Month: July 2010

Once you realize how our system actually works, you realize that the things Democrats and Republicans argue about are really tertiary to the understanding of how corrupt our system actually is.

I’ll get the link working eventually on the site, but just haven’t had time. I’m still hoping for a substantive response from someone. Part of the problem is that my ideas are radical; they are not found, as far as I know, in any textbook. They draw from past ideas–for example my idea was adopted in part by the German government after World War 1 in a very callous way, and benefited a few at the cost of many–but the thinking is my own.

In essence, I have reimagined what Capitalism would look like, if we were to adopt it fully. Anyway, I hope someone will eventually comment on it substantively.

If Republic is Res Publica, the “public thing”, what is the “private thing”? Our political system is how we make laws together. I think we need a word for all the parts of our lives that are not, formally, the concern of government. Speech, for example, is a “private thing”. Government has nothing to say about it, at least in my idealized system.

Capitalism is not a system for the development of material wealth–however distributed–but rather of ideational wealth, of ideas. The “labor” of the Capitalist is thinking. Bill Gates invented Windows. These ideas lead to greater wealth through qualitative change in the means of production, with the important caveat that the wealth not be redistributed through money creation.

What Marx argued, as I understand it, is that Capitalism was a system wherein the productive labor of workers was converted into Capital, which was then reinvested in the system, in a spiral in which the gap between “have’s”, and “have not’s” (Alinsky’s terms) steadily increased. In his understanding the Capitalist provided nothing but money.

For that reason, his economic system was falsified by the emergence of a middle class, and by the steady enrichment of “the workers”. What happened was ideas were converted into de facto Capital, since doing something better is the same as doing more of it. Moreover, anyone can have an idea. Thus, anyone can create “capital” from scratch, at least if they can get funded.

Thus workers become Capitalists in two ways: first they can have ideas that convert to money. Second, they could save money, which is reinvested, either directly, or through saving it in a bank. Many wealthy men started with an idea and savings: Ross Perot, for example.

This process has been greatly disrupted by the “flexible currency” Keynes called for, as well as through his very clever and thoroughly disingenuous–even sinister–defamation of savings, and encouragement of debt. His thought process was that if you don’t save money, you have to borrow it. If the government, then, can control that borrowing process, they own you. He tried to get the Fed moved directly under the control of the US government–which is how it works everywhere else–but failed. He did create the IMF and World Bank, though, and my sense is that that system has been used to create and support dictators and economic dependency throughout the world, and that they have a plan for us too.

That’s enough for now. Few thoughts.

Long day, relaxing, thought popped in my head: what if the Devil is actually on the side of God, understood according to your metaphysics literally or figuratively?

Pain is necessary for growth. What if his job is to make sure things never run quite perfectly? What if his job is to force us to fight him, and so begin actively growing as souls?

In the afterlife (which I understand literally, but the symbolism is still interesting) his job is to maintain connection with lost souls through the medium of power. Evil is nothing but the desire to get and exercise power, through the infliction of pain on others. Such people would be utterly unreactive to a loving, compassionate spirit. But they would understand someone who wanted to hurt them, who dominated them.

I really think many people today would rather feel pain than emptiness. Hell is nothing but loneliness, amplified infinitely. It is being alone with every sad thought, every guilty thought, and every ounce of emotional suffering you have ever undergone, in the darkness, and with no one else within an infinite amount of distance. I have felt it in my dreams. I very literally would not wish that on the worst human being who ever lived. The pain is unimaginable. Our bodies limit it now. We can go get a drink, make a telephone call, watch a movie, or whatever. In hell, there are no escapes.

Yet into such a world can come our friend the Devil, whose role is to torment, but also to guide. Perhaps one day he can pace, pace pace, then lead lead lead souls into new realizations that get them out of his realm altogether.

Very random, but it felt true enough to take the time to type.

I’ve been saying this for years, but failure is the price of success. The corrollary, which Churchill hinted at in his “success is failing and continuing with undiminished enthusiasm”, is that failure IS success, when viewed properly. Why does failure hurt? Because we attached ourselves to a given outcome. We created a tender spot in our emotional body over which we had no direct control.

