Think Or Sink

Economy is the management of the house (oikos in Greek), ecology is the study, or logic, of the house. They are closely related. We are presently engaged in the sixth large mass extinction event since animal life appeared on Earth. It is, potentially the most dangerous, because hypoxia (so far undocumented in previous mass extinctions, but likely) threatens (my trademark worry).

Yet, this extinction event is driven by the behavior of Homo Sapiens, thus, it could be prevented (as long as the extinction does not develop too much inertia). Thus we should use more logic to manage the house.

Worst Extinction Coming? Lest We Intervene Creatively

Horizontally: million of years before present. Both the P-T (Permian-Trias) and K-T (Cretaceous-Tertiary) extinctions coincide with Earth core eruptions (according to me, they acidified the seas). Vertically: percentage of fossilized marine genera that went extinct.

Thus the nature of economic policy, not just economic performance, is in question. Here is Krugman in “Cheese-eating Job Creators”

People are pretty down on European economic performance these days, with good reason. But mainly what we’re looking at is bad macroeconomic policy…That’s a very different story from the old version of Eurotrashing, which focused on Eurosclerosis — persistent low employment allegedly caused by excessive welfare states.

…John Schmitt and Dean Baker began pointing out a long time ago that this story was out of date. If you looked at Europe in general and France in particular, you saw that yes, people retired earlier than in America, and also that fewer young people worked — in part because they didn’t have to work their way through college…

Well, I hadn’t looked at this data for a while; and where we are now is quite stunning:

France & USA EMPLOYMENT Rate [NOT Unemployment U2]

Many of the French would be indignant about that graph, as they are focused on the Unemployment Rate known as U2 (which is above 10% in France).

And Krugman to conclude: “Since the late 1990s we have completely traded places: prime-age French adults are now much more likely than their US counterparts to have jobs.

Strange how amid the incessant bad-mouthing of French performance this fact never gets mentioned.”

Krugman knows well that this is not strange. Wall Street centered plutocracy has control of American propaganda, and admitting any sort of French superiority in economics would be equivalent to anathema.Financiers hate France most, as she is full of counterexamples to the plutocratic paradigm, so they use the biggest, ugliest lies against her.

Employing people of prime employment age is a deliberate policy of the state in France. Early (and sufficient!) retirement is part of it. So is free university education (as Krugman hints at above).

And yet, comparing an enormous country-continent such as the USA and a European country, is always fraught. European countries are automatically small, and crowded. Most have long exhausted natural resources.

Besides, God is American (just listen to Barack Obama if you doubt it). So, when American companies (Chevron, etc.) tried fracking in Poland, it did not work, as God had not blessed Poland (or not been blessed by Obama, whatever). The geology was uncooperative.

Or maybe Poland cannot be as thoroughly destructed as Texas (largest state of the USA), Wyoming (very large, and less populated USA state), or the Dakotas (what’s that?).

Much of the wealth of the USA comes from recently conquering a gigantic, wealthy continent, after having disposed of the preceding occupants (thus acquiring title and attending riches).

In a way, the USA is an ode to the exploitative paradigm: We Came, We Saw, We Destroyed, We Thrive.

No wonder well paid economists and other propagandists from the world’s richest universities prefer to change conversation, and explain to use why slavery is so superior to economy, the French way. (Americans get two weeks vacations; the French, who invented mandatory paid vacations in 1936, get 5; a reform all of Europe has copied. )

All this sudden American wealth was not because of a mysterious American genius in matters economic, but for the one found at the end of a saber. Proof? The USA was mostly created by Europeans. What those Europeans could do in the New World, they could never have done in the Old One.

Parts of Europe are still suffering from Roman ecological devastation.

The European Union (four million square kilometers) is less than half the area of the USA (ten million square kilometers). Europe (even without Putin’s Grosse Reich) has twice the population of the USA.

France exploited coal for 73,000 years, but, surprise, surprise, has run out of it. France had insignificant gas, now exhausted, and only a few barrels of oil.

This general paucity of resources forces Europeans to exchange high added value products (aerospace, cars, machine tools) against the natural resources they need (even Spain is selling trains to Saudi Arabia).

In other words, Europeans have to be more brainy, but for countries such as Norway (oil, gas) or Britain (oil, gas, Russian money).

In a sense the archetype  European country is wealthy Switzerland. First source of Swiss income? Pharmaceuticals.  Where does the better Swiss economic management come from? Direct democracy.

The strategies used in France and Germany are slightly different, with more emphasis on university education in France (which is free) and thus more of a scientific axis, and more on apprenticeship in Germany (thus a more active high tech Mittelstand). They are both trying to adopt the other’s advantage (Germany is doing a huge teaching-scientific effort, and has just adopted a French like minimum wage… while France is talking about how great Germany is).

The advantage of the Silicon Valley seems, and is, incontrovertible. Yet, it has to a great extent to do with the size of the market of the USA, & the discrete fact that the most important actor in the economy is the state. Silicon Valley was basically founded by the defense establishment of the USA (the basic tech was often invented in… France. But the smaller French market, and the lack of an empire of awe and conspiracies, put the French at a disadvantage.)

In any case, the better French success with employment (especially its quality, that the graph above does not exhibit) demonstrates, to some extent, the superiority of governmentalism.

See:  https://patriceayme.wordpress.com/2013/08/13/synthesis-found-governmentalism/

Not to say that government policies in France are, and have been perfect (France has a new Prime Minister, the young, Catalan-Swiss-French Emanuel Wals). Far from it. They are actually often laughable, while gritting one’s teeth. To quit laughing, though, one has to just consider the USA, where, in spite of obvious natural riches, much of the plundering by the higher ups negatively impact economic performance.

The social inequality in San Francisco is on a par with Rwanda (that makes more sense than it looks, as both depends upon Coltan, plundered in Congo).

We are going to need lots of correct governmentalism, if we are going to be spared a sixth, and most terrible, mass extinction.

Speaking of extinction, in apparently unrelated news, the thirty billion dollar woman, Helene Pastor, just died from her wounds from an (unknown commando) attack. Flags have been lowered all over the Principality of Monaco. When people die, the pain of the state is apparently proportional to wealth.

https://patriceayme.wordpress.com/2014/05/07/cap-wealth-decapitate-critter-power/

There are warning flags fluttering in the air.

Patrice Aymé

INFLATION GOOD, STAGNATION BAD

INFLATION FEEDS SELF EXAMINATION, EMPLOYMENT, FUTURISM.

Moderate Inflation Optimizes Consumption, Self Examination, A Questioning Attitude, Full Employment, New Economy, Technology & Science, Enough Money For What’s Needed.

Why?

1) Inflation advantages the implementation of more advanced technology, because inflation forces people to a continual reevaluation of their old habits.

2) Inflation stirs the economic soup and advantages workers relatively to rentiers. (A rentier, by definition works from a rent; rentiers’ existence is less active than that of workers, they have to do less. Advantaging them is advantaging laziness. Activity ought to be more encouraged by a better income than the one received by doing nothing; it’s harder to negotiate the augmentation of a rent than that of a salary.)

3) Inflation insures that those who want to work, in particular with the future, have enough money to do so.

Inflation creates, de facto, negative interest rates. With inflation turned on, the very rich and corporations could not sit on the money, or lend it to each other through “dark pools“. The money would have to be invested profitably in the real economy.

Putting inflation back in gear is ONLY PART of the return to the winning recipe of the 1950s. But a master piece. It fights economic stagnation.

Conventional economic theory has it that people look for the cheapest products, or for better products, or a mix of these characteristics. Right. That fantasy is called the “market”. As in a real market, people are supposed to go down the alleys, and pick up what they deem to be the best.

In the imagination of vulgar economists, the “market” is supposed to solve everything (including health care in Obama’s Financial Times addicted mind). Let’s leave aside for now the problem that what they call a market is rather a jungle.

Before comparing products, people have to want to bother to look at them. Comparing is tiring, risky, and involves training (be it of a slightly new taste). Be it to buy sushi, a car, a new TV, or a vacation. In a steady state economy, with always the same prices, why would people want to look?

And what about, not just comparing old products, but looking at completely new products? Say you always bought apples and never looked at oranges? Why would people want to look at those? Curiosity? What about adding necessity to curiosity? Inflation insures the latter, because inflation introduces an element of discomfort with one’s old world. 

Inflation forces people to look and make comparisons, not just between the products that are offered, but between the habits they themselves hold (and that, left unchanged, would lead them to yesterday’s products). Continually rising sticker shocks spur a more demanding demand that questions one’s old demands.

Socrates said that the unexamined life was not worth living. Inflation says that one cannot afford the unexamined life.

Verily, conventional economic theory had forgotten that detail: if consumers don’t need to bother, they will not bother. MENTAL INERTIA RULES, and turns into generalized economic inertia. Inflation is a spur that forces economic participants to reconsider their relationship with the economy, and all values, and makes actually the entire public into savvy , even philosophical, economic participants, lest they drown in rising prices, and an unaffordable past.

Having more demanding consumers (that nominal price inflation creates), in turn incites would be suppliers to offer new products, as they know consumers are continually examining not just the products offered, but examining if the habits they have make life as worthy as possible.

Indeed, old habits depend upon old values, and old consumption patterns. When inflation permeates the economy, all prices rise, and force a dynamic ecology, by changing continually the environment, forcing speciation of new technology, that serve new habits.

It is similar to what happens when speciation in biology is forced by environmental changes.

Increasing prices force people to continually look afresh at whether their old habits are WORTH IT. People see the costs and prices of what they used to like, go up, and they ask themselves: why not to try something better?

Inflation continually swirls the economy, for higher performance. It creates an ever changing world, never boring, always valuing work

It’s no coincidence that the period of the 30 years of gloriously expanding economy after World War Two was characterized with significant inflation. Nor is it a coincidence that a depression is characterized by years of deflation.

As one can see today, or one has seen in Japan, deflation is hard to fight. Work programs in infrastructure financed by the government in Japan, over two decades, resulted with a government debt to GDP basically the highest in the world (more than 200%). And still Japan is stuck. Maybe what’s lacking in Japan, are animal spirits.

How is inflation controlled? By not expanding the money supply too much. What does that mean? Those who have the money keep it, others can wait for the grave. In other words no inflation profits first the established order.

Some will say: oh no, you don’t understand, with 4% inflation, the rich will get richer. Question: how come did the rich not become richer during the post war forceful expansion? High margin tax rates (93% under that well known Marxist, President Eisenhower). Just reinstitute those and redistribute to the indigent (including victims of inflation).

The “market” has been the paradigm of economics, and it’s made possible by the fractional reserve private-public money creating banking system. The latter has been ignored by most thinkers (except for president FDR and his men, who regulated it cleanly… and which the Clinton and his weasels destroyed). 

Of course the FDR reforms ought to be reestablished (this is what the inchoating “Banking Union” is about in Europe, and the various fines given to EU & USA banks in recent weeks… although jail sentences would have been better).

But more generally, the very image of the free economy as a “free market” is meek.  And irrelevant.

There is no “free market”. Most of the impulsion for new technologies was given by governments (even cans and microwaves were initially military programs; actually the question ought to be inverted: which new technologies were started as non-governmental programs, or not governmentally supported? Good luck to find any!) 

Through the (mostly private) bankers, the (plutocracy captured) government regulates the money supply, and has opted to restrict the new flow to old money.

A better picture of reality than the “free market” is the jungle. The genus Homo evolved through war, in the jungle. It’s hypocrisy and obfuscation to pretend that it’s otherwise in today’s economy. Once one has admitted this, and only then, can one mitigate this efficiently. Let’s bring some light to that obscure and tragic reality.

And let’s bring fresh money, enough money to employ youth well and irrigate the future. That is, allow enough inflation to insure this.

Could that create problems? Sure. And it did, in the roaring post-WWII expansion. However, corrective mechanisms were then applied: help to first time home buyers, construction programs, free universal health care and education, anti-plutocratic taxation.

One ought to argue that inflation is progressive, as it forced the implementation of these progressive measures (otherwise society would have exploded in rage; whereas now its put to sleep in the torpor of stagnating plutocratization).

Last, but not least: in the unprecedented confrontation between human technology and the biosphere, stagnation is not an option. Missing out on inflation, and the reality of the jungle it makes obvious, and the progressive answers it requires, maybe missing out on the animal spirits we need to survive.

***

Patrice Ayme