Not Your Grandfather's Great Depression 29 comments
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The current stock market crash has spurred a vital national debate about the causes and catalysts of the Great Depression. The dominant school of thought believes that the stubborn refusal of then president Herbert Hoover to intervene after the stock market crash of 1929, and his preference for free market solutions, led directly to the ensuing decade-long catastrophe. Through this lens, our leaders assure us that the most recent raft of government measures will prevent another episode of bread lines, Hoovervilles and pencil salesmen. As usual they have it completely wrong. In my view, the Depression was created precisely because Hoover followed the path that our government is now taking.
When the stock market bubble of the Roaring Twenties (which was created as a result of the loose monetary policy of the newly created Federal Reserve) finally popped, Hoover would not allow market forces to correct the imbalances. His policies were aimed at propping up unsound businesses, artificially supporting prices, particularly wages, and providing Federal funds for public works projects. These moves went well beyond the progressive reforms of Teddy Roosevelt, and established Hoover as the most interventionist president ever up to that point. In fact, much of what eventually became the New Deal had its roots in Hoover's policies.
However, at the time, there were those who recommended a different course. Andrew Mellon, the long-serving Secretary of the Treasury whom Hoover had inherited from the prior two Republican Administrations, was labeled by Hoover as a "leave it alone isolationist" who wanted to "liquidate labor, liquidate stocks, liquidate the farmers, and liquidate real estate." Hoover would have none of it. In fact, during his nomination speech for his second term, Hoover bragged, "We determined that we would not follow the advice of the bitter liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction."
Hoover chose to ignore the sound advice of his Treasury Secretary (in contrast to today where the current Treasury Secretary Henry Paulson is actually leading the charge over the cliff) and instead used every tool at his disposal to "fix" the problem. As a result, rather than allowing a recession to run its course, with healthy and rapid liquidations of the mal-investments built up during the boom, Hoover inadvertently created what became the Great Depression.
When Roosevelt took office he continued the same failed policies only on a grander scale. The magnitude and the idiocy of many New Deal programs, such as the wage and price setting National Recovery Administration (NRA), compounded the problems. So while Mellon's advice would have caused a sharp but relatively brief economic downturn (which occurred after the Panic of 1907, for example), the Depression plodded on for nearly a decade until the country began gearing up for the Second World War.
In an amazing feat of revisionist history, somehow Hoover's interventionist policies have been completely forgotten. It is taken as fundamental that his inaction led to the Depression and Roosevelt's "heroics" got us out. Unfortunately, since we have learned nothing from history, we are about to repeat the very mistakes that led to the most dire economic circumstance of the last century.
A major difference however, is that the structure of the U.S economy today is far weaker than it was in the fall of 1929. Years of reckless consumer borrowing and spending, and enormous trade and budget deficits have resulted in a hollowed out industrial base and an unmanageable mountain of debt owed to foreign creditors. Instead of the support of a strong currency backed by gold, the public now must deal with a modern Fed free to print as much money as politicians want. So rather than getting the benefits of falling consumer prices (as happened during the Depression), consumers today will contend with much higher consumer prices, even as the economy contracts.
With Barack Obama now waiting in the wings to conjure a newer New Deal, far larger than even FDR could have imagined, and at a time when we cannot even afford the old one, this will not be your grandfather's Depression. It may be much worse.
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This article has 29 comments:
Can you give an actual example of one of Hoover's "interventionist" policies? Who is being the revisionist here?
If we keep the government out and let things go bankrupt, we will hurt short term but be OK. If we allow government to help we are in for an inflationary holocaust lasting a decade likely longer.
Their cure is worse than the disease.
Bush is NOW HOOVER, and Obama or McCain (it matters not because both voted for the $700 billion+ bailout) will be FDR.
We are screwed but we did not have to be.
Buy gold and pray. Lots and lots of gold AND lots and lots of prayers.
consider that we are in the cone of possible landings for a hurricane. to simply say that a hurricane hit is not possible means you will do nothing to prepare for the possibility. good luck to all.
"Dogs will eat dogs." Woof.
Electric reserve margins are declining in the US it is reported.
www.utilityproducts.co...
Energy shortages may worsen economic problems?
cheers from Los Lunas, New Mexico :-)
www.prosefights.org/th...