The task, as I see it, is to radiate out, such that nothing in the external world can hurt, but such that you support everyone out there. This is, of course, much easier said than done (like virtually everything else). Towards that end, frequent failure is an immeasurable boon, since it prevents self importance, and it teaches you not to be too attached to things beyond your direct control (although obviously things like effort, preparation, and attention affect the outcome; this is no excuse for sloppiness or laziness). If you truly can fail, and not be affected in the slightest, then go again, then go again, then go again, the entirety of your life, at some point you will pass beyond really caring about any difference between success and failure, and focus only on the pleasures of the process.

And once you can do that, you will be reliably happy.

Let us posit, first of all, that a situation is conceivable in our world in which the entirety of economic output is exactly equal to what people want, and our system is perfectly stable. Even as our bodies emerge from wombs, require constant material replenishment, grow, and then fade again, the entirety of our economic output supports this process precisely, delivering food to decaying bodies (we are always both growing and decaying, and the first cannot happen sustainably without outside input), building materials to decaying buildings, and items of pleasure to decaying minds and spirits. The processes of creation and destruction are precisely balanced.

In this simple form, it is obvious there are two factors: actual production, and actual desire. Necessary production can be reduced according to reduced desires. This is a desirable state, which we might define as pervasive contentment.

Production capacity–and this applies more generally to the creation of any real or imaginary good–is a function of physical capacity, motivation, and information. Let us consider each in turn.

Physical capacity, speaking economically, is the ability to apply motivation and information in such a way that a material good is created. This implies raw physical materials, like coal, plastic, actors for movies, silicon for computers. It further implies a physical setting in which this can happen. In primitive times, a farmer’s field was his setting, and his seeds, his plow, and his ox his physical materials. In our age, it is of course a factory, but it can also be a movie studio, or even the street, for example for a documentary.

Work–which I am here equating with motivation–can increase this capacity in one of two ways. First, through work alone, qualitatively equal production capacity can be expanded. The farmer can pull out the roots and rocks of a second field, giving him more room to plow. A second industrial plant–say, to make cars–can be built.

Note here as well that the production of raw materials is, too, a type of production. If you are mining gold, you can open a second gold mine. This may or may not work, since gold is finite, as are all physical materials.

Secondly, work can be applied to creating more information, which is to say better techniques for making things. The wood plow can give way to the bronze then the iron plow, then eventually to the modern tractor. Factories can introduce labor saving devices, such that one worker can produce over time more and more material with the same amount of physical work.

Laborers provide the physical capital which is invested, whereas the Capitalist determines the precise form of that investment, which is to say his job is to inject information into the system, as an inventor, systems engineer, or businessman. As I will show, this job amounts to increasing the wages of the laborers, not decreasing them.

We can now make some general mathematical abstractions:

Actual production of material and “informational” goods (movies, books, etc.) is equal to (physical materials plus physical plant plus physical and mental labor). This is potentially a steady state situation, in conditions in which people are contented with the quantities and qualities involved.

Growth, on the other hand, requires more. The following applies to a modern, industrial economy:

A (physical materials plus physical plant plus physical and mental labor) times

B (physical labor to increase raw materials or improve the physical plant) plus

C (money “labor”/Capital to increase raw materials or improve the physical plant) plus

D (Creative labor to qualitatively restructure the search for raw materials or the efficiency of the production of goods), all divided by

E (the desire or need to have more things/experiences). This is a function of generalized cultural considerations and physical population. The first is a variable that can be operated on by increased efficiencies in the “production” of contentment. This is the realm of moral improvement, of what I term “qualitative power”, in my essay on Goodness.

In terms of physical population, obviously the amount of material goods needed to maintain minimual levels of nutrition, shelter, and the like will go up and down as the number of mouths to feed goes up and down.

A and B are multiplied, since both are necessary. Logically, you can’t have growth if you don’t keep doing what you were doing to begin with. Further, you cannot have growth if you don’t put in extra work, at least in terms of building something bigger, like a second factory.

Quantity C is a factor of the conversion of labor into money then back into labor (through investment in efficiency–which gets more work done per worker–or added physical capacity–which employs more workers in that industry, at a detriment to some other industry, or to accommodate increasing population), in a continuing cycle. Money is made, by both “workers” and “capitalists” (a very fluid and inexact delineation for the last 50 years), saved, and then invested.

In a condition of fixed money supply and increases in efficiency, the cost of the output of that capacity–the material goods produced–will drop steadily. The costs of material goods will decrease, and the value of the money paid will increase.

(Note here, too, that unions are an integral aspect of Capitalism. They are the counterpart to the corporation.)

This is the same as saying that the capacity of labor to generate material sufficiency will steadily increase, absent changes in either perceived need, or the money supply. This means all workers receive steadily more “money” in terms of what they can buy, per hour worked. This in turn means increased capacity to save their money for further investment and consumption.

In conditions of expansion through simple duplication (without increases in information deployed as increases in efficiency), where one factory is simply duplicated across the railroad tracks, the purchasing power of the workers will NOT increase.

This type of expansion is necessary where people are growing more numerous, but not smarter. This would be a growing population putting more land under cultivation. At some point, it is quite possible for resources to be unequal to the task of feeding everyone, since resources are finite, and potential human beings are not. This was the dystopia of Malthus, who figured that the Industrial Revolution would cause less people to die, and more people to be born. This, in turn, would cause more people to need to be fed, in a cycle which outpaced potential growth in material production, leading to famine and pervasive poverty, absent government coercion in the direction of reducing population growth.

Malthusianism might be defined as Capitalism denuded of information. It presumes both that individuals are incapable of rationally limiting their own reproduction, and that Capitalists are incapable of increases in efficiency, which is to say the material form the means of production take.

Creative Labor, D, is the sole means of increasing the standard of living for a fixed population. It is a necessary component of true Capitalism, which is based on the simultaneous increase in material goods up to the point of satiation, and a corresponding increase in the value of money.

This is the counterbalance to the potential that natural resources could be exhausted. It involves the capacity to plan, and to innovate. An obvious example is the invention by American Norman Borlaug of seeds with far greater yields than those used before. Many doomsday scenarios of overpopulation were put forth by apparently serious academics throughout the 20th Century, of which none have come true. In conditions of increasing prosperity, people naturally control their birth rates, and science increased the efficiency and hence capacity of production.

The equation can be written thus: [(A*B)+C+D]/E=Rate of Growth.

As long as this overall fraction is less than one, growth will happen. Once it reaches one, which is to say what we want equals what we are making, then growth will cease, and the system will go into equilibrium.

At equilibrium, no one will be hungry, unclothed, or unsheltered–unless they want it that way, as have many religious ascetics over the years. Poverty will be gone. Malcontentment will be gone.

Note that even at equilibrium “growth” is still happening, in that things are being grown and produced. As long as human life endures on Earth this can never be a static system.

In a non-Capitalist system, which is what we have, and which I have proposed we term “Monetary Mercanilism”, C is equal not just to the money in existence, but that money plus whatever is created by entities with the power to do so, most notably central banks, and the institution of fractional reserve banking. Note that the production of money is completely external to the production of material goods.

A key point is that the value of C remains constant. If we double the money supply, the purchasing power of that money is cut in half, yet the entirety, the whole, is the same. If I print enough money to turn the purchasing power of $1 million into $500,000, what I have done is take that value for myself.

Thus, money creation does not affect the rate of growth, so much as the value of labor, and distribution of ownership. The rate of growth can be enormous over huge chunks of time, but the actual benefits to workers will be substantially less than it would be in true Capitalism. Further, Capitalists CAN benefit from Monetary Mercantilism, since they can borrow such money, which in effect gets given to them for free, but the fact is that they lose much of the value of their own property in so doing. They, too, transfer value to the banks.

Two points need to be underscored. First, that the amount of industrial growth that is necessary is affected by our cultural/moral system. Second, that the satisfaction of material wants is best done generally without fiat money, which enriches a few at the expense of the many.

Keynesianism is refuted by pointing out, first, that severe misallocations of capital production only happen in command economies; and second, that when the value of money is increasing, the value of savings is rising with each step, such that money invested is in the end always worth more than what was saved. There is no demand side problem. Let us say that when paid it is worth $1, and after investment it is worth $2 in the old goods. In the short term this may lead to greater consumption of goods. In the long run, it will lead to greater savings, enhanced financial security, and more generalized wealth and freedom.

Marxism consists in the argument that resources are limited, and innovation is zero. Given this, no real increase in the purchasing power for workers can happen. Those who have excess money will invest it, gain profits, reinvest those, and in a cycle of wealth building cause the actual buying power of workers to steadily decrease, such that at some point a very few own everything, and revolution happens organically. (He made, incidentally, no plan for professional revolutionaries, whose existence falsifies his economic theory, as of course have the events of the last 150 years.)

He made two primary errors. First, ignoring the ability of science to reorganize the means of production such that real increases in the purchasing power of everyone in society, top to bottom, steadily increased.

Second, and more critically, he did not account for money creation. His basic thesis is in fact accurate, but only in regard to bankers, who must for that reason be distinguished from “Capitalists”, per se, who actually make things people can use.

As we saw with respect to C, those who create money transfer ownership to themselves in so doing. If X amount of money is in existence, and someone prints and loans another X to Capitalists and consumers, then the purchasing power of those who did not borrow money is cut in half. Yet, the bankers who lent the money can buy with that money .5X worth of goods. To earn this priviledge, they did NO productive physical or creative labor.

What confuses people is they don’t look at the long term. In fractional reserve banking, most of the money that is “loaned” is actually created. Yet, it is paid back in real dollars. This alone would make money for banks, but they add to it interest, which helps among other things keep pace with the inflation they themselves create.

What we need is a financial revolution, not a political revolution. Logically, poverty is best cured by wealth, and not by retaining the poverty while tearing down the rich. Inequality of outcome is best dealt with through counter-resentment cultural systems.

Let us look at several outcomes.

First, if in our formula C and D equal 0, and A=E, we are in a steady state. As an example, this is the N’avi of Avatar. This is “Dances with Wolves”. This is “The Last Samurai”. This is whatever pastoral or other evocation works for you, in which people have stable social and economic lives.

You cannot create this through the cultivation of resentment. Resentment is not about building, but tearing down. It is not about creation but destruction.

Socialism eradicates C by eradicating money. In pure socialism, no money is needed, since all production and transfer of material goods are done by bureaucratic elites. It is, in effect, a managed barter system, where the same people decide what each side of the transaction is worth, and what the demand will be. Since the amount of information in that system is reduced by the number of people who are not empowered to make decisions–which is to say substantially everyone–this process is necessarily less efficient than one with more information. This is clear theoretically, and clear in the actual historical record.

Socialism reduces D greatly by eradicating the free flow of information through constrictions of free speech, and through centralizing the decision making process. People outside the Party cannot simply have ideas and try them without permission.

Practically, Socialist economies–such as the Soviet Union, Cuba, North Korea, and Vietnam–contract until they again allow freer movements of money and information, as for example China has done.

The intent of such systems is to artificially alter E through propaganda and political repression. People cannot demand more than they are getting, and they are told constantly how wonderful their lives are. Since their lives are not wonderful–since the system invariably leads to the concentration of whatever wealth there is in the hands of the bureaucratic elites–what this leads to is silence, and pessimistic resignation. This is not a better way of living.

My vision is something like the social order of Denmark, implemented around the world. The Danish model is not Socialist. It is a liberal order, in which people voted what they got, and continue to vote for it. I don’t know if they can actually afford it, but the reality is that if we fix our financial system, so much money will flow from it, that things like one year maternity leaves become imaginable. Further: they could be self-funded, such that the government would not even have to provide the money, so that could be eradicated as a political problem.

In a just, intelligent system, we would work roughly one tenth as much as we do, and live as well or better. There would be no unemployment, no poverty, and substantially no political problems to solve domestically. Were the same model deployed internationally, the same results would occur there.

Here is a fairly detailed proposal for a good revolution

Let us suppose a hypothetical line, below which our consciousness is in chaos, and above which it is ordered. Call it F. Let F=1. Above the line all experiences contain the possibility of bliss. Below the line, all experiences are processed as good or bad.

Clearly, we order our worlds through the actions that flow from our consciousness. At the same time, crazy things still happen, and many people enter the adult world in profound confusion, such that the effects of their consciousness show little order.

Either way, in states of profound disorder, we are happy when “happy” things happen, and sad when “sad” things happen. Since this system is fundamentally chaotic, so is our emotional state, which goes up and down the more things we label good or bad.

