Posts Tagged ‘Inflation’

Points Against Multiverses

December 31, 2015

Physics, the study of nature, is grounded not just in precise facts, but also a loose form of logic called mathematics, and in even more general reasonings we know as “philosophy”. For example, the rise of Quantum Field Theory required massive Effective Ontology: define things by their effects. The reigning philosophy of physics became “shut-up and calculate”. But it’s not that simple. Even the simplest Quantum Mechanics, although computable, is rife with mind numbing mysteries (about the nature of matter, time and non-locality).

Recently the (increasing) wild wackiness of the Foundations of Physics, combined with the fact that physics, as it presently officially exists, cannot under-stand Dark Energy and Dark Matter, most of the mass-energy out there, has led some Europeans to organize conferences where physicists meet with reputable  philosophers.

Einstein Was Classical, The World Is Not. It's Weirder Than We Have Imagined. So Far.

Einstein Was Classical, The World Is Not. It’s Weirder Than We Have Imagined. So Far.

[Bell, CERN theory director, discovered a now famous inequality expressing locality, which Quantum physics violate. Unfortunately he died of a heart attack thereafter.]

Something funny happened in these conferences: many physicists came out of them, persuaded, more than ever, or so they claimed, that they were on the right track. Like little rodents scampering out in the daylight,  now sure that there was nothing like a big philosophical eagle to swoop down on them. They made many of these little reasonings in the back of their minds official (thus offering now juicy targets).

Coel Hellier below thus wrote clearly what has been in the back of the minds of the Multiverse Partisans. I show “his” argument in full below. Coel’s (rehashing of what has become the conventional Multiverse) argument is neat, cogent, powerful.

However I claim that it is not as plausible, not as likely, as the alternative, which I will present. Coel’s argument rests on a view of cosmology which I claim is neither mathematically necessary, nor physically tenable (in light of the physics we know).

To understand what I say, it’s better to read Coel first. Especially as I believe famous partisans of the Multiverse have been thinking along the same lines (maybe not as clearly). However, to make it fast, those interested by my demolition of it can jump directly to my counter, at the end: NO POINTS, And Thus No Multiverse.

***

Multiverses Everywhere: Coel Hellier’s Argument:

Coel Hellier, a professional astrophysicist of repute, wrote :  “How many Big Bangs? A philosophical argument for a multiverse”:

“Prompted by reading about the recent Munich conference on the philosophy of science, I am reminded that many people regard the idea of a multiverse as so wild and wacky that talking about it brings science into disrepute.”

Well, being guided by non-thinking physicists will do that. As fundamental physicist Mermin put it, decades ago:

The Philosophy "Shut Up And Calculate" Is A Neat Example Of Intellectual Fascism. It Is Increasingly Undermined By The Effort Toward Quantum Computing, Where Non-Locality Reigns

The Philosophy “Shut Up And Calculate” Is A Neat Example Of Intellectual Fascism. It Is Increasingly Undermined By The Effort Toward Quantum Computing, Where Non-Locality Reigns.

Coel, claiming to have invented something which has been around for quite a while, probably decades: My argument here is the reverse: that the idea of multiple Big Bangs, and thus of a multiverse, is actually more mundane and prosaic than the suggestion that there has only ever been one Big Bang. I’m calling this a “philosophical” argument since I’m going to argue on very general grounds rather than get into the details of particular cosmological models.

First, let me clarify that several different ideas can be called a “multiverse”, and here I am concerned with only one. That “cosmological multiverse” is the idea that our Big Bang was not unique, but rather is one of many, and that the different “universes” created by each Big Bang are simply separated by vast amounts of space.

Should we regard our Big Bang as a normal, physical event, being the result of physical processes, or was it a one-off event unlike anything else, perhaps the origin of all things? It is tempting to regard it as the latter, but there is no evidence for that idea. The Big Bang might be the furthest back thing we have evidence of, but there will always be a furthest-back thing we have evidence of. That doesn’t mean its occurrence was anything other than a normal physical process.

If you want to regard it as a one-off special event, unlike any other physical event, then ok. But that seems to me a rather outlandish idea. When physics encounters a phenomenon, the normal reaction is to try to understand it in terms of physical processes.”

Then Coel exposes some of the basic conclusions of the Standard Big Bang model:

So what does the evidence say? We know that our “observable” universe is a region of roughly 13.8 billion light years in radius, that being the distance light can have traveled since our Big Bang. (Actually, that’s how we see it, but it is now bigger than that, at about 90 billion light years across, since the distant parts have moved away since they emitted the light we now see.) We also know that over that time our observable universe has been steadily expanding.

Then astrophysicist Coel start to consider necessary something about the geometry of the universe which is not so, in my opinion. Coel:

“At about 1 second after the Big Bang, what is now our observable universe was only a few light years across, and so would have fitted into (what is now) the space between us and the nearest star beyond our Sun. Before that it would have been yet smaller.”

What’s wrong? Coel assumes implicitly that the universe started from a POINT. But that does not have to be the case. Suppose the universe started as an elastic table. As we go back in time, the table shrinks, distances diminish. Coel:

“We can have good confidence in our models back to the first seconds and minutes, since the physics at that time led to consequences that are directly observable in the universe today, such as the abundance of helium-4 relative to hydrogen, and of trace elements such as helium-3, deuterium, and lithium-7.[1] Before that time, though, our knowledge gets increasingly uncertain and speculative the further back we push.”

These arguments about how elements were generated, have a long history. They could actually be generated in stars (I guess, following Hoyle and company). Star physics is not that well-known that we can be sure they can’t (stars as massive as 600 Suns seem to have been discovered; usual astrophysics says they are impossible; such stars would be hotter than the hottest stars known for sure).

Big Bangists insist that there would have been no time to generate these elements in stars, because the universe is 13.8 billion years old. But that 13.8 billion is from their Big Bang model. So their argument is circular: it explodes if the universe is, actually 100 billion years old.

But back to Coel’s Multiverses All Over. At that point, Coel makes a serious mistake, the one he was drifting towards above:

“One could, if one likes, try to extrapolate backwards to a “time = zero” event at which all scales go to zero and everything is thus in the same place. But trying to consider that is not very sensible since we have no evidence that such an event occurred (from any finite time or length scale, extrapolating back to exactly zero is an infinite extrapolation in logarithmic space, and making an infinite extrapolation guided by zero data is not sensible). Further, we have no physics that would be remotely workable or reliable if applied to such a scenario.[2]

…”all scales go to zero and everything is thus in the same place.” is not true, in the sense that it does not have to be. Never mind, Coel excludes it, although he claims “extrapolating back in time” leads there. It does not.

Instead, Coel invites us to Voodoo (Quantum) Physics:

“So what is it sensible to consider? Well, as the length scale decreases, quantum mechanics becomes increasingly important. And quantum mechanics is all about quantum fluctuations which occur with given probabilities. In particular, we can predict that at about the Planck scale of 10−35 metres, quantum-gravity effects would have dominated.[3] We don’t yet have a working theory of quantum gravity, but our best guess would be that our Big Bang originated as a quantum-gravity fluctuation at about that Planck-length scale.”

Well, this is conventional pata-physics. Maybe it’s true, maybe not. I have an excellent reason why it should not (details another time). At this point, Coel is firmly in the conventional Multiverse argument (come to think of it, he did not invent it). The universe originated in a Quantum fluctuation at a point, thus:

“So, we can either regard our Big Bang as an un-natural and un-physical one-off event that perhaps originated absolutely everything (un-natural and un-physical because it would not have been a natural and physical process arising from a pre-existing state), or we can suppose that our Big Bang started as something like a quantum-gravity fluctuation in pre-existing stuff. Any physicist is surely going to explore the latter option (and only be forced to the former if there is no way of making the latter work).

At times in our human past we regarded our Solar System as unique, with our Earth, Sun and Moon being unique objects, perhaps uniquely created. But the scientific approach was to look for a physical process that creates stars and planets. And, given a physical process that creates stars, it creates not just one star, but oodles of them strewn across the galaxy. Similarly, given a physical process that creates Earth-like planets, we get not just one planet, but planets around nearly every star.”

