The Blind Destruction of The Economy

If all you have is a hammer,” says the old proverb, “everything looks like a nail.” And I’m hard pressed to think of a better way to describe the destruction of the US economy (and many others) over the past few weeks. It has been a foolish set of reactions, and I’m going to show you both why it happened and why it was unnecessary.

First, however, I should clarify that the financial meltdown and the blowing up of the economy are two different things:

  • As many of us have long noted, the leading finance regimes of the world were insanely over-blown bubbles, just waiting for some kind of pin to pop them. This was a virtual economy of fabricated currency units contained within carefully controlled securities markets.
  • The real economy of goods, deliveries, repairs and so on was separated from the virtual economy, and its surplus was skimmed away with paid-for regulations and obligations. The people in this economy got relatively poorer and poorer, the big corporations treated them as serfs and their rulers despised them, but they were allowed to keep working.

Finally the financial bubble popped, hurting lots of people, both comfortable and poor. But that didn’t require the burning down of the real economy… the aforesaid making, growing, repairing and distributing of everything that really matters to us.

Why They Burned It Down

Really, it boils down to this: When the shit hits the fan, people revert to their basic psychological premises. And for politicians… for rulers of most any sort… that psychological premise is control. If and when they reach down into their souls, that’s what they find.

On top of that we should remember that politicians aren’t much different than perpetual beauty pageant contestants. When such people see a parade developing, they run to the front and grab the parade’s attention any way they can. And if the parade has come together mainly out of fear, you get their attention by agreeing with them (loudly) and being just a little bit more extreme than they were. Then, you present yourself as the solution.

Hooray, it’s now my parade!”

Afterward, when the other beauty pageant contestants up their ante (more fear, more control) you raise yours too. Politicians react to the other contestants, not to some schlub on Main Street.

Complications aside, the actual economies of America and much of the world have been shut down because of this. The damage is already severe and the fallout may last a long time.

They Had No Choice!”

To those saying the politicians had no choice I have a very simple response: “No; they saw no choice.”

Now, since almost everyone has been taught to see the world as the ruler sees it, most people saw no choice either. But there were far better choices… choices that didn’t burn down economies.

What Other Choices?”

I suppose we can begin our list of other choices with a respectable adult – an actual grown-up – standing up, day after day, explaining to people the history of epidemics, the choices we face, the costs of each, and how every person can either save their neighbor or endanger them. We had several weeks, after all.

But this was not done. Sure, politicians acted a little bit like this after the horse was out of the barn, but people need time to assimilate such things, and a one-shot effort doesn’t work. Any ruler worth his or her salt would know this. But, they didn’t. Instead they reverted to what they did know: more control. Their psychological bias was for war rhetoric, soldier boys, tanks and quasi-tanks, more cops, fines, punishments and jail cells. Everything, to them, looked like a nail, and so the real economy was hammered.

But even without a respectable adult talking sensibly, most people were intelligent enough to take precautions. By the time the first lock-down orders were given, most Americas were already “sheltering in place,” and I suspect that most other peoples were too.

Here are a few other choices the rulers never considered:

  • Tell the people they won’t be taxed upon – won’t even have to report – their income from making masks, ventilators, valves, etc.
  • Tell the people that patents and regulations are suspended for the next year… that they will be held to account for negligence, misrepresentation, and so on, but that they needn’t get approvals.
  • Put every bit of data, every proposal, every blueprint and chemical formula online, available to the world. Upon receipt. (Why not? Because the people are brute beasts and the ruling class is not?)

This list could go on at length, but just this much would put millions of intelligent and motivated people to work – immediately and at zero cost – fixing the crisis in far more and better ways than command-and-control processes.

The proof of this is that even with none of the above, and at significant risk to themselves, some people are still acting independently. Here, for example, is a home-made ventilator (cleverly hacked together from CPAP materials) that could save many lives:

 

 

 

 

 

 

 

 

The Price We Pay For Being Ruled

Things didn’t have to go this way, and the price we’re paying now is the cost of rulership. I’ll spare you the details, but millions of us have already realized that rulership was never as advertised and that other options, while less than perfect, are far less bad than the bloody, arrogant and exceedingly expensive mess we’ve had.

You are not a nail; you’re a thinking and productive human being. Be clear on the fact that you didn’t deserve to be hammered and that it wasn’t okay. Because you didn’t and it wasn’t.

This is not the kind of world we deserve, and it’s up to us to improve it. The rulers are unable to move forward, and they just proved it again… this time on a massive scale.

**

Paul Rosenberg

freemansperspective.com

The Economy of Bandages, Splints and Duct Tape

I’ve written an unusual amount about the financial systems of the world over the past month. Honestly, I’ve felt that I’d be derelict not to.

Please understand that I’m not giving you prescriptions. I trust that you are capable of making your own plans. My concern is that by living inside the present financial system, people can easily believe nothing will ever really change.

You might also keep in mind that I dislike the present financial system for philosophical reasons. I would much rather build a decentralized economy than to remain in a rigged, corporatist economy.

My message to you today is really a simple one: We’re not in our fathers’ economy anymore.

All Is Bandage and Splint

The financial systems of the Western world are standing only because of emergency measures.

