On Some Basics of Economics

On Some Basics of Economics

McJ asked some very thoughtful questions in the comments section and I started to answer them but “it just growed” like Topsy did and on rereading my answer and thinking it might interest others with the same questions, I have put it up here on the main page. So, to the answer:-

These are good questions, McJ. There's a lot to them and I'll answer in installments if I may.
To start with your last point first re Uni economics and this so called “high finance” being over your head, I'll say you are probably better off not knowing or remembering much about it from those uni days. This comment at the end of your questions was probably more of a quip but I think it goes to the heart of much of this. I have had better luck explaining the reality of money/banking/economics to complete neophytes than to those educated to the “dismall science”. The reason is that this “education” amounts to indoctrination and, like all indoctrination, it is based on false information and for reasons of an hidden agenda i.e. exploitation. One example of this is Milton Friedman (who can't be dead enough nor buried deep enough – to borrow a phrase from Professor As'ad AbuKhalil aka Angry Arab) and the so called “Chicago School” of economics. Friedman was responsible for providing the academic cover for “Thatcherism” and “Reagonomics” of the eighties which rapidly accelerated the shift in wealth from the general populace, including the sale of publicly owned utilities, to the already very wealthy.

The Chicago School was, in fact, the economics department at the University of Chicago which Friedman headed. Now here's the sting - the University of Chicago was established with Rockefeller money and, by all things observable, still controls it. Another example is that “The Economist” magazine in England is largely owned and controlled by the Rothschilds. These people have interests diametrically opposed to the rest of us. It is vital to their interests that they control economics education so as to distort it to justify their position as essential to society and generally mislead everybody.

So if you will indulge me in a little rant here, I'll try to demystify a couple of things. Economics justifies itself by reciting the following Mission Statement that “it accomplishes the greatest good for the greatest number with the scarce resources available”. It then immediately goes on to teach (if you were studying it) that the first law of economics is the Law of Supply and Demand. This says that supply follows demand i.e. that production will respond to those with a demand (and you are left to think, need) willing to purchase this same production. The trouble is that those with needs but no money are not catered for in this scenario and therefore this gives the lie to the initial justification, the “Mission Statement”, of doing the greatest good for the greatest number.

What happens in practice is that the whims of the wealthy, those with money, are met at the expense of the needs of the poor. An extreme, but by no means isolated, example is the case of strawberries being grown and exported to the West from Ethiopia some years ago at the time it was suffering from a severe famine!

The other half of the “Mission Statement” mentions the scarce resources as if this were a fact. Often it is not. Finite limits does not necessarily mean scarcity. Though, resources are often made apparently scarce by tying their supply to scarce money either in the community as a whole (as in Depressions and is happening now) or in the pockets of a section of the community (such as through class exploitation – also happening now). These scarcities are facilitated by government action responding to banks and bankers interests which are always directly counter to everyone else's.

But this is never explained to the student. Money enters the scene when the mechanics of “production” are taught. Production is said to be the result of bringing together three elements or “factors”; Labor (workers/you and I), Resources (oil, timber etc) and Capital (Capitalists/Bankers and their money or Capital). Firstly, note the division of people into Labor (Workers) and Capital (Capitalists/nonworkers). Secondly, this formula is bullshit. You don't, in fact, need Capital or Capitalists to make something. If Labor co-operates and has access to Resources, then it actually doesn't need money. Therefore, Capital is not an essential element or factor of production or wealth creation. Yet, bankers have inserted themselves into every facet of society telling everybody how essential they are to everybody's wellbeing. For sure, having a money system facilitates production once we get much past the tribal level of complexity but it is nothing more than an abstract measuring and scoring system that we (Labor) can provide for ourselves at negligible cost.

Money is not a resource in the sense of being something physical or even resident in this world. I like to say that money is the only thing in this world that God didn't make and that is so because money doesn't actually exist in this world! Money exists only in the minds of people suitably indoctrinated to the notion. And that is all it is; a notion; an abstract mental notion. That notion is recorded in this world as a scoring system through various “double entry” bookeeping systems (banks) and as a measurement system through goods and services being given a price. But it is all arbitrary and captive to the whim of those owners of the bookeeping systems (bankers).

How we all view or conceive of money is crucial to the control the bankers have over maintaining their position of domination over us all. Money is taught as if it is a physical commodity with a finite existence and this is reinforced in the media and in conversation everyday. It is one hell of a mind job! It has been able to get this foothold in our minds because historically money (coins) had some intrinsic worth or demand for it as a commodity in itself such as a gold content or rum in the case of early White society in Australia! From there it went to a paper Banknote which was an IOU that could be exchanged for gold. Then the exchange was taken away. The remaining paper has no intrinsic value. It would take an awful lot of it to keep you warm on a cold night, for instance. What gives it value is our willingness to exchange goods for it instead of the bankers exchanging gold for it. WE provide its value! Now we have digital money, the ultimate in abstract. We have an instructive word in our language to describe the digital world, virtual i.e. something that has no existence but looks like it has. There is nothing more "Matrix" like in the world than money and understanding this is the key to freedom from this invisible oppression all around us. (Update, I just found this very pertinent blog entry from Suraci called Who Is The Lender? to which he could equally add the question, Where do the loan funds come from?)

