Friday, January 1, 2016

An Alternative: An Interest-free Economy

In his latest jeremiad, David Stockman has this to say:
In fact, bond defaults will be the transmission channel by which the global deflation pounds the Wall Street casino and brings another recession cycle to main street. In that respect, one of the most egregious evils of ZIRP and financial repression is that they prolong and distend the bad credit cleansing cycle.
So... bonds, that is debt "sold" in the form of credit extended (for if there are assets underlying, then they are no doubt over-valued) is the key.

Bond dealers sell debt, all sorts, that is credit at interest.  Note, again, not money, but credit, that is the nominal tally of what credit the seller is "good for."  For example, bond buyers (your pension) may load up on mass transit bonds, allocating your pension accumulation (which is just digital promises to pay you something someday) to get a light right system built, after which fares repays your bond holdings plus interest.  Sadly, the light rail is 1880s technology which will never generate enough revenue to repay the bond, let alone interest.  See Chicago, Detroit, Stockton, etc.  That's what happens when there is not strict separation of business and state. You are next.

First, there need be no such arrangement, because light transit could be financed as a private enterprise.

Second, private enterprise would not use 1880s technology, it would move to something more, say, 2001.

Third, private enterprise would turn a profit.  See Hong Kong mass transit.  (It's hard to follow Hong Kong machinations, but since owning real estate is not allowed in Hong Kong, you must pretend the government is in charge as you acquire the real estate necessary to achieve your goals.)

Let's here from the time Bill Clinton was elected president, and his response, the child, when he was told how the world works:
According to Bob Woodward's account in The Agenda, Clinton replied to this news in a half whisper: "You mean to tell me that the success of my program and my reelection hinges on the Federal Reserve and a bunch of fucking bond traders?"
Sorry for the bad words, but it's a quote.  His agenda was of course in service of the hegemon, so really that is how most of the world works, but not necessarily all of it.  There are alternatives, like the free market.

But note the simple fact: there is no denying that credit at interest is the game, the great distorter, deformer, malformer, misallocater, malinvester.   Everyone is clear on that.

But is anyone saying "let's not do that"?  We at the same time know it is utterly unnecessary to a thriving economy to have interest bearing instruments at all let alone for finance.  Yet, is anyone saying "let's not do that?"  All major religious systems say "don't do it because it does harm..." but not even the religious folk argue against it (except for some followers of Islam).

But we are in a regime called capitalism, although with dozens of definitions, essentially the idea that capital amassed is gratification delayed, and reward is later wealth.  The main vehicle of this accumulation is usury, charging interest on loans, something once limited to those regnant, then an elite,  and only in the 20th century to the middle class and amazingly now extended to the most impovershed.

That gratification delayed (time preference theory) is raw Calvinism, he who gained popularity for protestantism by unleashing usury as a means to overwhelm and destroy the papacy's hold on rents (the actual motivation for the reformation - reallocation of rents).  As accumulation began to redistribute northward, and accumulation be put in the service of individuals, the very definition of wealth changed to wealth as personal accumulation instead of weal.  As more and more assets were arrogated unto fewer and fewer people, who had less and less ability to make economic decisions, what once went to charities and organic community development now went to industries, the hegemon and war.  The bottom of this was captured by Dickens and the Russian novelists, labor movements resisted and carved out a middle class, temporarily, until the capitalists could figure out a way to ruin the weal again.  They figured it out.

Incidentally, by 1905 this destructive process was conceptualized by Weber as "the protestant work ethic," a halo on despoliation.

Now, 100% of the blame goes to those who will be wiped out in the coming years.  To agree to work for 40 years at a job that cannot possible be real economy, and expect to be paid for another 20 years to continue doing nothing is culpable.  As your mom said, just because everyone else is doing it, doesn't mean you have to.  Further, you can be part of the solution immediately as well, so there is excuse for being "wiped out."  You lost nothing when nothing was there except empty promises. All unemployment is voluntary.

Just start your own business.  Ignore what you "lost" (there is nothing to speak of there anyway) and get going creating weal, correctly defined, as the contributing to the range of goods and services available to an ever widening range of people who can afford them with their own money.  This is the free market, the only true path to peace and prosperity.

Work is self-employment (well, actually, customer-employment), your work is your lifestyle, and your lifestyle is your work, and wealth is something you contribute to, not accumulate for yourself.

When there is a shortage of something, its price goes up.  Given extremely few people will be starting up badly needed businesses, the business you start up will be all the more valuable.

And recall, no entrepreneur takes risks; you need customers, not money, to start up a business.

Feel free to forward this by email to three of your friends.


Anonymous said...

Happy New Year John