Since 2008, the central banks of the West have spent literally trillions of dollars and Euros to keep their economies functioning. And they haven’t been able to cut that back, even though they’ve tried. If we went back to the “normal” of 1970, 1980 or 1990, the system would collapse into a heap.

So… bandages and splints.

A huge portion of all government bonds in the West, on the order of $10 or $15 trillion worth, are yielding negatively. Put in $10,000. and get $9,800. back. It’s almost an insanity((Short term bond traders can still make money on such bonds if the market goes even more negative in the future. Then, they can sell their bonds at a mark-up since they are “less bad than the new ones.”)). This has never happened before, and no one is sure about its effects over time.

More bandages and splints.

Interest rates have been lower and longer than ever in recorded history. This has artificially inflated everything from house prices (who cares about anything but the monthly payment these days) to stock prices (the CEO takes a ridiculously cheap loan, buys back his company’s stock, the price goes up, and he gets a huge bonus).

Yeah, more bandages and splints.

Governments, at the same time, are running deficits like they never have before((You can find short passages where they did worse in the middle of wars, but nothing really analogous to this.)). They keep doing it because profligate spending keeps things from crashing, and because insanely low-interest rates keep them from facing the consequences.

So, still more bandage and splint. I’ll stop here, even though I’m quite sure I could go on for some time.

And Beneath That…

Please bear in mind that all those bandages and splints are the surface rigging. The structural rigging is a mess too.

Gold used to be what kept the system honest: If you played games with your currency, the gold trade would nail you. But even the possibility of that ended in 1971.

Stock prices, back in the day, were based on what were called fundamentals. Nowadays they depend on central banks, tweets and algorithms.

Also back in the olden days, people retired on dividend income. That is, on the actual profits earned by companies. Nowadays, they retire based upon the aforementioned stock prices, which are more or less untethered from things like profits and losses. The secure retirement of millions, then, rests upon the whims of others.

And perhaps worst of all, John and Jane Doe are hip-deep in the Debt game. Everyone’s playing it, after all. They have loans for everything, cultivate their credit scores like their lives depend upon it, and have more or less no hope of paying off their debts in their lifetimes. And whether or not people acknowledge it (your friends are playing too… don’t be rude), the collateral damage from this is serious.

And so, at this level it isn’t all bandage and splint, it’s also rusted beams, wood bracing and super-sized duct tape.

Last Words

Again, I’m not telling anyone to do anything. What I’m really doing is unburdening my conscience. I have a small public platform here, and I’ve felt obliged to make people aware of this situation.

Do as you wish, but do it with your eyes open.

**

If you want a deeper understanding of these issues, see:

FMP issue #7
Parallel Society #4
The Breaking Dawn

Paul Rosenberg
www.freemansperspective.com

Entropy and Spontaneous Generation

EntropySpontaneous

When I wrote two weeks ago about spontaneous generation still being enthroned in science as the primordial soup (and it is), I wanted to avoid a long discussion on entropy. But since that’s the only option left open to die-hards, it became an issue.

So today I’ll explain entropy and how it ties into this discussion. Even if you’re not particularly interested in science, I think this will be of value to you. And I’ll keep it brief.

Carnot and His Perfect Machine

The study of entropy begins with a man named Nicolas Carnot (1796–1832), who worked on steam engines. Carnot wondered whether it was possible to build a perfect machine that, given an initial start, would keep going indefinitely. What he found was that it can’t be done. No matter how perfectly you might build the machine, some energy is disbursed as it runs. In other words, the machine keeps losing bits of energy to the surrounding environment. This loss of useful energy is called entropy.

In the years since Carnot, it has been discovered that entropy shows up in every process we can see, even in information theory. It’s now considered a bedrock of physics.

Now, let’s go back to Carnot’s perfect machine and explain the concept of a “closed system.”

No matter how perfectly Carnot might counter-balance everything, any machine he might make would slow down and eventually stop. He could build it and give it a push to start it, but it wouldn’t keep running without another push.

  • This machine on its own is called a closed system. In it, entropy cannot be overcome. The machine will eventually stop.

  • To overcome entropy, Carnot would have to reach in (one way or another) and give the thing a push… which would be a violation of the closed system. We could call this, including Carnot’s push from the outside, an open system.

There’s nothing more mysterious to this principle than that. (Applying it to things like atomic particles requires intricate work, but the principle’s the same.)

And note one other thing here: Just because a system isn’t fully closed doesn’t mean it will reverse entropy. Carnot’s machine wouldn’t keep moving just because it was hit by sunlight, or got cold, or if was put in a magnetic field, or if it slid sideways. Only a specific type of push would keep it going.

You Already Understand Entropy

Regardless of terminology, we already understand entropy; we’ve lived with it all our lives.

  • When we buy batteries at a store, we hope they haven’t been on the shelf too long, because if they’re old, they won’t last very long.

  • However hard you spin a top, it will eventually slow down and fall.

  • We don’t wait for a rotten piece of fruit to un-rot. The idea is preposterous, because entropy doesn’t just reverse itself.

  • We don’t wait for an old piece of equipment to become brand new again.

