Not to word smith, but just make a point that while using the descriptive word "recovery" regarding the economy, I think you should keep in mind that "renewal" or "restoration" are more accurate. So use the word "recovery" but keep "renewal" in mind. Why? Because you are not trying to recover, as in go back to, the position just before the crisis since that erroneous position caused the problem.
For example, people should not hope to recover the economy back to its previous position of relying on phony money on Wall Street, such as complex derivatives and the mortgage "products" that were high wire acts without a net. As I've blogged before I saw first hand that corporate executives have had an attitude of individuals making a killing rather than individuals making a living. Immoral and false monetary tools are simply ways to invent money and give it to the few who are "in on the act."
Meanwhile genuine jobs that create genuine product disappear, are outsourced, or given to immigrants since they are "beneath" the corporate Illuminati.
The economy will not "recover," as in become healthy again, if corporate executives, all the way down to small business owners, do not restore their own view of how the economy should work and succeed, so that the most can be prosperous doing work that is real and of value.
I've written about this before, so I won't repeat myself. But people must change their minds and their hearts about the American dream (and, indeed, the global universal aspiration of just about everyone) to not be only about raising prices and raising incomes and being on the endless hamster wheel. People have been enslaved in this economy so that there is only one way to survive, and that remains precarious too. The answer cannot be just to think only of products that liberate money from people's wallets and call that free market and success.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Sunday, February 15, 2009
Saturday, October 11, 2008
Capitalism/financial crisis tutorial Part 13
Here I will teach you to understand that the definition of "capitalism" is not the stock market.
As I listen to commentators and their analyses and opinions, even the ones I respect make a very fundamental flaw. They mistake one tool of capitalism-the stock market-as actually "being" capitalism. That is not only false but it is dangerous and exactly why the world is in this mess. The stock market is not capitalism. In fact, capitalism can flourish in a country where "stocks" and the 'stock market' were never even invented.
Let me repeat the true definition of genuine capitalism. Capitalism is the selling of surplus goods and services in order to obtain cash. By surplus I mean goods and services that are beyond what an individual or family needs for its own survival (subsistence). Thus a farmer who sells corn beyond what he needs to feed his own family, in order to obtain cash, which he can use ("invest") to buy more goods and services for his family is a capitalist. Thus, if you had a country that was comprised only of people who grew their own food, made their own clothes and built their own homes, and then sold "extra" of whatever they made in order to raise cash by which to obtain other goods and services would be a totally capitalist country.
That simplistic and pure form of capitalist country would be, therefore, a genuinely capitalist country without banks, loans, interest earned or paid, corporations, financial instruments (such as stocks) or the market in which they are bought and sold (the stock market). You can have a totally pure and successful capitalism without a single bank, stock or interest payment in the entire country.
This is one reason that Communists used to call western countries and their people and allies "capitalist tools." They actually correctly saw that the tools that people invented to support their theoretical (but warped) capitalism have taken over, becoming the "definition" of capitalism and smothering the flourishing of genuine, traditional capitalism. In other words, westerners actually think that capitalism is defined by one and only one of its tools, the stock market. Communists were able to laugh at capitalists and make insults based on that truth, without even realizing how right they were, LOL. See, Communists (not to go too far astray on a political tutorial, but bear with this diversion for a second, because it is constructive) actually in their heart of hearts remained in touch with a truth of genuine capitalism that the western capitalists themselves actually forgot and abandoned once they surrendered themselves to "make a killing" capitalism rather than "make a good living" capitalism. The original Communists actually held onto one of the foundational necessities and "ideals" of pure capitalism long after actual capitalists forgot and abandoned it. That is the idea that there is an individually worked but collectively shared mechanism for elevating all people to a good subsistence level, and then creating surplus to raise everyone equally to greater and greater standards of living. Of course Communism is such a disaster that it did the exact opposite of what they "aspired to." But this is why Communism had such a charm for many people, because it correctly observed a fundamental flaw in the advanced forms of "capitalism" that had replaced true fundamental capitalism. Maybe some day I'll blog about where Communism went all wrong, but all you need to do is observe how Russia and China are self correcting the misassumptions and abuses of Communism to understand its flaws.
That's one reason I always had a real giggle over some of the standard insults by Communists. No one, either the insulter or the insulted, realized some awesome insights contained in the insults. Forbes used to tout their motto as "Capitalist Tool," derived from that insult, thinking they were being really clever. The laugh is on them, though, because Forbes, like all westerners, are subservient to "capitalist tools," just like robots who have taken over their makers. So even the great champions of "capitalism" do not realize that they have genuinely and honestly forgotten what true capitalism really is and how to both achieve and maintain it. Everyone, wealthy, middle class or poor, educated or uneducated, thinks that capitalism=stock market. That is totally an error.
The stock market, if one truly understands capitalism and applies the definition that I have provided, is simply one place and one method where "cash is obtained for surplus." Thus, westerners have taken one method and one place where the subsistence guy sells his surplus to obtain cash and now declared that this one market place is capitalism. They no longer even acknowledge the existence of subsistence and surplus nuance (or reality) in the economy, which is the actual definition of capitalism. All they call "capitalism" is the raising (or losing) of cash in the stock market. Ye gads, it is no wonder that both the average person and the so called experts have messed up this economy so badly. Yes, the average person must share blame with the masters of the universe, though I'm not trying to be mean, but if everyone "buys into" a false and greed oriented definition of capitalism, everyone must share the blame when it doesn't work the way it should, and it eventually, like a snake, recoils and bites both the handlers and the supportive bystanders.
Thinking that capitalism equals the stock market is like a person who believes in a fad diet that is comprised of eating one and only one food, every meal, every day. Not only is that in error, but the person who eats only one food forever will suffer illness, breakdown of the body, and death. Likewise, "capitalism" that is comprised of only the "stock market" causes the entire concept and reality of capitalism to become ill, have breakdowns, and, indeed, die.
Whether you own stock or not, each and every American is enabling this "single food" perception that the stock market "is" capitalism in total. Why? Because all of selling, buying, marketing, and operations of every man, woman and child and their life necessities and pleasures are run by the "robots" of "how much stock dividends pay." I know, I've seen it from the inside. No one makes sane decisions about job creation, hiring, firing and product development anymore. Virtually ALL decisions in the USA and much of the Western world is made by total consideration of how much people will make on the stock market as a result. It used to be that all the average person had to worry about is whether people will make a wise investment or a foolish one based on having enough information and the good will of people who are the decision makers. However, some years ago companies went into actually provoking foolish seeming decisions in order to manipulate stock movements and thus either gain after losses or in collusion with "competitors."
Here is an example. Many of you have heard about "derivatives." I first met developers of derivatives when I worked for a certain bank, JP Morgan. At the time, less developed countries (LDC's) were in a debt crisis. Western countries had lent far more to the poor countries than the poor countries could ever pay back. There was a great pressure in the world for "debt forgiveness" (something we still hear about as an issue today). So I learned that a group of derivatives developers found a way to be helpful and well meaning in this regard. They developed a financial "instrument" that packaged debts that could not be repaid and sold them for a fraction of their face value. In other words, they invented the means by which debt could be forgiven and the remaining debt transferred into a capital raising tool that was discounted to levels that the LDC's could handle. So "derivatives" actually came about as a method for handling certain risks and where "special handling" is needed, and thus they have a good purpose and a place in the market.
But not too long after that an "invent a new game at the casino" mentality took over those in charge of derivatives. They not only invented new derivatives for bizarre reasons, but they "created" the "need" for the derivatives in the first place. For example, imagine if the LDCs became poor because some banker envisioned making money by inventing a derivative for that reason. That's not what happened in the LDC case, but I want to use that so you can envision more easily what happened next. Developers of "new sources" of profit in financial institutions started looking at ways to if not cause a crisis, imagine or invent one, and then sell those derivatives to investors just as if they were inventing a new game of risk at the casino. So "good" derivatives became polluted by derivatives that were invented to create and then "manage" "risk" that was often unconscionable to take in the first place. This will help you to understand the frenzy in "mortgages based" derivatives that have imploded and tanked the economy. People invented ways to "make money" by taking both deliberately and sometimes accidentally and stupidly stupendous "risks." Some purely looted, knowing full well that someday the derivatives market in their area would collapse. They don't care because they took the money and ran several years ago.
Depressing, no? Yes.
So you see, whether you are an auto company, a fast food company, electronics manufacturer, software developer, or what have you, you rarely make a decision based on true capitalism anymore, the capitalism that allows the poor to join in everyone to raise their standards of living and their family prosperity. You rarely think about what jobs our country needs, what products we need, and how to keep prices low, and what is for the greater good, and how, in return, you and the rest of the company executives "make a good living." You look at how to make a killing and what is for the best of the holy and sacred "share price," "dividend," or your "off the book profits" (such as derivatives). And if you are the average person, you bought into that mentality and enable it, some of you willingly, but many of you have been coerced into a corner, because that's the reality in which we operate. You try to be good and have a savings account, but almost like magic someone makes a decision somewhere that raises prices and you have to drain your savings and live on charge card. Trust me, I know, and it ain't an accident. Like I explained in a previous tutorial, if this were true capitalism you should be able to buy a good house for $17,000 just as you could forty years ago. After all, doesn't "progress" bring about new inventions and techniques to do faster and better what used to be expensive and laborious years ago? Of course. For example, when my family flew to Germany in the 1960's economy tickets cost over $3,000. What would you think if over forty years the plane ticket prices went up to $12,000? Well, why have you accepted that regarding housing, food and fuel? True capitalism is the enemy of inflation and serves only to elevate the numbers of people who share in "making a good living," not elevating the prices of making that good living from year to year, decade to decade. True capitalism creates jobs, and does not export them (they may very well create additional jobs that are in other countries, but those are net additions, not subtractions from the domestic job force). The "Harvard Business Review" might as well have been "Satan's Journal," starting in their 1980's with their "capitalism on crack" ideas like "re-engineering" and other devices to eliminate domestic jobs.
I hope you find this helpful. Autopsies are often very instructive, though not very timely.
As I listen to commentators and their analyses and opinions, even the ones I respect make a very fundamental flaw. They mistake one tool of capitalism-the stock market-as actually "being" capitalism. That is not only false but it is dangerous and exactly why the world is in this mess. The stock market is not capitalism. In fact, capitalism can flourish in a country where "stocks" and the 'stock market' were never even invented.
Let me repeat the true definition of genuine capitalism. Capitalism is the selling of surplus goods and services in order to obtain cash. By surplus I mean goods and services that are beyond what an individual or family needs for its own survival (subsistence). Thus a farmer who sells corn beyond what he needs to feed his own family, in order to obtain cash, which he can use ("invest") to buy more goods and services for his family is a capitalist. Thus, if you had a country that was comprised only of people who grew their own food, made their own clothes and built their own homes, and then sold "extra" of whatever they made in order to raise cash by which to obtain other goods and services would be a totally capitalist country.
That simplistic and pure form of capitalist country would be, therefore, a genuinely capitalist country without banks, loans, interest earned or paid, corporations, financial instruments (such as stocks) or the market in which they are bought and sold (the stock market). You can have a totally pure and successful capitalism without a single bank, stock or interest payment in the entire country.
This is one reason that Communists used to call western countries and their people and allies "capitalist tools." They actually correctly saw that the tools that people invented to support their theoretical (but warped) capitalism have taken over, becoming the "definition" of capitalism and smothering the flourishing of genuine, traditional capitalism. In other words, westerners actually think that capitalism is defined by one and only one of its tools, the stock market. Communists were able to laugh at capitalists and make insults based on that truth, without even realizing how right they were, LOL. See, Communists (not to go too far astray on a political tutorial, but bear with this diversion for a second, because it is constructive) actually in their heart of hearts remained in touch with a truth of genuine capitalism that the western capitalists themselves actually forgot and abandoned once they surrendered themselves to "make a killing" capitalism rather than "make a good living" capitalism. The original Communists actually held onto one of the foundational necessities and "ideals" of pure capitalism long after actual capitalists forgot and abandoned it. That is the idea that there is an individually worked but collectively shared mechanism for elevating all people to a good subsistence level, and then creating surplus to raise everyone equally to greater and greater standards of living. Of course Communism is such a disaster that it did the exact opposite of what they "aspired to." But this is why Communism had such a charm for many people, because it correctly observed a fundamental flaw in the advanced forms of "capitalism" that had replaced true fundamental capitalism. Maybe some day I'll blog about where Communism went all wrong, but all you need to do is observe how Russia and China are self correcting the misassumptions and abuses of Communism to understand its flaws.
That's one reason I always had a real giggle over some of the standard insults by Communists. No one, either the insulter or the insulted, realized some awesome insights contained in the insults. Forbes used to tout their motto as "Capitalist Tool," derived from that insult, thinking they were being really clever. The laugh is on them, though, because Forbes, like all westerners, are subservient to "capitalist tools," just like robots who have taken over their makers. So even the great champions of "capitalism" do not realize that they have genuinely and honestly forgotten what true capitalism really is and how to both achieve and maintain it. Everyone, wealthy, middle class or poor, educated or uneducated, thinks that capitalism=stock market. That is totally an error.
The stock market, if one truly understands capitalism and applies the definition that I have provided, is simply one place and one method where "cash is obtained for surplus." Thus, westerners have taken one method and one place where the subsistence guy sells his surplus to obtain cash and now declared that this one market place is capitalism. They no longer even acknowledge the existence of subsistence and surplus nuance (or reality) in the economy, which is the actual definition of capitalism. All they call "capitalism" is the raising (or losing) of cash in the stock market. Ye gads, it is no wonder that both the average person and the so called experts have messed up this economy so badly. Yes, the average person must share blame with the masters of the universe, though I'm not trying to be mean, but if everyone "buys into" a false and greed oriented definition of capitalism, everyone must share the blame when it doesn't work the way it should, and it eventually, like a snake, recoils and bites both the handlers and the supportive bystanders.
Thinking that capitalism equals the stock market is like a person who believes in a fad diet that is comprised of eating one and only one food, every meal, every day. Not only is that in error, but the person who eats only one food forever will suffer illness, breakdown of the body, and death. Likewise, "capitalism" that is comprised of only the "stock market" causes the entire concept and reality of capitalism to become ill, have breakdowns, and, indeed, die.
Whether you own stock or not, each and every American is enabling this "single food" perception that the stock market "is" capitalism in total. Why? Because all of selling, buying, marketing, and operations of every man, woman and child and their life necessities and pleasures are run by the "robots" of "how much stock dividends pay." I know, I've seen it from the inside. No one makes sane decisions about job creation, hiring, firing and product development anymore. Virtually ALL decisions in the USA and much of the Western world is made by total consideration of how much people will make on the stock market as a result. It used to be that all the average person had to worry about is whether people will make a wise investment or a foolish one based on having enough information and the good will of people who are the decision makers. However, some years ago companies went into actually provoking foolish seeming decisions in order to manipulate stock movements and thus either gain after losses or in collusion with "competitors."