It takes consistent effort to de-programme yourself from this notion of the existence of money. Keep contemplating it. Once fully grasped, it makes obvious the nonsense talked about in the name of economics and politics (often the same thing). As I said, in an earlier response, it took me months to finally “get it” (though I was referring to the mechanics of credit/money creation but it all fuses together). So don't be despondent if after reading this you feel you still don't “get it”. It's a process. Of course, if you do see it all, that's great. Tell someone about it! Doing so will reinforce it in your mind and/or point up gaps in your understanding.

An excellent book I can recommend is “The Truth In Money Book” by Theodore and Margaret Thoren and Richard Warner. It is out of print, unfortunately, but you might find a copy somewhere. It also describes the Fractional Reserve system in place in the US but now replaced in Canada and Australia, at least, with the “Mark to Market” system of bank control and credit (money) creation. More on the later system (and in answer to your question) in a following response.
Two other books that I haven't read but which have very good reviews are “The Creature From Jeckyl Island” by G. Edward Griffin and “The Web of Debt” by Ellen Brown whom we have talked of. None of these authors are economists, which is telling! The best books I have read have been by engineers. I like to think it is because they are trained in cause and effect and have to be rigorous in their thinking. They can't bullshit their way out of a collapsed bridge saying it isn't collapsed at all, or, “it's a temporary adjustment”!
What I am trying to get across is that economists are largely ignorant of the basic orientation (motivation) of their field of study together with an ignorance of its fundamental contradictions as a result of their “education” or more correctly, indoctrination or even mind control. Once people have accepted nonsense and their livelihood or psychological stability now depends on it, they will defend it vehemently to their own and others' cost. Those practitioners that can sophisticate it and obscure the simple truth are rewarded with advancement and are VERY unlikely to expose the nonsense. Though, there are always exceptions and I can point to one I have read, though, not extensively so the recommendation is tentative. Ladies and Gentlemen, I give you Professor Michael Hudson

Next up, credit creation or where money comes from which will include “Mark to Market” as it applies to banks (to the extent that I understand it, anyway). Right now I need a cup of tea and a little lie down! I find this stuff wearing to think and write about. So be encouraged, gentle reader, it's not just you! It's worth perservering with, though, for your own freedom and for the next generation's. One thing that is helpful to bear in mind is that if you have a measure of discernment and intelligence (and you must have to be reading this! wink), and you don't understand something after giving it your attention, then it is almost always because you are being presented with false information or information is being withheld or both. Keep digging because truth is freedom and freedom doesn't exist in the absence of truth!

Comments

McJ's picture

Well James... If I had

Well James...
If I had recently been attending Uni I would most likely be doing a lot less reading! laughing out loud

I totally agree with what you are saying about education. Just my opinion, but it's mostly about regurgitation. My daughters have come up against this recently in their experience with the advanced education system. The early going is a lot about indoctrinating them into the system - learning citation systems, using peer reviewed sourcing, how to set up your lab report, where to put your name on the page etc. etc. sticking out tongue . Last year I helped one of them with a major research paper she had to write as a requirement for her graduation. She was at her wits end because the department was telling them that foremost among the many rules of the game, it had to be original (like a mini masters thesis) yet the English teacher overseeing it kept threatening to fail them if they didn't source everything they wrote. Many of her classmates ran into troubles with it and had to redo theirs. As their field is engineering and design, their natural inclination was to create something new, and not to recycle old stuff and then put an original twist on it. (To be fair and perhaps slightly less cynical they didn't get the concept of supporting their own original ideas with another's more respected and accepted research and ideas.) I helped her with the fine art of regurgitation and showed her how to source it to death. They loved it and she got an A+. It was interesting because she ended up taking it in a completely different direction then she was thinking of going and their criticisms were mostly directed toward her not having enough recommendations which was the place at the end of the report where she was supposed to insert her own ideas. Her paper was on using Yurts/Hexayurts as a semi permanent solution to the homeless crisis, and although it turned out very well for her (the department actually recommended she submit it to the city for review) I think she ended up hating the subject and probably never wants to think about it again.

"It then immediately goes on to teach (if you were studying it) that the first law of economics is the Law of Supply and Demand."

Ya, I did pick that one up! My husband, who took four years of Business Administration is forever bringing it up along with 'economies of scale' - which drives me crazy ohhh sure . I have never bought the idea that (for example) importing tomatoes from Mexico is a cheaper and better idea than buying, selling or eating the ones we can grow in our back yard. Or why we should truck our cattle to the next province for slaughter and then truck the butchered meat back here for us to buy. It's all 'bottom line' bullshit (or you might say the most good for the least people) that fails to factor in the human (and environmental etc.) costs of such thinking...but their is no winning that argument in my household. smiling

"Of course, if you do see it all, that's great. Tell someone about it! Doing so will reinforce it in your mind and/or point up gaps in your understanding."

I found that out too! I understand it when I am reading about it but when I go to explain it to someone I tend to 'get lost' so I go back and read some more in an attempt to fill in them gaps!

