Back in LA this weekend, running back and forth along the I 10 axis to Palm Springs, visiting and meetings, etc. A question come up regularly, from young and old: Am I optimistic?
Yes, I am optimistic the system is coming down. Well, I am optimistic the system is down, it has failed, and now it is just a matter of time as people realize they are living in a false economy and the goodies stop.
I was engaged in a multi-generational discussion of the economy in Palm Desert, where no doubt in the 1960s the exact same conversations went on around the pool, to the same tinkling of ice in cocktails. But the difference was all generations agreed, it's over.
And it should be over, the bailouts, the wars, the fascism (big biz and big govt being one). In the 60s there was some hope for "conservatism" since there was some check on the State. But Nixon took USA off the gold standard, to pay for the Vietnam war. And that brought in inflation, and the economic downturn of the late 1970s, and then the discovery that Uncle Sam would bail out failed management, with the Chrysler debacle, large business and bankers realized they could structure matters in a way to keep the profits and socialize the losses (make the taxpayers take any losses.)
The only think left was how to finance any and everything. It is arcane, and you'd have to know letters of credit to understand it, but the trick was for banks to lend credit not money. Since standby letter of credit obligation exposure is off books and need not be footnoted in the financials, there was no end to what could be backed by ersatz credit. It started at the top, shopping malls and nuclear power plants, and then worked it's way down to people financing any crazy idea. A problem people ignore is how cheap credit leads to malinvestment not only in overinvestment, but in misallocation. False economies emerge, and that is where we are today.
The false economy is so extended that there is really no way of backing out. We farmed out making sewing machines so our factories could make missile parts. We turned family farms into weapons of mass destruction. We destroyed medicine and have a generation of social workers, not scientists, tending to ailments. Education has gone downhill as costs have risen. Any innovation or initiative is crushed, like ridesharing and crowdfunding. how do we back out?
Problem is, the powers that be want a violent denouement, for this changes the topic and absolves themselves, like Nero letting Rome burn. There is no role for the State to play, not politicians, lawyers, cops or soldiers.
We got here lending credit at usury. People say I just don't understand PVT, time preference, and risk premium, all reasonable things. What if I do understand it, and still disagree? Aggregating capital lent at interest for projects can do grand things, like great walls and pyramids. But the practice is neither necessary not sufficient for peace and prosperity, and my critics ignore that the practice does harm, as in precipitating the current crisis.
The argument made for usury (mis-identified as interest) is akin to saying rape is largely like married sex. In both instances the actions can be the same, and many of the biological benefits, quite naturally, obtain. Further, some of those are even conducive to good feelings. Can't I recognize this?
Sure I can, but can't the advocate of usury notice the harm done in the process, as it is in rape? Apparently not. We all love a system we think will benefit us.
There are ways and means and patterns and practices to arrive at peace and justice without usury, just as there can be love without rape. If you can maintain economics and sex are value-neutral, then sure, the philosophy works. But economics is not value-neutral, contrary to what most economists insist.
It was very different when there were no credit cards, and people ran up usury-free debt at places they did their trade, and settled up once a month. Not even money involved. Between the carrot of easy credit inveigling itself in community cohesion, and the stick of tax reporting, we atomized and then were recollectivized into a welfare/warfare state. Minimum wage and single payer are now our national purpose, at least for 99% of us.
Very quickly, since there was no rational limit to credit, we had more risky business, more bailouts, more war.
Starting a business is to fight the powers that be. It requires atomic level relationships, and a reconnecting the comity we once had, before the banks could lend credit at usury. Crowdfunding and self-finance, maybe even vendor financing, at no usury, is to rebuild the country. It will make for a recovery. Deregulation of something, anything would help, so maybe there is a role for the State, if going away is a role.
Happily my opinion does not matter. There is no preparation for what is to come, because when and what cannot be predicted. Business is great training for being flexible and cooperative, probably assets in a fix.
When it falls down, the state will be ineffective. I am optimistic about that. The banks won't work, but who cares? We can go back to a mere 50 years ago, where your relationship in your community is what mattered, and people settled up once a month, and neither the usurer nor the taxman had any part of it.
The problem if the state goes down, who will be the cops? You. Are you ready for that?
Feel free to forward this by email to three of your friends.
Yes, I am optimistic the system is coming down. Well, I am optimistic the system is down, it has failed, and now it is just a matter of time as people realize they are living in a false economy and the goodies stop.
I was engaged in a multi-generational discussion of the economy in Palm Desert, where no doubt in the 1960s the exact same conversations went on around the pool, to the same tinkling of ice in cocktails. But the difference was all generations agreed, it's over.
