and provincial levels of government.

I remember the native leadership were excited about this and insisted the results the native vote be published separately from the white vote.  There are several explanations as to why Canadian natives, as well as Canadians in general,  did not support this accord.  Having since lived four years on a reserve I think native leaders do not speak for their people and Canadian natives certainly did not want more native self-government. Nepotism is found everywhere but on reserves it is blatant.

For the record I am very happy neither I nor my children were raised on an Indian reserve.  I also see natives as being and remaining a conquered people. Treaties are and were a fiction which allow us to, with a clear conscience, hold indigenous people in prison camps. Those people who take a politically  correct approach to native issues are making them into scapegoats.  Forget about the evils of residential schools.  What we are currently doing is much worse.

 

Please help promote this weblog

Please send the link to this post to your friends and social media.  Promoting a weblog can be difficult.  I get some referrals from LinkedIn.  I used to get quite a few from Reddit but I have been “shadow  banned” for linking to my own weblog.  Self promotion (and free speech?) are serious offenses on Reddit. I figure my strength is in the thinking that goes into the posts and I thank you for helping.  (r/economics   r/libertarian   r/economiccolapse  r/Degrowth )

Truth: An impossible request

Dear Santa Clause,  For Christmas this year I ask you to give all the people around the world a sense of truthfulness to themselves and all others including young children.

There are two problems in this request: People believe in different versions of the truth and many people have an interest in distorting the truth.

There are many things about ourselves and this world that we do not and can not know from rational observation.  A lot of people fill in the gaps with differing religious knowledge but it is difficult for an observer to say which version is the truth.  A person who claims to speak or write only the truth is playing god with his/her religion and values.  Who is to say there is no Santa Clause?  A philosopher could define Santa Clause as a concept and maybe make the case that he is real.

Deliberate distortions of the truth go back to the dawn of civilisation.  I have read that ancient story tellers quickly learned to make their stories show their patrons in favourable lights.

There are a lot of distortions of the truth in our own civilization including war reporting, the courts and most politically correct issues.

Distortions of the truth in war reporting were documented in 1975 by Phillip Knightly in his book The First Casualty.  War correspondents are called upon to distort the truth for the sake of their part in their country’s war effort. The first casualty of war is he truth

I would suggest this happens where ever there is conflict.

Courts put some emphasis on  “the whole truth and nothing but the truth”.  But how much injustice has resulted from prosecutors with holding  evidence which shows a person to be innocent.  The adversarial process is a strong incentive to avoid the truth.

There are also distortions in most politically correct issues.  Feminists are mistresses of the ancient art of sophistry, North American natives are a conquered people and police do not care about the color of the people they shoot.

Politicians and business people often have a vested interest in hiding the truth.  Political leaders who say the economy is on a long-term down trend are unlikely to get many votes, or at least they think that.  Every banker in the world would lie to avoid a run on his bank.

Donald Trump challenged the media with his untruths and won.  As a former journalist I was very happy not to be working the election.  If the press had not reported his distortions he probably would not even have got the nomination.  Mostly I worked on small town newspapers where most of the politicians were basically honest.

News people like good stories and when famous people say stupid or ridiculous things, it is usually a good story.   I once quoted a school trustee because I wanted to show how stupid he was.  The next day some lady phoned the local radio talk show and said,  “Did you see what Dr. P….. said at school board.  Wasn’t that great?”

What about the responsibility of the media to report the truth?  Publishers have the right to decide what goes into their publication and some specialize in fiction. There are ethical issues in claiming fiction as fact.  It is also hard for a reporter or editor to ignore a statement because he knows it is not true. Most reporters, editors and publishers do not want to upset their friends.  In general advertisers to not much  care about the editorial content so long as their advertising brings in customers.

How do we as consumers of news know if something is true?  We have to evaluate if an item makes sense and that depends upon our values, religion and knowledge base.

As I have worked on this post I have wondered a little if untruthfulness is an essential part of surviving human relationships.  That might be best left for another reincarnation.

 

Please help promote this weblog

Please send the link to this post to your friends and social media.  Promoting a weblog can be difficult.  I get some referrals from LinkedIn.  I used to get quite a few from Reddit but I have been “shadow  banned” for linking to my own weblog.  Self promotion (and free speech?) are serious offenses on Reddit. I figure my strength is in the thinking that goes into the posts and I thank you for helping.  (r/economics   r/libertarian   r/economiccolapse  r/Degrowth )

The economic foundation of racism

Is racism an ugly fact of life or is it a symptom of a much larger problem?  I suspect it is mostly the latter in which  case it is a serious problem with lots of potential for inflicting injustice on people who really do not deserve it.

A discussion of racism should start with some basic principles.

* We do not have to like everyone and it is okay to disagree with others.  We do not have to associate with people we dislike.

* Some people enjoy hurting others.  If you want to really hurt another person say something negative about them that is true.

* Physical violence is wrong.

* Verbal and psychological violence is wrong.  It is disgusting and immoral but it should not be considered criminal  because it involves values, morals and some very fine lines.  It may be that a part of growing up is to learn how to cope with negatives and some people may have to do more learning than others.

* Some members of minority groups are obnoxious and we do not have to like or associate with them.

* We sometimes fear the unknown and strangers.