Coel then gets into the famous all-is-relative mood, rendered famous by “French Theory”:

“It was quite wrong to regard the Sun and Earth as unique; they are simply mundane examples of common physical objects created by normal physical processes that occur all over the galaxy and indeed the universe.

But humans have a bias to a highly anthropocentric view, and so we tend to regard ourselves and what we see around us as special, and generally we need to be dragged kicking and screaming to the realisation that we’re normal and natural products of a universe that is much the same everywhere — and thus is strewn with stars like our Sun, with most of them being orbited by planets much like ours.

Similarly, when astronomers first realised that we are in a galaxy, they anthropocentrically assumed that there was only one galaxy. Again, it took a beating over the head with evidence to convince us that our galaxy is just one of many.”

Well, it’s not because things we thought were special turned out not to be that nothing is special. The jury is still out about how special Earth, or, for that matter, the Solar System, are. I have argued Earth is what it is, because of the Moon and the powerful nuclear fission reactor inside Earth. The special twist being that radioactive elements tend to gather close to the star, and not in the habitable zone. So Earth maybe, after all special.

At this point, Coel is on a roll: multiverses all over. Says he:

“ So, if we have a physical process that produces a Big Bang then likely we don’t get just one Big Bang, we get oodles of them. No physical process that we’re aware of happens once and only once, and any restriction to one occurrence only would be weird and unnatural. In the same way, any physical process that creates sand grains tends to create lots of them, not just one; and any physical process that creates snowflakes tends to create lots of them, not just one.

So, we have three choices: (1) regard the Big Bang as an unnatural, unphysical and unexplained event that had no cause or precursor; (2) regard the Big Bang as a natural and physical process, but add the rider that it happened only once, with absolutely no good reason for adding that rider other than human parochial insularity; or (3) regard the Big Bang as a natural and physical event, and conclude that, most likely, such events have occurred oodles of times.

Thus Big Bangs would be strewn across space just as galaxies, stars and planets are — the only difference being that the separation between Big Bangs is much greater, such that we can see only one of them within our observable horizon.

Well, I don’t know about you, but it seems to me that those opting for (3) are the ones being sensible and scientifically minded, and those going for (1) or (2) are not, and need to re-tune their intuition to make it less parochial.”

To make sure you get it, professor Coel repeats the argument in more detail, and I will quote him there, because as I say, the Multiverse partisans have exactly that argument in the back of their mind:

“So, let’s assume we have a Big Bang originating as a quantum-gravity fluctuation in a pre-existing “stuff”. That gives it a specific length scale and time scale, and presumably it would have, as all quantum fluctuations do, a particular probability of occurring. Lacking a theory of quantum gravity we can’t calculate that probability, but we can presume (on the evidence of our own Big Bang) that it is not zero.

Thus the number of Big Bangs would simply be a product of that probability times the number of opportunities to occur. The likelihood is that the pre-existing “stuff” was large compared to the quantum-gravity fluctuation, and thus, if there was one fluctuation, then there would have been multiple fluctuations across that space. Hence it would likely lead to multiple Big Bangs.

The only way that would not be the case is if the size of the pre-existing “stuff” had been small enough (in both space and time) that only one quantum fluctuation could have ever occurred. Boy, talk about fine tuning! There really is no good reason to suppose that.

Any such quantum fluctuation would start as a localised event at the Planck scale, and thus have a finite — and quite small — spatial extent. Its influence on other regions would spread outwards, but that rate of spreading would be limited by the finite speed of light. Given a finite amount of time, any product of such a fluctuation must then be finite in spatial extent.

Thus our expectation would be of a pre-existing space, in which there have occurred multiple Big Bangs, separated in space and time, and with each of these leading to a spatially finite (though perhaps very large) universe.

The pre-existing space might be supposed to be infinite (since we have no evidence or reason for there being any “edge” to it), but my argument depends only on it being significantly larger than the scale of the original quantum fluctuation.

One could, of course, counter that since the initial quantum fluctuation was a quantum-gravity event, and thus involved both space and time, then space and time themselves might have originated in that fluctuation, which might then be self-contained, and not originate out of any pre-existing “stuff”.[5] Then there might not have been any pre-existing “stuff” to argue about. But if quantum-gravity fluctuations are a process that can do that, then why would it happen only once? The natural supposition would be, again, that if that can happen once, then — given the probabilistic nature of physics — it would happen many times producing multiple different universes (though these might be self-contained and entirely causally disconnected from each other).”

Then, lest you don’t feel Multiversal enough, professor Coel rolls out the famous argument which brings the Multiverse out of Cosmic Inflation. Indeed, the universe-out of nothing Quantum fluctuation is basically the same as that of Cosmic Inflation. It’s the same general mindset: I fluctuate, therefore I am (that’s close to Paris motto, Fluctuat Nec Mergitur…). Coel:

In order to explain various aspects of our observed universe, current cosmological models suggest that the initial quantum fluctuation led — early in the first second of its existence — to an inflationary episode. As a result the “bubble” of space that arose from the original quantum-fluctuation would have grown hugely, by a factor of perhaps 1030. Indeed, one can envisage some quantum-gravity fluctuations leading to inflationary episodes, but others not doing so.

The inflationary scenario also more or less requires a multiverse, and for a similar reason to that given above. One needs the region that will become our universe to drop out of the inflationary state into the “normal” state, doing so again by a quantum fluctuation. Such a quantum fluctuation will again be localised, and so can only have a spatially finite influence in a finite time.

Yet, the inflationary-state bubble continues to expand so rapidly, much more rapidly than the pocket of normal-state stuff within it, that its extent does not decrease, but only increases further. Therefore whatever process caused our universe to drop out of the inflationary state will cause other regions of that bubble to do the same, leading to multiple different “pocket universes” within the inflationary-state bubble.

Cosmologists are finding it difficult to construct any model that successfully transitions from the inflationary state to the normal state, that does not automatically produce multiple pocket universes.[6] Again, this follows from basic principles: the probabilistic nature of quantum mechanics, the spatial localisation of quantum fluctuations, and the finite speed at which influence can travel from one region to another.”

The driver of the entire Multiverse thinking is alleged Quantum Fluctuations in a realm we know f anything. Those who are obsessed by fluctuations may have the wrong obsession. And professor Coel to conclude with more fluctuations:

“The dropping out of the inflationary state is what produces all of the energy and matter that we now have in our universe, and so effectively that dropping-out event is what we “see” as our Big Bang. This process therefore produces what is effectively a multiverse of Big Bangs strewn across that inflationary bubble. Thus we have a multiverse of multiverses! Each of the (very large number of?) quantum-gravity fluctuations (that undergo an inflationary state) then itself produces a whole multiverse of pocket universes.

The point I am trying to emphasize is that any process that is at all along the lines of current known physics involves the probabilistic nature of quantum mechanics, and that means that more or less any conceivable process for creating one Big Bang is going to produce not just a single event, but almost inevitably a vast number of such events. You’d really have to try hard to fine-tune and rig the model to get only one Big Bang.

As with any other physical process, producing multiple Big Bangs is far more natural and in-line with known physics than trying to find a model that produces only one. Trying to find such a model — while totally lacking any good reason to do so — would be akin to looking for a process that could create one snowflake or one sand grain or one star or galaxy, but not more than one.”

Patrice Says: NO POINTS, AND THUS NO MULTIVERSE(s):

Did the universe expand from one point? Not necessarily. It could have been from a line, a plane, a volume, even something with a crazy topology. The Big Bang is the time zero limit of the FLRW metric. Then the spacing between every point in the universe becomes zero and the density goes to infinity.

Did the Universe expand from Quantum Gravity? Beats me, I don’t have a theory of Quantum Gravity.

What I know is that, expanding from what’s known of gravity, if the universe expanded from a “point”, that would be smaller than the Planck volume, thus the universe would be within a Black Hole. From what we know about those, no expansion.

Once we don’t have the universe expanding from a point, we cannot argue that it expanded from one point in some sort of “stuff”. If the universe is the “stuff” itself, and it’s everywhere, and expanding from everywhere, exit the argument about a “point”.

The argument about a “point” was that: why this particular point? Why not another “Quantum Fluctuation” from another “point” in the “stuff”. Why should our “point” be special? Is it not scientific to believe in the equality of points? Except points have measure zero in three dimensional space, and thus it’s more “scientific”, “mathematical” to suppose the universe expanded from a non-measure zero set, namely a volume (and it better be bigger than the Planck Volume).

So the argument that there should be many universes because there are many points and many Quantum (Gravity) fluctuations flies apart.

Remains the argument that we need Cosmic Inflation. Yes, but if the universe expands from all over, all over, there is only one such. Cosmic Inflation does not have to appear at all points generating baby universes, It becomes more like Dark Energy.

Speaking of which, why should we have two Cosmic Inflations when we already have one? Even my spell checker does not like the idea of two inflations. It does not like the “s”. Ah, yes, the existing Big Bang needs its own Inflation.

Yet if there is only one inflation, presto, no more standard Big Bang, But then what of Helium, Lithium, etc? How do we synthesize enough of those? Well maybe we would have much more time to synthesize them, inside stars… Especially super giant stars.

Another word about these Quantum Fluctuations. Are they the fundamental lesson of Quantum Physics (as the Multiversists implicitly claim)? No.

Why? There are several most fundamental lessons about Quantum Physics. Most prominent: the DYNAMICAL universe is made of waves. That fact, by itself implies NON-LOCALITY. It also implies neighborhoods, no points, are the fundamental concepts (one cannot localize a wave at a point). This is the origin of the “Quantum Fluctuations”.

So we just saw that “Quantum Fluctuations” may not be the most fundamental concept. Fundamental, yes, but not most fundamental. When debating fundamentals with the Devil, you better bring exquisite logic, and a Non-Local spoon, otherwise you will be Quantum fluctuated out.

Patrice Ayme’

With Intellectuals Like That, Who Needs Savages?

December 6, 2014

With Progressives Like That, Who Needs Conservatives?

With “Democrats” Like That, Who Needs “Republicans”?

How did the West, so superior in nearly all ways in the 1950s, got in its present predicament? The main predicament being the educational system: in the 1950s, France, Britain or the USA had, by far, the best educational system in the world.

Now they are far, far behind. More exactly three years behind by the age of 15, says the UNESCO’s on-going PISA comparison study of more than 65 states.

How did the West, progressing by leaps and bounds technologically around the 1950s, came to stagnate relatively speaking? How come we are stuck with an energy system which kills the planet? When alternatives exist?

One way to get mentally despondent, is to be submitted to heavy propaganda… From thinkers who are paid, or appreciated, to not be that smart. This started long ago, and affected philosophical circles first; the fish rots by the head.

The poster example is “French Theory”, and the anti-“colonialist” movement. Both have excellent things about them. However both made the truth short-circuit.

Short-circuiting the truth is never a good idea… If you want real progress. So it should really be a no-no, no matter what. On the other hand, the “Big Lie Technique” as Hitler called it, works very well. As Hitler explained, common people expect only little lies, not gigantic ones.

In 2008, Obama was elected for “Change You Can Believe”. Indeed: namely no change.

It’s painful to see proto-intellectuals such as Paul Krugman, crawl desperately in search of the truth which keeps on eluding them. Or maybe they are paid to find truth elusive?

In “Democrats Against Reform”, Dec. 4, 2014, Paul Krugman is mystified:

“It’s easy to understand why Republicans wish health reform had never happened, and are now hoping that the Supreme Court will abandon its principles and undermine the law. But it’s more puzzling — and disturbing — when Democrats like Charles Schumer, senator from New York, declare that the Obama administration’s signature achievement was a mistake.

In a minute I’ll take on Mr. Schumer’s recent remarks. But first, an update on Obamacare — not the politics, but the actual policy, which continues to rack up remarkable (and largely unreported) successes.”

A dog with a bone. And like dogs with bones, indeed the “Democrats” were treatd in the last elections. They are now cruising towards a full right wing Republican government, effective January, and probably with the presidency added, in two years. Why? Because they have been lying.

Krugman: …”health reform’s efforts to create meaningful competition among insurers are working better than almost anyone (myself included) expected. Premiums for 2014 came in well below expectations, and independent estimates show a very modest increase — 4 percent or less — for average premiums in 2015.”

It’s painful to read such “faint praise” for Romneycare, aka, Obamacare.

Yes, Obamacare is a great success! Oyez! Ten millions insured. The lie? Only Another 40 million uninsured to go. But who is counting?

Krugman exults: “independent estimates show a very modest increase — 4 percent or less — for average premiums in 2015.”

The lie? The latest inflation forecasts for 2015 are less than 1.5%. So what the honorable professor is telling us is that health insurance premiums will augment more than twice faster than inflation. What a success! Calling that a success is a lie.

Said otherwise, Krugman forecasts an augmentation of premiums of 50% over ten years. As average American family income is stagnating, the wisdom of Obama is clear: his friends from the insurance cartels will be able to make 50% more profits within ten years! Alleluia!

In short, if you think of Obamacare as a policy intended to improve American plutocrats’ lives, it’s going really well. Yet it has not, of course, been a political winner for Democrats, as We The People can now see for itself that plutocrats’ heaven is not necessarily a decent place for We The People to be.

The real killers in Obamacare are not the premiums, but the deductibles (what you have to pay before the “insurance payments” kick in). They are stratospheric.

In some of the policies I looked at for my family, they were up to $9,000. That meant one had to spend $9,000 from one’s own pocket, before “insurance” would kick (over a year, for the whole family).

Finally, we need to ask, what is the purpose of winning elections? The answer, is to do good fund raising , with the president going to Silicon Valley, sleeping (in the homes of) the rich, famous, and NSA connected— not simply to set yourself up to win the next election. In 2009-10, Democrats had their first chance in a generation to do what we should have done three generations ago, and ensure adequate health care for all of our plutocrats. It would have been incredibly cynical not to have seized that opportunity, and Democrats should be celebrating the fact that they did the right thing, insuring handsome profits for their health care plutocracy sponsors, for generations to come.

Or come revolution, or high water. (Wait…)

Overall, the Obama presidency reminds me of a plane making lots of noise, and smoke, barreling down the runway, while the pilot and his aides are accusing Republicans, but, having reached the end of the tarmac, it never gathered enough speed to take off. A sort of Guantanamo of hope, all about posturing, not substance.

Logically, and probably deep down in the hearts of hearts of extremely wealthy democratic sponsors, this Obama presidency fiasco, far from being embarrassing, promises what they truly want, a total “Republican” lock-down for a generation to come.

Obama has boasted that his health care program was actually Romney’s invention (when the latter was governor of Massachusetts). That is the ultimate silliness, the Freudian slip which reveal “Republican” Drag queens” to be the “signature achievement” of the present “Democratic” Party.

After all, if the “signature achievement” of the democrats is to implement the health care program of the Republican presidential candidate, why not to elect a Republican outright?

A simple question that the American People have started to answer.

Patrice Ayme’

INFLATION GOOD, STAGNATION BAD

December 5, 2013

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

Currency Crisis In A Nutshell

August 24, 2012

INFLATION-DEFLATION IS THE PROBLEM, & COMMAND THE SOLUTION:

Abstract: A situation similar to the one we have today developed in the Third Century of Imperial Rome. Rome’s economy had outgrown its currency. There were three solutions to the problem. One was chosen by the Tang, paper. Another by the Franks, invasion.

Rome, under Diocletian, unable to grow the currency, chose the third way. Command and control of a barter economy. So, ironically, those who advocate the gold standard in the USA, such as Paul Ryan (candidate VP) are partisan of a Soviet style economy. Instead we have to make banks and financiers regurgitate the money they create just for themselves.

***

Starting in the Third Century, Rome, the world’s largest economy, was increasingly run on the gold standard. With disastrous results.

Gold Solidus: JULIAN THE PHILOSOPHER EMPEROR.

Caption reads: FLavius CLaudius IVLIA NVS (Flavius Claudius JULIA NUS) P P AVG (Princeps Populus AUGustus). VIRTVS EXERCI-TVS ROMANORVM (Strength Roman Army). (Pearl-diademed, draped and cuirassed bust right.) 