Economic activity does not "make money". It makes real goods and services. Only banks and the federal mint and printer are allowed to "make money". The US dollar, like every other national currency, is a closed system. Only the US government and US authorized banks are allowed to "make" US dollars. You can trade your way out of an "economic" balance of trade deficit by shipping more value of goods than you import, but the industrial economy cannot "make money" to grow its way out of financial debt.
After a few years of rapid growth of bank credit to enable economic growth like we see now and they saw in 1929, the amount of unrepayable monetary debt in the system becomes so psychologically worrisome that everyone tries at the same time to pull money out of the economy to payout their debts. But it's a game of monetary musical chairs because there are not enough US dollars in the system to pay all the principal plus interest on all the US dollar loans. So from 1929 forward, in order to balance Americans' credit and debt balances on banks' balance sheets, thousands of businesses and individuals were forced into "bankruptcy" so that banks could write their debt off their balance sheets.
In our "bank-debt money at interest" system of money creation there can never be enough money to balance the banks' books unless the banks can write off debts, via economically unnecessary and painful bankruptcies, or unless the federal government creates and spends/circulates enough non-debt money into the system to cover the interest obligations. If government "borrows" money at interest to inject into the system, the deficit of money to monetary debt just gets worse.
This is a systemic flaw in our money creation system that sacrifices real economic wealth to the accounting system of bank balance sheets. It endures due to enduring monetary ignorance. People just don't seem to be able to understand that banking involves the creation of money out of nothing, though you will learn this in introductory financial economics class. Even people who know that banks create money don't seem to be able to see the simple arithmetic problem that if you create a $1000 loan at 8% interest, you are only putting $1000 of "money" into the system but you are putting $1080 of monetary "debt" into the system. The more money you create the bigger the unrepayable interest debt gets. When the difference between the amount of debt in the system and the amount of money in the system to pay that debt gets too big, we get "financial crisis".
Thr foregoing is not the only problem with our money creation system. Let's say borrowers collectively get themselves into $1 trillion of debt, and they use the money to buy stuff from other Americans. The Americans who sold the stuff now own $1 trillion of debt-free money. The Americans who bought the stuff now own $1 trillion worth of economic stuff, but they have no money to repay their debts.
If all the borrowers are forced into bankruptcy to clean up the banks' balance sheets, the trillion of debt plus interest ceases to exist, but now there is $1 trillion of "owned" money floating around the economy looking for a rate of return on investment. They want a "monetary" return, but until the banks do a new round of lending and inject new money into the system, there is no more money in the system. The investors own ALL the money, so it's arithmetically impossible to collect a monetary return. Meanwhile this vast pool of owned money sloshes into asset classes, inflating prices in stocks or real estate, then deflating them when it pulls out looking for the next hot thing.
There is nothing wrong with the US "economy". People want to work, businesses want to produce and sell things, and people want to buy them. The "economy" is ready to roll. There is a lot wrong with the US monetary system. I think you will agree that the functioning of the real economy should take precedence over the arithmetic niceties of the monetary accounting system. Until commentators and policymakers are prepared to recognize the facts about money we will spin our wheels in vain trying to overcome the laws of arithmetic.
I'm finding your comments about the role money and debt play in our current situation very interesting. Can you recommend any specific books that further discuss the problems you've been discussing and possible solutions?
Thanks!
tomatden@yahoo.com
oh, of course, the unregulated free market would have fixed everything, just like it did in the booms that caused the busts. This guy and Mish have major mental problems - they just cant handle sharing with their neighbors, or admitting that socialized regulated eonomies work better than their destructive laissez-faire discredited Reagan trickle-down nonsense. Sorry, the little investment house brats dont get unjustified salaries. Boo fin hoo.
I'm Canadian and the financial economics text I used is "Economics of the Canadian Financial System" by Shearer, Chant and Bond. I think some or all of these authors are American and they may also have written US textbooks. Their writing is clear and you don't have to be a grizzled specialist to understand what they're explaining.
I first became interested in money about 25 years ago when my Province--Alberta--wen... into a depression. We're an oil economy and in 1982, between collapsing oil prices and the fiscal assaults of our federal government, Alberta's economy went from boom to bust over a period of about 4 months. Houses lost 1/2 their value. 1000s of bankruptcies. 20% interest on mortgages. I was in business at that time (I still am) and I made it through, but it wasn't pretty. It took nearly 10 years for real estate prices to recover.