* Minority groups can be racist against majority groups

There is some anecdotal evidence that racism and negativity based on being a part of a group is increasing.  The question is whether or not this is itself a problem.  This writer thinks it is mostly a symptom of a deeper and larger problem of a shortage of energy and mineral resources.  There are lots of these resources left on the surface of our planet but we have “cherry picked” the most easily accessible and those that are left require a lot of time and energy to extract.  The result is that our economy has started into a serious decline.  Lots of people sense that the decline is happening but do not have a clue as to why.

This is where racism comes in.  When things go poorly, we need scapegoats so that we do not have to ourselves take responsibility – in this case for using up the resource base.  Actually we have a double scapegoat scenario developing.  Some people are blaming foreigners for our problems while others are blaming these evil racists among us for the problems.  This writer blames everyone.

Whoever is to blame, we are facing a very difficult situation around the world.  Normal people are aware of this – Brexit, Trump, the Italians – even if people do not understand the negative forces at work.  Some people have a propensity to hate but to treat the rest as criminal is itself an injustice.

The native Peoples in our part of the world have and Indian prayer – that they not criticize another person until they have walked a mile in that persons moccasins.  Most of the people who are considered racist deserve the benefit of that prayer and the rest of us have a need for some clear understanding without which the problem will not be solved and we will all experience a lot of suffering.

My ebook Funny Money: Adapting to a Down Economy discusses this problem and outlines some policies which might ease the suffering.  You can  get a free copy from the link at the top of this weblog.

That evil man destroying people and resources

The day after the American election the skies around our place were overcast but all indications were that the sun rose and set as normal.  The question now is what sort of economic policies Donald Trump will implement.  Expect to see more resource exploitation, legislation and policies to restrict competition and more subsidies to business.  His economic policies will probably differ from Hillary’s mostly by degree.  Some people and the environment will probably suffer.

The most important thing to keep in mind is that he is unlikely to be able to do all the things he wants. About half of Americans did not want him to be president and most of these will be against at least some of his policies.  Many of those who voted for him will have conflicting vested interests and he will have to make some tough decisions.

Being president of the United States requires two skill sets – campaigning and governing. Trump has proven himself a master of the first set and now has to prove himself as a governor.  A lot of his campaign was based on emotions and he demonstrated an excellent understanding of people and their emotions.   His win must have been a blow for people who are politically correct. One of the buttons he pushed was sexuality.  He demonstrated that at least half of those who voted have not been suckered by the sophistry of feminism.  I wonder how many women had fantasies in which they were the object of his attentions and how many went on to vote for him.

His emotional campaign could become a big problem for him as many people will feel disappointed if he can not or will not keep promises.

As this is written Trump’s economic policies are mostly unstated but he prides himself on being a businessman so we can expect America to be open for business and we can expect policies which will allow a few people to make lots of money by exploiting other people and resources.  But then this is the history of North America and most of the world.

This writer believes our current economic problems are with the available energy and mineral resources.  Yes, there are lots of these still in the crust of the earth.  But we have “cherry picked” the most accessible and those that are left require so much energy their value is limited.  As not many people believe this, or care, we can expect the new president to encourage the exploitation of what is left, even those that are in parks or other reserves.  The consequences of this policy will be to bring forward the timing of a major economic collapse.

We boast we live in a market economy based on competition but a lot of economic legislation restricts competition so business people can make profits.  If we had perfect competition there would be no profits.  There may be little room for more legislation to restrict competition but if business people can think up some we can expect President Trump to be sympathetic.  He has already indicated he will restrict trade.

Us Canadians sometimes talk about corporate welfare bums who thrive on government subsidies.  Americans are probably already familiar with the concept and the new government will probably continue and increase the trend  No doubt some business people will be claiming a need for subsidies to extract the more difficult energy and mineral deposits.

I was disappointed rather than surprised with the election results because I fear a major economic collapse.  Also I suspect Mrs. Clinton would have followed similar economic policies even if not as blatantly.  We are in the same ship with the same storms and neither is likely to even try to get into a different sea.

Regulating those evil payday lenders

Here is a link to an article from the Mises Institute opposing regulations for the American payday lending industry.

This simple proposal to regulate short-term lending raises important questions about how we treat poor people, about the role of money in our economy and how we regulate business activity.

This writer believes we should have a collective responsibility to ensure every one has the opportunity for the same standard of living as most other people.  Probably the best way to meet this responsibility would be a universal basic income scheme.  Such a program would not stop everyone from mismanaging their finances but it should eliminate the need for a lot of short-term credit.

Money can be an instrument of exploitation and is based on the debt created when banks make loans.  Debt is a path to slavery, especially for poor people.

We need a radical revision of the way in which we create money.  We treat money as a commodity which has its own intrinsic  value.  We would be better to treat money as a tool to facilitate the exchange of goods and services.  As a tool rather than a commodity there would be no need for interest.  Also the total amount of money available needs to be flexible up and down as the quantity of goods and services we need to exchange expands or retracts.  This guy has written extensively on this topic on his weblog and in his book.

As much as possibly economic forces, competition, should be used to regulate business activity. The more competition the fewer profits and the less need for regulation.  Regulations tend to restrict competition, allow greater profits and increase the demand for more regulations.

This writer is not enthusiastic about supporting the payday loan industry but does recognize that in our society there is a need for short-term credit.  I also believe there is a need to reform our financial system and the reforms could reduce the need for credit from all of us including the poor.

%d bloggers like this: