LETS go to market: Dealing with the economic crisis

A 4000-word essay titled “LETS go to market: Dealing with the economic crisis”  has been added as a page to this web log.  Some of the ideas in this essay have not (yet) been presented in the web log.

The ideas in this article are outside mainstream economic analysis but I believed they are mostly based on the economics I learned as a student at the University of British Columbia.

We look at the formula from the quantity theory of money which I prefer to call the connectivity       formula  because it shows how the real part of the economy connects with  the financial.   There have been many ups and downs in the Q part of this formula.  These changes have impacted previous economic crisis.  The underlying cause of the current crisis is probably the unsustainable use of resources.

Three ways of creating money are considered  (gold, fractional  reserve and Local Exchange trading system [LETS]) and the advantages and disadvantages of each. If there is anything that should be considered funny money it is fractional reserve money.  Therefore I suggest we expand LETS into  a National Exchange Trading System.(NETS)

Such a radical change in our financial organization would be an opportune time to make other changes on our economic organization.  I would like to see the perfect competition model  used as a guideline.

I believe subsidies should be given to consumers rather than producers therefore I propose that transfer payments and subsidies should be replaced with a universal subsistence program.

You can read the essay here.

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Who’s to blame and what do we do about the economy?

One thing of which there has been no shortage during this economic crisis is words with lots of scapegoats and ideas as to what to do.  Here’s my attempt to summarize.

Who is responsible for this mess?

The two favorites are greedy Wall Street bankers and incompetent politicians who aren’t following the policies which would most benefit the speaker.  The bankers may be greedy and the politicians may be incompetent but are they any more so than their predecessors who ruled during the golden age of prosperity?

The next groups to blame are those who won’t approve stimulus spending and those who object to spending cuts. Sometimes both groups are blamed for refusing to compromise.

Others who can be blamed are the ratings agencies who gave false assurances,  those making negative statements who are thus creating a negative feedback loop and those who spreading lies to create profit opportunities for themselves.

What can we do about the economy?

One approach is to cut government spending especially that which benefits poor people or those whose finances are precarious..  Of course we don’t want to cut government spending which finds its way into our own pockets.

The second approach is to stimulate the economy.  There are several ways of doing this including government spending, creating more money (quantitative easing and the National Infrastructure Bank) or encouraging exports and restricting imports to protect jobs. We could also use people with DBS degrees (the D stands for doctor) to convince us there is no real crisis and everything will be okay.

Now here are the answers to these two questions in the view of the author of this blog.

We are all to blame.  The basic problems is that humans have used up a lot of resources, especially those that are easily accessible,  and most of us have had a part in this.  Most of us have had nice homes, designer cars, interesting vacations, frequent restaurant meals and lots of other things.  Most of us have been demanding high returns on our pensions and savings.

So what should we do about the crisis?

If the problem really is with the resource base,  stimulating the economy will only make things worse and socking it to the poor is mean – and many more  people are likely to join them.

Therefore my vote is that everyone should be expected to accept a lower standard of living starting with those with higher than average incomes supported by taxpayers (most of whom get their high incomes from belonging to a union in a monopoly field) and those with high incomes resulting from legislation that restricts competition.  This includes people whose income comes from copyright and patent legislation and those whose income is protected by licensing requirements.

It is my fear that not enough of us care enough about our neighbors for this to actually happen.

So there you have it.  This post has added 489 words to the economic hot air.

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