Entropy is the way the physical world works, and we’ve all known it since childhood. The battery has to be recharged or replaced. The watch must be wound.

So please remember that entropy is something you already know. If a discussion on entropy confuses you, the speaker is either poorly skilled or is using confusion as a tool.

Barbarians and Seekers

There are in general two types of motivations for studying science, and they define two types of students:

  • The first type I call “Seekers.” These are people who want to discover and to understand how the world works.

  • The second type is those who want science to provide them with the tools of dominance. These people, to use plain terms, are functioning as sophisticated barbarians.

In response to my initial piece on this subject, I had a very pleasant conversation with a man of the Seeker type. He disagreed with me, but he was polite and thoughtful. I wanted to use our conversations as an article by itself, but I had to give up the idea as it would have been too long.

As for the barbarians… well, these are the ones who jump into a discussion with the primary goal of winning. They weaponize terminology and love legalistic proclamations. Their goal is intellectual dominance. I suggest that you learn to recognize this type, learn not to be intimidated by them (that’s their primary weapon), and stay away from them.

Understand this, please: A mind of the first rank will speak to you with the goal of kindling understanding in you. He or she will treat you as valuable and capable and will avoid confusing or intimidating you. They won’t care about position or fame, and they would be happy for you to supersede them.

Back to the Swamp

Now we can deal with the primordial soup once more, with a bit of understanding. And again, I’ll be brief.

At the end of the line, experiment rules over theory. So, I think we should take Albert Einstein’s advice seriously, that “We should try to hold on to physical reality.” And the physical reality here is this: If a swamp could produce DNA in 500 million BC, it should produce DNA now too… and it doesn’t.

Lots of people try to get around this, and their big argument is, “But the conditions were different then.”

When you say, “Different in what way that would produce DNA?” the answer is, “We don’t know, but maybe we’ll discover it.” That’s not terribly convincing, and it sounds a lot like faith.

Furthermore, there are parts of Earth, right now, with more or less any condition that would have been available then (hot, cold, wet, dry, sulfur vents, seawater, etc.). DNA never spontaneously forms in any of them. I see this argument as a way to avoid physical reality.

Now, let me jump to the end: In order for the primordial soup to produce life, these things would have had to happen:

  • An exception to entropy would not only have had to exist, but it would have had to hold steady for an immense length of time. In my friend’s scenario that was 700 million years. Any break during that immense span would cause the DNA to break down again… and quickly.

  • All the right pieces would have had to be in place at the right times. And for DNA, that’s a lot of complex material that just happens to be sitting around. (And how did it get so complex?) The four critical amino acids (complex molecules all) would not only have to be present, but in the right configurations. These are all left-handed molecules, and even one right-hander could kill the whole deal.

  • Environmental conditions don’t reverse entropy. Hotter conditions on the early Earth (which seems to be the assumption) might be contra-effective for forming DNA, as heat tends to disperse things rather than congeal them.

  • All the cellular membranes, cytoplasm, vacuoles, plasmids, and so on that are required for this new string of DNA to endure and reproduce itself would have had to be present also. And even for a very primitive organism that’s a whole lot of stuff, all of which would have had to form contrary to entropy as well.

I could go on, but there’s no point. The odds against this are beyond astronomical.

Still, arguments can go on. One is the very faith-like, “But even astronomical odds are not zero!” Another is a verdict-like proclamation (very emphatic) that entropy exists only inside things like sealed boxes. Following that argument, however, batteries on an open shelf (or with their covers removed) wouldn’t lose their charge. And since a sea of neutrinos pours through every box (as do magnetic, electrical, gravitational, and Higgs fields), nothing could be deemed a closed system.

Beyond all these words, however, physical reality remains paramount, and DNA still doesn’t form spontaneously.

So my opinion stands: The primordial soup must go.

* * * * *

A book that generates comments like these, from actual readers, might be worth your time:

  • I just finished reading The Breaking Dawn and found it to be one of the most thought-provoking, amazing books I have ever read… It will be hard to read another book now that I’ve read this book… I want everyone to read it.

  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.

  • There were so many points where it was hard to read, I was so choked up.

  • Holy moly! I was familiar with most of the themes presented in A Lodging of Wayfaring Men, but I am still trying to wrap my head around the concepts you presented at the end of this one.

Get it at Amazon ($18.95) or on Kindle: ($5.99)