In the 1930s Depression Alberta was bankrupt. Canada has a branch banking system with 5 national banks who have branches in all the provinces. All 5 head offices are located in central Canada and they never much liked us independent Albertans so there was never any help for us from Ottawa or from the central Cdn banking powers. It was American money and knowhow that eventually developed our oilfields, which is one reason most Albertans like Americans better than we like our federal government!
Our provincial government had heard of an alternate financial system called "social credit" that was thought up by an Englishman named CH Douglas in the 1920s. Alberta tried to issue some money for our people in the form of a "dividend", but our federal gov't had this declared unconstitutional because banking is a federal repsonsibility in Canada.
Douglas was an engineer who, while working out some troubles with an aircraft factory's accounts in 1916, discovered that the factory was generating more "prices" than it was distributing incomes (payrolls, input costs, overheads, etc.). He then collected information from 100 large English businesses and found they ALL generate more prices than they distribute money that the economy will need to PAY those prices.
When Douglas looked into banking he discovered that, like factories, banks generated more monetary "debts" than they generated monetary "money" to pay those debts. Douglas' findings formed the perspective of my own research into our money system.
During the 1930s Depression there was lots of interest by governments in "money". Canada had a Royal Commission on Money and Banking in, I think, 1938. It is almost amusing--pathetic is probably more like it--how little the politicians knew about money, as evidenced by the questions they asked of our first Bank of Canada Governor Graham Towers. But these were our national leaders who were supposed to be deciding economic and financial policy for the country.
Anyway, war spending got the world out of the Great Depression, without anyone coming to understand and fix the monetary problems that caused the Depression. Now we're on the edge of a monetary scenario virtually identical to 1929 and I'm trying to get the right people to start focussing on how money works so this time they can fix the underlying arithmetic problem.
As for solutions, I don't know. I think bank-money interest charges are inherently inflationary, but I'm not sure about that. It seems to me that an enterprise (a bank) that puts $1000 of money into a system but at the same time puts $1080 worth of money "prices" into the system is set up to both fail to be able to actually collect those prices and to cause price inflation as well. It's not like other industries where competitors can produce the missing $80 because, like I pointed out above, currencies work in a closed system and only banks and government can "produce" the money that we will need in order to "pay" the money prices.
Douglas advocates a "national dividend"--government creates money and gives it to everyone so there's enough money in the economy to pay all the prices in the economy. A modern equivalent would be a "guaranteed annual income" where government would provide everyone with a survival income but if you wanted a car or better lodgings you'd have to work. Or government could just pay for some or all present social spending by creating the money instead of withdrawing it from the economy through taxes.
The dollar amounts of any dividend or equivalent spending would have to be determined technically to try to ensure you don't put in so much that you discourage work or so little that people can't buy the goods that your economy produces. The first way would be inflationary and the 2nd deflationary, and monetary policy should be designed to preserve the vallue of your currency--unlike now where the policy is to allow inflation but try to keep it under 3%.
Another approach might be to change from banks charging interest to charging fees up front. On the $1000 loan the bank's "administration fee" might be $80, so you get $920, the bank gets $80 which it distributes among its employees, shareholdeers, etc, and the entire $1000 loan amount gets into the economy so everybody has at least an arithmetic chance of repaying their loans. Larger and longer term loans would have different fee structures, but again these are technical rather than policy considerations.
So there are any number of ways and combinations of ways the money-deficit might be accomplished, but there are consequences to each one. Policymakers have to decide what balance of benefits and consequences is acceptable, then give the job to banking technicians to make it happen.
And right now, again as I noted above, after all the bankruptcies that loosed up all the "owned money" floating around our economies, there's probably too much money rather than not enough. The trick is to get the money into the hands of the people who want to buy the goods that the economy produces, without penalizing those who want to save for their own future.
A nation's money is essential to its economic life so responsible governments can't let arithmetic problems destroy their productive economies. Again, it is up to governments to decide what (realistic! we CANNOT afford "everything" that everyone wants) ends they want to achieve, and it is then up to the technocrats to figure out how to make it happen.
I'm not a financial economist, though I studied it. I studied lots of stuff, actually. Enough to know that the technical solutions to the money problems will need specialists. There are lots of smart and knowledgable people working in banking and finance, both in the private sector and government The only conditiion they would need to satisfy is an ability to see the simple truths I presented about the creation of money and debt, because most people have some odd blind spot in this area.