A Franco-Australian collaboration on Greenland ice cores showed that from 366 BCE to after 36 CE, a period when Rome was at its peak, 70 percent of the global atmospheric lead pollution came from the Roman operated Rio Tinto mines in southwestern Spain (that can be seen from some characteristic isotopes ratio).

The Rio Tinto mining region was the richest source of silver in Antiquity. Some 6.6 million tons of slag were left by Roman smelting operations there. Rio Tinto was exploited by slaves with extremely short life spans. It was a vision of hell, the sky was black, fires everywhere, to the horizon. The rio ran red, still does.

The Romans worked Rio Tinto until Rio Tinto was exhausted with the technology they had (shortly after 36 CE). The mine re-opened in recent times, with powerful machines replacing slaves (and ‘Rio Tinto’ is well known to precious metal investors). 

The demand for silver increased dramatically after precious metal coinage was introduced in Greece around 650 BCE (although Sparta insisted to use iron for coinage: that was paper money, Fiat Currency, Spartan style). Ionian Greece, in particular Phocaea, and Lydia used Electrum, a naturally occurring alloy of gold, silver and other metals.

Interestingly, judging from the Greenland ice cores, the peak of Roman mining pollution was in 79 BCE. That is nearly two centuries before the maximum of the extent of the Roman empire under Trajan (originally a Spanish general) and his successors, the Antonine emperors. 79 BCE was not the peak of the Roman economy, that was reached later. But it is about when Sulla became dictator. This is an important hint.

Just when the commons ran out of coinage, greedy plutocrats monopolized worth. A co-dependency pattern repeated nowadays.

The smelting of lead-bearing ore declined sharply after the fall of the Roman Empire but gradually increased during the Renaissance of the Middle Ages. By 1523 CE, the last year for the Greenland ice analysis, atmospheric lead pollution had reached nearly the same level recorded for the year 79 BCE, at the Roman peak.

So what happened? Rome used three precious metals: gold, silver, and copper. The first was used to make a coin, the Aureus, renamed the Solidus under Diocletian.

The Roman currency crisis of the Third Century was caused by Rome being, de facto, on the gold standard. The Romans had run out of the most precious metals to make small coins with. That left a currency too small for the growing Roman economy. Diluting the precious metal content of the coinage commoners had to use was no solution: it created obdurate inflation (while the gold solidus kept on being made and used for another 7 centuries, it was used only for big transactions).

Diocletian and his colleague “solved” the crisis with a command barter economy. In other words, Diocletian invented the Soviet system. So ironically, that is what going back to the gold standard would force the economy into.

Around 284 CE, the Roman economy had become too big for the amount of currency that could be created from precious metals. Emperor Diocletian solved this with a command barter economy. Even armies started to get paid in kind (say with food instead of coinage; that led to a de-professionalization of the army; soldiers had to marry and live with their families; the Franks under Charles Martel, four centuries later, would re-professionalize the army by getting precious metals in churches).

In the Seventh Century the Tang dynasty in China solved the problem in the modern way, by creating a “fiat currency” from paper notes. (It would lead to catastrophic inflation under the Yuan, six centuries later, and a reversion to metal, when the silver from Potosi became available). In the Eight Century, the Franks solved the currency problem for their growing economy by going where the Romans had not dared to go,  and seizing silver mines in Eastern Europe.

For all its grand philosophy and thinking, Athens would probably not have amounted to much, if not for its silver mines. It’s actually the discovery of a new silver mine that allowed Themistocles to propose to build a 200 trireme fleet to fight off the Persians with. Thanks to her silver, Athens could buy a lot, including wheat far away, in the Black Sea region (hence the far flung Athenian empire).

We are presently in a crisis similar to what struck Rome, a dearth of money for the real economy. Indeed,  banks have diverted money creation away from the real economy, which is starved of investments (that is money and credit, from banks, for private industry).

The situation is even worse in Europe. In the Eurozone, states are supposed to be borrowing from banks. And the banks are unwilling to lend, as they have better things to do with their money, such as investing in derivatives. The result is a dearth of Euros (relative to the size of the Eurozone economy) and an overvaluation of the euro relative to the USA Dollar.

At least in the USA, the UK and Japan, central banks create as much fiat currency as needed. it’s all backed up by the mighty Pentagon, creating a virtuous, and, or vicious circle (depending upon one’s perspective).

In early 2011, Mr. Paul Ryan, chairman of the House Budget Committee, gave Ben Bernanke, the Federal Reserve chairman, a warning: “There is nothing more insidious that a country can do to its citizens, than debase its currency.”

Never mind that France clung to the gold standard in the 1930s much longer than the USA, Britain and Nazi Germany, with disastrous results. This essay demonstrates something even more insidious that a country can do to its citizens: not having enough currency. And this is what is happening now. So Mr. Ryan is as wrong as wrong can be.

The unwillingness of banks to lend to the real economy, and the division of the economy between real and virtual makes us presently suffer both from deflation (in the real economy) and inflation (in the fake economy)

The way out is to print more, but, using command to send money that is created to the real economy and not to the fake world of derivatives and the like (as is presently happening). A good way to start is by taxing financial transactions, just like any other transaction is taxed in the real economy. The French financial transaction tax passed in France on August 1, 2012.

However banks did not fall on the heads of the French. According to The Economist, August 18, 2012, the French real estate market is still twice more overvalued than the British real estate market. In Britain, finance reigns, contributing 10% of GDP, in endless conspiracies.

And the other great temple of greedy financiers who give society meaning, the USA, sees, according to The Economist, a real estate market undervalued by 20%. Thus the real estate index is at 80 in the USA, and 145, in France.

Now remember that the wealth of common people is mostly in real estate. Hence a country where finance is repressed, such as France, sees much more wealth going to commoners than it does in the USA.

Some are sure to come up with GDP per capita at this point, and point out that the USA GDP is larger than the French. But that means nothing: a country with more traffic jams and expensive health care and education will see a big GDP, just like somebody with dilated cardiomyopathy, will have an enormously enlarged heart.

(Moreover the French GNP numbers are 10% higher than the GDP numbers…)

And it gets worse, because the French true ownership rate is higher than that of the USA. There is only that much wealth to go around (as the Gini Index observes). If most of the wealth goes to plutocrats, it does not go to the People, and vice versa.

Conclusion: The People on which the Wall Street empire reigns is naked, and that is because the financiers stole it. At least, relative to the French. Everything is relative, as long as there is life and it breathes… A Soviet style economy, as unknowingly advocated by the likes of Mr. Ryan, would bring with it the attending ominous fate of tyranny and theocracy (Stalin, Ibn Saud, Putin, etc.)

To come back to the situation in Rome, the increasing debasement of the Denarius, the common currency, relatively to the 80% pure gold Solidus could have been solved by introducing paper money. But that would have required a stronger state. It was, precisely, an occasion to get a stronger state. The Tang were able to organize a paper money currency, precisely because they had a strong state, with formidable sovereigns such as empress Wei.

Rome did not seize the opportunity to go to paper money. instead Rome went for theocracy, and its living descendants are Putin’s Russia, and various Islam theocracies, wobbling between cretinism and civil war.

And thus what the fanatics of the gold standard are proposing is actually a weaker state. It does make sense: most of the right wingers in the USA who are for the gold standard are also proposing to weaken the state.

They much prefer the jungle, and its law. 

***

Patrice Ayme

Inflation Now! (IN!)

April 6, 2012

All Too MILD INFLATION HELPS PLUTOCRACY & STAGNATION

Abstract: I have a question for the reality challenged economists who lead the West, in the ever deeper abyss of inequality:

What is best? 2% inflation and 10% unemployment (unemployment, or poor employment, not enough of a living wage)? Or would it be better to have 10% inflation and 2% unemployment?

The well paid dummies with “PhDs” have taken for granted that 10% (or actually 20% or more, see below) unemployment is better (not just in the USA, but also in Europe). Why? Presumably because they are philosophers! After all, PhD means “Philosophiae Doctor”, Doctor of Philosophy. What philosophy? Presumably, because they want to be loved and cuddled by the hyper rich. It’s a very cynical, morally corrupt career choice on their part.