TheBreakingDawn

* * * * *

Paul Rosenberg
www.freemansperspective.com

The Rise of the Superfluous Class, Part 2

Superfluous2Class
You’ve gotta love serious people.
“Dan,” my new friend from the superfluous class, showed up to Jay’s precisely on time. And he didn’t waste my time with a confirmation call; he just did what he said.
We walked in together. I greeted Michele (again, that’s mi-KEL-ay, the Italian version of Michael), who pointed to his largest table. By the time we sat, he was on his way over with a menu.
“Their kitchen is open,” he said, referring to the Italian restaurant next door. “Only the lunch menu.”
“That’s fine,” I said. “Thanks.”
“I’ll call it over; you send the kid to get it?”
I agreed, then turned to Dan, who was already nodding his understanding.
“Two of my friends will be here in a few minutes,” he said. “They’re delivering passengers and coming right after.”
He looked over the menu.
“I can order for them.”
As I waited for him to look over the menu (I already knew what I wanted), Dan looked at me and said, “My name isn’t really Dan… I use that until I’m certain about someone; my real name is Nikos.”
“Then Nikos it is,” I said.
He smiled.
We put our order together and handed it to Michele just as Nikos’s two friends walked in. I was introduced to Johnny and Adam. I don’t think any of the three are past 30, meaning that they’ll have some different cultural assumptions than I do, and I find that kind of interesting.
I intended to start the conversation slowly, but these three had a need to jump into it fast. Within seconds I was answering questions about Bitcoin: where it came from, how it worked, why the status quo hates it, and so on. I enjoyed it quite a lot.
From there we went to questions about the larger world: politics, war, and government in general. Then, as we were finishing our food, we had one of those silent moments that pop up unexpectedly. Nikos ended it with a serious question:
“Look, I think you understand a lot about this, so I’d like you to give it to me straight. Are we going to succeed in these things we’re doing, or will we be snuffed out?”
“That depends on how you look at it,” I said. They probably thought I was weaseling out of a real answer, but they gave me the benefit of the doubt and waited for me to continue.
“First of all, you’re winning already. You guys are living life your own way, and please believe me, that’s a very big deal. I suppose this makes me sound like the proverbial old guy, but I’ve watched such things for 40 or 50 years now – living by your own wits is something that will make you far better men. Whether or not your financial fortunes skyrocket, the progress of your soul will, and that’s a very big deal.
“Now as for giving you a better lifestyle, that’s going to be less certain. In general it will, but you’ll face obstacles, and maybe a lot of them. And some small percentage of your friends may get hurt along the way. Honestly, that’s why I want to help – I want to keep that percentage down.
“And in the long run you’ll succeed too, but that will take decades at least.” They didn’t look very happy at that prospect.
“What this really is,” I continued, “is evolution. Humanity is slowly improving, and the great blockage in front of us is a system of rulership that’s basically unchanged since the Bronze Age. It’s a long-outdated, barbaric system of control and extortion, and it needs to go… and sooner or later it will go.
“Look at yourselves: What are you doing that’s truly harmful? You’re providing services that people willingly pay for. And for this you should be harassed, threatened, and possibly punished? That’s nuts. It’s primitive and it’s barbaric.”
And there I stopped dead, wanting to let the thought sink in if at all possible. And they did leave it sit for a minute or so.
Finally Nikos spoke up. “Johnny, tell Paul and Adam what you told me earlier about driving for Uber.”
Johnny nodded and collected his thoughts. “Okay… my brother – he works at a bank – was giving me grief because I wouldn’t drive for Uber… that I could pick up extra rides and that I was being stupid to turn them down.”
“So what did you tell him?” Adam and I asked at the same time.
“I said that, yeah, I could make money with Uber, but their bosses are pigs. They try to hurt Lyft and anyone who drives for them, and they think they’re super-geniuses rather than mostly lucky. But he didn’t understand at all.”
We all nodded and waited for Johnny, who looked like he had something more to say.
“If all I wanted was easy cash,” he went on, “I’d go on disability and get my girlfriend on that babysitting program. It pays two or three hundred a week for nothing. But I’m not gonna chase just any scrap and I’m not gonna live as a parasite.”
I decided right there that I liked this guy.
“I’ll tell you what else,” Nikos added. “As soon as they can, Uber will play the same dirty tricks on everyone else that the cabbies played on them. Oh, and they treat women like crap too. Screw ’em.”
Screw ’em,” we all agreed.
The conversation continued a bit further, but soon enough it was time to get back to work. We pitched in to cover the food and drinks, and we made a standing date for the first and third Thursday of every month at 2:00 pm. I promised that I’d be at the next one and for as many others as I could.
I walked to the train station feeling hopeful in a way I hadn’t in a long time. And by the time I made it to the corner, I realized that I was feeling the hopefulness of youth. And even knowing that youth was often misguided in their hopefulness, I decided to savor it for as long as I could… it had been a long time.

* * * * *

A book that generates comments like these, from actual readers, might be worth your time:

  • I just finished reading The Breaking Dawn and found it to be one of the most thought-provoking, amazing books I have ever read… It will be hard to read another book now that I’ve read this book… I want everyone to read it.
  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.
  • There were so many points where it was hard to read, I was so choked up.
  • Holy moly! I was familiar with most of the themes presented in A Lodging of Wayfaring Men, but I am still trying to wrap my head around the concepts you presented at the end of this one.