The other day I checked online for one of Douglas' publications to printout for my girlfriend. In 1935 Douglas made a presentation to the King and government of Norway called, "Money and the Price System". Google that title and it will take you almost immediately there. When reading Douglas you have to keep in mind that he believed, as many believed at that time, that there was some vast banking conspiracy trying to rule the world. I agree that there seems to be some perverse influence driving the ways finance has evolved, but there aren't any humans in some dark room plotting away. Maybe it's just human nature at work. But anyway, don't dismiss Douglas' clear findings and insights just because he believed in a conspiracy that doesn't exist.
I found that text on amazon for $1.85
Have you seen this?
video.google.com/video...
It's 47 min long, so it takes a bit to get started. It was very interesting to me, might be like reciting the alphabet to you, but check it out.
A good man.
Money is the "immaterial" lifeblood of our economic existence but energy--almost entirely fossil fuels--is the physical lifeblood. Shut off our electricity for 6 months and we are dead, period. Our economic systems cannot function without money and energy, so those are the obvious targets of people who want to control us. These megalomaniacs think they know better than 6 billion individual humans how we should live our lives and they want to impose their "vision" upon us all. They must be exposed to the light and resisted.
That said, there were some dangerous reform ideas in the video. First of all we never want to give government sole control of money. Politicians are no more omniscient saints than are bankers. Our present system of banking does an incredibly efficient job of micromanaging financial credit at the local bank level because thousands of individual loans officers, rather than a Stalinist central committee, are making the decisions. I don't know anything about the operation of large banks like you find on Wall St so I can't offer opinions about big business banks, though others understand them and have solutions.
If we try to replace the whole bank-money system with some new system people will at least temporarily lose all faith in money and the economy will shut down and we'll have a depression. Unlike the 1930s nobody lives on farms anymore and we all depend on a functioning economy for our necessities of life, so a long depression could be devastating. Aside from the problem of unrepayable interest the present banking system is pretty good. Remember what they say about "revolution": lots of pain and death and turmoil then it's "meet the new boss, same as the old boss". It is human nature that corrupts systems, and no system is immune to that.
As Warren Buffett called them, "financial weapons of mass destruction" like derivatives should be made illegal. Any financial instrument that cannot be clearly explained to an ordinary person should not be allowed to be created. Brokers had no idea what they were selling. Nobody, or almost nobody, knew what derivatives were. The usefullness of money--and make no mistake, money is absolutely essential to any economy beyond the local barter level--is based on people's faith that it "is" money. So "money" has to be kept simple enough that pretty much anyone can understand it.
I've been mulling another prospect that the video touched on--the banning of all forms of "usury". This has some serious repercussions. EVERY pension fund's eventual ability to pay out pensions depends on usury. If today's contributions cannot be multiplied many times in value then people will never be able to afford to live on those pensions. I am not saying this is unthinkable. I am just pointing out that this is the kind of consequence we get if we ban usury.
If we got into a stable-value money environment then savings would retain exactly the value they had the day you saved them. If you expect a rate of return on your savings you are essentially enslaving future producers whose production of goods you will consume without paying them anything in return.
On the other hand, CH Douglas, whose social credit system I mentioned earlier, believes that modern energy-based mechanical production has effectively freed humanity from the curse of Adam ("by the sweat of your brow you will eat your food until you return to the ground'). Douglas thinks we need to shift the focus of our values from production to leisure, as it takes only a fraction of the workforce to produce all the material goods and services that we need. He thinks the era when consumption is morally connected with production (you don't work, you don't get paid) has been rendered obsolete. He thinks the technological industrial structure we are born into is our "cultural inheritance" and increasingly we will get money from "dividends" rather than from employment which becomes increasingly economically unnecessary. He suggests the unlimited liability corporation as the model in which all citizens are shareholders: America, Inc.
I think most of us NEED to work and strive, even if we don't absolutely need to for economic reasons. I don't think humanity is psychologically ready for leisure. I think we would go to pot without the discipline of work. But I might be wrong and this is just my opinion.
Douglas died in 1952 before the modern postwar economy really took off. In 1958 John Kenneth Galbraith published, "The Affluent Society" where he demonstrates that the old idea that production is driven by demand is false. With advertising, supply creates demand. Douglas could not have imagined the cornucopia of unnecessary luxuries you are taught to want on TV commercials every night. First World people are staggering under mountains of junk that we bought for no good reason other than we were probably influenced by advertising.