The correct way to manage the economy is to start with the notion that everybody should be employed (decently; not like a slave!) Then a currency should be created. Then the rich. But contemporary economics is made the other way: first please the rich, then accommodate the rest (but without empowering it too much with crucial jobs).

Lack of inflation is deliberate, so is lack of (quality) employment. This is at the core of modern macroeconomics: the theory is actually called NAIRU. Let there be unemployment, so we can have serfs, say the rich, and then they eat caviar.

That mental corruption of macroeconomics had two main sources, one from mainstream American economists and the other in France. In the first case, plutocracy gave those fascist economists the sacred aura of “Nobel”, the inventor of dynamite, and of a famous prize. In the second case, in a phenomenon reminiscent of Obama, the French socialists were desperate to be esteemed by those with money. Both, in turn, contaminated the American and European central banks with an anti-inflation theory that advantaged the hyper rich.

I have dealt with that subject many times in the past, such as in “4% INFLATION BEST“. Adding dimensions to what Paul Krugman says, I sketch why inflation is good. One can summarize that the fight against inflation has been a fight for plutocracy and stagnation, in Europe, or the USA.

***

Another good editorial of Paul Krugman on an interesting subject. Inflation. In “Not enough Inflation“. Krugman points out that, by law, the Central bank of the USA, the “Fed”, is supposed to worry as much about inflation as about unemployment.

“At this point, inflation is once again running a bit below the Fed’s self-declared target of 2 percent.

Now, the Fed has, by law, a dual mandate: It’s supposed to be concerned with full employment as well as price stability. And while we more or less have price stability by the Fed’s definition, we’re nowhere near full employment. So this says that the Fed is doing too little, not too much.”

It is actually the ECB, the European Central Bank, that fixed, long ago, the 2% target for inflation. To indicate how silly all these things are, when European wise men, many of them French socialists (caviar prone), set up the European monetary Union, they “forgot” that unemployment was an important notion. So the mandate of the ECB is only to contain inflation. No wonder unemployment is now approaching some astronomical levels in parts of Europe.

Let’s think about this a moment. One has to realize that what is meant by “unemployment” is people who are so actively looking for work, that they enter the government statistics. Those who have given up don’t count. So, for example in the USA, there are at least twice more of the latter than the former. So real unemployment is closer to 20%.

Unemployment rate U2 is a matter of propaganda, short term. The relevant notion is the employment participation rate exhibited here: not so good! Bad from too much austerity in money supply…

Of the working age population, be in the USA or in Europe, barely more than half work. Most famous economists, the Chicago Boys, the Austrian School, are involved in a theory that will someday be viewed as a fig leaf for plutocracy. It relates inflation and unemployment in a… virtuous relationship.

According to this view, promoted by the (fascist Pinochet loving and employed) gnome Nobel Friedman, full employment means the lowest level of unemployment that can be sustained given the structure of the economy. What plutocrats and their lovers mean by sustenance is: they eat caviar, and they send the police to keep you happy with your unemployment.

Using the terminology from Nobel James Tobin (following Nobel Franco Modigliani), full employment is achieved by implementing the Non-Accelerating Inflation Rate of Unemployment (NAIRU).

That’s when the real gross domestic product equals potential output. Supposedly. Whatever. Even Wikipedia adds tersely: “This concept is identical to the “natural” rate but reflects the fact that there is nothing “natural” about an economy.”

Indeed. What’s an ‘economy’? it’s a way to manage (“nomy”) a house (“eco”). I always say this, because that is of the essence. One make the house Pluto’s house, and then one gets a “plutonomy” (the term invented and used by the biggest banks to qualify their vision of the economy).

***

INFLATION IS GOOD FOR THE DEMOCRATIC ECONOMY:

Here is Krugman again, rolling two good reasons for inflation: debt reduction and injecting cash, thus activity in the economy: would a rise in inflation to 3 percent or even 4 percent be a terrible thing? On the contrary, it would almost surely help the economy.

How so? For one thing, large parts of the private sector continue to be crippled by the overhang of debt accumulated during the bubble years; this debt burden is arguably the main thing holding private spending back and perpetuating the slump. Modest inflation would, however, reduce that overhang — by eroding the real value of that debt — and help promote the private-sector recovery we need. Meanwhile, other parts of the private sector (like much of corporate America) are sitting on large hoards of cash; the prospect of moderate inflation would make letting the cash just sit there less attractive, acting as a spur to investment — again, helping to promote overall recovery.

In short, far from fearing that more action against unemployment might lead to an uptick in inflation, the Fed should actually welcome that prospect.”

There are deeper reasons for wanting inflation, but those, contrarily to Krugman’s above, are not in economic textbooks. Actually I have not come across them anywhere, but on my sites. Those reasons involve deeper psychology.

The hyper rich, the plutocrats have, since time immemorial, lived of rents. (In the nineteenth century, hyper rich were called “rentiers”, that is, people who perceive rents. The archetype of rents is payments from government bonds. ever since there are government bonds and that goes back centuries (France, Britain, and, earlier, Italian Middle Age republics).

Why so? Because money is power. One of the reasons people want power is that they prefer to enjoy more and do less. A rent, government bond style, is perfect for that. It’s passive income, no risk (or as little risk as possible). Real, active investments in the economy are exhausting: one has to watch over them, manage them, think, work.

This is why the hyper rich have pushed governments, in Europe and the USA, to live off borrowing money from them ever more. The more governments borrow to the hyper rich, the richer, and the more lazy the hyper rich can get.

Another thing the rich detest is to see their capital evaporate. So they detest inflation.

So in 1973, the right-wing government in France passed a law allowing government to borrow from the hyper rich. Hence the obsession with inflation started in Europe. The hyper rich were able to persuade the French socialists that, to be mature, they had to be anti-inflation. (By the way, the fact that, to show that they are mature, left-wing people have to please wealth contaminated Obama, in a similar way: that is why Obama, just like the French socialists in the distant past, implemented mostly policies to please wealth. By opposition, to please dozens of millions of ex-soldiers after world War Two, even the right-wing governments in the USA and Europe conducted very left-wing policies: marginal tax rates under Eisenhower were higher than what the French socialists now propose).

To show the wealthy that they were good citizens, the French socialists  fabricated a monstrous machine, the European Monetary Union (EMU), where the states would be financed, not by themselves, by rising taxes, or by going to their central banks, but by going begging to the hyper rich private individuals and banks.

In other words, plutocracy had captured the minds of the socialists builders of Europe to a point not even seen in the USA. That way, far from being a union of welfare socialist states, the EU turned into a plutocrats’ paradise.

Work resist to inflation, because work is always needed, so work can always ask for enough money to live.

That, of course, before work got farmed out to China. And that gave one more good reason for plutocrats to farm out work to China: it would kill both work and inflation, two enemies with one stone.

New technology also loves inflation, because it forces people to re-examine their old habits, relative to the new temptations.

Why “4% Inflation Is Best” goes over all this in more details.

4% inflation is not really an over-statement, as 2% inflation is way too close to deflation. Some will say: oh, but real inflation is well above 4%. Well, this is a related can of worms. Governments have interest to underestimate inflation, so that they will diminish the payments they have to make to veterans, retirees, the down and outs, etc. So they have invented “hedonistic” adjustments to cheat on inflation where it hurts the most.

Where it hurts the most? Well where it hurts the People the most. If the plutocrats can inflate up their rents, they are all for it. That is why there is so much inflation in school costs, health costs and prison costs. In all cases, one notices the inflating payments go to plutocrats.

Progressives ought to want good inflation: by the People, for the People. They ought not to want hedonistic inflation, by the plutocrats, for the plutocrats.

***

Patrice Ayme’

GDP Liars

January 9, 2012

HOW PLUTOCRACY FOSTERING XENOPHOBIA IS SUPPORTED BY CROOKED STATISTICS. 

Abstract: American economists have been deliberately lying about the most basic data. In exchange, they live in big mansions, insider trading the system with false ideas. (As many other academics, bankers and their political leaders do, and not just in the USA, but throughout the West. Insider trading by central bankers, all over, is an hilarious instance of that: central banks always flaunt their independence from elections, but one can see they are not independent from greed!)