Get it at Amazon ($18.95) or on Kindle: ($5.99)

TheBreakingDawn

* * * * *

Paul Rosenberg
www.freemansperspective.com

The Rise of the Superfluous Class, Part 1

Superfluous1Class
Jay’s Bar, my hangout back in the 1990s – through the heady years of the early internet, the cypherpunks, and the all-out gas that was the digital gold economy – seems to be coming back to its glory.
Not into financial glory, you understand. Jay’s is a neighborhood bar, with some overlap from downtown; it’s never going to be a huge money-maker… which is just fine by me. Jay is mostly retired these days, but his son Michele (mi-KEL-ay) is taking over from him… and ably, I’m pleased to say.
And now, the radicals are returning to Jays. Last time they were technical guys; this time they’re coming from what I’ve occasionally called the “superfluous class.” By that I mean people who, through no real fault of their own, have found no place in the modern economy.
Not only are most of the factories gone, but mom-and-pop stores barely exist anymore. And mom and pop’s kids don’t have many doors opening to them. There simply aren’t enough jobs, and it’s only getting worse, with self-driving trucks, warehouse robots, fast-food robots, and bricklaying robots all rolling into the world ahead of expectations.
Already there are tens of millions of these people, and all the system can do is to keep them on the dole, let them run up credit card debt and then reset every seventh year in bankruptcy (a kind of welfare for the clever), and of course to feed their Facebook addictions.
But something’s happening with these people, or at least with some of them: They don’t want to exist as couch potatoes. They want to produce, they want to create, they want to be challenged and to overcome.
And one by one, they’re beginning to stop in at Jays. Whatever magic this place has, I hope it never goes away.

2600 Recycled

Few people will remember this, but 2600s were groups of hackers… phone hackers, a generation before computer hacking became cool. (Their magazine is still published.) They used to meet, more or less clandestinely, to trade tricks and commiserate with each other. My local 2600 group used to meet by a bank of pay phones every Tuesday at 6:00 pm in the big train station.
And so, you can imagine my feelings as I walked through that station a few weeks ago and overheard three young guys discussing a Bitcoin and Ethereum system for some kind of business. I didn’t want to intrude, so I pulled a crumpled receipt out of my pocket, scribbled the URL of an anonymous chat room on it, handed it to one of them, smiled, and left.
Synchronicity, as we used to say.
And a week or so later, the synchronicity showed up at Jay’s. I walked in on my way to the train station, and lo and behold, I saw one of those guys sitting at the bar. I sat next to him, ordered a tonic and lime, then asked Michele if he could get me a plate of pasta from the Italian place next door.
The guy recognized me and thanked me for the link to the chat room. We talked for a while, and after I had established some more credibility with him, I asked what kind of work he did… with the appropriate “if you don’t mind my asking.”
He and his friends are from the superfluous class. They’re the children and grandchildren of warehouse and factory workers, mainly, and had no job possibilities in front of them, save perhaps at Walmart or the occasional political campaign.
But they refused to be idle and useless. And so, they’ve made their way to what people are calling the “gig economy.” In other words, driving for Lyft, renting out rooms on Airbnb, running deliveries, and so on.
This has worked to keep some of their bills paid, but it’s just barely keeping them afloat and it really isn’t very challenging after the first few times.
And so, they’re looking for something more, which has led them to Bitcoin, among other things.

The Page Turns, but the Song Remains the Same

I agreed with my new friend “Dan,” to have lunch with him and his friends from time to time. I explained to him that I’m semi-retired these days, but that I’d gladly help them stay out of trouble. He was excited to have some guidance. They had been working in the dark.
Learning how to function outside the authorized culture takes time and experience, and the penalties for a mistake are far higher now than they were back in my day.
Soon enough I had to run, but I promised Dan that I’d meet him and a friend or two back at Jay’s the next Thursday for a late lunch at 2 pm, a nice, quiet time.
As Dan walked out and I paid my bill, Michele smiled and said, “So, Professor [that’s what they used to call me after catching me grading papers at the bar], you’re going to start teaching the next generation?”
I laughed. “But only at your place, Michele.”
“Then this one’s on me,” he said and tore up the bill.
 
* As I’ve noted before but won’t keep noting, stories set at Jay’s bar, though based upon real people and events, are fictional.

* * * * *

A book that generates comments like these, from actual readers, might be worth your time:

  • I just finished reading The Breaking Dawn and found it to be one of the most thought-provoking, amazing books I have ever read… It will be hard to read another book now that I’ve read this book… I want everyone to read it.
  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.
  • There were so many points where it was hard to read, I was so choked up.
  • Holy moly! I was familiar with most of the themes presented in A Lodging of Wayfaring Men, but I am still trying to wrap my head around the concepts you presented at the end of this one.

Get it at Amazon ($18.95) or on Kindle: ($5.99)

TheBreakingDawn

* * * * *

Paul Rosenberg
www.freemansperspective.com

Five Core Economic Facts

EconomicFacts

Scores of economic figures go screaming across our screens every day, many of them contradicting yesterday’s figures, and perhaps half of them based upon lies. On top of that, we have dozens of economic theorists arguing back and forth. In the end, it’s all too muddled for most of us to make out. We each have our guesses, but none of them are terribly certain.

So, this week I’d like to point out the central economic facts of the moment, five fundamental conditions that we should all be clear on.

Obviously I’m not a fan of any of this, but it I think it’s crucial that we see what really is. Later, we can consider what we’d like to be.

Fact #1: We have debt-burdened money.

Dollars are created in tandem with T-bills, and T-bills pay interest. So, creating a dollar always creates an obligation to pay interest beyond the dollar amount.

But where do those extra dollars to pay interest come from?

Well, from more newly created dollars of course – but dollars that have interest requirements of their own.