This ties in with the video's contention that we need constant economic growth at all costs. It is true, the debt-money system would collapse if we stopped borrowing to buy more junk. Nevertheless, our values have become materialist and people would feel "impoverished" without piles of junk ringing them round. So it will be politically difficult to wean people off consumerist junk collecting if this is going to be part of a "sustainable" future where we decide to pay for health care and pensions instead of junk. We can't afford both. Nobody can. "Rich" countries are not "infinitely" rich, as the socialist welfare advocates seem to believe.
I am aware of the history of financiers like Rothschild and Rockefeller, and central bankers like England's Josiah Stamp, and Presidents and Prime Ministers, who recognized the power of finance and quaked before it. But that is the very power by which finance makes our comfortable lives possible. The alternative is barter for simple goods we can make and exchange locally. When I was young I liked the hippie idea but in reality, the simple life sucks. Ask anyone who has come from peasant life in the Third World: it's a life of endless toil.
Our globalized economy is all or nothing. We can't choose to have electricity and the internet and cellphones but choose not to have coal mines and oil refineries and factories and need ships crossing seas for trade with China that is only possible if there is an international financial exchange system in place. We are rich for the reasons Smith and Ricardo told us we'd be rich: because we trade.
Finance per se is essential to our existence. Like any form of power some people will try to monopolize it and wield it for their own aggrandizement. As Max Weber wisely said, "There are no permanent solutions in politics." And which American told us, "The price of freedom is eternal vigilance."? Harold Bloom sees life as a struggle between the "diversity generators" and the "conformity enforcers". Power hungry megalomaniacs and centralists of all breeds are conformity enforcers. That's why you guys in the US have the Second Amendment, to protect yourself against those who would enslave you under their "enlightened" delusions of grandeur.
It looks like there is no Easy Street in this life. We must strive and be vigilant. In our recent decades of materialist excess we have focussed on our piles of junk while our freedoms are being quietly stolen away by every kind of grand planner and global warming charlatan. I believe we can fix the financial system after everyone calms down for a minute and realizes that even if we do suffer a depression the world does not stop turning. We lived through nearly a decade of depression in Alberta in the 1980s so I can personally attest that it's not as bad as it's made out to be. That is, unless you're such a materialist that you can't bear to part with some of your junk.
Precisely.
Power granted to central government is eventually abused, or at least misused.
This is why we prefer to have as few "programs" as possible.
Lang.
On Oct 20 04:13 PM Esol Esek wrote:
> Shiff can say it, but it doesnt make it right. Seriously, how does
> he know what would have happened with zero intervention whatsoever.
> I guess he;s in a position to second-guess Roosevelt now, too, like
> a million other capitalist parrots. Sometimes you gotta remind these
> folks that Social Security is a savings account. The fact that the
> corrupt republicans have raided it pay for wars is not the fault
> of the program. The fact is that the moneyed elites, supported by
> these sell-out jounalists, think they have a god-given right to live
> above the rest of society. You want to throw bad investments out?
> Then throw out the top 1% of society into the street or put them
> in stocks the old fashioned way.
>
> oh, of course, the unregulated free market would have fixed everything,
> just like it did in the booms that caused the busts. This guy and
> Mish have major mental problems - they just cant handle sharing with
> their neighbors, or admitting that socialized regulated eonomies
> work better than their destructive laissez-faire discredited Reagan
> trickle-down nonsense. Sorry, the little investment house brats dont
> get unjustified salaries. Boo fin hoo.