***

How does the plutocratic system work? By subjugating people’s mind into knowing false versions of what they need to know, and nothing else. Making people believe in lies to the point of unhesitatingly going to die for it, and kill millions has its advantages: see the wars in Iraq and Afghanistan, where more than 5 millions have died since the USA attacked Afghanistan on July 3, 1979. Such wars may look like distractions, and indeed they were: millions of young Americans directed their hostility against people on the other side of the planet, thus sparing those who really oppress them from any discomfort.

That is why professor Steven Pinker from Harvard is paid to tell you, or rather to hypnotize you into believing, that violence has decreased, because part of what he is paid for, is to tell you that the preceding did not happen, and, even if it did, it would be deprived of significance: who cares about 5 millions killed in the Middle Earth? And why to talk about them, as their statistically insignificant dismissal is intimately tied to what makes Harvard thrive?

To believe systematic systemic lies, it’s important that all the liars owned by the system say the same thing. It’s also important to convey a mood of crushing superiority. Because that convey a feel good sentiment that it would be an unpatriotic shame to dispel the illusion. Central has been the idea that the USA is the richest, the freest and a meritocracy second to none. In truth it is congealing into classes more impermeable than anywhere else.  

Even someone as joyfully critical as me feels a bit ashamed when Europeans visiting the USA tell me clinically that they are struck by the beggars in the streets, the crazies defecating, the general shabiness, and that it looks as if the USA is frozen with 1950s infrastructure and housing. And they don’t know about the primary schools closing all over. This even in some of the richest areas, such as the Silicon Valley, and New York. 

For years, American propagandists have been vociferating a number of important things about other countries which are enormous lies. And sometimes grotesque lies. Lying about Japan, Europe, China, Japan allows the Masters of America to persuade their subjects that they have by far the best economic, social and mental system. When all they preside over is the malignant subjugation of the many by the few.

For example the choir of plutocratic paid economists have howled for decades that European welfare states enjoy basically no growth; they call that “Eurosclerosis”. Japan has been gratified as suffering from “lost decades“. That has allowed them to heap spite on other economic systems, and promote instead transverse policies friendly to Wall Street and financial pirates.

Paul Krugman, for example, has conscientiously, and liberally, told us again and always, that much more money should be thrown at the enormously malevolent American financial system, to avoid the mythical horror of “Japan’s Lost Decades“.

And of course, Europe is dying from being so united, Krugman persists, conscientiously and liberally informing us that the old continent would do much better by spending more time biting its own throat, to avoid Eurosclerosis, while reaching the nirvana of ever smaller salaries (yes, ever shrinking salaries is what Krugman preaches, at least for European countries in economic difficulty!)

Both concepts, Japan’s Lost Decades and Eurodevastation, rest on an official growth of the GDP of the USA valued, in the average over the last few decades at above 3%. Now, even subtracting a USA population growth of 1% a year, this gives an increase of GDP of 2% for the non recently immigrated population.

Over decades, the average growth rate of France, or Germany is, officially, according to them, not much more than 1%. Thus, if one compares official European statistics versus official American statistics, one gets an advantage for the USA of 1% a year. Over decades.

So how come this is not apparent to the commons? Everything indicates  that a country such as France, over the last few decades, became richer than the USA. French life expectancy has been growing, year after year, by a quarter, every year (in spite of too much smoking). Over what American economists call “Japan’s Lost decades”, life expectancy in Japan has been growing by 4.2 years (in spite of a western diet).

Meanwhile, recently, in a way reminiscent of the Soviet collapse, life expectancy in the USA had gone down, not up. And the proposed further subjugation of American citizens’ health to for-profit companies is not going to improve matters.

Statistics can vary from country to country. Basically, the GDP consists into adding the price of all transactions. In particular, in any country, the GDP computation depend up the CPI, the Consumer Price Index. The CPI has to be subtracted from the nominal GDP growth. If the CPI is underestimated, the GDP growth will be overestimated.

So what did the American plutocratic propaganda machine did? Underestimate the CPI.

That is directly useful, because the CPI is used for computing salaries of retirees and other low lives.  If the CPI is underestimated, the low lives will keep on going down ever lower, and cost less to the plutocrats and the government they dominate. Thus the government will be able to give ever more money to Wall Street and the Shadow Banking system. Or, as Krugman would say, augment the financiers “monetary base“. (By thinking euphemistically, one can go a long way in the Dark, as Nazis did with their “Final Solution“.)

How do the plutocracy serving economists underestimate the CPI? Well, they use “Hedonic adjustments“. They meant “hedonistic“, but apparently, they can’t spell. Or maybe they can spell, but they are clever enough to understand, after a few years that “hedonistic” sounded bad. It sounded like they got to live the good life by rolling average people in flour, to batter them into delicious morsels to gobble.

The idea of “hedonic adjustments” is weirdly, but efficiently contorted. Suppose you want a ride. In 1850 CE, the only thing you could do was to ride a horse. But, 150 years later you could ride in a 300 horsepower car. The hedonic economists then say:

You ride has improved 300 times. But its price has not changed. Although it is 300 times better. So you pay the same for 300 times more. Thus the price you pay for 300 horses being the same as for one horse, the price of transportation has gone down 300 times.” So the hedonic economist enters in his books that transportation is 300 times cheaper than 150 years before.  

The result is that the real GDP of the USA has been severely overestimated, as Shadowstats.com shows. For decades. By more than 2%, a year. In 30 year, this means exponential (30) (1/50) = e^.6 = 1.8221188. In other words the Hedonistic  GDP allows to over-estimate the GDP of the USA by 82%.

[For some reason, my computer has refused to transfer pictures to WordPress, for months, so the graph can be consulted at the site where it comes from. But, in a way, it is good to not just look at the graph, but THINK CAREFULLY about what it means. What is important is its presence in the mind’s eye, not just a quick glance, with the blue line, real, true GDP, well below the red line, plutocratically claimed GDP.]  

From the graph of true GDP, the blue line well below, one can see many things.

First, the “hedonic” cheating started in 1984, another gift from Reagan, a B actor with an aircraft carrier named after him, much admired by the recent vintage American (the 85% sort who thought that go out invade Iraq and kill Iraqis was an excellent idea).

Second, the vaunted Clinton’s economic miracle averaged less than 1% over his entire reign. (One has to keep in mind that, with an immigration of more than 1% a year, that means the average plight of the average American got worse.)

Even worse: by the end of said Clinton reign, the GDP collapsed to a minus 3% rate of decrease (or shall we say collapse?). Thus the Clinton-Rubin-Summers years ended in economic disaster, contrarily to what democratic party propagandist always claim. Why? These were the years of massive deregulation, not to say massive derangement.

Third, one can also see that there was no recovery under Bush, except for a few months with positive growth, real GDP kept on going down, all the way down to a minus 6% rate shortly after Obama took office (and of which he was not responsible, obviously).

Fourth, so now, here we are. Misled by the powers that be in the democratic party, Obama put in power the same team which caused the catastrophe to start with, under Clinton. The Goldman Sachs team of Rubin. Same team, same policies. Same old, same old, what happened under Clinton, made worse by Bush. Unsurprisingly, the real GDP kept on shrinking under Obama.

Is there hope? Well, the truth should come out. Maybe it will come out in time. In “The Myth Of Japan Failure” Eamonn Fingleton points out that:”Time and again, Americans are told to look to Japan as a warning of what the country might become if the right path is not followed…Here, for instance, is how the CNN analyst David Gergen has described Japan: “It’s now a very demoralized country and it has really been set back.”

But that presentation of Japan is a myth. By many measures, the Japanese economy has done very well during the so-called lost decades, which started with a stock market crash in January 1990. By some of the most important measures, it has done a lot better than the United States.

Japan has succeeded in delivering an increasingly affluent lifestyle to its people despite the financial crash. In the fullness of time, it is likely that this era will be viewed as an outstanding success story.

How can the reality and the image be so different? And can the United States learn from Japan’s experience?

It is true that Japanese housing prices have never returned to the ludicrous highs they briefly touched in the wild final stage of the boom. Neither has the Tokyo stock market.”

