The renowned heterodox financial economist and economic historian Dr. Michael Hudson will be visiting Australia in October.
Michael is another of the handful of economists who predicted the Global Financial Crisis, and he has since worked intensively with the governments of Iceland and Latvia to attempt to pull them out of the economic quagmire. He shares my expectations that the “green shoots” being spied by more conventional thinkers will wither under the weight of the private debt that created this crisis in the first place (and whose existence has been ignored in all the rescue plans to date).
Debtwatch is supporting a talk to be given by Michael on the financial crisis on October 23rd at Customs House (the event will probably be from 6-8pm, but we’re still finalising arrangements).
Michael is an excellent speaker who holds no punches, and I can guarantee that it will be a stimulating event. He has extensive knowledge of financial crises back to antiquity, and argues that we may have to revisit what we once thought was the Biblical practice of “Debt Jubilees” to overcome our modern dilemma.
So it will be a great night, but there is a problem–funding. In this “free market system”, while bankers still pay themselves multi-million dollar salaries, it is difficult to get financial support for contrarian thinkers. So I’m trying to help by making a personal donation of $100 to Michael’s expenses, and by encouraging blog members to also chip in via the PayPal Donation widget on this site.
I have dedicated the first three options on the widget to funding Michael’s tour, with amounts respectively of A$2, 5 and 10. It’s easy to use, and has so far raised about A$5,000 to support my own research (I’ll publish more on how I’m using these funds shortly). Just click on the widget to the right of this post, choose one of the options, and proceed from there.
You can donate whether or not you have a PayPal account of your own–it’s very easy and quite secure.
The event itself will be free, but there is limited seating (roughly 150 seats), and donors will receive preference over others should that be necessary.
There are now over 2,000 subscribers to Debtwatch, so if just ten percent of members make the median donation, we’ll raise about A$1,000 towards Michael’s travel and accommodation expenses.
If this exercise works–if it raises A$1,000 or more for Michael’s speech–then I will repeat the exercise for Paul Ormerod, the author of The Death of Economics, Butterfly Economics, and Why Things Fail, who will be in Sydney in November.
September 11th, 2009 at 3:19 pm
Another doubter http://news.smh.com.au/breaking-news-business/china-economic-rebound-not-real-talbott-20090910-fj23.html
September 11th, 2009 at 3:42 pm
I don’t believe that there are any green shoots in the Anglosphere or EU economy, albeit Australia and Canada are on the whole way better off than the US or UK (for now).
My spreadsheet models suggest that this depression will probably go on until 2026 to 2042.
I will probably be dead by the time it is over, or 45 years depending on your persuasion.
However, the downward decline will take far longer than the Great Depression (18 months) or Long Depression (12 months maybe) … perhaps a window of 5 years to reach rock bottom.
http://hireme.geek.nz/model-US-EU-credit-market-depression.html
The American imperialist nitwit Max Keiser thinks that there will be another 18 months of bad news and ongoing decline … nay it has barely started.
http://www.maxkeiser.com/
Things I expect in this depression
1. All retirement systems in the US will be bust, but the EU and rest of the Anglosphere will not have healthy superannuation systems for decades
2. There may be 2 or 3 cycles of hyperinflation in the USD and UKP, Eurozone — who knows? At least 2 “World Reserve Curruences” will be bust before it is over
3. 0% Growth is the new economic reality, but some industrial sectors will off and on make up to 5% — declining oil reserves will make this non-linearity a fact of life
4. It may be 25 years before any meaningful consumption returns — for the next generation the only consumption will be with the upper 10% income bracket in the Anglosphere and EU.
September 11th, 2009 at 6:43 pm
There is no way I’ll be ablöe to attend – since I am literally on the other side of the world – but I donated anyway. Why?
Video (or Audio) upload. Would be a good thing to be able to share.
Please?
September 11th, 2009 at 8:19 pm
aspadistra,
that’s bleak. It is however wrong IMO.