Here is an example. Many of you have heard about "derivatives." I first met developers of derivatives when I worked for a certain bank, JP Morgan. At the time, less developed countries (LDC's) were in a debt crisis. Western countries had lent far more to the poor countries than the poor countries could ever pay back. There was a great pressure in the world for "debt forgiveness" (something we still hear about as an issue today). So I learned that a group of derivatives developers found a way to be helpful and well meaning in this regard. They developed a financial "instrument" that packaged debts that could not be repaid and sold them for a fraction of their face value. In other words, they invented the means by which debt could be forgiven and the remaining debt transferred into a capital raising tool that was discounted to levels that the LDC's could handle. So "derivatives" actually came about as a method for handling certain risks and where "special handling" is needed, and thus they have a good purpose and a place in the market.
But not too long after that an "invent a new game at the casino" mentality took over those in charge of derivatives. They not only invented new derivatives for bizarre reasons, but they "created" the "need" for the derivatives in the first place. For example, imagine if the LDCs became poor because some banker envisioned making money by inventing a derivative for that reason. That's not what happened in the LDC case, but I want to use that so you can envision more easily what happened next. Developers of "new sources" of profit in financial institutions started looking at ways to if not cause a crisis, imagine or invent one, and then sell those derivatives to investors just as if they were inventing a new game of risk at the casino. So "good" derivatives became polluted by derivatives that were invented to create and then "manage" "risk" that was often unconscionable to take in the first place. This will help you to understand the frenzy in "mortgages based" derivatives that have imploded and tanked the economy. People invented ways to "make money" by taking both deliberately and sometimes accidentally and stupidly stupendous "risks." Some purely looted, knowing full well that someday the derivatives market in their area would collapse. They don't care because they took the money and ran several years ago.
Depressing, no? Yes.
So you see, whether you are an auto company, a fast food company, electronics manufacturer, software developer, or what have you, you rarely make a decision based on true capitalism anymore, the capitalism that allows the poor to join in everyone to raise their standards of living and their family prosperity. You rarely think about what jobs our country needs, what products we need, and how to keep prices low, and what is for the greater good, and how, in return, you and the rest of the company executives "make a good living." You look at how to make a killing and what is for the best of the holy and sacred "share price," "dividend," or your "off the book profits" (such as derivatives). And if you are the average person, you bought into that mentality and enable it, some of you willingly, but many of you have been coerced into a corner, because that's the reality in which we operate. You try to be good and have a savings account, but almost like magic someone makes a decision somewhere that raises prices and you have to drain your savings and live on charge card. Trust me, I know, and it ain't an accident. Like I explained in a previous tutorial, if this were true capitalism you should be able to buy a good house for $17,000 just as you could forty years ago. After all, doesn't "progress" bring about new inventions and techniques to do faster and better what used to be expensive and laborious years ago? Of course. For example, when my family flew to Germany in the 1960's economy tickets cost over $3,000. What would you think if over forty years the plane ticket prices went up to $12,000? Well, why have you accepted that regarding housing, food and fuel? True capitalism is the enemy of inflation and serves only to elevate the numbers of people who share in "making a good living," not elevating the prices of making that good living from year to year, decade to decade. True capitalism creates jobs, and does not export them (they may very well create additional jobs that are in other countries, but those are net additions, not subtractions from the domestic job force). The "Harvard Business Review" might as well have been "Satan's Journal," starting in their 1980's with their "capitalism on crack" ideas like "re-engineering" and other devices to eliminate domestic jobs.
I hope you find this helpful. Autopsies are often very instructive, though not very timely.
Friday, October 10, 2008
Capitalism/financial crisis Case study in the news
Read this article about Iceland. I don't even have to comment, because if you have been reading my tutorials you will immediately spot how this is an ideal case study to observe when capitalism derailed, when they went from "making a good living" to "making a killing," and ended up killing their own pseudo-capitalism, which had been thriving and growing via technology advances and investment in the subsistence side, but then was infected by high risk "surplus" greed.
http://online.wsj.com/article/SB122359763876821355.html
http://online.wsj.com/article/SB122359763876821355.html
Capitalism/Financial crisis Tutorial 12
Now you must focus on and understand the "housing for those who cannot afford it" disaster. It is being totally mischaracterized by both conservatives and liberals. The problem is not that "banks were forced to give loans to people who cannot afford their houses." That is a symptom of a deeper, systemic problem, not the problem itself. That's conservative psycho-babble, to blame Freddie and Fannie per se. However, it was liberal psycho-babble that led to a failed national housing policy that created entities like Freddie and Fannie in the first place. Here is the explanation of how the path to hell was paved with good intentions.
During the Civil Rights movement, Afro-Americans correctly mistrusted their local governments (state, county, city and town) because who were the oppressors? Their neighbors and their governments. Relief, when it came, seemed to come only from Washington, via the Supreme Court, via Congress, via the President, via Federal law authority. Thus, Afro-Americans and other disenfranchised people came to think of the Federal government as being the only source of resources and fairness.
This was reinforced by the Great Society policies of President Lyndon Johnson. Now, I happen to think that when it came to Civil Rights, Johnson deserved a lot of credit and was a visionary. However, he lacked capitalist advisers to explain how to extend capitalism to the disenfranchised, and not create an artificial set of entities and philosophies in Washington that would eventually stunt and doom the very good things everyone hoped for.
Where are houses and jobs? Where the people live, not in Washington. Here is an analogy. Suppose that you bought a car from your local car dealership, and it was a horrible lemon that never worked. And suppose that because of local laws, you could not get a replacement or refund, so you are stuck with the car, and you need it for your job. You need a good car mechanic. Now, would you refuse to take your car to a local mechanic, just because you were treated unfairly by the local car dealer and the local laws that allowed him or her to screw you over? Would you instead call a car mechanic in Washington, and with him or her hundreds of miles away, tell them how your car needs repairing and to send you money, but never actually have a car mechanic open the hood and fix your car? This is what happened when justifiable wounding and suspicion by those whose rights were curtailed for so many years motivated them to reject local solutions to local problems, especially housing.
Time heals all wounds and elections take place and minds are changed. Many Afro-Americans have been elected to offices for several decades now. Yet the country is stuck with a boat anchor of "housing policy" coming from Washington that is a legacy of past times and one that never worked. Who thinks that Section 8 and other housing has worked out real well? Provided the poor with good homes in safe neighborhoods? Duh, of course not.
Lyndon Johnson should have been educated by true capitalists (should any have existed) and then twisted arms to empower (and fund where necessary) state and local governments to have healthy and individualized housing plans and programs. What does Washington know of fair housing in Birmingham, Alabama, or Chicago, Illinois, for example? And is fair housing paying for people to live in either "too much" house or worse, "too little" house in crack neighborhoods?
There should never have been a HUD (Department of Housing and Urban Development) and if I had been President (or the wise advisor behind the scenes) it would never have been created, and if it had been, I would certainly have dismantled it.
If states had their own "HUD" responsibilities, partnered with ethical private capitalists, New Orleans would have been rebuilt twice as fast as it is plodding along now, because the mechanisms for rebuilding would already have been locally in place; they would just have needed Homeland Security type of special funding. Further, the government could have maintained focus on truly federal projects that are locally sited (such as the levees in New Orleans) through a modernized and well funded Army Corps of Engineers. That agency became demonized by environmentalists and as a result, they receive very mixed messages and mandates. And whenever a message is mixed and you have "two masters," you end up with half baked disasters.
If capitalism had been stimulated (even arm twisted) on the local level, we'd have a different society today. We'd already be on our second generation of well capitalized aspiring Afro-Americans living in their own housing, under their own control, just like everyone else. They and other aspiring poor would not be prisoners of federal concrete jungles called "housing," or equally bad, the "justification" for disastrous looting such as the creation of the so called Freddie and Fannie programs that are now "coming home to roost" by dragging down the entire country's economy.
This entire country would be so different, as I pointed out before, if only a few dozen genuine capitalists (not looters) had stepped forward in the 1960's-1980's and had solved the low and moderate income housing problems on a color blind basis within the states, meeting their own individual needs of their people. Instead we have a multi-billion dollar disaster that never even achieved its objectives for now two generations.
I hope you find this helpful and eye opening. Nothing like knowing the real reasons why the ship sank.
During the Civil Rights movement, Afro-Americans correctly mistrusted their local governments (state, county, city and town) because who were the oppressors? Their neighbors and their governments. Relief, when it came, seemed to come only from Washington, via the Supreme Court, via Congress, via the President, via Federal law authority. Thus, Afro-Americans and other disenfranchised people came to think of the Federal government as being the only source of resources and fairness.
This was reinforced by the Great Society policies of President Lyndon Johnson. Now, I happen to think that when it came to Civil Rights, Johnson deserved a lot of credit and was a visionary. However, he lacked capitalist advisers to explain how to extend capitalism to the disenfranchised, and not create an artificial set of entities and philosophies in Washington that would eventually stunt and doom the very good things everyone hoped for.
Where are houses and jobs? Where the people live, not in Washington. Here is an analogy. Suppose that you bought a car from your local car dealership, and it was a horrible lemon that never worked. And suppose that because of local laws, you could not get a replacement or refund, so you are stuck with the car, and you need it for your job. You need a good car mechanic. Now, would you refuse to take your car to a local mechanic, just because you were treated unfairly by the local car dealer and the local laws that allowed him or her to screw you over? Would you instead call a car mechanic in Washington, and with him or her hundreds of miles away, tell them how your car needs repairing and to send you money, but never actually have a car mechanic open the hood and fix your car? This is what happened when justifiable wounding and suspicion by those whose rights were curtailed for so many years motivated them to reject local solutions to local problems, especially housing.
Time heals all wounds and elections take place and minds are changed. Many Afro-Americans have been elected to offices for several decades now. Yet the country is stuck with a boat anchor of "housing policy" coming from Washington that is a legacy of past times and one that never worked. Who thinks that Section 8 and other housing has worked out real well? Provided the poor with good homes in safe neighborhoods? Duh, of course not.
Lyndon Johnson should have been educated by true capitalists (should any have existed) and then twisted arms to empower (and fund where necessary) state and local governments to have healthy and individualized housing plans and programs. What does Washington know of fair housing in Birmingham, Alabama, or Chicago, Illinois, for example? And is fair housing paying for people to live in either "too much" house or worse, "too little" house in crack neighborhoods?
There should never have been a HUD (Department of Housing and Urban Development) and if I had been President (or the wise advisor behind the scenes) it would never have been created, and if it had been, I would certainly have dismantled it.
If states had their own "HUD" responsibilities, partnered with ethical private capitalists, New Orleans would have been rebuilt twice as fast as it is plodding along now, because the mechanisms for rebuilding would already have been locally in place; they would just have needed Homeland Security type of special funding. Further, the government could have maintained focus on truly federal projects that are locally sited (such as the levees in New Orleans) through a modernized and well funded Army Corps of Engineers. That agency became demonized by environmentalists and as a result, they receive very mixed messages and mandates. And whenever a message is mixed and you have "two masters," you end up with half baked disasters.
If capitalism had been stimulated (even arm twisted) on the local level, we'd have a different society today. We'd already be on our second generation of well capitalized aspiring Afro-Americans living in their own housing, under their own control, just like everyone else. They and other aspiring poor would not be prisoners of federal concrete jungles called "housing," or equally bad, the "justification" for disastrous looting such as the creation of the so called Freddie and Fannie programs that are now "coming home to roost" by dragging down the entire country's economy.
This entire country would be so different, as I pointed out before, if only a few dozen genuine capitalists (not looters) had stepped forward in the 1960's-1980's and had solved the low and moderate income housing problems on a color blind basis within the states, meeting their own individual needs of their people. Instead we have a multi-billion dollar disaster that never even achieved its objectives for now two generations.
I hope you find this helpful and eye opening. Nothing like knowing the real reasons why the ship sank.
Thursday, October 9, 2008
Capitalism/financial crisis tutorial Part 11
I explained that greed and price increasing are symptoms of lack of true capitalism. I explained that capitalists must remember that there is a difference between true capitalism, driven by "making a good living," and pseudo capitalism, which is "to make a killing in the market." The latter attitude destroys true capitalism, totally and certainly.
The public is guilty of this same mindset. This is where you differ from previous generations up to your grandparents. Here is a case study that most of you should understand today, having found out the hard way with your retirement funds.
There are two basic investment vehicles: stocks and bonds. Stock is a share in the profits of a company. A bond is a vehicle that raises money for governmental, municipal and also corporate purposes, but I want to focus on the governmental and municipal purposes.
How did your grandparents pay for World War II? They funded it by buying bonds. Rich and poor dug deeply into their pockets and bought "war bonds." The way one gets a return on investment is that you buy a bond, say, worth $100 when it "matures," but you only pay say $90 for it. Thus you have a safe profit but often over a long time frame (ten, twenty or thirty years).
True capitalists love bonds. They get return on their money but take virtually no risk with it at all. The United States Treasury is constantly issuing bonds and related instrument, bills, called T-bonds and T-bills. Retirement funds buy a lot of these bonds, also ones issued by states and cities to do things like build bridges, sewage treatment plants, and other municipal projects. So when you invest in a heavily "bond" based fund it is usually called a "Fixed Income" or "safe" fund. Your "return" is modest but virtually secure, so long as the country itself is secure.
Contrast this with the investment in the stock market. The past two generations of "capitalists" have pimped stocks to the ignoring of bonds. Thus, even granny and grandpa have become addicted to looking for a retirement fund where they can, yes, get "make a killing" of a high profit. But high profit means investing in companies that you have no control over, and who have no compunctions to return your investment. Everyone has been hooked into the greed fish line of stocks (also called "equities.")
So when you sign up for an IRA or investment fund, you usually get to choose between bond based funds and stock based funds. People used to pour their money into bond based funds for three reasons: 1) secure and safety of your money 2) modest returns on your money and 3) patriotism and how to invest in your community. But for the past thirty years or so even people who cannot afford to lose their money listened to "money managers" and tempted by their own greed, put their money into equity aka stock funds. People like me who put most of my small but crucial IRA into the bond side were viewed as stupid bores.
Six years ago I relocated to CT and had to set up a new checking and savings account. I decided to transfer my IRA also to that bank. The young money manager, who I met for the first time that day literally yelled at me, trying to force me to put my money in the stock side. My usual rule of thumb is at most fifty fifty but I have a preference for eighty percent bond and twenty percent stock. He actually started to write in what HE wanted on my forms, which was all in stock, or "letting me" put a little in bond. I would not budge and insisted on eighty percent bond "fixed income" and twenty percent in "stocks" (they usually call it something like 'high earning,' in order to make you really feel like a dunce for investing in bonds.)
Well, like most Americans I got my statement in the mail a few days ago. What a surprise. While I lost money in the bond side, I "only" lost four percent of my bond portfolio worth. (I hated losing even that much because not only was that a good amount of money but it also shows you what trouble we are all in, when even the bond side takes a hit). BUT, what a "surprise" (not): on the stock side I lost twelve percent of my stock's portfolio worth, which fortunately is a small amount because I had fought my young punk "money manager" to put only a token amount in stocks. So while the stock market convulses during this financial crisis (and hopefully settles at more reasonable levels than the inflated levels it has been at), bonds retain their safety and value (so long as the country as a whole stays solvent) while stock based retirement "savings" crash and burn.