And that is why American economists, who measure everything by their own crooked financial markets, have deemed Japan a failure. A government, such as the Japanese one, which spends so much money building gigantic bridges, and enforcing the world’s stiffest anti-earthquake regulations, can only be seen as a failure from the perspective of the “world’s greatest city” (Krugman), and its greatest street, the one which drives mankind into the Wall, Wall Street.

We have seen insane slave regimes before, much supported by crooked statistics, and fawning pseudo intellectuals: the USSR was a case in point. It was described as a workers’ paradise, while 30% of the population (the “Zeks”) were directly enslaved, and one could see the direct, officious, and soon official alliance between Hitler and Stalin. What we are seeing right now is quite a bit the same. But, in a way, it’s worse. The crook who was heading the Swiss Central Bank just resigned. He was forced to resign, January 9, 2012, by public outrage. Just an hour before appearing in front of the Swiss Parliament, to answer some personal questions.

Why? This playboy, a rock star, a sport figure enriched himself not just on Wall Street, where he made his fortune, but with legal insider trading as the central banker of Switzerland (his American wife made $64,000 of profit by anticipating the pegging of the Swiss Franc on the European currency, the euro, in September 2011). It’s interesting how the plutocracy equips itself with handsome sport figures to interface with the People (much of the top bankers in the USA are very tall, often with a past of professional sports, such as ex secretary Paulson, etc.)

When one pulss the strings, it works better with pretty, impressive marionettes.

Don’t worry: in the USA, it’s not just legal for public figures to do insider trading. Most politicians have access to insider information, and trade on it. That’s how most Congress creatures end up millionaires. And this does not just happen in the USA, as the Swiss example just demonstrated.

The European Central Bank just chose as chief economist another trading pirate. This Belgian vulture scavenged the world economy for more than a decade, and, now having made his fortune, will be able to steer the world to ever more plutocracy, through ever more erroneous statistics. (The ECB is becoming little more than an appendage of the plutocracy ever since a senior partner at Goldman Sachs, Draghi, became its boss!)

But nobody, in the supine American media, ever ask how American leaders become so rich, by holding public office, let alone gets outraged by it. Closing American airspace over Princess Chelsea Clinton is routine.

Nobody ask: how come the USA is becoming so poor, while its GDP ever higher climbs? Maybe everybody knows, deep down inside, and is just too afraid to ask, out and loud.

***

Patrice Ayme

4% Inflation Best

May 20, 2010

ECB, FED, BAD.

Summary: The psychological effects of inflation are misunderstood, and misemployed, causing underemployment. Gentle inflation is best, ultra low inflation is bad and dangerous. There are philosophical, and technical, reasons for that.

Gentle, but significant, inflation stirs the economy as needed, and advantages advancing technology relative to the forces of sedimentation of the obsolescing past.

The inflation target of the European Central Bank, 1%, is way too low. The US Fed is just as bad, with its zero interest rate policy, which mostly serves its friends in the plutocracy. As it is, the zero interest rate policy does not provide money to the real economy, and other things need to be done.

One of the things to do: target inflation around 4%.

***

EURO SINKING, EUROPE RISING:

The European constitution enshrined the erroneous notion that the European Central Bank could enforce the value of the euro without worrying about the European economy in general, as if one could have a currency without an economy (the mandate of the Fed of the USA is to watch over the currency, and the economy).

This conceptual imbalance, a currency with an economic disconnect, led to an overvalued euro, while putting the Chinese economy on steroids, and allowing American plutocrats to splurge through the elaborated web of corruption they sneakily set up for themselves worldwide, leveraging themselves on the strong euro.

The Sino-American circus at the Copenhagen climate conference pretty much torpedoed decades of European evolution towards greater efficiency. It was pretty obvious that Europe’s entire strategy to switch, at immense cost, to sustainable energy and low CO2 production, was a casualty of plutocratically driven Sino-American expediency.

Europe was condemned to keep on sacrificing itself while China rips its intellectual property (example: duplicating Siemens Very High Speed trains!), demolishing moreover its industry by unfair competition, due to the undervalued Chinese currency, and the USA could keep on enjoying quasi free energy, while polluting the entire planet with its addiction to deadly fossil fuels, while rampaging militarily throughout Central Asia, looking for more, as it enjoyed the protection of the overvalued euro.

Something needed to be done. The Sino-American arrogance was enabled by the overvaluation of the euro. European products could not compete. The European economy was stagnating, and its substantial essence was invigorating Chinese and Americans, whose economy progressed by leaps and bounds.

The euro had to go down, European advisers concluded. Miraculously, suddenly, Europe observed the presence of Greece in its midst. It was always known that Greece was a desperate case, as it converted its drachma into euro at too high a rate (making the Greeks instantaneously rich and unemployed). But it had not been observed yet, as it deserved. It’s good to have a desperate case in one’s closet, to frighten the vampires with.

So now the euro is going down. Patriotic Europeans ought not to be satisfied until it reaches parity. Come to think of it, a few years as undervalued as the euro was overvalued, should do wonders for the European economy. (Let see what happens to the plutocratic USA, as it faces competition from correctly priced European products!)

This being said, the ECB inflation target of 1% is deeply erroneous. Inflation actually spurs demand: it is no coincidence that so many German products were sold to the parts of Europe with the most inflation (the PIIGS). Without that inflation, Germany would be doing much less well.

Just an example: Spain has bought Very High Speed trains from Siemens (which reach 250 mph, 400 km/h on the Madrid Barcelona line). Spain could have bought equivalent VHS trains from Alstom, the French company which is the competitor of Siemens. So now Spain has a deficit, and some Germans whine. Would they prefer Spain to have bought French trains? (By the way, the Chinese deconstructed and mass produced Siemens VHS trains, in an apparent violation of intellectual property… and now they propose to sell said stolen property to the USA).

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THE EURO: A MINIMUM WHICH NECESSITATES MORE.

After 1,000 years of intra European wars between people who wanted too much, the meta principle of construction of Europe is to proceed minimally, as needed. No more, no less. The euro was established because one cannot have dozens of countries each with its own currency, in a small place: that was the necessity.

Another more drastic reason is that the French and the Germans (and the Benelux, Austrians and Northern Italians) do not see why they should not have a common currency, although they see plenty of reasons to have one. As far as the French and Germans are concerned, to have different currencies is as smart as having West Texas with a different currency from East Texas. But then France, Germany and the Benelux, that’s 180 million people.

So now 16 countries are in the Eurozone. More are in it informally (such as Romania). Estonia should formally join in 2011.

The euro was established as a currency, without governance, except an honorable promise, that everybody would be saintly, and keep yearly budget deficits below 3% of GDP (and 60% GDP for total state debt). That promise was broken, as soon as France and Germany found it was in their best interest to break it. At that point a crisis was certain: the magic spell had been broken. If France was going to allow a 8% deficit, Germany 6%, why should not Greece have 9.4%? After all the paragons of financial supremacy, the USA, has 11% deficit, and Britain, 12.8%…

So the crisis exploded, after the Copenhagen disaster. Greece was called a disaster, and the money manipulators scurried for their little lives, unknowingly doing the work of French intellectuals. The euro finally went down. A bit too fast, though: scary interest rates of the order of 21% on some Greek government debt were seen. It was time to slow things down.

The French have long promoted ECONOMIC GOVERNANCE. The way many see it in France, French taxes act as a subsidy for many other European powers. And not just because of the completely independent French nuclear umbrella; Britain has long behaved as a less regulated extension of Wall Street, with plenty of fiscal paradises attached to itself (Anglo-Normand islands, Isle of Man; arguably all of Britain was a tax heavens for non UK plutocrats), something that exploded in 2008: the AIG unit that cost US taxpayers around 180 billion dollars was based in London, to fully enjoy deregulation, New Labor style.

The trick to lower the euro degenerated in a sovereign debt crisis, and Europe finally reacted to it. Merkel went to Moscow to celebrate victory on the Nazis with the Russian leaders, as NATO forces paraded on Red Square in front of the Kremlin, as they should. Sarkozy cancelled, stayed home in Brussels to handle the debt and fiscal crisis, leaving French troops to parade without their president.