Interesting philosophical thoughts and comments, however many are flawed and much too simplistic. Some examples would incude:
1) Derivatives - a derivative is simply a financial instrument that derivies it's value based on some other underlying instrument. There are many kinds of derivative instruments and some are highly useful. For example call options and put options on stocks are really quite useful and I personally use them all the time. Others such as CDO's and others also have their uses but they were abused, unregulated, and in many cases fraudlently issued/used. The problem is thus not the instrument, but rather the fraudlent use of it. If you take the example of the securitized sliced and diced mortgages that are responsible for so much of the current financial crisis, the concept of selling bundles of mortgages to LT investors who are willing to hold them for the investment return is a solid concept. Nothing wrong with matching up LT borrowers with LT lenders. The problems arose from the massive fraud utilized in the process. For example the liar loans initiated by the mortgage broker, appraiser, underwriter, etc (think Countrywide Mortgage) were done solely to collect hugh fees and increase the owners stock values so they could sell out for hundreds of millions in profits. There was no reality in the underlying liar loans and the initiators had to know it, fraud pure and simple. Secondly, you take the private ratings agencies (Moody's et al) who then did virtually no verification of the liar loans, yet issued AAA ratings on the bundle of mortgages so they could be sold as derivatives. In reality the bundles were more like DDD. But then again the ratings agencies collected hundreds of millions of dollars in fees for fraudently rating the derivatives. And in fact it has proven that the rating agencies actually let the mortgage banks "shop" for ratings, of course for an increased fee. If a bank did not like the initial rating, they could pay an extra fee, massage the data, and get it re-rated higher. Again, clear fraud, but nothing to do with the concept of the derivative. Lastly, look at the banks and investment banks. They clearly knew that the securitized mortgages were fraudlent. They kept almost none of them themselves but were willing to offload them to worldwide investors, of course for hundreds of millions of dollars in fees. Again fraud, pure and simple. So in short, there is nothing wrong with the derivative. It was in fact the fraud, abuse, and theft in the application of the instrument. This same phenonemon of fraud, theft, abuse, etc, can be shown and demonstrated over and over and over again in the US capitalist system for many decades if not centuries. It really has nothing to do with the instrument, but rather has to do with the greed, dishonesty, influence, access to power, etc of the participants. The same thing happened in the US civil war. Northern industrialists for example made defective boots and thousands of similar products and sold them to the Union Army for hugh profits. Again greed, dishonesty, theft, and the like. Yet another well quoted example is the Wall Street crash of 1929. It has been documentated and reported that the titans such as Joseph Kennedy, JP Morgan, and the like were forewarned that Black Friday was imminent and thus they sold out of virtually 100% of their stock holdings before the crash. Over the ensuing years they were able to again gain control at much much cheaper prices from the massive losses of the population. The one note that I remember is that Joseph Kennedy's net worth was $4 million just before the crash. Within a matter of a few years his net worth has grown to over $200 million. A pretty amazing feat in the Great Depression. Yet another damning example of derivative contracts is the AIG case. AIG simply fraudently collected premiums on multiple derivative(insurance) contracts without the financial ability to pay-off the losses in the event they went bad, which is exactly what happened. This would be similar to your auto insurance company collecting insurance premiums from you for years, paying the company executives all your premiums as bonuses, then when you have an accident and go to collect your insurance, the insurance company says sorry we don't have any money. Again nothing wrong with the insurance concept, but fraud caused the demise of the parties, not the concept itself.
2). Pollution - pollution is a serious problem, will be incredibly costly to fix if it even can be fixed, and there is certainly massive evidence that human beings are responsible for most if not all of it. You cite CO2/global warming as being a scam. Yet it is impossible to deny that the Artic ice cap is melting at an increasing rate, with potential dire consequences in the relatively near future. Likewise it is impossible to deny that the seaboards on both the US east and west coast are increasingly being polluted with everything from heavy metals to toxic garbage and manmade runoff such as oil, grease, etc from human living/driving. That is simply a measurable fact. Likewise it is undeniable that there are large dead zones in the world's oceans that are collecting large swaths of plastic garbage. Again a measurable fact. And since plastic is a reasonably new invention of mankind it is by definition something caused by mankind over the recent past. So while you may disagee with convential scientific consensus about global warming and it's causes, you cannot dispute facts such as polar ice cap melt, ocean pollution, plastic pollution, etc. They are simply measurable facts that exist, not opinions. Why you choose to deny global warming, when probably 99% of the scientists in the world have significant scientific data to support it is a mystery. It reminds me of the agri-pollution on the US east coast. It is a scientific fact that much of the US east coast is polluted and this can be easily shown by measurement. It is also a fact that large commercial agri-business, namely pork and chicken farming, produces massive waste. And it can easily be shown that many of the ingredients of this agri-business pollution are in fact showing up in the eastern seaboard ocean. Yet agri-business denys they are the cause or are responsible for any of it. Again just a denial of reality, yet it is reality none the less. Unfortunately, our capitalist free enterprise system is more than happy to take the "easy profits". But they are only phantom profits because they fail to recognize the substantial pollution and other costs that somebody else has to pay for. For example, just ask the east coast fishermen who have no livelyhood now because the pollution has destroyed their way of life. Much less all the other costs such as cleanup, health costs, quality of life, etc.