If this generation were true capitalists you would have invested the bulk of your "savings" types of investments in bonds. Everyone is totally guilty of this and now you are reaping the consequences of "going for the killing."
Here is discussion of how it is also patriotic in addition to wise and safe to buy bonds. How did China end up with so much of American cash? They buy lots of USA treasury bonds, since average Americans don't bother to anymore, and thus Chinese money keeps the American Treasury, and thus country itself, afloat. When you buy a bond you are investing in your own community (city, state or bond issuing authority) AND country (Treasury bonds). Your money "stays in the country." With what money do the Chinese use to buy bonds? The cash they receive for goods manufactured in China that used to be manufactured in the United States. So the looters who have exported jobs to China open up the route for American money to flow overseas. Then that money is used to buy American bonds, which are needed to keep the country going. Now I'm not bashing China, not at all. I think that their economy deserves to be industrialized and to be a world power in their own pursuit of genuine capitalism and prosperity. But they have gained by what so called "capitalists" in the USA have done to loot and sell out their own country, by deporting jobs and addicted the populace to greedy consumerism without fiscal responsibility. Everyone has been swept into the dustbin of just being stooges, while the masters of the universe and looters have manipulated corporations and the marketplace just to make profits for themselves, their cronies and their so called "good causes" (they convince themselves they are modern day Robin Hoods). As a result, the savings and bond valuing mentality of true capitalism has been destroyed in this country, along with the millions of jobs that were crucial to the survival of this country. Nice work, a**holes.
The public is guilty of this same mindset. This is where you differ from previous generations up to your grandparents. Here is a case study that most of you should understand today, having found out the hard way with your retirement funds.
There are two basic investment vehicles: stocks and bonds. Stock is a share in the profits of a company. A bond is a vehicle that raises money for governmental, municipal and also corporate purposes, but I want to focus on the governmental and municipal purposes.
How did your grandparents pay for World War II? They funded it by buying bonds. Rich and poor dug deeply into their pockets and bought "war bonds." The way one gets a return on investment is that you buy a bond, say, worth $100 when it "matures," but you only pay say $90 for it. Thus you have a safe profit but often over a long time frame (ten, twenty or thirty years).
True capitalists love bonds. They get return on their money but take virtually no risk with it at all. The United States Treasury is constantly issuing bonds and related instrument, bills, called T-bonds and T-bills. Retirement funds buy a lot of these bonds, also ones issued by states and cities to do things like build bridges, sewage treatment plants, and other municipal projects. So when you invest in a heavily "bond" based fund it is usually called a "Fixed Income" or "safe" fund. Your "return" is modest but virtually secure, so long as the country itself is secure.
Contrast this with the investment in the stock market. The past two generations of "capitalists" have pimped stocks to the ignoring of bonds. Thus, even granny and grandpa have become addicted to looking for a retirement fund where they can, yes, get "make a killing" of a high profit. But high profit means investing in companies that you have no control over, and who have no compunctions to return your investment. Everyone has been hooked into the greed fish line of stocks (also called "equities.")
So when you sign up for an IRA or investment fund, you usually get to choose between bond based funds and stock based funds. People used to pour their money into bond based funds for three reasons: 1) secure and safety of your money 2) modest returns on your money and 3) patriotism and how to invest in your community. But for the past thirty years or so even people who cannot afford to lose their money listened to "money managers" and tempted by their own greed, put their money into equity aka stock funds. People like me who put most of my small but crucial IRA into the bond side were viewed as stupid bores.
Six years ago I relocated to CT and had to set up a new checking and savings account. I decided to transfer my IRA also to that bank. The young money manager, who I met for the first time that day literally yelled at me, trying to force me to put my money in the stock side. My usual rule of thumb is at most fifty fifty but I have a preference for eighty percent bond and twenty percent stock. He actually started to write in what HE wanted on my forms, which was all in stock, or "letting me" put a little in bond. I would not budge and insisted on eighty percent bond "fixed income" and twenty percent in "stocks" (they usually call it something like 'high earning,' in order to make you really feel like a dunce for investing in bonds.)
Well, like most Americans I got my statement in the mail a few days ago. What a surprise. While I lost money in the bond side, I "only" lost four percent of my bond portfolio worth. (I hated losing even that much because not only was that a good amount of money but it also shows you what trouble we are all in, when even the bond side takes a hit). BUT, what a "surprise" (not): on the stock side I lost twelve percent of my stock's portfolio worth, which fortunately is a small amount because I had fought my young punk "money manager" to put only a token amount in stocks. So while the stock market convulses during this financial crisis (and hopefully settles at more reasonable levels than the inflated levels it has been at), bonds retain their safety and value (so long as the country as a whole stays solvent) while stock based retirement "savings" crash and burn.
If this generation were true capitalists you would have invested the bulk of your "savings" types of investments in bonds. Everyone is totally guilty of this and now you are reaping the consequences of "going for the killing."
Here is discussion of how it is also patriotic in addition to wise and safe to buy bonds. How did China end up with so much of American cash? They buy lots of USA treasury bonds, since average Americans don't bother to anymore, and thus Chinese money keeps the American Treasury, and thus country itself, afloat. When you buy a bond you are investing in your own community (city, state or bond issuing authority) AND country (Treasury bonds). Your money "stays in the country." With what money do the Chinese use to buy bonds? The cash they receive for goods manufactured in China that used to be manufactured in the United States. So the looters who have exported jobs to China open up the route for American money to flow overseas. Then that money is used to buy American bonds, which are needed to keep the country going. Now I'm not bashing China, not at all. I think that their economy deserves to be industrialized and to be a world power in their own pursuit of genuine capitalism and prosperity. But they have gained by what so called "capitalists" in the USA have done to loot and sell out their own country, by deporting jobs and addicted the populace to greedy consumerism without fiscal responsibility. Everyone has been swept into the dustbin of just being stooges, while the masters of the universe and looters have manipulated corporations and the marketplace just to make profits for themselves, their cronies and their so called "good causes" (they convince themselves they are modern day Robin Hoods). As a result, the savings and bond valuing mentality of true capitalism has been destroyed in this country, along with the millions of jobs that were crucial to the survival of this country. Nice work, a**holes.
Wednesday, October 8, 2008
Capitalism/Financial crisis tutorial Part 10
So here is the bottom line. How did the United States (and much of the developed world) go so very wrong and destroy genuine capitalism? If you've read what I've written it is easy to understand. Here it is in summary:
Capitalism works when it is engaged in by capitalists to "make a living." Capitalism is no longer true capitalism and indeed is destroyed if capitalists are in it "to make a killing."
It really is that simple. Think about it. True capitalism requires participants who are seeking to "make a living." There is nothing wrong with making a very good living, so this is not one of those tiresome and hypocritical arguments by liberals that people have to "reduce their standard of living" and "kill more babies because the earth 'cannot sustain a growing population.'" What I am explaining is that true capitalism is comprised of millions of capitalists who are seeking to "make a living," and not having as their sole objective to "become wealthy, and make a killing." When the latter is the objective then people break true capitalist workings and systems. Here is why.
Think back to the origins of capitalism, those corn farmers who grew enough for themselves and then sold the surplus. None of them wanted to "corner the corn market." None of them took their profits and bought luxury items to the total exclusion of creating jobs that mimic their own success. Thus, the poor corn farmer who finally made a little extra corn to sell goes to the market to sell his corn and get cash. He then uses the cash to buy a better tool for his family's subsistence corn field, or to buy a better seed corn to grow, or simply to provide his family with more necessities. Eventually the farmer who succeeds in capitalism can establish other families as farmers. In other words, as the farmer works his way up the ladder of capitalism (solvent or "breaks even," makes a profit, becomes "well to do" and then "becomes very successful") he should be spreading capitalism, not "cornering the market on it." This is how it used to be not so long ago. Yeah, robber barons were always around and they had huge power. But capitalism itself succeeded in the USA in its early days because everyone was an aspiring capitalist and was assisted by other aspiring capitalists, so that there were plentiful jobs and people worked to make and keep everything affordable for everyone else.
So rather than mega-industrialists and mega-financiers calling the shots and worse, setting the model for "aspiring to make a killing," you had many community based modest capitalists who weren't aiming to be the most wealthy person in their milieu. For example, a local real estate developer might aim to replicate his own success in his community, not "look to make as much profit as he can." He would build his own house (subsistence) and then with his knowledge and investment, make what he has available to others, and thus spreads capitalism, keeps prices down and still makes what we used to call "a very comfortable living."
Think about the recent survey where children replied what careers they most aspired to. They no longer answer with "jobs," even high esteem jobs like President. All they want is to be "famous." And now they commit suicide in order to be posthumously "famous" on the Internet. This is what capitalism has done to itself in the hands of those who push that "the markets rule" and "I'm in it to make a killing." When the sole objective of a business is to be as rich as possible, then the person no longer makes genuine capitalism decisions. It's like if our ancestors didn't want to grow more corn to improve their families and community, and instead wanted to drive their "competitor" families out of business by blocking their ability to grow corn. Pseudo capitalists who seek only wealth as their objective start to violate capitalist healthy mechanism because, just as an example, they will not invest in subsistence sides of the economy using healthy and moral capitalist decisions, the opposite of what their grandparents "would have done with their money." The lack of simple savings accounts is an obvious example. Also, the continual taking of risk with the subsistence side of the economy is another example. The third and obvious horrifying development is all of these companies who make all decisions based only on how their stock trades and dividends are paid, and what analysts say about them. That is not capitalism at all. Companies stop making capitalist decisions and indeed stop being capitalist entities the moment they go public and become part of the kabuki theater of "only the shares matter." They no longer even care about capitalist principles for their own products, their own commodities, say nothing about the overall health of true capitalism. They are in it to "make a killing." They will start to do anything to inflate their false profits (pun intended) rather than actually promote growth and prosperity through genuine capitalism. They stunt and destroy capitalism, rather than nurture and expand it. And like spiders they pull everyone into the web, as you see with your "retirement funds."
When one only thinks of "making a financial killing," one no longer even understands capitalism, or is capable of even thinking of the types of decisions one ought to make in order to be true capitalists and promote its healthy spread. The right capitalist decisions does not even "occur" to the "make a killing" pseudo investor. They don't even have those ideas cross their minds, or appear on their radar. It would not even occur to them to keep something reasonably priced even if they could "make a killing" and "charge what the market will bear." If they knew how early local capitalists made decisions, like their grandparents, they'd think they were crazy or naive. "Why did he do that? If he had done this instead he could have 'made a killing!'"
That is where the USA has gone wrong. It has destroyed true capitalism and replaced it with a pseudo self-eating self destructive 'capitalism' that is based on the unconscious AND openly spoken objective that "each man or woman is out to corner the market and make a killing in business and investment." It's a horror story far worse than stupid imaginary aliens being body snatchers. Americans have led the way in the ultimate horror story of destroying true capitalism, all while wrapping their bloated (or skinny) behinds in the American flag and proclaiming themselves as the true defenders of capitalism and freedom. THAT is a horror show movie.
Capitalism works when it is engaged in by capitalists to "make a living." Capitalism is no longer true capitalism and indeed is destroyed if capitalists are in it "to make a killing."
It really is that simple. Think about it. True capitalism requires participants who are seeking to "make a living." There is nothing wrong with making a very good living, so this is not one of those tiresome and hypocritical arguments by liberals that people have to "reduce their standard of living" and "kill more babies because the earth 'cannot sustain a growing population.'" What I am explaining is that true capitalism is comprised of millions of capitalists who are seeking to "make a living," and not having as their sole objective to "become wealthy, and make a killing." When the latter is the objective then people break true capitalist workings and systems. Here is why.
Think back to the origins of capitalism, those corn farmers who grew enough for themselves and then sold the surplus. None of them wanted to "corner the corn market." None of them took their profits and bought luxury items to the total exclusion of creating jobs that mimic their own success. Thus, the poor corn farmer who finally made a little extra corn to sell goes to the market to sell his corn and get cash. He then uses the cash to buy a better tool for his family's subsistence corn field, or to buy a better seed corn to grow, or simply to provide his family with more necessities. Eventually the farmer who succeeds in capitalism can establish other families as farmers. In other words, as the farmer works his way up the ladder of capitalism (solvent or "breaks even," makes a profit, becomes "well to do" and then "becomes very successful") he should be spreading capitalism, not "cornering the market on it." This is how it used to be not so long ago. Yeah, robber barons were always around and they had huge power. But capitalism itself succeeded in the USA in its early days because everyone was an aspiring capitalist and was assisted by other aspiring capitalists, so that there were plentiful jobs and people worked to make and keep everything affordable for everyone else.
So rather than mega-industrialists and mega-financiers calling the shots and worse, setting the model for "aspiring to make a killing," you had many community based modest capitalists who weren't aiming to be the most wealthy person in their milieu. For example, a local real estate developer might aim to replicate his own success in his community, not "look to make as much profit as he can." He would build his own house (subsistence) and then with his knowledge and investment, make what he has available to others, and thus spreads capitalism, keeps prices down and still makes what we used to call "a very comfortable living."
Think about the recent survey where children replied what careers they most aspired to. They no longer answer with "jobs," even high esteem jobs like President. All they want is to be "famous." And now they commit suicide in order to be posthumously "famous" on the Internet. This is what capitalism has done to itself in the hands of those who push that "the markets rule" and "I'm in it to make a killing." When the sole objective of a business is to be as rich as possible, then the person no longer makes genuine capitalism decisions. It's like if our ancestors didn't want to grow more corn to improve their families and community, and instead wanted to drive their "competitor" families out of business by blocking their ability to grow corn. Pseudo capitalists who seek only wealth as their objective start to violate capitalist healthy mechanism because, just as an example, they will not invest in subsistence sides of the economy using healthy and moral capitalist decisions, the opposite of what their grandparents "would have done with their money." The lack of simple savings accounts is an obvious example. Also, the continual taking of risk with the subsistence side of the economy is another example. The third and obvious horrifying development is all of these companies who make all decisions based only on how their stock trades and dividends are paid, and what analysts say about them. That is not capitalism at all. Companies stop making capitalist decisions and indeed stop being capitalist entities the moment they go public and become part of the kabuki theater of "only the shares matter." They no longer even care about capitalist principles for their own products, their own commodities, say nothing about the overall health of true capitalism. They are in it to "make a killing." They will start to do anything to inflate their false profits (pun intended) rather than actually promote growth and prosperity through genuine capitalism. They stunt and destroy capitalism, rather than nurture and expand it. And like spiders they pull everyone into the web, as you see with your "retirement funds."