What this means is that unless more and more dollars are made all the time, all the debts that are spun can’t be covered. Such a system cannot resolve unless there are debt-free dollars that can cover the gaps. And presently there are none.

So, the dollar system can run effectively in one direction only. It can operate smoothly while creating ever-more currency, but if the system starts to contract, there will be a currency shortage. And that leads directly to trouble.

Fact #2: We have unpayable debt.

Official US government debt is now about $20 trillion, and forward promises are probably north of $200 trillion. This will never be repaid under any typical scenario. And other countries are worse.

Right now, the central banks are buying up all sorts of bad loans to keep things going, but eventually, this problem will resolve in one of two ways:

  1. Debasement, aka inflation. Print up enough currency units to drive a burger to $1,000, and all those loans can be paid back pretty easily. There would be disastrous effects, but the debts would be covered.

  2. The nations could simply say, “Tough luck, we’re not gonna pay you back. Have a nice day.” That, however, would create a lot of bad feelings, so a default needs an excuse. And for a major nation, about the only excuse strong enough is war.

There are a few exotic possibilities, such as central banks printing money to buy the national debts then forgiving them, but those are problematic as well.

So, when reality can no longer be evaded, the solutions look pretty grim.

Fact #3: Stock and bond prices are maintained by the central banks.

The Federal Reserve itself has bought many trillions of dollars of stocks and bonds since 2008. This is being done to keep the (critical) upper middle class happy and paying taxes.

Without central bank buying and other tricks like stock buy-backs, the various investment markets would have crashed deeply. Trillions of dollars pumped into a fixed-size pond created a lot of liquidity.

If this wild buying stopped, the markets would lose their perennial backstop, and millions of supremely reliable subjects would be screaming in the streets.

Fact #4: Interest rates can’t be allowed to rise.

What I’m addressing here is the interest on national debts, but since they overwhelm the markets, more or less everything else would be dragged along.

Right now, government bonds pay shockingly low rates of interest, some of them actually negative. But if they rise – as they would in any “normal” or “healthy” scenario – the interest on all those national debts would be unpayable; government agents would almost have to go house to house and drag away assets.

Fact #5: Pension funds are based upon fantasies.

A large number of pension funds, believe it or not, are basing their calculations on annual returns of 8%, a figure than no one gets on a reliable basis these days. The “safe” investments pay about 2%, where they must stay because of Fact #4 above. A few weeks ago, the governor of Illinois had a fit when the state’s pension calculation was cut from 7.5% to 7%. He’d never get even that rate of return in any case, but it trimmed the state’s fantasy figures, requiring hundreds of millions in tax increases.

Illusions like this can be maintained for only so long. Right now the public is playing along, dreaming that it will all just work out somehow, but the end of their game will most certainly come.

Are They Locked into a Corner?

It would seem the financial overlords have painted themselves into a corner… and indeed they have. Unfortunately, there are still force majeure escapes available to them – extreme events, real and/or theatrical, that would justify a complete wipeout of the current financial regime and the installation of a new one.

And, it should be said, the overlords have reason to be confident about such scenarios. After all, no matter how wild their demands may be, they get 99.9% compliance. So long as they slap the masses with some high-intensity fear and then make a bunch of promises, the odds are high that they’ll get away with whatever they want.

And what would they like? Well, they’ve already told us: They want negative interest rates and a ban on cash. That gives them full manipulative powers and turns all the mundanes into serfs. To really sell this plan, however, they’ll need something appetizing to go with it, and they’ve been hinting about that too: guaranteed basic incomes.

Guaranteed basic incomes would be like welfare without the stigma, because everyone would get it, with no exceptions. (With reduced bureaucracies too.) I’ve dramatized the whole plan in The Breaking Dawn, but suffice it to say that it doesn’t end well for most people.

Is There No Answer?

Sure there is, but it requires courage, determination, and personal initiative. For those who prefer to shut up, sit still, and let the system drag them along, things look bleak.

* * * * *

If you’ve enjoyed Free-Man’s Perspective or A Lodging of Wayfaring Men, you’re going to love Paul Rosenberg’s new novel, The Breaking Dawn.

It begins with an attack that crashes the investment markets, brings down economic systems, and divides the world. One part is dominated by mass surveillance and massive data systems: clean cities and empty minds… where everything is assured and everything is ordered. The other part is abandoned, without services, with limited communications, and shoved 50 years behind the times… but where human minds are left to find their own bearings.

You may never look at life the same way again.

Get it now at Amazon ($18.95) or on Kindle: ($5.99)

TheBreakingDawn

* * * * *

Paul Rosenberg
www.freemansperspective.com

Nowhere to Run To; Nowhere to Thrive

nowhereIt’s something of a truism in physics that closed systems tend toward entropy. In other words, building walls around a process will make it degrade faster than it normally would. And this principle clearly applies beyond physics.

An academic named John B. Calhoun famously documented this effect in rat populations. He gave his animals everything they could possibly need but enclosed them in a limited space. Inside their closed system, some males became aggressive, others withdrew psychologically, mothers stopped caring for their young, and eventually their population plummeted, even though there was plenty of food.

Humans are not rats, of course; we are self-referential, thinking beings. Subjected to fully closed systems, we’d break down mentally long before we starved ourselves.