And it should be over, the bailouts, the wars, the fascism (big biz and big govt being one). In the 60s there was some hope for "conservatism" since there was some check on the State. But Nixon took USA off the gold standard, to pay for the Vietnam war. And that brought in inflation, and the economic downturn of the late 1970s, and then the discovery that Uncle Sam would bail out failed management, with the Chrysler debacle, large business and bankers realized they could structure matters in a way to keep the profits and socialize the losses (make the taxpayers take any losses.)
The only think left was how to finance any and everything. It is arcane, and you'd have to know letters of credit to understand it, but the trick was for banks to lend credit not money. Since standby letter of credit obligation exposure is off books and need not be footnoted in the financials, there was no end to what could be backed by ersatz credit. It started at the top, shopping malls and nuclear power plants, and then worked it's way down to people financing any crazy idea. A problem people ignore is how cheap credit leads to malinvestment not only in overinvestment, but in misallocation. False economies emerge, and that is where we are today.
The false economy is so extended that there is really no way of backing out. We farmed out making sewing machines so our factories could make missile parts. We turned family farms into weapons of mass destruction. We destroyed medicine and have a generation of social workers, not scientists, tending to ailments. Education has gone downhill as costs have risen. Any innovation or initiative is crushed, like ridesharing and crowdfunding. how do we back out?
Problem is, the powers that be want a violent denouement, for this changes the topic and absolves themselves, like Nero letting Rome burn. There is no role for the State to play, not politicians, lawyers, cops or soldiers.
We got here lending credit at usury. People say I just don't understand PVT, time preference, and risk premium, all reasonable things. What if I do understand it, and still disagree? Aggregating capital lent at interest for projects can do grand things, like great walls and pyramids. But the practice is neither necessary not sufficient for peace and prosperity, and my critics ignore that the practice does harm, as in precipitating the current crisis.
The argument made for usury (mis-identified as interest) is akin to saying rape is largely like married sex. In both instances the actions can be the same, and many of the biological benefits, quite naturally, obtain. Further, some of those are even conducive to good feelings. Can't I recognize this?
Sure I can, but can't the advocate of usury notice the harm done in the process, as it is in rape? Apparently not. We all love a system we think will benefit us.
There are ways and means and patterns and practices to arrive at peace and justice without usury, just as there can be love without rape. If you can maintain economics and sex are value-neutral, then sure, the philosophy works. But economics is not value-neutral, contrary to what most economists insist.
It was very different when there were no credit cards, and people ran up usury-free debt at places they did their trade, and settled up once a month. Not even money involved. Between the carrot of easy credit inveigling itself in community cohesion, and the stick of tax reporting, we atomized and then were recollectivized into a welfare/warfare state. Minimum wage and single payer are now our national purpose, at least for 99% of us.
Very quickly, since there was no rational limit to credit, we had more risky business, more bailouts, more war.
Starting a business is to fight the powers that be. It requires atomic level relationships, and a reconnecting the comity we once had, before the banks could lend credit at usury. Crowdfunding and self-finance, maybe even vendor financing, at no usury, is to rebuild the country. It will make for a recovery. Deregulation of something, anything would help, so maybe there is a role for the State, if going away is a role.
Happily my opinion does not matter. There is no preparation for what is to come, because when and what cannot be predicted. Business is great training for being flexible and cooperative, probably assets in a fix.
When it falls down, the state will be ineffective. I am optimistic about that. The banks won't work, but who cares? We can go back to a mere 50 years ago, where your relationship in your community is what mattered, and people settled up once a month, and neither the usurer nor the taxman had any part of it.
The problem if the state goes down, who will be the cops? You. Are you ready for that?
Feel free to forward this by email to three of your friends.
2 comments:
Hi John,
Just thought this article was interesting regarding anarchy:
http://www.americanthinker.com/2014/03/rules_and_rule_makers.html
So in anarchy, society can still get "rules", but not ones sanctioned by the State or Rule Makers? It's still not clear to me how any kind of rules would be created by society without a State or designated Rule Makers?
If rules are in voluntary association, then there is no problem. Chess, skiing and religion would be no fun or interesting without rules, all are voluntary. The Lex mercatoria which rules int'l trade for 1000 years was voluntary. You already live 99% in anarchy, your life ruled by a a series of rolling agreements forming and disbanding over time, so at any given time there is no telling what is going on with you, and people must ask "How are you?"
People say anarchy is utopia when is here and now, and only when the state steps in do we have chaos. We simply do not need states, but we do need rules. And we have all the rules we need at any given time.
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