When one only thinks of "making a financial killing," one no longer even understands capitalism, or is capable of even thinking of the types of decisions one ought to make in order to be true capitalists and promote its healthy spread. The right capitalist decisions does not even "occur" to the "make a killing" pseudo investor. They don't even have those ideas cross their minds, or appear on their radar. It would not even occur to them to keep something reasonably priced even if they could "make a killing" and "charge what the market will bear." If they knew how early local capitalists made decisions, like their grandparents, they'd think they were crazy or naive. "Why did he do that? If he had done this instead he could have 'made a killing!'"
That is where the USA has gone wrong. It has destroyed true capitalism and replaced it with a pseudo self-eating self destructive 'capitalism' that is based on the unconscious AND openly spoken objective that "each man or woman is out to corner the market and make a killing in business and investment." It's a horror story far worse than stupid imaginary aliens being body snatchers. Americans have led the way in the ultimate horror story of destroying true capitalism, all while wrapping their bloated (or skinny) behinds in the American flag and proclaiming themselves as the true defenders of capitalism and freedom. THAT is a horror show movie.
Tuesday, October 7, 2008
Capitalism/Financial Crisis tutorial Part 9
I am now going to explain how the United States diverted from true capitalism, using the housing crisis as the example.
I've explained that true capitalism arose from individual grassroots farmers, who were the majority of humans for most of their history, who provided for themselves their own subsistence needs (food, clothing and shelter) and who sold surplus crops and livestock for cash.
In true capitalism human "progress" is used to ensure that all humans can always obtain plentiful and cheap subsistence needs, and that includes a home, whether an apartment or a house. The devices of capitalism are confined to usage on the "surplus" side of human needs.
This is why God forbids the charging of interest (called usury) in all of the sacred books, to the Jews, to Christians and to Muslims. This is so that profits are not made via the providing of the basic subsistence needs for life. It's not that God doesn't think people should earn profit from financial deals. God is saying that profits should not be made from the providing of basic subsistence needs and that instead, the capitalist motivation is that producers of housing and so forth are giving themselves jobs and a means of income for their families and workforce.
So let's break it down, comparing "before" and "after," with "before" being most of human history. Every person has a God given right to provide their family with food, clothing and shelter. "Jobs" as such did not exist. One's "job" was to grow food, tend herds and build shelters for one's self, for one's family, for one's extended family, and for one's community. You see examples of this in traditional developing nations (though the examples are often sad shacks in impoverished areas, such as Haiti) and also in the USA among the Quaker and similar communities. Quakers provide with their own hands their need for food, shelter and clothing, and they sell their surplus in the markets for cash. Thus Quakers are examples of pure capitalism as it evolved throughout human history. I bet that is a surprise for you to read.
Now, let's look at the "good" "after" before looking at the "bad" after. For a while the United States made the transition from the agricultural society that I've described above to an industry and financial markets based society, which is inevitable and can be done correctly. I'm far from saying that people need to stay "stuck" in "primitive" agricultural "survivalist" scenarios. No, far from it. I am explaining how capitalism was born in those agricultural subsistence/surplus distinctions in economic sectors and how to maintain true capitalism one must maintain those distinctions between subsistence and surplus sectors of the economy.
So the "good" after was the use of human "know how" and development of industry with its concepts and tools to do two things. One is to create "jobs," where one obtains a paycheck in return for productive work. What I mean is that people did not pay paychecks for people to sit around and be "muses" and throw pottery, hold seminars and paint paintings. The concept of a job came from the second development which was "specialization." Instead of everyone having to be a farmer or a carpenter, providing subsistence goods and products to their own family, people specialized in "jobs" in order to "mass produce" subsistence goods and services. Thus, instead of growing food for one's own family and taking the surplus to market to sell for cash, certain people became "professional farmers" who grew food as their "job" to take to the marketplace, the marketplace itself evolving into a series of "jobs" in "stores." Likewise, instead of building one's own home, one was able to buy a home using cash from your "job" that had been built by a professional "home builder."
The United States flourished in this transition. The key to this working is that there must be a job and subsistence product available to virtually everyone. This is because human "development" takes away the freedom of humans to self support. You see people instinctively know that that is a loss on both sides of the political spectrum, actually. You see, for example, the homeless recapture, but under miserable in intolerable conditions, the "staking out of a claim" of land and "building their own home." You also see "survivalists" have that mindset. Humans need and must have a way to sustain themselves that is NOT enslaved to surplus side capitalism and its machinations and tools. This is one of the things that Communists and socialists also instinctively realize, but they totally destroy that object with their fail philosophy that denigrates properly working capitalism. Genuine capitalism would have provided a good job with a good paycheck that allows everyone to obtain entry level good quality housing and other subsistence products. And the United States came very close to understanding this and being on the road to achieving it, but for several problems, which I call the "bad after."
First of all, the United States was hampered by segmentation of its society along racial lines. One cannot have true capitalism if entire segments of the society are denied equal access. So just as the Afro-American population yearned to be part of the American dream of capitalism that I described above (good paying job and access to all of subsistence good quality product, including housing), racist legacy and continuing racist mentality meant that it would not even occur to active "capitalists" to treat entire segments of the citizenry as being part of the great uplifting of capitalism. The urge to capitalism is incredibly strong and Afro Americans managed to achieve quite a bit of it, but hemmed in by the "redlining" not of housing but of racism. For example, they sent their kids to college, but to "black colleges." They worked at jobs, but at "black jobs." They achieved middle class objectives, such as producing many fine teachers, but they were confined, again, to their reduced form of capitalism in their constricted society. The Civil Rights movement did not come about because Afro-Americans wanted abortion, broken families, welfare, and the right to show rear end cracks in music videos. The Civil Rights movement came about because Afro-Americans of that generation fully understood and endorsed the correctness of genuine capitalism, and were desperate to be part of it.
If, back in the 1950's and 1960's, genuine capitalists broke the race barriers and set the example, rather than waiting for the government and society as a whole, the history of the United States would be vastly different today than it has become, sadly. All it would have taken is a few "Donald Trumps" for the middle class, who were color blind, to have changed human social history in the United States. The USA would not be as divided and self destructive as we see that it is now.
The second mistake was the infecting of the "subsistence" side of the capitalist equation with "surplus side" looting and river boat gambling. It's one thing to use usury and financial tools to loot and so forth when one is "money managing" the "surplus side" of the capitalist economy. It was a dire mistake for providers of subsistence product, however, to profit seek like horny dogs within the "subsistence" side of the economy. They destroyed the jobs side of the equation and they used subsistence products to gain wealth rather than to be the modest and moderate means of "making a living" for themselves and their family.
Here's an example. My brother graduated from college in the early 1960's. He married and got a good job. They moved into an apartment that we in the family thought was "fancy" and "upscale," marveling that they could afford it. I don't remember what it cost but it was cheap. Anyone with a decent job could have an easily affordable apartment or rental unit in a home. In fact, that was part of the building boom, because with many jobs many people needed housing to start their family. In a very short amount of time they bought their first house, which I saw being built, as it was new in a housing development. It cost $17,000.
In TRUE capitalism, a new couple starting out should be able to do exactly the same thing as my brother and his wife paying the exact same price, pretty much. Yep, you heard me. Inflation is the death of capitalism and there is no excuse for it. I should be able to walk out of my apartment and get a job that is good and pays sufficient for me to get an apartment at the rate that they paid (certainly less than the $700 I must pay now) and also buy a house near my job for $17,000. For thousands of years humans lived off of the land, providing with their own hands, and paying in gold or silver, whose value was unchanging and never manipulated, when there was a need for cash. "The value of gold" itself did not go "up and down" when true capitalism was developed. Sure, a gold coin could buy different amounts of goods at different locations during different circumstances. But there was no mentality that "as time goes on jobs become scarcer and things become more expensive." That is suicidal insanity, and that's the economy we in the USA, and dragging many along with us, live in in this world today.
Genuine and moral capitalism would have meant that there were always many capitalists who build affordable housing at the same prices it has always been available for AND who provided jobs that pay sufficiently to meet all subsistence needs. The government would not have needed to price fix or manipulate for this to happen: that is the genuine beauty of capitalism as it truly was meant to be, it would have happened just as it started to develop, but was hijacked and polluted before it was established.
It is proof of one of the great scandals that anyone with an education knows that over time, humans know how to provide the same product faster and cheaper, and better quality, than even just a few years before. Thus, baseline good homes should have been consistently available at the same price throughout the past forty years. As time goes by people value add and do things better and faster in the same amount of time, not get more incompetent, greedy and stupid. If a house build in the 1960's sold for $17,000 then obviously that house could have been built even faster, cheaper and with more features for that same $17,000 in 1980 or the year 2000! But Americans brainwashed themselves. They let jobs be destroyed, they allowed greed to infect all segments of society, and they were trained to "expect" "upward mobility" without understanding how that actually takes place. And so we arrived in a society where the mantra, the chant, of both "liberals" and "conservatives" is that people "pay what the market will bear."
Look at the hard lesson you all have learned about how oil prices infiltrate and inflate prices of everything everywhere. In a true capitalist society we would have had a broad secure foundation of many good paying basic jobs whose paycheck would allow the purchase of that $17,000 home or $200 per month apartment. We would have ridden through gas prices more serenely because the subsistence base of the capitalist economy would have been secure. Instead, prices of everything was jacked up over the past thirty years because "surplus" risks were taken with subsistence products in order to fill the pockets of looters. And the looters are not just the banks and hedge fund managers. Everyone bought into the myth of "upward mobility" but built on sand castles and air, by raising expectations, but kicking the foundation of capitalism (the subsistence side being available for all) right out from under the entire country. Your local banker, real estate dealer and everyone else is just as guilty and colluding as anyone else. Everyone has bought into this mutant view of "capitalism" that allows the "markets" to be manipulated, looted, and destructive of the equality of access of benefit to the broad base of people. I could go on and on with numerous examples, but this tires and enrages me so much that I'll leave it here for now. LOL. *sigh*
I think you get my point. Today should have been entirely different than it is now. There should have been a job and a home for every one who wanted and needed one, and it would have been there due to properly running capitalism, untainted by excessive greed and unreality. It really has become a disaster of incredible proportions, not just because of the crumbling of the fake infrastructure and individual financial disasters, but because of the loss of ethics that true capitalism that is moral actually imbues and instills. Much of the depravity and loss of morals and ethics in society comes from the hijacking of genuine moral capitalism, turning it into a mutant "market rules" greed machine, with warts.
I've explained that true capitalism arose from individual grassroots farmers, who were the majority of humans for most of their history, who provided for themselves their own subsistence needs (food, clothing and shelter) and who sold surplus crops and livestock for cash.
In true capitalism human "progress" is used to ensure that all humans can always obtain plentiful and cheap subsistence needs, and that includes a home, whether an apartment or a house. The devices of capitalism are confined to usage on the "surplus" side of human needs.
This is why God forbids the charging of interest (called usury) in all of the sacred books, to the Jews, to Christians and to Muslims. This is so that profits are not made via the providing of the basic subsistence needs for life. It's not that God doesn't think people should earn profit from financial deals. God is saying that profits should not be made from the providing of basic subsistence needs and that instead, the capitalist motivation is that producers of housing and so forth are giving themselves jobs and a means of income for their families and workforce.
So let's break it down, comparing "before" and "after," with "before" being most of human history. Every person has a God given right to provide their family with food, clothing and shelter. "Jobs" as such did not exist. One's "job" was to grow food, tend herds and build shelters for one's self, for one's family, for one's extended family, and for one's community. You see examples of this in traditional developing nations (though the examples are often sad shacks in impoverished areas, such as Haiti) and also in the USA among the Quaker and similar communities. Quakers provide with their own hands their need for food, shelter and clothing, and they sell their surplus in the markets for cash. Thus Quakers are examples of pure capitalism as it evolved throughout human history. I bet that is a surprise for you to read.
Now, let's look at the "good" "after" before looking at the "bad" after. For a while the United States made the transition from the agricultural society that I've described above to an industry and financial markets based society, which is inevitable and can be done correctly. I'm far from saying that people need to stay "stuck" in "primitive" agricultural "survivalist" scenarios. No, far from it. I am explaining how capitalism was born in those agricultural subsistence/surplus distinctions in economic sectors and how to maintain true capitalism one must maintain those distinctions between subsistence and surplus sectors of the economy.
So the "good" after was the use of human "know how" and development of industry with its concepts and tools to do two things. One is to create "jobs," where one obtains a paycheck in return for productive work. What I mean is that people did not pay paychecks for people to sit around and be "muses" and throw pottery, hold seminars and paint paintings. The concept of a job came from the second development which was "specialization." Instead of everyone having to be a farmer or a carpenter, providing subsistence goods and products to their own family, people specialized in "jobs" in order to "mass produce" subsistence goods and services. Thus, instead of growing food for one's own family and taking the surplus to market to sell for cash, certain people became "professional farmers" who grew food as their "job" to take to the marketplace, the marketplace itself evolving into a series of "jobs" in "stores." Likewise, instead of building one's own home, one was able to buy a home using cash from your "job" that had been built by a professional "home builder."
The United States flourished in this transition. The key to this working is that there must be a job and subsistence product available to virtually everyone. This is because human "development" takes away the freedom of humans to self support. You see people instinctively know that that is a loss on both sides of the political spectrum, actually. You see, for example, the homeless recapture, but under miserable in intolerable conditions, the "staking out of a claim" of land and "building their own home." You also see "survivalists" have that mindset. Humans need and must have a way to sustain themselves that is NOT enslaved to surplus side capitalism and its machinations and tools. This is one of the things that Communists and socialists also instinctively realize, but they totally destroy that object with their fail philosophy that denigrates properly working capitalism. Genuine capitalism would have provided a good job with a good paycheck that allows everyone to obtain entry level good quality housing and other subsistence products. And the United States came very close to understanding this and being on the road to achieving it, but for several problems, which I call the "bad after."
First of all, the United States was hampered by segmentation of its society along racial lines. One cannot have true capitalism if entire segments of the society are denied equal access. So just as the Afro-American population yearned to be part of the American dream of capitalism that I described above (good paying job and access to all of subsistence good quality product, including housing), racist legacy and continuing racist mentality meant that it would not even occur to active "capitalists" to treat entire segments of the citizenry as being part of the great uplifting of capitalism. The urge to capitalism is incredibly strong and Afro Americans managed to achieve quite a bit of it, but hemmed in by the "redlining" not of housing but of racism. For example, they sent their kids to college, but to "black colleges." They worked at jobs, but at "black jobs." They achieved middle class objectives, such as producing many fine teachers, but they were confined, again, to their reduced form of capitalism in their constricted society. The Civil Rights movement did not come about because Afro-Americans wanted abortion, broken families, welfare, and the right to show rear end cracks in music videos. The Civil Rights movement came about because Afro-Americans of that generation fully understood and endorsed the correctness of genuine capitalism, and were desperate to be part of it.
If, back in the 1950's and 1960's, genuine capitalists broke the race barriers and set the example, rather than waiting for the government and society as a whole, the history of the United States would be vastly different today than it has become, sadly. All it would have taken is a few "Donald Trumps" for the middle class, who were color blind, to have changed human social history in the United States. The USA would not be as divided and self destructive as we see that it is now.