The Human Experiments

The human analog of the rat experiment wouldn’t be constrained physical space, but constrained mental space. And that’s precisely what we’re getting now with mass surveillance. In other words:

Surveillance locks our minds into a closed system.

We know we’re being watched. Every time we look around to see who might be listening, every time we avoid expressing ourselves freely (speaking, writing, whatever), every time we lower our voices so the punishers won’t hear, we are conscious of the fact that we’re living in a closed system. Fear of shame and punishment are the walls around that enclose us.

And we do have empirical evidence on the effects of such closed systems. In a paper entitled The Legacy of Surveillance, Marcus Jacob and Marcel Tyrell wrote this about East German surveillance:

Our empirical evidence suggests that a one standard deviation increase in Stasi (secret police) informer density is associated with… a 10% decrease in organizational involvement, and a 50% reduction in the number of organs donated across the districts in East Germany.

We furthermore find robust evidence that surveillance intensity has a strong negative effect… on current economic performance, and may explain approximately 7% of the East-West differential in income per capita and 26% of the unemployment gap.

So, the surveillance of East Germany produced serious, measurable, and strongly negative results.

Jacob and Tyrell conclude:

[W]e find that people’s experience of living in a regime in which state security informers had their tentacles in every aspect of people’s lives has resulted in a strong and lingering sense of mistrust of members of society outside the immediate family circle.… We furthermore find robust evidence that surveillance intensity has a strong negative effect… on current economic performance in these regions.

So, if we try to imagine that modern surveillance – in many ways much worse than it was in East Germany – will have no negative effects, we delude ourselves.

Closed mental systems – like the most intense surveillance that has ever existed on this planet – is a war on our minds, a war on will. It leaves people unable to make autonomous and ethical decisions. They become truly selfless; that is, they have no solid self that can exert choice, will, and effort… that can strive, risk, defend, and grow.

As Hannah Arendt wrote in The Origins of Totalitarianism:

The disturbing factor in the success of totalitarianism is the true selflessness of its adherents.

When the State Overtakes Society

One of the primary effects of mass surveillance is to suppress individual judgment. We dare not act on our own minds, because authority will see it and disapprove. And that, as I mentioned last week, makes us less conscious, less alive.

Large central structures, like surveillance states, remove initiative, adaptation, and self-reference from individual men and women, forcing them into a fixed structure.

The crucial thing is this:

When regulation is within the individual, complex and beneficial interactions thrive.

When regulation is outside the individual, personal virtues fail.

When people cannot rely on themselves, their patterns of thinking change. Rather than referring to their own perceptions, their own knowledge, and their own analysis, they defer to the judgment of an external voice. They lose themselves in the process.

The inevitable product of this is denuded individuals and non-adaptive structures.

Coming to a Closed System near You…

Having nowhere to run has always meant death to the finer elements of human nature, and it remains true now.

Over time, mass surveillance will cause motivation and production to fall and human happiness to decline. We are thinking creatures, and if we are prevented from acting according to our natures, we will fail to thrive. And once that point is reached, all the king’s horses and all the king’s men won’t put it back together. They couldn’t in East Germany and they haven’t in North Korea.

Mass surveillance is a war on the best within us. It is already bearing bad fruit, but the worst is yet to come.

Assert your will. Now.

Paul Rosenberg
www.freemansperspective.com

What the World Would Be Like Without Capitalism

slaverySome people say that the search for profit is abusive, heartless, evil, and so on. I’m not particularly in love with profit for its own sake (and I certainly don’t think it justifies abuse), but a reflexive condemnation of profit is deeply ignorant.

The truth is, “profit” killed the ancient abomination of human slavery. To eliminate the ability of people to profit would draw slavery back into the world. And we obviously don’t want that.

Here’s why:

Slavery Was an Economic System

What is not understood is that slavery was the foundation of economics in the old world – such as in Greece and Rome.

Slavery was almost entirely about surplus. (Surrounded by creative justifications, of course.) It was a type of enforced thrift.

An undeveloped man, left to himself, will spend almost all of what he earns. If he does earn some surplus, he’ll likely spend it on luxuries, frivolities, or worse. Until he develops a strong character, little of his surplus will remain for other uses.

A slave, on the other hand, never holds his earnings in his hands and therefore cannot spend them. All surplus is transferred to his or her owner. It was precisely this kind of surplus that made Rome rich.

But then Christian Europe came about. Prior to that, I cannot point to a single ancient culture that forbade the practice; it was seen as normal. So, for Europe to expel the slavery it inherited from Rome was a monumental change.

Europeans replaced slavery – slowly and because of their Christian principles, not because of a conscious plan – by doing these things:

  1. Developing personal thrift. This required a strong focus on building up virtues like temperance (self-control) and patience.
  2. Replacing the enforced surplus of slavery with profit. That is, by mixing creativity in with their commerce: innovating, inventing, and adapting to get more surplus out of commerce.

Under a new system that was eventually tagged capitalism, thrift and creativity generated surplus, and no human beings had to be enslaved.

A World Without Profit

On the other hand, we have recent examples of what happens when a culture forbids profit: the “socialist paradises” of Stalin’s USSR, Mao’s China, and the enslaved states of Eastern Europe. (Among others.)