So, many things we could discuss/debate, but the above are a few examples of where your philosophy seems to ignore important factors. Just a few thoughts.
On 2008 Oct 20 09:22 PM derryl wrote:
> tomatden: I just watched the video. I read all the conspiracy theories
> 25 years ago when I first got into the study of money so I know there
> are some people like Rockefeller who really did want to implement
> one world government--he donated the New York land for the UN. There
> are others like Maurice Strong who want to get control of our use
> of energy via the global warming scam that claims--without a single
> shred of scientific proof--that our emissions of CO2 cause global
> warming. Maybe these power mongers realize the money scam has run
> its course so now they're onto the CO2 scam.
>
> Money is the "immaterial" lifeblood of our economic existence but
> energy--almost entirely fossil fuels--is the physical lifeblood.
> Shut off our electricity for 6 months and we are dead, period. Our
> economic systems cannot function without money and energy, so those
> are the obvious targets of people who want to control us. These megalomaniacs
> think they know better than 6 billion individual humans how we should
> live our lives and they want to impose their "vision" upon us all.
> They must be exposed to the light and resisted.
>
> That said, there were some dangerous reform ideas in the video. First
> of all we never want to give government sole control of money. Politicians
> are no more omniscient saints than are bankers. Our present system
> of banking does an incredibly efficient job of micromanaging financial
> credit at the local bank level because thousands of individual loans
> officers, rather than a Stalinist central committee, are making the
> decisions. I don't know anything about the operation of large banks
> like you find on Wall St so I can't offer opinions about big business
> banks, though others understand them and have solutions.
>
> If we try to replace the whole bank-money system with some new system
> people will at least temporarily lose all faith in money and the
> economy will shut down and we'll have a depression. Unlike the 1930s
> nobody lives on farms anymore and we all depend on a functioning
> economy for our necessities of life, so a long depression could be
> devastating. Aside from the problem of unrepayable interest the present
> banking system is pretty good. Remember what they say about "revolution":
> lots of pain and death and turmoil then it's "meet the new boss,
> same as the old boss". It is human nature that corrupts systems,
> and no system is immune to that.
>
> As Warren Buffett called them, "financial weapons of mass destruction"
> like derivatives should be made illegal. Any financial instrument
> that cannot be clearly explained to an ordinary person should not
> be allowed to be created. Brokers had no idea what they were selling.
> Nobody, or almost nobody, knew what derivatives were. The usefullness
> of money--and make no mistake, money is absolutely essential to any
> economy beyond the local barter level--is based on people's faith
> that it "is" money. So "money" has to be kept simple enough that
> pretty much anyone can understand it.
>
> I've been mulling another prospect that the video touched on--the
> banning of all forms of "usury". This has some serious repercussions.
> EVERY pension fund's eventual ability to pay out pensions depends
> on usury. If today's contributions cannot be multiplied many times
> in value then people will never be able to afford to live on those
> pensions. I am not saying this is unthinkable. I am just pointing
> out that this is the kind of consequence we get if we ban usury.
>
>
> If we got into a stable-value money environment then savings would
> retain exactly the value they had the day you saved them. If you
> expect a rate of return on your savings you are essentially enslaving
> future producers whose production of goods you will consume without
> paying them anything in return.
>
> On the other hand, CH Douglas, whose social credit system I mentioned
> earlier, believes that modern energy-based mechanical production
> has effectively freed humanity from the curse of Adam ("by the sweat
> of your brow you will eat your food until you return to the ground').
> Douglas thinks we need to shift the focus of our values from production
> to leisure, as it takes only a fraction of the workforce to produce
> all the material goods and services that we need. He thinks the era
> when consumption is morally connected with production (you don't
> work, you don't get paid) has been rendered obsolete. He thinks the
> technological industrial structure we are born into is our "cultural
> inheritance" and increasingly we will get money from "dividends"
> rather than from employment which becomes increasingly economically
> unnecessary. He suggests the unlimited liability corporation as the
> model in which all citizens are shareholders: America, Inc.
>
> I think most of us NEED to work and strive, even if we don't absolutely
> need to for economic reasons. I don't think humanity is psychologically
> ready for leisure. I think we would go to pot without the discipline
> of work. But I might be wrong and this is just my opinion.