The second mistake was the infecting of the "subsistence" side of the capitalist equation with "surplus side" looting and river boat gambling. It's one thing to use usury and financial tools to loot and so forth when one is "money managing" the "surplus side" of the capitalist economy. It was a dire mistake for providers of subsistence product, however, to profit seek like horny dogs within the "subsistence" side of the economy. They destroyed the jobs side of the equation and they used subsistence products to gain wealth rather than to be the modest and moderate means of "making a living" for themselves and their family.
Here's an example. My brother graduated from college in the early 1960's. He married and got a good job. They moved into an apartment that we in the family thought was "fancy" and "upscale," marveling that they could afford it. I don't remember what it cost but it was cheap. Anyone with a decent job could have an easily affordable apartment or rental unit in a home. In fact, that was part of the building boom, because with many jobs many people needed housing to start their family. In a very short amount of time they bought their first house, which I saw being built, as it was new in a housing development. It cost $17,000.
In TRUE capitalism, a new couple starting out should be able to do exactly the same thing as my brother and his wife paying the exact same price, pretty much. Yep, you heard me. Inflation is the death of capitalism and there is no excuse for it. I should be able to walk out of my apartment and get a job that is good and pays sufficient for me to get an apartment at the rate that they paid (certainly less than the $700 I must pay now) and also buy a house near my job for $17,000. For thousands of years humans lived off of the land, providing with their own hands, and paying in gold or silver, whose value was unchanging and never manipulated, when there was a need for cash. "The value of gold" itself did not go "up and down" when true capitalism was developed. Sure, a gold coin could buy different amounts of goods at different locations during different circumstances. But there was no mentality that "as time goes on jobs become scarcer and things become more expensive." That is suicidal insanity, and that's the economy we in the USA, and dragging many along with us, live in in this world today.
Genuine and moral capitalism would have meant that there were always many capitalists who build affordable housing at the same prices it has always been available for AND who provided jobs that pay sufficiently to meet all subsistence needs. The government would not have needed to price fix or manipulate for this to happen: that is the genuine beauty of capitalism as it truly was meant to be, it would have happened just as it started to develop, but was hijacked and polluted before it was established.
It is proof of one of the great scandals that anyone with an education knows that over time, humans know how to provide the same product faster and cheaper, and better quality, than even just a few years before. Thus, baseline good homes should have been consistently available at the same price throughout the past forty years. As time goes by people value add and do things better and faster in the same amount of time, not get more incompetent, greedy and stupid. If a house build in the 1960's sold for $17,000 then obviously that house could have been built even faster, cheaper and with more features for that same $17,000 in 1980 or the year 2000! But Americans brainwashed themselves. They let jobs be destroyed, they allowed greed to infect all segments of society, and they were trained to "expect" "upward mobility" without understanding how that actually takes place. And so we arrived in a society where the mantra, the chant, of both "liberals" and "conservatives" is that people "pay what the market will bear."
Look at the hard lesson you all have learned about how oil prices infiltrate and inflate prices of everything everywhere. In a true capitalist society we would have had a broad secure foundation of many good paying basic jobs whose paycheck would allow the purchase of that $17,000 home or $200 per month apartment. We would have ridden through gas prices more serenely because the subsistence base of the capitalist economy would have been secure. Instead, prices of everything was jacked up over the past thirty years because "surplus" risks were taken with subsistence products in order to fill the pockets of looters. And the looters are not just the banks and hedge fund managers. Everyone bought into the myth of "upward mobility" but built on sand castles and air, by raising expectations, but kicking the foundation of capitalism (the subsistence side being available for all) right out from under the entire country. Your local banker, real estate dealer and everyone else is just as guilty and colluding as anyone else. Everyone has bought into this mutant view of "capitalism" that allows the "markets" to be manipulated, looted, and destructive of the equality of access of benefit to the broad base of people. I could go on and on with numerous examples, but this tires and enrages me so much that I'll leave it here for now. LOL. *sigh*
I think you get my point. Today should have been entirely different than it is now. There should have been a job and a home for every one who wanted and needed one, and it would have been there due to properly running capitalism, untainted by excessive greed and unreality. It really has become a disaster of incredible proportions, not just because of the crumbling of the fake infrastructure and individual financial disasters, but because of the loss of ethics that true capitalism that is moral actually imbues and instills. Much of the depravity and loss of morals and ethics in society comes from the hijacking of genuine moral capitalism, turning it into a mutant "market rules" greed machine, with warts.
Monday, October 6, 2008
Capitalism/Financial crisis tutorial Part 8
OK, now I have to explain a really simple concept that has become very obscure, before I can take you through more details. That is to tell you that there are two types of money/wealth, and I'm going to use non business terms, so don't expect to see this in textbooks ha. There is real money and fake money. (Real wealth and fake wealth). Here is an explanation and examples and reading this, you'll immediately make the leap in your own minds to why this is a dire problem today.
Real money is when you take a physical commodity (something that is real and you can touch) and turn it from low money to high value money. The author of the concept of real money is gold. When someone picks up a rock it has little or no value, unless it has gold inside of it. The person who finds the rock with gold in it has just increased his or her ownership of real money, from the value of just some rock that has little or no value to now "inventing" by virtue of finding it a rock that has value because it has gold in it. So let's say some old time western guy who was panning for gold finds one really good piece of gold in a rock. All he invested was his "time" (back before people had paychecks) so he literally created a real money value from nothing to something. If he sells that rock to someone who then has the facilities and knowledge to extract the gold from the rock, the gold finder pockets cash that was already in existence, while turning over to the buyer of the gold rock "cash" (gold) that, as far as the economy was concerned, did not exist before (since it was useless laying in some pile or rocks or in an ore vein underground somewhere prior to being found). So the rock finder has "invented" or "added" real money to the economy through his or her finding of gold. The gold "processor" who extracts the gold and puts it into a form that can be sold on the market also adds some "real money" because the work that he or she does in assaying and purifying the gold allows it to be put into usable form, and adds to the real money wealth of the personal or national treasury.
This, by the way, is why medieval scientists tried to make gold out of other substances using what they called 'alchemy.' Everyone throughout human history has understood and agreed that the finding of gold is a real addition of real money to a person or nation's treasury. Once gold is found it is real and always usable. So that is real money.
Fake money is obtaining cash (either literally or in theory, thus cash in your hand, or a promise of cash on "paper" in the form of ledgers) that represents wealth but is not an actual promise of wealth. In other words, fake money or fake wealth is a transitory transaction involving financial concepts, but it does not add a real substance (like gold) to one's wealth.
Now, an individual, communities and countries grow in wealth, prosperity, safety and security based on their addition of real money, not fake money. For example, suppose you found a bag of gold that you could use, and your town found a bag of gold that they could use, and your country found a bag of gold that they could use. All three entities have gotten real money and added to their wealth. If you were worth $xyz before the gold was found, you are now worth $xyz+the bag of gold.
All "value added" economies run on that principle. They take something that is real and cheap and transform it into something of real tangible value. Suppose a person, like my step uncle, built a house on some land that he had, using his own hands and obtaining his own materials. He would literally have created real money because where there was a blank space previously, there is now a house that can be seen, touched, lived in or sold. That is the ultimate in "value added," where his low financial investment (buy a few tools maybe, or buy fixtures he could not make, such as plumbing) is transformed by his paycheck free labor into something of high and constant value (a home). I say it is constant value because in capitalism, an object continues to have value even if no one in the market "wants" it so long as it meets its original subsistence usage, such as a house continues to provide shelter even if no one else wants to buy it. Likewise, that bag of gold that you found continues to have value even if you only have it hidden under your mattress and are not using it to purchase anything. Real money comes from objects that have been transformed from low or no value to a real and consistent, near permanent value.
Fake money is a device to take cash from one place and put it in another place. It does not add real value to the economy. I know some will disagree with my statement, but that is because they are jumping too far ahead in this concept and equating my term "real value" with the concept of "financial activity taking place." Just because fake money makes a lot of people busy passing it around, that does not make it "real." Real money is real even if it is not being used. That bag of gold is real even if you are not doing anything with it, and the house you live in is real even if no one else would want to buy that house. Fake money depends on, like a shell game, constant movement and activity because if that activity stopped, the fake money would disappear. THAT is the crisis that the economy is in now, in a nutshell. The proportion of real money and fake money has been completely reversed in the past forty years or so. While most of the economy used to be based on "real money," the masters of the universe and robber barons (along with well meaning but gullible people) have abandoned the recognition of real money and substituted frenzied activity using fake money as the "foundation" of the economy.
Real money is generated by the three classic ways: discovering a natural resource and extracting it (such as gold), taking a low value product and turning it into high value product (such as building a house), and by jobs that perform or rely on the previous two methods (for example, manufacturing).
Fake money is "generated" (or better said, "defined") by "doing things." Thus a service based economy is "fake money" based. This is because a service is performed for money (food prepared, recreation taken, a hair cut being given, etc) but the service did not result in money or value that can be seen, touched, preserved or value enhanced. You paid someone to cook the burger or cut your hair, but all that was is a passing of cash to the service provider, rather than building or creating "real money." Manufacturing is a real money job because the workers get a paycheck AND a value added good is produced (in theory, but much of what is manufactured today is garbage of transitory use and no real value). But in theory and in reality, manufacturing jobs generate real money based personal, community and national wealth. Service jobs do not. Service jobs just keep money moving into various people's hands and do not add to prosperity. In fact, they erode prosperity because manufacturing (and infrastructure maintenance) are not taking place, since people get their paychecks via fake money.
Think about China. Where have the manufacturing jobs gone, and the "real money?" Yep.
Worse, wall street masters of the universe, colluding with the service and consumer driven and obsessed society, took "fake money" to a category you can think of as "extreme fake money" or "fake money on crack." They invented "things to do with money" that moves fake money into bizarre places for bizarre reasons, concentrating the ability of individuals to become wealthy, but depleting the "real money" economy. It started somewhat innocently with the idea of paying interest for the use of money, which is how banking got started (although the first reason banks were invented was because people needed a safe place to store their money... they were not originally looking for interest in return or loans to be given). The first stage of banking was just to get the money out of the vulnerabilities of being under granny's mattress or the cowboy who might be robbed of his gold, and into a safe place called a bank. The second stage of banking was paying interest and giving out safe loans.
But then along comes the crazy eighties, on the foundation of the insane 60's and 70's. Money "managers" wanted to make more money than just their share of interest. And so they started "inventing" "financial tools" that are supposed to "increase wealth," but actually just generated a frenzied movement of money that then concentrates itself into the hands of those who keep it moving. They noticed things like foreign exchange trading, where they could buy a currency, wait for the value of that currency to go up, and then sell that currency, pocketing the profit. That then gave birth to all sorts of insane financial "instruments" where basically the entire economy became a gambling casino, but one where the masters of the universe controlled which way the roulette wheels would spin. So they would pretend to be helping clients "wisely invest their money," but what they were doing instead was eliminating sources of real money (such as manufacturing jobs) and promoting the exclusive use of fake money through constant financial manipulations. That is the reason this country is in such a horrible, horrible, horrible financial mess.
I'll let you take a deep breath and think about it.
(I hear the Pope has just made the same comments as me :-)
Real money is when you take a physical commodity (something that is real and you can touch) and turn it from low money to high value money. The author of the concept of real money is gold. When someone picks up a rock it has little or no value, unless it has gold inside of it. The person who finds the rock with gold in it has just increased his or her ownership of real money, from the value of just some rock that has little or no value to now "inventing" by virtue of finding it a rock that has value because it has gold in it. So let's say some old time western guy who was panning for gold finds one really good piece of gold in a rock. All he invested was his "time" (back before people had paychecks) so he literally created a real money value from nothing to something. If he sells that rock to someone who then has the facilities and knowledge to extract the gold from the rock, the gold finder pockets cash that was already in existence, while turning over to the buyer of the gold rock "cash" (gold) that, as far as the economy was concerned, did not exist before (since it was useless laying in some pile or rocks or in an ore vein underground somewhere prior to being found). So the rock finder has "invented" or "added" real money to the economy through his or her finding of gold. The gold "processor" who extracts the gold and puts it into a form that can be sold on the market also adds some "real money" because the work that he or she does in assaying and purifying the gold allows it to be put into usable form, and adds to the real money wealth of the personal or national treasury.
This, by the way, is why medieval scientists tried to make gold out of other substances using what they called 'alchemy.' Everyone throughout human history has understood and agreed that the finding of gold is a real addition of real money to a person or nation's treasury. Once gold is found it is real and always usable. So that is real money.
Fake money is obtaining cash (either literally or in theory, thus cash in your hand, or a promise of cash on "paper" in the form of ledgers) that represents wealth but is not an actual promise of wealth. In other words, fake money or fake wealth is a transitory transaction involving financial concepts, but it does not add a real substance (like gold) to one's wealth.
Now, an individual, communities and countries grow in wealth, prosperity, safety and security based on their addition of real money, not fake money. For example, suppose you found a bag of gold that you could use, and your town found a bag of gold that they could use, and your country found a bag of gold that they could use. All three entities have gotten real money and added to their wealth. If you were worth $xyz before the gold was found, you are now worth $xyz+the bag of gold.
All "value added" economies run on that principle. They take something that is real and cheap and transform it into something of real tangible value. Suppose a person, like my step uncle, built a house on some land that he had, using his own hands and obtaining his own materials. He would literally have created real money because where there was a blank space previously, there is now a house that can be seen, touched, lived in or sold. That is the ultimate in "value added," where his low financial investment (buy a few tools maybe, or buy fixtures he could not make, such as plumbing) is transformed by his paycheck free labor into something of high and constant value (a home). I say it is constant value because in capitalism, an object continues to have value even if no one in the market "wants" it so long as it meets its original subsistence usage, such as a house continues to provide shelter even if no one else wants to buy it. Likewise, that bag of gold that you found continues to have value even if you only have it hidden under your mattress and are not using it to purchase anything. Real money comes from objects that have been transformed from low or no value to a real and consistent, near permanent value.
Fake money is a device to take cash from one place and put it in another place. It does not add real value to the economy. I know some will disagree with my statement, but that is because they are jumping too far ahead in this concept and equating my term "real value" with the concept of "financial activity taking place." Just because fake money makes a lot of people busy passing it around, that does not make it "real." Real money is real even if it is not being used. That bag of gold is real even if you are not doing anything with it, and the house you live in is real even if no one else would want to buy that house. Fake money depends on, like a shell game, constant movement and activity because if that activity stopped, the fake money would disappear. THAT is the crisis that the economy is in now, in a nutshell. The proportion of real money and fake money has been completely reversed in the past forty years or so. While most of the economy used to be based on "real money," the masters of the universe and robber barons (along with well meaning but gullible people) have abandoned the recognition of real money and substituted frenzied activity using fake money as the "foundation" of the economy.