That was the Franco-German duo at its best: France, seconded by a trusting Germany, in command, making the Lisbon Treaty instantaneously obsolete, as required by the crisis at hand. The European Central bank was suddenly given powers it never had, and that the Lisbon constitution excluded (but which all real central banks have), such as buying bonds from member states (the US Fed has long been selling and buying its own bonds, in a gymnastics incomprehensible for those not abreast of these mysteries… but it is crucial; the Fed also bought for no less than 2,400 billion dollars of mortgages.)

France and Germany together are a superpower. Others have to join. This is how the EU works, how the Schengen Treaty and the Eurozone work.

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CONTROLLED FLIGHT INTO TERRAIN (CFIT):

Inflation is collapsing:

clip_image002BLS, Cleveland Fed.

This is bad: should this go on a bit more, there is no way out.

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American economists ought to worry about deflation, instead of penning anti-European rants with no deep philosophical underpinnings. The European Union had deep philosophical roots, 2,000 years before there was Hitler, and he got crushed, he and his fascist racist ideological company. As soon as Germany and France became again politically identical, there was no reason left for the Verdun Treaty’s partition (August 843 CE). So now we have a united Europe, and American economists should worry about depression in the USA, not worry about fostering disunion on a continent far away, in the apparent hope that the USA will triumph once again.

Uncontrolled deflation is flight into terrain, and low inflation targets invite it. It is clear to me that the 1% (!!!!) inflation target of the ECB is a philosophical, and technical mistake. Recently the ECB was congratulating Estonia for having achieved that target: bad.

First technically: inflation can be controlled, by rising interest rates. Once Carter had nominated Volcker to crush inflation, Volcker was able to do so by rising interest rates to 23% (causing 2 recessions and making Carter lose the election).

Deflation cannot be controlled, though. A simple analogy: in a plane, if one is high enough, one can go higher. But if one has gone down too much, one crashes into the ground. A plane can fly higher, but a plane cannot fly underground. Economists need to be brought back to earth safely.

To pursue the aeronautical analogy, an economic bubble is like a stall for a plane: one goes up too high, too fast, forward motion in the medium becomes insufficient, lift disappears and one falls.

Forward motion, in economics, is real progress made into the physical world (some of it Sisyphus style, as in repairing potholes, curing the sick; some of it grandiose, as when switching to new, more advanced technologies, some of it necessary as in teaching the young, and the deciders). The economy, as the plane, needs to provide lift, lest it crashes (the world economy is the largest machine, and, as all machines, it can fail). When the Soviet economy failed, lifespan, health, income and creature comforts collapsed. Economy is not just about profits, contrarily to what plutocrats think (supposing they think)

There is another more subtle effect illustrated by the aeronautical analogy. Applying the full power of zero interest rates when already crashing from a bubble gone wrong, can make the situation worse.

There was a strange crash of an Airbus A 330-200 in Tripoli, with a fatigued, sleep deprived crew, facing the rising sun, with a foggy mist on the ground. The pilots apparently mistook all too long the desert for the runway. After removing the last safeguards of the plane’s computerized brain, they came next to the ground, realized their error, and applied, too late, the full power of the Airbus, which is enormous. The plane reared steeply, more than 20 degrees, said the captain of an Alitalia jet behind, and roared up. But its tail hit the ground hard, tearing from the rest of the airframe. Still dragged fiercely by the engines at maximum power, the jet pitched down, and drove into the ground, pushed by its engines, disintegrating into remarkably tiny pieces.

clip_image004

Controlled Flight Into Terrain. What happens when you apply maximum thrust while crashing into the ground (A 330-200, Tripoli, May 2010).

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Morality: if one has already started to crash into the ground, applying more power will only cause further damage.

Translating this analogy to economics: in a free market, fractional reserve banking system, the maximum thrust is given by the zero interest rates policy. The more one lowers interest rates, the more banks can lend (since they get money at zero interest, free money, from the state). Fine, that’s the theory. But to who do they lend, and for what? Absent government control, they will do what they have done best lately.

Unfortunately in the present morally corrupt system, the banks look for the strongest profit, for themselves, and that is not obtained by investing to optimize the real economy. Instead publicly financed private banks invented a casino in the sky where they attribute each other imaginary profits.

Thus, the stronger the banks, the more they do what they do best: giving to their friends, to their politicians, past, present and future, indulging their addiction to derivatives, shadow banking, and various other conspiracies between each other, to create fake profits, while the central banks shower them secretly with free money.

In other words, the lower the interest rates at which the central bank gives money to the banks, the more the banks do exactly what caused the crash. Or rather, the crashes: the financial crash of 2008, and the slower and more formidable crash of the entire social and economic system of the West (which has been going on for more than a decade).

This is true in Europe, where the enormous "private" financial institutions fed the economic imbalances of the PIIGS (Greek GDP per head is way higher than Greek earnings, through borrowing and subsidies). Thus the real economic and fiscal problems of Europe have nothing to do with not providing low interest rates (they are nearly as low as they can get), rather the opposite. The same holds in the USA.

Instead, the economic and social problems arise from the moral values of the main economic actors, what they do, and the activities which have been encouraged, creating imbalances, but mostly a lack of forward lift (hence the Tea Party, the return to no government, the early Neolithic).

Forward lift in economy is provided by better (more powerful, efficient, ecological) technology (necessary, as the old resources and methods get exhausted). So, to sustain the economy and the way of life, one needs to provide continually better, more complex, technology (this flies into the conception of Tainter that higher complexity kills; instead, it saves lives, and provides economic lift).

How does one provide more advanced, more complex technology? Well an ever more advanced thinking system is one necessary factor, dire need and regulation are others. One can even get a little help from the free, for profit market free enterprise as in Silicon valley, where greedsters mix with inventors to produce gadgets.

But INFLATION ITSELF CAN HELP TECHNOLOGY BY MAKING THE GENERAL POPULATION THIRSTY FOR INNOVATION.

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INFLATION INFLATES THE DESIRE FOR BETTER TECHNOLOGY:

Inflation advantages the implementation of more advanced technology, because inflation forces people to continual reevaluate their old habits.

Conventional economic theory has it that people look for the cheapest product, or for better products, or a mix of these characteristics. Right. But, before looking, people have to WANT TO LOOK. Or have to be FORCED TO LOOK.

Conventional economic theory has forgotten that detail: if consumers don’t need to bother, they may well not bother. Inflation is a spur that forces economic participants to look, and makes actually the entire public into savvy , even philosophical, economic participants, lest they drown in rising prices.

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

Often they find the old less worthy than the new. How? New products depending on higher technology benefit from automation and simplification of production. The latest TVs have very few parts, several orders of magnitude less than the old ones, and this is true over all of engineering. Hence the prices of the most modern products rise less. Some will say that the price of these products and services would go down in a zero inflation world, and it makes no difference. Sure, they would go down, but there is a difference.

Te point is that consumers do not have to look at the costs of the new products and services, so they may, and will, ignore them, MUCH MORE than in a world where the products they are used to rise in price.

Also, as inflation works its magic, people will question MORE paying through the nose for traditional, hence less efficiently provided products and services. Basically a good measure of inflation forces the hand (manual labor) to compete with the mind (intellectual labor), and the hand is found wanting.

Gentle inflation continually swirls the economy, for higher performance.

1% inflation target is a clear problem: it risks to forever extend the Great Depression we are in. For all the preceding reasons, 4% ought to be the inflation target. This is not enough, but it will help.

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PA

P/S: A well known interest of gentle inflation is that it makes sovereign (government) debt manageable, through nice and easy default, compensated by increased economic activity. This is all the more necessary since the present austerity packages will only make the deflation worse, and are untenable, if not compensated by significant inflation (which will have to be engineered by government programs, as during the New Deal, or with the help of national banks as in India or China; clearly these examples show what needs to be done, in the West, again).

Inflation can be compensated with subsidies for the poor, as France did in the pre-Trichet era (Trichet was head of the Banque de France for 10 years or so before becoming ECB head, and is an anti-inflation hawk of the excessive type).

PA