>
> Douglas died in 1952 before the modern postwar economy really took
> off. In 1958 John Kenneth Galbraith published, "The Affluent Society"
> where he demonstrates that the old idea that production is driven
> by demand is false. With advertising, supply creates demand. Douglas
> could not have imagined the cornucopia of unnecessary luxuries you
> are taught to want on TV commercials every night. First World people
> are staggering under mountains of junk that we bought for no good
> reason other than we were probably influenced by advertising. <br/>
>
> This ties in with the video's contention that we need constant economic
> growth at all costs. It is true, the debt-money system would collapse
> if we stopped borrowing to buy more junk. Nevertheless, our values
> have become materialist and people would feel "impoverished" without
> piles of junk ringing them round. So it will be politically difficult
> to wean people off consumerist junk collecting if this is going to
> be part of a "sustainable" future where we decide to pay for health
> care and pensions instead of junk. We can't afford both. Nobody can.
> "Rich" countries are not "infinitely" rich, as the socialist welfare
> advocates seem to believe.
>
> I am aware of the history of financiers like Rothschild and Rockefeller,
> and central bankers like England's Josiah Stamp, and Presidents and
> Prime Ministers, who recognized the power of finance and quaked before
> it. But that is the very power by which finance makes our comfortable
> lives possible. The alternative is barter for simple goods we can
> make and exchange locally. When I was young I liked the hippie idea
> but in reality, the simple life sucks. Ask anyone who has come from
> peasant life in the Third World: it's a life of endless toil. <br/>
>
> Our globalized economy is all or nothing. We can't choose to have
> electricity and the internet and cellphones but choose not to have
> coal mines and oil refineries and factories and need ships crossing
> seas for trade with China that is only possible if there is an international
> financial exchange system in place. We are rich for the reasons Smith
> and Ricardo told us we'd be rich: because we trade.
>
> Finance per se is essential to our existence. Like any form of power
> some people will try to monopolize it and wield it for their own
> aggrandizement. As Max Weber wisely said, "There are no permanent
> solutions in politics." And which American told us, "The price of
> freedom is eternal vigilance."? Harold Bloom sees life as a struggle
> between the "diversity generators" and the "conformity enforcers".
> Power hungry megalomaniacs and centralists of all breeds are conformity
> enforcers. That's why you guys in the US have the Second Amendment,
> to protect yourself against those who would enslave you under their
> "enlightened" delusions of grandeur.
>
> It looks like there is no Easy Street in this life. We must strive
> and be vigilant. In our recent decades of materialist excess we have
> focussed on our piles of junk while our freedoms are being quietly
> stolen away by every kind of grand planner and global warming charlatan.
> I believe we can fix the financial system after everyone calms down
> for a minute and realizes that even if we do suffer a depression
> the world does not stop turning. We lived through nearly a decade
> of depression in Alberta in the 1980s so I can personally attest
> that it's not as bad as it's made out to be. That is, unless you're
> such a materialist that you can't bear to part with some of your
> junk.
Well SS may well be operating much like a Ponzi scheme, but that is only because our dishonest politicans have effectively spent the funds contributed by employees and employers, instead of holding them in trust as was the original concept. Actually the government claims they have replaced the contributions made by employees and employers with government issued bonds, so from a pure technical point they have not really stolen it but rather borrowed it. The real problem is that the government can only repay those bonds from future taxes on all of us. Had they not spend the SS money as it came in, it would be sitting in some form of assets instead of debt (future taxation claims) and be available to distribute the assets. So it is not really a Ponzi scheme, but for all practical purposes it is kind of operating like one. This is only true because it is questionable whether or not the government really will be able to repay the SS trust. What is more likely is that they will change/reduce the benefits of SS and thereby effectively reduce the amount they have to repay.
If you compare SS to your IRA account, it is more or less similar. In your IRA, you and your employer put cash in. You then invest that cash to try and earn something on it (or you could leave it in cash). If you invest in say GM bonds in your IRA .... tough luck now. You will not now get your money back, because GM is bankrupt or in fact you will only get some part of your bankrupt bond investment back. That is probably what will happen with your SS as well, because the government from future taxes will probably only be able to pay back part of your SS investments. Thus they will reduce future benefit payments to you to reflect this, as opposed to the benefit payments they are promising you now.
On May 18 03:50 PM Lang wrote:
> Social Security is NOT a savings account. In reality SS is just another
> "Ponzi Scheme"
> Lang.
>