Real money is generated by the three classic ways: discovering a natural resource and extracting it (such as gold), taking a low value product and turning it into high value product (such as building a house), and by jobs that perform or rely on the previous two methods (for example, manufacturing).
Fake money is "generated" (or better said, "defined") by "doing things." Thus a service based economy is "fake money" based. This is because a service is performed for money (food prepared, recreation taken, a hair cut being given, etc) but the service did not result in money or value that can be seen, touched, preserved or value enhanced. You paid someone to cook the burger or cut your hair, but all that was is a passing of cash to the service provider, rather than building or creating "real money." Manufacturing is a real money job because the workers get a paycheck AND a value added good is produced (in theory, but much of what is manufactured today is garbage of transitory use and no real value). But in theory and in reality, manufacturing jobs generate real money based personal, community and national wealth. Service jobs do not. Service jobs just keep money moving into various people's hands and do not add to prosperity. In fact, they erode prosperity because manufacturing (and infrastructure maintenance) are not taking place, since people get their paychecks via fake money.
Think about China. Where have the manufacturing jobs gone, and the "real money?" Yep.
Worse, wall street masters of the universe, colluding with the service and consumer driven and obsessed society, took "fake money" to a category you can think of as "extreme fake money" or "fake money on crack." They invented "things to do with money" that moves fake money into bizarre places for bizarre reasons, concentrating the ability of individuals to become wealthy, but depleting the "real money" economy. It started somewhat innocently with the idea of paying interest for the use of money, which is how banking got started (although the first reason banks were invented was because people needed a safe place to store their money... they were not originally looking for interest in return or loans to be given). The first stage of banking was just to get the money out of the vulnerabilities of being under granny's mattress or the cowboy who might be robbed of his gold, and into a safe place called a bank. The second stage of banking was paying interest and giving out safe loans.
But then along comes the crazy eighties, on the foundation of the insane 60's and 70's. Money "managers" wanted to make more money than just their share of interest. And so they started "inventing" "financial tools" that are supposed to "increase wealth," but actually just generated a frenzied movement of money that then concentrates itself into the hands of those who keep it moving. They noticed things like foreign exchange trading, where they could buy a currency, wait for the value of that currency to go up, and then sell that currency, pocketing the profit. That then gave birth to all sorts of insane financial "instruments" where basically the entire economy became a gambling casino, but one where the masters of the universe controlled which way the roulette wheels would spin. So they would pretend to be helping clients "wisely invest their money," but what they were doing instead was eliminating sources of real money (such as manufacturing jobs) and promoting the exclusive use of fake money through constant financial manipulations. That is the reason this country is in such a horrible, horrible, horrible financial mess.
I'll let you take a deep breath and think about it.
(I hear the Pope has just made the same comments as me :-)
Capitalism/Financial Crisis tutorial Part 7
OK, so here we come to the heart of the matter and the first clue as to how capitalism has become so warped and derailed from its true principles, thus causing this financial crisis.
As humans grow and develop and society progresses, under capitalism the "subsistence" part of the economy is supposed to become easier to achieve, increasingly safer from risk and cheaper. What we have instead is "masters of the universe" who have made the subsistence part of the economy more expensive, more difficult to achieve, and increasing, rather than decreasing in risk. Let's use examples from my previous tutorials to better understand how "it is supposed to be" for capitalism to work properly and how, instead, "how far away from the true workings of capitalism" our economy has gone.
Up until around fifty years ago for the vast majority of Americans who lived outside of urban areas, so long as family members were able bodied you were able to have a house because you built it yourself. It may only be a shack, a log cabin, a bungalow or an addition onto the family farm, inn or homestead, but if the men in your family were able bodied, you had a roof over your head. That was total security regarding "housing." Pre-built and sold houses did not really occur until after World War II when so many soldiers returning home needed houses. So subsistence people, who were the vast majority of the population, who are the ones who "invented" capitalism (via selling surplus farm goods for cash), built their own homes, either with their own hands or with extended family members. So the starting assumption of successful capitalism is cheap and secure housing that is obtained by the subsistence homedweller.
As the subsistence person generates cash through the sale of excess farm goods, he could build a better, safer and bigger house. Risk decreased not increased. Capitalism allowed the man building his own house to buy better tools to obtain the raw materials (saws, axes, quarrying materials, etc) and thus he could build a better house for the same "investment." This is called "value added." The small amount of cash that was gained in capital markets by selling excess food crops or livestock was used to better enable the free hands that built his own free house and/or farm for his family. Forget about city folk and industrialists for a minute; I'm talking about the vast majority of people, not the poor who made their way up the economic scale via the Industrial Revolution (factories) and the industrialists whose lives were focused on managing cash. The vast majority of Americans (and indeed, people around the world) were simultaneously "inventing" authentic capitalism by investing the small amounts of cash they obtained by selling farm surplus back into their subsistence (self produced) food, clothing and shelter.
So under true capitalism the basics of subsistence (food, clothing and shelter) are supposed to be constantly coming down in "price" and certainly not up. The subsistence part of the capitalist economy is supposed to be stable and open ended in its availability (so as the population grows the subsistence part expands to accommodate new members), safer not riskier, and cheaper because as technology develops one has better products for the same amount of effort. Thus, under a genuine system of capitalism there should always be an ample supply of subsistence food, shelter and clothing that can be obtained at low price and via individual initiative.
And what have we seen? The median price of a "starter" house being $100,000 or more? People being unable to get an apartment for under $700 a month? And no one able to obtain shelter unless one plays the right games of getting the right jobs, pleasing the right people, or getting public assistance, and then put in less safe rather than upwardly mobile conditions? The past thirty years is the opposite of what America was in the process of doing back when it was pursuing true capitalism (as imperfect as it was even then, but people were still in touch with the foundational principles).
In true capitalism there should be an abundance of homes that are priced exactly the same as they were thirty years before and the means to get a livelihood to afford them should also be abundant. Rather than pushing the cost of housing up to ridiculous robber baron prices (and then enabling people to "afford" them), true capitalism would have ensured a plenitude of good houses in the right locations that cost exactly the same as what their grandparents paid. This country should have had tons of homes that are priced at $20,000-$60,000, and an abundance of "jobs" or other means to afford them. But we all know, now, what happened don't we? And there should have been tons of apartments that lease at $100-400 per month.
In true capitalism that is not manipulated by masters of the universe and robber barons, the natural market would have developed a plenitude of homes that are low priced and high quality, and jobs or other means of income that allowed people to increase, not decrease, their ability to buy entry level housing that is high quality.
Here's the tripping point. At some point the masters of the universe decided the economy should be based on "getting the highest price that the market will 'bear'" for both surplus and subsistence. So if someone is "willing" to pay $100,000 for a $40,000 home, ALL the $40,000 homes were forced to be priced at $100,000 through robber baron collusion. They then pointed to "capitalism" and say "hey, in a free market, if someone wants to pay $100,000 for this house, then the market is 'demanding' that we price all the houses at that level!"
I could not believe it when I saw this happen in front of my very eyes, starting in the early 1980's. (Of course the foundation for the disaster was laid in 1960's-70's when the "social revolution" meant that the "new generation" rejected values and eduction in favor of economic and other plundering and self gratification). But the 1980's was when true capitalism exploded and disintegrated. Everyone bought into the "well, gosh, we must charge what the biggest idiot will pay" and then they enabled the idiot to "pay" that amount, thus driving subsistence products into the most speculative and inflationary extreme of surplus philosophy "investment."
That, by the way, is the reason that conservatives teach that the biggest enemy of capitalism is inflation. In true capitalism you do not have inflation of subsistence goods. In fact, in true capitalism you have the healthy opposite of inflation, which is a constantly improved product (a better house) for the same price. That is the definition of "progress," by the way. You are not supposed to have riskier and more poorly constructed products for HIGHER prices! But that is exactly what this economy has become via deliberate manipulation plus some well meaning stupidity. However, today's conservatives, as right as they are about inflation, are colluders with the disintegration of true capitalism, rather than defenders. This is because they are part of the youthful, manipulative and ignorant plunderers, not the watchdogs against it that they claim to be. They used to be but they sold out. I saw it happen. I worked for a bank in the 1980's and I saw the Republicans being targeted by campaign donations so they would vote to get rid of the Glass Steagall Act (the one that kept risky investment banking separate from supposedly safe savings and commercial banking). The bankers I worked for knew that the conservatives were the ones who had to be turned away from being true capitalist watchdogs and become part of the looters.
The United States left true capitalism a long time ago and it is a total disaster.
In my next tutorials I'll go back to stepping you forward in how true capitalism unfolded and how it got derailed. *sigh*
As humans grow and develop and society progresses, under capitalism the "subsistence" part of the economy is supposed to become easier to achieve, increasingly safer from risk and cheaper. What we have instead is "masters of the universe" who have made the subsistence part of the economy more expensive, more difficult to achieve, and increasing, rather than decreasing in risk. Let's use examples from my previous tutorials to better understand how "it is supposed to be" for capitalism to work properly and how, instead, "how far away from the true workings of capitalism" our economy has gone.
Up until around fifty years ago for the vast majority of Americans who lived outside of urban areas, so long as family members were able bodied you were able to have a house because you built it yourself. It may only be a shack, a log cabin, a bungalow or an addition onto the family farm, inn or homestead, but if the men in your family were able bodied, you had a roof over your head. That was total security regarding "housing." Pre-built and sold houses did not really occur until after World War II when so many soldiers returning home needed houses. So subsistence people, who were the vast majority of the population, who are the ones who "invented" capitalism (via selling surplus farm goods for cash), built their own homes, either with their own hands or with extended family members. So the starting assumption of successful capitalism is cheap and secure housing that is obtained by the subsistence homedweller.
As the subsistence person generates cash through the sale of excess farm goods, he could build a better, safer and bigger house. Risk decreased not increased. Capitalism allowed the man building his own house to buy better tools to obtain the raw materials (saws, axes, quarrying materials, etc) and thus he could build a better house for the same "investment." This is called "value added." The small amount of cash that was gained in capital markets by selling excess food crops or livestock was used to better enable the free hands that built his own free house and/or farm for his family. Forget about city folk and industrialists for a minute; I'm talking about the vast majority of people, not the poor who made their way up the economic scale via the Industrial Revolution (factories) and the industrialists whose lives were focused on managing cash. The vast majority of Americans (and indeed, people around the world) were simultaneously "inventing" authentic capitalism by investing the small amounts of cash they obtained by selling farm surplus back into their subsistence (self produced) food, clothing and shelter.
So under true capitalism the basics of subsistence (food, clothing and shelter) are supposed to be constantly coming down in "price" and certainly not up. The subsistence part of the capitalist economy is supposed to be stable and open ended in its availability (so as the population grows the subsistence part expands to accommodate new members), safer not riskier, and cheaper because as technology develops one has better products for the same amount of effort. Thus, under a genuine system of capitalism there should always be an ample supply of subsistence food, shelter and clothing that can be obtained at low price and via individual initiative.
And what have we seen? The median price of a "starter" house being $100,000 or more? People being unable to get an apartment for under $700 a month? And no one able to obtain shelter unless one plays the right games of getting the right jobs, pleasing the right people, or getting public assistance, and then put in less safe rather than upwardly mobile conditions? The past thirty years is the opposite of what America was in the process of doing back when it was pursuing true capitalism (as imperfect as it was even then, but people were still in touch with the foundational principles).
In true capitalism there should be an abundance of homes that are priced exactly the same as they were thirty years before and the means to get a livelihood to afford them should also be abundant. Rather than pushing the cost of housing up to ridiculous robber baron prices (and then enabling people to "afford" them), true capitalism would have ensured a plenitude of good houses in the right locations that cost exactly the same as what their grandparents paid. This country should have had tons of homes that are priced at $20,000-$60,000, and an abundance of "jobs" or other means to afford them. But we all know, now, what happened don't we? And there should have been tons of apartments that lease at $100-400 per month.
In true capitalism that is not manipulated by masters of the universe and robber barons, the natural market would have developed a plenitude of homes that are low priced and high quality, and jobs or other means of income that allowed people to increase, not decrease, their ability to buy entry level housing that is high quality.
Here's the tripping point. At some point the masters of the universe decided the economy should be based on "getting the highest price that the market will 'bear'" for both surplus and subsistence. So if someone is "willing" to pay $100,000 for a $40,000 home, ALL the $40,000 homes were forced to be priced at $100,000 through robber baron collusion. They then pointed to "capitalism" and say "hey, in a free market, if someone wants to pay $100,000 for this house, then the market is 'demanding' that we price all the houses at that level!"
I could not believe it when I saw this happen in front of my very eyes, starting in the early 1980's. (Of course the foundation for the disaster was laid in 1960's-70's when the "social revolution" meant that the "new generation" rejected values and eduction in favor of economic and other plundering and self gratification). But the 1980's was when true capitalism exploded and disintegrated. Everyone bought into the "well, gosh, we must charge what the biggest idiot will pay" and then they enabled the idiot to "pay" that amount, thus driving subsistence products into the most speculative and inflationary extreme of surplus philosophy "investment."
That, by the way, is the reason that conservatives teach that the biggest enemy of capitalism is inflation. In true capitalism you do not have inflation of subsistence goods. In fact, in true capitalism you have the healthy opposite of inflation, which is a constantly improved product (a better house) for the same price. That is the definition of "progress," by the way. You are not supposed to have riskier and more poorly constructed products for HIGHER prices! But that is exactly what this economy has become via deliberate manipulation plus some well meaning stupidity. However, today's conservatives, as right as they are about inflation, are colluders with the disintegration of true capitalism, rather than defenders. This is because they are part of the youthful, manipulative and ignorant plunderers, not the watchdogs against it that they claim to be. They used to be but they sold out. I saw it happen. I worked for a bank in the 1980's and I saw the Republicans being targeted by campaign donations so they would vote to get rid of the Glass Steagall Act (the one that kept risky investment banking separate from supposedly safe savings and commercial banking). The bankers I worked for knew that the conservatives were the ones who had to be turned away from being true capitalist watchdogs and become part of the looters.
The United States left true capitalism a long time ago and it is a total disaster.
In my next tutorials I'll go back to stepping you forward in how true capitalism unfolded and how it got derailed. *sigh*
Capitalism/Financial Crisis tutorial Part 6
In this post I'm just going to pull together the foundation for understanding capitalism and comprehending where the economy has gone wrong, causing the current financial crisis, which continues to spread.
1. So remember, as you read in my previous tutorial postings, it is the poor people who "invented," or more accurately to say "discovered" capitalism, not the rich. If you read text books they all glom onto the "mechanisms" of capitalism (banks, monetary system, earning interest, etc) and make it look like that is the "beginning" of capitalism (and thus invented by and the tool of the rich). But that is not true because the principles of capitalism arose from the grassroots of poor people who lived "hand to mouth" in a subsistence way, which was throughout history the vast majority of people, when they individually were able to grow or build more than they needed for subsistence, called a surplus, and sold that surplus for cash.