Here is what I want to posit, which I believe was done explicitly by the Buddhists, who thought everything through well: all experiences should be treated as theoretically equal. Clearly, there is a qualitative difference between making love to a woman you love, and being killed slowly by a torturer or by hunger and thirst.

The question of how one could make them equal, though, is a practical one. It is an empirical one. We have no means by which to say this transformation is, a priori, impossible. It is a question of how one trains ones consciousness to find in all experiences the possibility of salvation through joy.

Logically, true order only emerges once the outcome is the same regardless of the input. We can’t control the operation of the world fully, but we CAN and SHOULD control the operations of our consciousness. This is harsh logic, but I get a hint from time to time how one would do this.

The goal is freedom.

What are the types of pain? Indecision/confusion, regret, fear, sadness from loss (loss of an intact qualitative gestalt, which is to say the evolution of a human situation you thought was eternal), acute physical pain/discomfort, illness. The fear of death can be called a pain, but I don’t know that death itself qualifies.

With respect to sadness, it seems to me we sometimes create images of how the world is, and feel sadness when we realize they are wrong. This is processed as a loss, even though nothing objective has changed about the world, or us. We might think someone loves us, but they don’t. We might think all people are fair and just, and realize they aren’t. The Buddhists have likely done this analysis, and it would be interesting to find it.

Inflation is conventionally measured using some combination of prices, normally the CPI and/or PPI.

However, if my basic thesis is correct that fiat money creation is simultaneously wealth transfer, then the more important measurement of inflation is indebtedness. Specifically, are the producers of labor and materials owning progressively more of the fruits of their production, or less? Materially, we are surrounded with everything we could need. Yet most Americans are in debt up to their eyeballs. Our governments, State, local, and Federal are in debt. This, too, is inflation in my view.

This line of thought, while I have not seen it put in quite that way, is perfectly consistent with the thoughts of Keynes himself, in the book that made his name: “Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

“Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

I would further like to make a brief comment on Keynes. I was greatly influenced by the book “Keynes at Harvard”, but what he does not do in that book is discuss the actual mechanism of Keynes system. I have therefore set myself that task.

Keynesian economics is intended as a means of transfering private wealth to the public sector through inflation, delayed taxation, and unnecessary interest payments. When governments print money and generate inflation, they devalue private savings.

When they create “jobs” which are external to the actual market system, they disrupt that system. As an example, if local businessmen are forced to compete with public works jobs paying 20% more than they can pay, they will be bankrupted. This takes time, which is the value for socialists of long term public works projects. This process has been seen dozens of times in the developing world, as a result of IMF policies that are an extension of Keynes ideas. Keynes, of course, was the key voice in the IMF, along with friend and Soviet agent Harry Dexter White.

Since the projects are funded using deficits, they are paid for in the future, out of taxes, which is to say out of the paychecks of people with jobs in the private sector. Absent those taxes, that money would have been available for investment.

The key element, though, is inflation. Nothing wrecks private ownership and private enterprise more than inflation. This is obvious enough in the case of hyperinflation. Yet, the same effect–the gradual dissolution of private capital formation, and increasing reliance on credit–is seen when it is done slowly.

This brings me to a concept I call “Hyperkeynesianism”. Logically, if inflation is wealth transfer, an aspiring socialist would want as much of it as possible. Yet, price inflation is unpopular. Could one not simultaneously indebt the nation, disrupt private enterprise through public works projects, and generate wealth transfer, without generating actual price inflation? Yes: all you would need is a mechanism for spending on the one side, and for soaking up the cash on the other. Could the IMF or World Bank (I am unclear on the precise difference, which is a subject for future research) not do that? Certainly. Could foreign governments also do it. Of course.

It should be added that the crisis in Europe has had the effect of making the dollar relatively better than the Euro. This has led to warehousing of dollars as well. There are many more dollars out there, than are in our system presently.

We keep expecting inflation due to the money being spent, yet what I read is that the global supply of dollars is contracting. I don’t think this is accidental. This whole thing is a setup. Obama came into office with a plan, and he is executing it. That plan was formulated by John Maynard Keynes, as a gift to his Fabian friends.