"The best books I have read have been by engineers. I like to think it is because they are trained in cause and effect and have to be rigorous in their thinking."

Coincidentally, two of my daughters have graduated from a three year engineering tech program and a lot of their friends have gotten full engineering degrees. They are the most delightful young adults to spend time with. When they get together, their conversations are always interesting and they are very open to new ideas. I sometimes follow their long conversations on Facebook when they engage on a subject. It is nothing like the usual social drivel you find there as they take apart each others arguments for it's entertainment value.

Thanks for the link to Michael Hudson.
Global Research is such a treasure trove!

I'm looking forward to the 'mark to market' lesson. smiling

"The most unpleasant truth in the long run is a far safer traveling companion than the most agreeable falsehood." Emerson

Thanks James. You and McJ

Thanks James. You and McJ really make me think, so understanding may yet follow.

Sense and Critical Thinking

Another very good article which makes a lot of sense due to your use of "your own mind" and critical thinking skills. To reveal and teach hard truths in the name of alleviating human suffering often brings the spirit and hence the body down. Then there is the reaction from those who have vested interests in concealing those truths or who’s very survival may appear to be threatened by truths revealed. So thanks for toughing it out.
I'm a tea drinker and it does have a healing vibe. So do these dude

McJ's picture

Videos: James Robertson and Renegade Economist

From James Robertson - Working For A Sane Alternative:
http://www.jamesrobertson.com/news-mar09-2.htm

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

From the Renegade Economist You Tube Channel - Michael Hudson
http://www.youtube.com/renegadeeconomist

"The most unpleasant truth in the long run is a far safer traveling companion than the most agreeable falsehood." Emerson

McJ's picture

James Bruges - Pseudo-Money


Pseudo-Money
by James Bruges

http://www.resurgence.org/magazine/article2747-Pseudo-Money.html

MONEY IS STRANGE. To you and me it is real; we know what we have or have not got in the bank. But it soon becomes unreal. The government can’t find £150 million for rural post offices – a very desirable social service – but can immediately come up with £37,000 million for the banks, with another £450 billion available: where does it come from? Companies on the stock exchange suddenly lose billions: where has it gone?

To understand why money can be real and unreal at the same time, imagine a very simplified incident: you sit down with a bank manager and after an hour you are able to spend £200,000 on a house. Good. But you are also lumbered with debt – negative money.

First scenario: overnight you decide not to go ahead with the purchase. The mortgage is cancelled. The £200,000 was conjured out of nothing one day and ceased to exist the next, so it can be described as pseudo-money.

Second scenario: you buy the house. The previous owner uses the money to buy things, employ a gardener, go to the theatre, travel. The £200,000 is now being used to buy and sell goods and services. That act of creating debt – negative money – is how the economy keeps ticking over.

Now fast-forward fifteen years. You have worked hard and paid off your mortgage. The original £200,000 debt, pseudo-money, is paid back and, as in the first scenario, no longer exists. But you have also paid interest over the years that maybe amounts to another £150,000. This growth is endemic to a financial system based on interest.

The beneficiaries, however, are not satisfied with linear growth. Deregulation has allowed them to multiply the growth of their money many times through ‘vehicles’ that no-one seems to fully understand. Herman Daly, a leading ecological economist, says that money transactions now outstrip transactions of real things by 20 to 1: the present so-called liquidity crisis is due to too many financial assets relative to real-world assets.

Hyper-intelligent financiers have been blinded by their greed to one little problem: debt must be settled. Financial assets of negative money – as created by the bank in the above incident – have to be paid back by real assets, real work and real people. There are not enough real assets to pay off the superabundance of debt the financiers have created. The collapse is not due to a shortage of money but to the overabundance of pseudo-money.Frederick Soddy, a scientist, said in the 1920s, “You cannot permanently pit an absurd human convention such as spontaneous increment of debt (compound interest) against the natural law of the spontaneous decrement of wealth (entropy).”

BUT WHY SHOULD banks be given this incredible privilege of creating the nation’s money for their own profit? US presidents saw the dangers for their new country. Jefferson: “The issuing power should be taken from the banks.” Madison: they “have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance”. Lincoln: “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. Money will cease to be master and become the servant of humanity.”

Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote: “I have unwittingly ruined my country … we have come to be a Government by the opinion and duress of a small group of dominant men.”

The threat of this small group that has divorced itself from the real economy – witness the absurd bonuses they award themselves – has now become obvious to all. But all are paying the price.

The privilege should be taken away from banks. Banks should be financial intermediaries that lend depositors’ money. It should be a criminal act for anyone other than the state to issue the nation’s money. All the money needed for exchange should be issued free of interest by an independent body answerable to parliament and should be spent into circulation by the government. We would then have an economy that is not dependent on usustainable growth.

The sudden collapse of a system that has been created by humans – which should therefore be manageable – acts as a warning that over-exploitation of far more complex natural systems could lead to an equally sudden ecological collapse. •

"The most unpleasant truth in the long run is a far safer traveling companion than the most agreeable falsehood." Emerson

Post new comment

The content of this field is kept private and will not be shown publicly.
By submitting this form, you accept the Mollom privacy policy.