2. Thus capitalism in its correct form arose from a society where the basics of survival, the "subsistence" part of the economy, were self provided, and not provided via capitalism or its tools. Here is what I mean. It is easy to think it was long ago that people grew their own food and built their own houses, shacks or huts, but that is not true: it is still within the memory of living people. Only fifty years ago much of the American population was still directly involved in agriculture on a personal basis. And people still had to build their own homes just before World War II. Let me use my stepfather's family as an example. While he recently died my step uncle who is in his 90's still lives and told me how he built his home (and how everyone did that), while we stood in his back yard and looked at that very home. He used the horses that my step grandparents had for plowing the fields on their farm to dig out the foundation of the house. My stepfather used to tell me and point out the very fields where he himself used to hitch up the horses and plow the farm. So, my step uncle continued in his explanation to me, when he married he had to build a home for his family (no longer living on the farm with his parents) so he used the horses to dig out the foundation and the cellar area, and then built his house by hand. What he did not know, being a young man, his father in law showed him. For example, he did not know how to miter corners properly, so his father in law taught him and helped him to do so properly. So you see, many older houses that young people see when they go to small towns are remainders of the time within memory when there were no real estate agents and no pre-built houses for sale for the vast majority of the country. So capitalism played no role in the provision of the "subsistence" part of the economy for the hundreds of years of history when capitalism was developed, first as a day to day reality and then later as a philosophy and economic concept.
3. So remember, capitalism developed when individuals who produced food for their own family's survival started to inch out of the "hand to mouth" mode and eventually grew more than their family needed, enabling them to sell the surplus for cash. It is the selling of surplus for cash that is "capitalism," pure and simple.
4. Now what did they do with the cash? They bought "extras" that helped in their subsistence. For example on the frontier they invested in improved metal tools that enabled better home and farm building and ability to grow and hunt food. People "invested" in their own "subsistence" using the cash. They would not dream of taking the cash to a "bank" (if one even existed) or "put their money to work earning interest." These were people who lived hand to mouth and they used their cash earned by selling surplus and put it back into improving their own lives. This is what poor people around the world in lesser developed countries still try to do, although much of that has been derailed and no longer works, because modernists and dreadful governmental systems have taken away from the poor the ability to maintain and grow their subsistence economy. Much more on this in future tutorials. But my point is that the tools of capitalism that everyone struggles with understanding today are not actual capitalism, since those tools did not exist at all when capitalism was "developed" by the normal day to day actions of the grass roots poor. Cash was "invested" back in the family in order to buy things they could not easily make themselves (such as metal tools) that continued to improve their subsistence. Cash was not saved or kept very long at all, say nothing of putting it in a bank, because there was always a dire need to use the cash to improve one and one's family's chances of subsistence and survival. Whether a cowboy out west or a farmer in the east, cash was quickly spent on the tools of one's survival and kept in a box, pouch, or under granny's mattress, not in a bank and certainly not laying around waiting for "interest" when there was a dire need for investing in the family's necessities.
5. This is how the "blue collar" professions developed. People who knew through subsistence how to make something for themselves (blacksmith, tool maker, etc) started to provide those services to other subsistence families in return for cash.
1. So remember, as you read in my previous tutorial postings, it is the poor people who "invented," or more accurately to say "discovered" capitalism, not the rich. If you read text books they all glom onto the "mechanisms" of capitalism (banks, monetary system, earning interest, etc) and make it look like that is the "beginning" of capitalism (and thus invented by and the tool of the rich). But that is not true because the principles of capitalism arose from the grassroots of poor people who lived "hand to mouth" in a subsistence way, which was throughout history the vast majority of people, when they individually were able to grow or build more than they needed for subsistence, called a surplus, and sold that surplus for cash.
2. Thus capitalism in its correct form arose from a society where the basics of survival, the "subsistence" part of the economy, were self provided, and not provided via capitalism or its tools. Here is what I mean. It is easy to think it was long ago that people grew their own food and built their own houses, shacks or huts, but that is not true: it is still within the memory of living people. Only fifty years ago much of the American population was still directly involved in agriculture on a personal basis. And people still had to build their own homes just before World War II. Let me use my stepfather's family as an example. While he recently died my step uncle who is in his 90's still lives and told me how he built his home (and how everyone did that), while we stood in his back yard and looked at that very home. He used the horses that my step grandparents had for plowing the fields on their farm to dig out the foundation of the house. My stepfather used to tell me and point out the very fields where he himself used to hitch up the horses and plow the farm. So, my step uncle continued in his explanation to me, when he married he had to build a home for his family (no longer living on the farm with his parents) so he used the horses to dig out the foundation and the cellar area, and then built his house by hand. What he did not know, being a young man, his father in law showed him. For example, he did not know how to miter corners properly, so his father in law taught him and helped him to do so properly. So you see, many older houses that young people see when they go to small towns are remainders of the time within memory when there were no real estate agents and no pre-built houses for sale for the vast majority of the country. So capitalism played no role in the provision of the "subsistence" part of the economy for the hundreds of years of history when capitalism was developed, first as a day to day reality and then later as a philosophy and economic concept.
3. So remember, capitalism developed when individuals who produced food for their own family's survival started to inch out of the "hand to mouth" mode and eventually grew more than their family needed, enabling them to sell the surplus for cash. It is the selling of surplus for cash that is "capitalism," pure and simple.
4. Now what did they do with the cash? They bought "extras" that helped in their subsistence. For example on the frontier they invested in improved metal tools that enabled better home and farm building and ability to grow and hunt food. People "invested" in their own "subsistence" using the cash. They would not dream of taking the cash to a "bank" (if one even existed) or "put their money to work earning interest." These were people who lived hand to mouth and they used their cash earned by selling surplus and put it back into improving their own lives. This is what poor people around the world in lesser developed countries still try to do, although much of that has been derailed and no longer works, because modernists and dreadful governmental systems have taken away from the poor the ability to maintain and grow their subsistence economy. Much more on this in future tutorials. But my point is that the tools of capitalism that everyone struggles with understanding today are not actual capitalism, since those tools did not exist at all when capitalism was "developed" by the normal day to day actions of the grass roots poor. Cash was "invested" back in the family in order to buy things they could not easily make themselves (such as metal tools) that continued to improve their subsistence. Cash was not saved or kept very long at all, say nothing of putting it in a bank, because there was always a dire need to use the cash to improve one and one's family's chances of subsistence and survival. Whether a cowboy out west or a farmer in the east, cash was quickly spent on the tools of one's survival and kept in a box, pouch, or under granny's mattress, not in a bank and certainly not laying around waiting for "interest" when there was a dire need for investing in the family's necessities.
5. This is how the "blue collar" professions developed. People who knew through subsistence how to make something for themselves (blacksmith, tool maker, etc) started to provide those services to other subsistence families in return for cash.
Sunday, October 5, 2008
Capitalism/Financial crisis tutorial Part 5
OK, now, having read the parts that I excerpted from Wikipedia about the Irish Potato Famine, now let me list the economic implications and "lessons that should have been learned" from this classic case study. I am not making any political points in this analysis as I am using this case study to show you the economic imperatives, the vital lessons, that are missed when people bog down in the English v. Irish, Protestant v. Catholic, upper class v. lower class dynamics. The same tragedy would have occurred if these decisions were made by contemporary executives of the same nationality as the victims.
1. Ireland had a healthy population that was sustained by fertile lands that were used for both pasturing (cattle) and agriculture.
2. The governing English decided to exploit the growing market (demand) for beef in England. Thus they took the pasturing land from the Irish and used it to cultivate supply of beef for the "free market" in England.
3. The Irish thus lost the ability to support their families through pasturing and had to become tenant farmers on small plots of allocated land. Each plot is so small that the only food that can be grown is the potato.
4. Thus the entire Irish population is dependent on one and only one food, the potato. It is as if all of America could only eat bread every day and no other food, and you had to bake your own bread based on wheat you grew in your back yard.
5. While all of Europe had periodic problems with the disease (called blight), only Ireland was entirely dependent on one and only one source of food, the potato. There was absolutely no alternative when blight destroyed half of the Irish potato crop.
6. An estimated one million of eight million total population slowly starved to death in Ireland and another one million fled, many coming to America.
7. Not only was the loss of population so extreme but it is long lasting, as even 150 years later, to this day, Ireland has never recovered from the impact of such a huge loss of life and breakdown of culture and society.
8. Notice that English were arguing for "laissez faire" (let the market adjust itself) economics. How can the market adjust itself when the one and only source of food was wiped out for an entire country? Using the example I mentioned, what would you, as Americans, do if you had to grow your own wheat in your backyards, bake your own bread, and eat only that one food, having no access to any other food, if then a disease wiped out half of the country's wheat? There were no stores in Ireland or alternate sources of food. So those who argued for "laissez faire" were basically giving the death penalty to Ireland.
9. Just like in modern times one cannot just "bring in some corn from America" to "tide people over the famine." If the only subsistence food structure is ruined there is no long term (and often no short term) solution to importing emergency food (though that obviously has to happen). Having a "one crop only" stricture upon Ireland was the destruction of capitalism in Ireland in the name of so-called capitalism aka "free market" in England.
10. True capitalism would have looked like this scenario. If the English developed a "taste for beef" and a home market demand, they should have invested in the Irish pasturalists who were raising beef for their own families and subsistence. As the English invested in the subsistence level beef farming in Ireland the Irish would quickly have built up a surplus of beef that could have been sold in the English market using capitalist principles.
So this is why this horrible tragedy in human history is a vital economic case study in addition to a political story. This is why the Irish Potato Famine used to be taught in schools (and well remembered in families) when I was a child. Schools used to teach these types of history to illustrate sound farming and economic principles in addition to historical human tragedies and political upheavals. However, modern agendas are so skewed that these events are no longer taught properly or at all, hence people of the past two generations do not understand what your average Joe and Mary knew just fifty years ago.
I hope you find this helpful. I'm sure that you will. Remember, true capitalism is investing in subsistence until there is a surplus, not manipulating the subsistence and putting in it grave jeopardy of economic risk based on cultivating market "cravings" and desire for excess profits. Like I said, the English should have invested in the subsistence beef production in Ireland until a surplus developed that then could supply the market using sound capitalist economic principles. And this is the very mistake that I see happening in much of the economic crisis today, and I will continue to offer tutorials and walk you through more examples, and offer remedies and suggestions (now that everything is a disastrous mess, maybe someone will finally listen to me, *lol*, except it's not really very funny and it never was).
1. Ireland had a healthy population that was sustained by fertile lands that were used for both pasturing (cattle) and agriculture.
2. The governing English decided to exploit the growing market (demand) for beef in England. Thus they took the pasturing land from the Irish and used it to cultivate supply of beef for the "free market" in England.
3. The Irish thus lost the ability to support their families through pasturing and had to become tenant farmers on small plots of allocated land. Each plot is so small that the only food that can be grown is the potato.
4. Thus the entire Irish population is dependent on one and only one food, the potato. It is as if all of America could only eat bread every day and no other food, and you had to bake your own bread based on wheat you grew in your back yard.
5. While all of Europe had periodic problems with the disease (called blight), only Ireland was entirely dependent on one and only one source of food, the potato. There was absolutely no alternative when blight destroyed half of the Irish potato crop.
6. An estimated one million of eight million total population slowly starved to death in Ireland and another one million fled, many coming to America.
7. Not only was the loss of population so extreme but it is long lasting, as even 150 years later, to this day, Ireland has never recovered from the impact of such a huge loss of life and breakdown of culture and society.
8. Notice that English were arguing for "laissez faire" (let the market adjust itself) economics. How can the market adjust itself when the one and only source of food was wiped out for an entire country? Using the example I mentioned, what would you, as Americans, do if you had to grow your own wheat in your backyards, bake your own bread, and eat only that one food, having no access to any other food, if then a disease wiped out half of the country's wheat? There were no stores in Ireland or alternate sources of food. So those who argued for "laissez faire" were basically giving the death penalty to Ireland.
9. Just like in modern times one cannot just "bring in some corn from America" to "tide people over the famine." If the only subsistence food structure is ruined there is no long term (and often no short term) solution to importing emergency food (though that obviously has to happen). Having a "one crop only" stricture upon Ireland was the destruction of capitalism in Ireland in the name of so-called capitalism aka "free market" in England.
10. True capitalism would have looked like this scenario. If the English developed a "taste for beef" and a home market demand, they should have invested in the Irish pasturalists who were raising beef for their own families and subsistence. As the English invested in the subsistence level beef farming in Ireland the Irish would quickly have built up a surplus of beef that could have been sold in the English market using capitalist principles.
So this is why this horrible tragedy in human history is a vital economic case study in addition to a political story. This is why the Irish Potato Famine used to be taught in schools (and well remembered in families) when I was a child. Schools used to teach these types of history to illustrate sound farming and economic principles in addition to historical human tragedies and political upheavals. However, modern agendas are so skewed that these events are no longer taught properly or at all, hence people of the past two generations do not understand what your average Joe and Mary knew just fifty years ago.
I hope you find this helpful. I'm sure that you will. Remember, true capitalism is investing in subsistence until there is a surplus, not manipulating the subsistence and putting in it grave jeopardy of economic risk based on cultivating market "cravings" and desire for excess profits. Like I said, the English should have invested in the subsistence beef production in Ireland until a surplus developed that then could supply the market using sound capitalist economic principles. And this is the very mistake that I see happening in much of the economic crisis today, and I will continue to offer tutorials and walk you through more examples, and offer remedies and suggestions (now that everything is a disastrous mess, maybe someone will finally listen to me, *lol*, except it's not really very funny and it never was).
