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Gypsy and Willy

No. 452

And a pinch to grow an inch...

April 19, 2010

In the last two blogs on the subject of The Gathering Storm...the one developing to embrace and possibly destroy the modern world...we discussed how Karl Marx anticipated what is now coming to a head in the world's capitalist economy and how the theory and practice of the economic policies of John Maynard Keynes seemed to find a way to avoid it. Interestingly, both saw the problem as a matter of growth, but in diametrically opposed ways. Marx realized that capitalism was at root a pyramid scam which would eventually collapse under its own weight due to its need...common to all pyramid schemes...for exponential growth. Keynes, on the other hand, while not denying the need for constant and ever increasing growth, felt that a periodic massive infusion of money could postpone signaled by a recession or the future. Meanwhile, he claimed, so much growth would be stimulated that the debt incurred in increasing the money supply could be paid back. Repeating this in every cycle would keep capitalism going forever.

In the face of accepting both these propositions as "truth," liberals and conservatives developed more practical...and The former, bleeding compassion from every pore, tried to direct the periodic infusions of cash directly to those most affected by the downturn, the workers. Conservatives instead counseled that we should just let the less efficient and/or less advanced firms simply die out, thus trimming the overproduction of Marx's predictions...and incidentally, lowering the numbers of firms in any given industry. Liberals said this would result in Marx's monopoly capitalist super-state. Conservatives complained that helping the less well off would only pass on the problem of debt repayment to our children and grandchildren.

Once again, both sides were right. So, they consistently...with stubborn futility...adopted BOTH solutions. Conservatives joined the "stimulus" crowd, saying that it would work "better" if the stimulus was given to big business...since that would promote more and faster growth. On the other hand, liberals quietly joined the "let 'em perish" crowd trying to forestall the evils of monopoly with endless numbers and types of "regulation." But, once again, both sides were wrong.

The problem is this "growth" thing. No matter how slowly or quickly this growth was obtained or to which segment of the population benefited most from the infusion, the Earth and its resources prove to be stubbornly finite and either "plan" tacitly assumes a possibility of the infinite growth of wealth. It is safe to say that all the other problems we are going to warming, pollution, etc....stem from cavalierly disregarding this simple fact. Indeed, some of the "wealth" created during the last couple of business cycles is quite ephemeral. So-called "mortgage derivatives"...for example...are just another name for bets concerning bets in that great gambling arena known as the stock market. Similar to the "trifecta" in horse race gambling, which allows one to bet on the outcome of a bundle (three) of races rather than just one, the derivatives allow bets of the performance of a bundles of mortgages and other financial instruments. Forgetting that a mortgage has to be paid off in order to be worth anything at all, Big Money got entranced by the "wealth on paper" that appeared to be created out of nothing and forgot that it was in fact...NOTHING.

Some nations, such as the BRIC (Brazil, Russia, India and China) group, are simply trying to raise the average wealth of their citizens up to the level of the advanced economies. Meanwhile, those same advanced economies are running out of ways...and the create ever more wealth for their already bloated and pampered citizenry. Once again, free market capitalism is transferring enormous amounts of wealth to the this case...ironically...the BRIC nations. In the process, the Earth and all its denizens are being eaten alive, both literally and figuratively.

So what's the plan to escape what appears to be certain doom? There is none and there will never be one as long as the world is run by the people and the systems they embrace who are currently running it. The BRIC countries cry out that it is unfair and unreasonable to restrict THEIR growth in any way, since they are so much poorer than the others to start with. The others just want it all to just go return to "normal." Since the approach is more of the same, so will be the result. The political class of NO country is give up the one thing that makes sense...their sovereignty. That is, the coming disaster is more-or-less hidden from the vast majority by calls for MORE regulations, MORE growth, MORE power to the state...MORE, MORE, MORE.

One thing remains clear. It will not we have to a worldwide unified stem growth at some point. But how much is enough? How can we get from here to there? Surely no politican in a democratic country can expect to be elected on a promise of "less wealth" or "enough wealth" At least the way elections are structured now. Stay tuned. We think these problems have solutions, but they will require all of us to get togehter and for the current systems to change.

Talk to you later...

To contact Gypsy or Willy and comment on what they have written...or anything else...write to (Willy Chaplin).or (Gypsy)


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