These examples are bleak indeed, featuring the enslavement of everyone to a ruling party.

Profit provides an incentive to work, and when it is gone, not only does work suffer, but those who want to get ahead have no honest way to do it. And that drives them either to despair or to crime.

If you eliminate profit – innovative, rewarding commerce – you get slavery. The form of that slavery may vary from one case to another, but it will be slavery of some type.

This result is the same, by the way, whether the elimination of profit occurs via communism (make a profit, we shoot you) or fascism (all profit-making is taken over by friends of the state).

The core issue is surplus:

  • If surplus can be gathered by average people via honest means, slavery can be eliminated.
  • If average people are not allowed to create and hold their own surplus (surplus being skimmed off to the state and/or state partners), slavery of one sort or another will be the result.

Profit is simply a tool – a way of generating surplus without the enforced thrift of slavery.

You cannot get rid of both slavery and profit. You can eliminate whichever one you wish, but you’ll be stuck with the other.

Profit Rests on Virtues

To live in a civilization that prospers by profit, we need to move beyond gorilla-level instincts like envy. We need to develop self-control, patience, and a focus on more than just material possessions.

It’s a shame that the West has turned away from traditional virtues over recent centuries. If the Church that previously taught these virtues was found to be wanting, we should have replaced it with something better, rather than casting everything aside and pretending that virtues were nothing but superstition.

If we ever lose enough of our virtues, profit will lose its protections, and the ancient way of slavery will return.

What we do matters.

Paul Rosenberg
FreemansPerspective.com

The Economy Can Never Fully Recover as Long as This Remains…

government regulations and businessWhen I was a young man, the older men I admired were the independent businessmen. Being a corporate suit issuing orders to underlings never appealed to me, but being a successful man who controlled his own life and business… that did.

Perhaps as a result, most of my friends are independent business people of one sort or another. Not long ago, I had a notable conversation with one of them, during which he said:

You know, Paul, business used to be fun. I’d take my children around and show them what we were doing, and explain the differences we’d make.

I waited just a beat as he winced and then continued:

Now, I don’t want to drag my kids into my business. Every time I move, there are regulations, permissions, forms to file. It takes up most of my time, for nothing. Business isn’t fun anymore. If I could find something else, I’d get out.

And this is a man who has been in his business since childhood, who loves to tell stories about it, and who used to enjoy his work immensely. If this guy is looking for the exit, the problem is dire.

It’s pretty obvious why

I have limited faith in government statistics, but there are a few informative ones on this subject:

The US Small Business Administration (SBA) recently reported that the annual cost of complying with government regulations is more than one trillion dollars per year and has been since 2005.

It goes on to report that big businesses (500+ employees), pay about $7,550 per employee to comply with the regulations. Small businesses, on the other hand (up to 20 employees) pay about $10,600 for every person they employ. And this is just one reason why small, independent businesses are being swallowed up by giant corporations.

Also bear in mind that this is just the cost of compliance with federal regulations. States also impose regulations on businesses. So do most of the county and city governments, especially large city governments.

New rules are produced constantly, and the cost of compliance rises constantly. In the US (and many other places), the cost of doing business has long since become prohibitive.

The Work-Arounds

Clever folks always find ways to get around this insanity, of course. But those ways are extra work and probably help relatively few people.

#1: They get rid of their employees

They find niches in their fields that allow them to escape the endless paperwork, penalties, and senselessly wasted time that comes with being an employer. (If you’ve ever had employees, you know what I mean.)

And what of the workers? Well, some get hired by the few related-industry employers that remain, while others have to take a mind-numbing mid-level corporate job just to pay the bills or get insurance. The rest are living on food stamps, disability, or a dozen other welfare programs.

#2: They go offshore

If your business is not resident where the regulators are, they usually can’t say anything about it.

Not many business people have moved abroad, but lots of them have set up offshore companies and are conducting business on the Internet. These people get their lives back… if they can find a way to make it work.

That is the dirty little secret of offshore companies, by the way: It’s not about escaping taxes; it’s about escaping all that ridiculous, insulting, pointless paperwork. No more spending days crunching numbers at tax time, no filing new reports every time you do something. You just take care of your customers and deliver good product. (Which ought to be enough.)

#3: They pay politicians for protection

Why would anyone donate thousands of dollars to a politician unless they expected to get something in return?

Big businesses pay politicians so that they can make a phone call to get problems that arise fixed. Small businesses can’t afford that, and most small business owners have moral problems with bribery.

Legit Is Dead

Unfortunately, the old “American way” of working hard, conducting honest business, and succeeding is gone, dead, and buried. It may still happen from time to time, but infrequently and off the beaten path.

Not long ago, I found this sign posted on a streetlight in Chicago:

business and government regulations

The sign is right – the old “legit” way of doing business is dead. If you want to get ahead these days, you either try to play a game that is rigged against you, you pay politicians to bend the rules for you, or you avoid the situation entirely.

It seems that the best and brightest – the would-be drivers of the economy – are choosing the last option.

What does that say about where things are going?

Paul Rosenberg
FreemansPerspective.com