Capitalism/Financial Crisis Part 4
When I was a youngster in school, the "Great Famine," also known as "The Irish Potato Famine," was taught in depth in history classes. It is a very important event in human (and American) history and is very informative, even necessary, to understand in order to be proficient in economics and what I have been explaining about capitalism having to mindfully treat subsistance and surplus product using totally different risk profiles. So before I explain more about why the Great Famine is so instructive about understanding true capitalism, read here some excerpts from the Wikipedia entry.
http://en.wikipedia.org/wiki/Irish_Potato_Famine_(1845-1849)
snip
The Great Famine (Irish: An Gorta Mór[1] or Irish: An Drochshaol),[2] also known as the Irish Potato Famine and the Great Hunger was a famine in Ireland which started in 1845, lasted — depending on the region — until 1849[3] or even 1852[4] and which led to the death of approximately one million people through starvation and disease; a further million are thought to have emigrated as a result of the famine.[5] Some scholars estimate that the population of Ireland was reduced by 20 to 25 percent.[6]
The proximate cause[7] of the famine was a potato disease commonly known as late blight. Although blight ravaged potato crops throughout Europe during the 1840s, the impact and human cost in Ireland — where a third of the population was entirely dependent on the potato for food — was exacerbated by a host of political, social and economic factors which remain the subject of historical debate.[8][9]
The famine was a watershed[10] in the history of Ireland. Its effects permanently changed the island's demographic, political and cultural landscape. For both the native Irish and those in the resulting diaspora, the famine entered folk memory[11] and became a rallying point for various nationalist movements. Modern historians regard it as a dividing line in the Irish historical narrative, referring to the preceding period of Irish history as "pre-Famine." The fall-out of the famine continued for decades afterwards and Ireland's population still has not recovered to pre-famine levels.[12][13][14]
snip
Although central to everyday life, the Irish potato crop was an uncertain quantity. The famine of 1845 was notable for its vastness only: according to the 1851 Census of Ireland Commissioners there were twenty-four failures of the potato crop going back 1728, of varying severity. In 1739 the crop was "entirely destroyed", and again in 1740, in 1770 the crop largely failed again. In 1800 there was another "general" failure, and in 1807 half the crop was lost. In 1821 and 1822 the potato crop failed completely in Munster and Connaught, and 1830 and 1831 were years of failure in Mayo, Donegal and Galway. In 1832, 1833, 1834 and 1836 a large number of districts suffered serious loss, and in 1835 the potato failed in Ulster. 1836 and 1837 brought "extensive" failures throughout Ireland and again in 1839 failure was universal throughout the country; both 1841 and 1844 potato crop failure was widespread.[18]
snip
The 1841 census showed a population of just over eight million. Two-thirds of those depended on agriculture for their survival, but they rarely received a working wage. They had to work for their landlords in return for the patch of land they needed in order to grow enough food for their own families. This was the system which forced Ireland and its peasantry into monoculture, as only the potato could be grown in sufficient quantity. The rights to a plot of land in Ireland could mean the difference between life and death in the early 19th century.[20]
snip
Ireland remained a net exporter of food even during the blight. The immediate effect on Ireland was devastating, and its long-term effects proved immense, changing Irish culture and tradition for generations.[22] The population of Ireland continued to fall for 70 years, stabilizing at half the level prior to the famine. This long-term decline ended in the west of the country only in 2006, over 160 years after the famine struck.[23]
snip
1845
Following earlier reports of its incidence in England, on 13 September 1845 potato blight was first reported in Ireland.[24] By mid October it was widespread.[25] The Prime Minister Robert Peel was prompted to act.[26] On 15 October he decided that this was the time to repeal the Corn Laws to reduce price of grain/bread for the poor.[27] On 18 October Peel set up a Scientific Commission to go to Ireland and investigate the potato blight and report on conditions.[28] An emergency Cabinet meeting on 31 October - 1 November instituted a Relief Commission plus other measures to alleviate distress but Peel's proposal to repeal the Corn Laws was rejected[29] On 9-10 November Peel ordered the purchase of £100,000 worth of Indian corn from America for distribution in Ireland.[30] On 15 November the Scientific Commissioners reported that half the potato crop had been destroyed.[31] On 20 November the Relief Commission first met.[32]Unable to convince his Cabinet to repeal the Corn Laws, on 5 December Peel tendered his resignation to Queen Victoria but was reinstated days later when Lord John Russell was unable to form a government.[33]
1846
The first deaths from hunger took place in early 1846.[34]In March Peel set up a programme of public works in Ireland but was forced to resign as Prime Minister on 29 June.[35]The new Whig administration under Lord Russell, influenced by their laissez-faire belief that the market would provide the food needed[36]then halted government food and relief works leaving many hundreds of thousands of people without any work, money or food.[37]Grain continued to be exported from the country.[38]Private initiatives such as The Central Relief Committee of the Society of Friends (Quakers) attempted to fill the gap caused by the end of government relief and eventually the government reinstated the relief works, although bureaucracy made food supplies slow to be released.[39]The blight almost totally destroyed the 1846 crop and the Famine worsened considerably.[40]By December a third of a million destitute people were employed in public works.[41]
1847 ("Black '47")
1847's exceptionally hard winter made conditions even worse.[42]A typhus epidemic killed tens of thousands, including wealthier people as the towns were now also affected.[43] 1847's harvest was largely unaffected by blight but too few potatoes had been planted so the Famine continued unabated.[44] The Soup Kitchens Act provided financial assistance to local authorities to help them feed Famine victims but this Act was withdrawn in September and relief was made the responsibility of local poor rates and of charitable organizations.[45]This put impossible loads on local poor rates, particularly in the rural west and south.[46] Emigration reached new heights and the infamous coffin-ships crossed the Atlantic in large numbers carrying people fleeing from the famine.[47][48][49][50]
1848
The blight returned in 1848 and outbreaks of cholera were reported.[51]Evictions became common among the Irish who couldn't keep up with the demands of their British landlords. Famine victims on outdoor relief peaked in July at almost 840,000 people.[52] On 29 July an uprising against the government was led by William Smith O'Brien. After a skirmish at "Widow McCormack's house" in the village of Ballingarry, County Tipperary the leaders of the rebellion fled to America or were sentenced to transportation.[53][54]
1849
The potato crop failed again in 1849 and famine was accompanied by cholera outbreaks.[55]This deadly cholera epidemic kills one of Ireland's greatest poets: James Clarence Mangan.[56]
1850
The Famine ends.[57]
1851
By 1851 census figures showed that the population of Ireland had fallen to 6,575,000 - a drop of 1,600,000 in ten years.[58] On the 1851 census both Cormac Ó Gráda & Joel Mokry would also describe it as a famous but flawed source. They would contend that the combination of institutional and individuals figures gives “an incomplete and biased count” of fatalities during the famine.[59] The famine left in its wake perhaps up to a million dead and another million emigrated.[60]The famine caused a sense of lasting bitterness by the Irish towards the British government, whom many blamed — then and now — for the starvation of so many people.[61] The fall-out of the famine continued for decades afterwards.
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Claims of potato dependency
Jeremy Rifkin, in his book Beyond Beef, writes "The Celtic grazing lands of...Ireland had been used to pasture cows for centuries. The British colonized...the Irish, transforming much of their countryside into an extended grazing land to raise cattle for a hungry consumer market at home.... The British taste for beef had a devastating impact on the impoverished and disenfranchised people of...Ireland.... Pushed off the best pasture land and forced to farm smaller plots of marginal land, the Irish turned to the potato, a crop that could be grown abundantly in less favorable soil. Eventually, cows took over much of Ireland, leaving the native population virtually dependent on the potato for survival (pp. 56,57)."
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One possible estimate has been reached by comparing the expected population with the eventual numbers in the 1850s (see Irish Population Analysis). Earlier predictions expected that by 1851 Ireland would have a population of eight to nine million. A census taken in 1841 revealed a population of slightly over 8 million.[63] A census immediately after the famine in 1851 counted 6,552,385, a drop of almost 1,500,000 in ten years. [82] Modern historian R.J. Foster estimates that 'at least 775,000 died, mostly through disease, including cholera in the latter stages of the holocaust'. He further notes that 'a recent sophisticated computation estimates excess deaths from 1846 to 1851 as between 1,000,000 and 1,500,000...; after a careful critique of this, other statisticians arrive at a figure of 1,000,000.' [83][84] In addition, in excess of one million Irish emigrated to Great Britain, United States, Canada, Australia, and elsewhere, while millions emigrated over following decades.
http://en.wikipedia.org/wiki/Irish_Potato_Famine_(1845-1849)
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The Great Famine (Irish: An Gorta Mór[1] or Irish: An Drochshaol),[2] also known as the Irish Potato Famine and the Great Hunger was a famine in Ireland which started in 1845, lasted — depending on the region — until 1849[3] or even 1852[4] and which led to the death of approximately one million people through starvation and disease; a further million are thought to have emigrated as a result of the famine.[5] Some scholars estimate that the population of Ireland was reduced by 20 to 25 percent.[6]
The proximate cause[7] of the famine was a potato disease commonly known as late blight. Although blight ravaged potato crops throughout Europe during the 1840s, the impact and human cost in Ireland — where a third of the population was entirely dependent on the potato for food — was exacerbated by a host of political, social and economic factors which remain the subject of historical debate.[8][9]
The famine was a watershed[10] in the history of Ireland. Its effects permanently changed the island's demographic, political and cultural landscape. For both the native Irish and those in the resulting diaspora, the famine entered folk memory[11] and became a rallying point for various nationalist movements. Modern historians regard it as a dividing line in the Irish historical narrative, referring to the preceding period of Irish history as "pre-Famine." The fall-out of the famine continued for decades afterwards and Ireland's population still has not recovered to pre-famine levels.[12][13][14]
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Although central to everyday life, the Irish potato crop was an uncertain quantity. The famine of 1845 was notable for its vastness only: according to the 1851 Census of Ireland Commissioners there were twenty-four failures of the potato crop going back 1728, of varying severity. In 1739 the crop was "entirely destroyed", and again in 1740, in 1770 the crop largely failed again. In 1800 there was another "general" failure, and in 1807 half the crop was lost. In 1821 and 1822 the potato crop failed completely in Munster and Connaught, and 1830 and 1831 were years of failure in Mayo, Donegal and Galway. In 1832, 1833, 1834 and 1836 a large number of districts suffered serious loss, and in 1835 the potato failed in Ulster. 1836 and 1837 brought "extensive" failures throughout Ireland and again in 1839 failure was universal throughout the country; both 1841 and 1844 potato crop failure was widespread.[18]
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The 1841 census showed a population of just over eight million. Two-thirds of those depended on agriculture for their survival, but they rarely received a working wage. They had to work for their landlords in return for the patch of land they needed in order to grow enough food for their own families. This was the system which forced Ireland and its peasantry into monoculture, as only the potato could be grown in sufficient quantity. The rights to a plot of land in Ireland could mean the difference between life and death in the early 19th century.[20]
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Ireland remained a net exporter of food even during the blight. The immediate effect on Ireland was devastating, and its long-term effects proved immense, changing Irish culture and tradition for generations.[22] The population of Ireland continued to fall for 70 years, stabilizing at half the level prior to the famine. This long-term decline ended in the west of the country only in 2006, over 160 years after the famine struck.[23]
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1845
Following earlier reports of its incidence in England, on 13 September 1845 potato blight was first reported in Ireland.[24] By mid October it was widespread.[25] The Prime Minister Robert Peel was prompted to act.[26] On 15 October he decided that this was the time to repeal the Corn Laws to reduce price of grain/bread for the poor.[27] On 18 October Peel set up a Scientific Commission to go to Ireland and investigate the potato blight and report on conditions.[28] An emergency Cabinet meeting on 31 October - 1 November instituted a Relief Commission plus other measures to alleviate distress but Peel's proposal to repeal the Corn Laws was rejected[29] On 9-10 November Peel ordered the purchase of £100,000 worth of Indian corn from America for distribution in Ireland.[30] On 15 November the Scientific Commissioners reported that half the potato crop had been destroyed.[31] On 20 November the Relief Commission first met.[32]Unable to convince his Cabinet to repeal the Corn Laws, on 5 December Peel tendered his resignation to Queen Victoria but was reinstated days later when Lord John Russell was unable to form a government.[33]
1846
The first deaths from hunger took place in early 1846.[34]In March Peel set up a programme of public works in Ireland but was forced to resign as Prime Minister on 29 June.[35]The new Whig administration under Lord Russell, influenced by their laissez-faire belief that the market would provide the food needed[36]then halted government food and relief works leaving many hundreds of thousands of people without any work, money or food.[37]Grain continued to be exported from the country.[38]Private initiatives such as The Central Relief Committee of the Society of Friends (Quakers) attempted to fill the gap caused by the end of government relief and eventually the government reinstated the relief works, although bureaucracy made food supplies slow to be released.[39]The blight almost totally destroyed the 1846 crop and the Famine worsened considerably.[40]By December a third of a million destitute people were employed in public works.[41]
1847 ("Black '47")
1847's exceptionally hard winter made conditions even worse.[42]A typhus epidemic killed tens of thousands, including wealthier people as the towns were now also affected.[43] 1847's harvest was largely unaffected by blight but too few potatoes had been planted so the Famine continued unabated.[44] The Soup Kitchens Act provided financial assistance to local authorities to help them feed Famine victims but this Act was withdrawn in September and relief was made the responsibility of local poor rates and of charitable organizations.[45]This put impossible loads on local poor rates, particularly in the rural west and south.[46] Emigration reached new heights and the infamous coffin-ships crossed the Atlantic in large numbers carrying people fleeing from the famine.[47][48][49][50]
1848
The blight returned in 1848 and outbreaks of cholera were reported.[51]Evictions became common among the Irish who couldn't keep up with the demands of their British landlords. Famine victims on outdoor relief peaked in July at almost 840,000 people.[52] On 29 July an uprising against the government was led by William Smith O'Brien. After a skirmish at "Widow McCormack's house" in the village of Ballingarry, County Tipperary the leaders of the rebellion fled to America or were sentenced to transportation.[53][54]
1849
The potato crop failed again in 1849 and famine was accompanied by cholera outbreaks.[55]This deadly cholera epidemic kills one of Ireland's greatest poets: James Clarence Mangan.[56]
1850
The Famine ends.[57]
1851
By 1851 census figures showed that the population of Ireland had fallen to 6,575,000 - a drop of 1,600,000 in ten years.[58] On the 1851 census both Cormac Ó Gráda & Joel Mokry would also describe it as a famous but flawed source. They would contend that the combination of institutional and individuals figures gives “an incomplete and biased count” of fatalities during the famine.[59] The famine left in its wake perhaps up to a million dead and another million emigrated.[60]The famine caused a sense of lasting bitterness by the Irish towards the British government, whom many blamed — then and now — for the starvation of so many people.[61] The fall-out of the famine continued for decades afterwards.
snip
Claims of potato dependency
Jeremy Rifkin, in his book Beyond Beef, writes "The Celtic grazing lands of...Ireland had been used to pasture cows for centuries. The British colonized...the Irish, transforming much of their countryside into an extended grazing land to raise cattle for a hungry consumer market at home.... The British taste for beef had a devastating impact on the impoverished and disenfranchised people of...Ireland.... Pushed off the best pasture land and forced to farm smaller plots of marginal land, the Irish turned to the potato, a crop that could be grown abundantly in less favorable soil. Eventually, cows took over much of Ireland, leaving the native population virtually dependent on the potato for survival (pp. 56,57)."
snip
One possible estimate has been reached by comparing the expected population with the eventual numbers in the 1850s (see Irish Population Analysis). Earlier predictions expected that by 1851 Ireland would have a population of eight to nine million. A census taken in 1841 revealed a population of slightly over 8 million.[63] A census immediately after the famine in 1851 counted 6,552,385, a drop of almost 1,500,000 in ten years. [82] Modern historian R.J. Foster estimates that 'at least 775,000 died, mostly through disease, including cholera in the latter stages of the holocaust'. He further notes that 'a recent sophisticated computation estimates excess deaths from 1846 to 1851 as between 1,000,000 and 1,500,000...; after a careful critique of this, other statisticians arrive at a figure of 1,000,000.' [83][84] In addition, in excess of one million Irish emigrated to Great Britain, United States, Canada, Australia, and elsewhere, while millions emigrated over following decades.
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