Monetarism is a complex Ponzi scheme and my guess is we are but a decade away from the apex of the pyramid. I offer Goldman Sachs as an example of a corporation just using the system the way it is designed. The difference between them and the other banksters is they got caught out on a technicality. But basically the more money there is the less it’s worth. One of the glaring accounting errors is the way inflation is calculated. Nations arrive at figures based on retail prices, including jumbo jets, flat screen TV’s and cheap imports; while food, water and shelter play only a small part. Ironically shelter is now an inflation suppressant because people can no longer afford it. Once stuff cost $X, now it costs $X1,000 – yet the stuff remains consistent.

Inflation has not been held down by good policy or sound economics. It is merely the product of cheap labour. This is an anomaly that has allowed the cow to get bigger while conversion of resources to product has increased exponentially. There is more money but even more stuff. The ledger is only balanced by a dramatic reduction in real wealth for the labour that produces it. China and India are prime examples but there has been a correlated increase in slavery right round the world, no longer out in the cotton fields but chained to the work bench in dark rooms a long way from the udder. So much for the milk of human kindness.

The Corps can switch to any impoverished nation at the pop of a champagne cork and will as soon as the China Bubble bursts. It actually makes accounting sense, so long as the product supply keeps growing faster than the money supply. Were it not the case the Ponzi would have collapsed by now. Real inflation could be calculated the other way round, by counting the increase in the amount of money in an economy and using that as the official inflation figure because as Rob says, this is only a claim on wealth. This claim includes debt which the banksters count as an asset. Red is the new black. The economy has long-lost the ability to pay it out and like all Ponzis, debt is a thousand times (if not millions) bigger than the cow. The danger of all pyramid systems is that they must keep going to avoid collapse. This is the great nightmare for governments all over the world, because it is a world that produced Genghis Khan and Hitler to name but two. Thus within the cow beats our heart of darkness.

Infact, much can be achieved now through a process akin to Quantitative Easing. However, an economic system sans taxation, and interest altogether would probably require “wiring up” with advanced monitoring, and tracking procedures to ensure serious inflation does not occur. See the p2pfoundation entry on TFE for further explanation.

This post was mentioned on Twitter by SteadyStateEcon: Money is not wealth, but a claim on wealth. Widespread understanding of that distinction can change the world. http://tinyurl.com/y4zbrmc...

For a while I worked in the financial world, and the justification for everything was that it let ordinary people retire (and live from the wealth that had grown over the years, while they salted away money in stocks).

So I think the reply from the status quo is likely to be “but how will people retire?”

I tend to think the answer will redefining retirement, from being completely idle and receiving checks in the mail, to working reduced hours using the judgment/wisdom accumulated from a lifetime, or simply doing things that are age appropriate. In a steady state economy there would be a great deal of inspecting of infrastructure needed, for example (look at stuff and note what you found).

The good thing is, if we can crack the question of “how will people retire?”, we will have cracked the rationale for investment growth. If the rationale for Wall Street is cracked, the rationale for economic growth is cracked. I may have a flaw in my thinking, but more and more I believe that re-inventing retirement may be the key to migrating from a growth-until-crash economy to a humane steady state world. Please call me out if I’m wrong!

The simple fact is that mainstream neoclassical economics has no theory of wealth distribution just as it has no theory of production. The field formalism of instantaneous supply and demand (Microeconomics) is simply quaint energy physics from the 19th century dressed up as modern economic “science”. MIT inspired economics is no more than a two vector field of commodity space into which the entire real world of economics is forced to fit. The math never worked. Yet, neoclassical economic theory does provide many nice stories to distract folks from real issues.

I love the last line, “If we are to make a paradigm shift — a shift from mindless pursuit of perpetual growth to an economy that persists within the physical and ecological bounds of the planet, a shift from wishful thinking to perceptive and reality-based decisions – we will need to fence in our COWs.” Well done!

It’s amazing how infiltrated the idea of returns on investment is in our world culture! We assume that any investment should be rewarded at the same value plus more. It is an odd conflict with morality, I think. “I’ll help you (with this stack of cash) but only with you help me back more (cash plus interest).” It is a subtle form of thievery performed by banks everyday that contributes to main injustices, principally a systemic need for economic expansion, as you pointed out.

I look forward to the future in a steady state economy, where we return favors in kind without demanding for more. We can create more people-based monetary systems; the documentary “The Money Fix” touches on some: http://bit.ly/4CPUgi

Cheers,
Joshua