Let me firstly agree on the subject of your long term outlook for growth. That said let me adress each of your predictions in turn and offer an alternative outcome.
“1. All retirement systems in the US will be bust, but the EU and rest of the Anglosphere will not have healthy superannuation systems for decades”
The idea of everyone saving 5-10% of their income for 25-40 years to then live like a rentier off that for another 20 years was always nonsensical. There is no healthy supperannuation scheme. That means in turn that they will generally be abandonded in favour of socialised age care, with some contributory element and a general return to old gae care within the family and community.
Debt is the vehicle for transferring wealth inter-generationally, but when the population pyramid is inverted one must either find a new way of transferring wealth (there isn’t one), or one must transfer the wealth at negative real rates. This makes saving for retirement a non starter.
“2. There may be 2 or 3 cycles of hyperinflation in the USD and UKP, Eurozone — who knows? At least 2 “World Reserve Curruences” will be bust before it is over”
Well, that kind of event could only happen as a result of fiscally driven seigniorage, and even then one would have to assume that this would not be overwhelmed by debt deflationary contraction. I don’t buy the argument that continued QE or money drops will result in a confidence driven hyperinflation as long as the money supply doesn’t run away. Far more important than that is maintaining an ability to continue with critical exports since as long as a reasonabkle reserve of forex is maintained that would prevent hyperinflation.
“3. 0% Growth is the new economic reality, but some industrial sectors will off and on make up to 5% — declining oil reserves will make this non-linearity a fact of life”
We agree here however there are various means for ensuring continuing high levels of employment under 0% growth. The options are:
- chartalism (fiscal deficit spending filling gap left by private sector and funded by excess private sector saving)
- command socialism
- a secular regime of negative interest rates. Actually this is likely to emerge from either of the two above. This is rendered a possibility in a fiat money regime.
“4. It may be 25 years before any meaningful consumption returns — for the next generation the only consumption will be with the upper 10% income bracket in the Anglosphere and EU.”
Leaving the rules of the game as they stand, I half agree. Only once the boomer wave has left this mortal coil could normality return. However you neglect that after this time population generally will be in slow decline so the age overhang will remain, and would keep consumption depressed in any case. Nations like oz like to think that immigration will keep them young but since immigration is clearly a political non-starter when there are not sufficient jobs and/or welfare for existing residents, that immigration will not be forthcoming or allowed to happen.
Secondly consumption by only the top 10% income bracket (basically a vision of fortified rich zones surrounded by a baying mob of armed peasants and vagabonds) is a nonsense, since the systems of production would not be viable in that scenario to produce for the top 10%.
September 11th, 2009 at 8:47 pm
Scepticus
The money being printed is being given to the winner side of the OTC derivative.
It is not going into a black hole just replacing wealth destruction so it is evening itself out, that is not happening.It is in the system.
How can that not be hyperinflationary?
It will continue to an unlimited amount, as soon as more winners are paid their winnings.
You have to understand this, it is not speculation what i am telling you it is what is happening.
September 11th, 2009 at 9:44 pm
EW, you make an interesting point. However, when I look into it I see that all the articles I can find on this matter come from goldbugs.
Can you point me to a source supporting this thesis of yours that does not come from the usual goldbug sources?
You must recognise that having ‘independant’ corroboration of what you are saying is critical for your credibility on this?
I’m prepared to believe you, if you can come up with this corroboration.
September 11th, 2009 at 9:46 pm
Hi aspadistra
Do you recommend gold and silver?
September 11th, 2009 at 10:15 pm
From apidastra’s link above:
“Conventional Kondratiev analysis would suggest that the 2000s should represent a Kondratiev winter. The fact that it is thus far (2006) not occurring suggests either monetary inflation and pumping of global liquidity on a massive scale in an attempt to deny the business cycle, or that a cycle of a larger magnitude than the Kondratiev cycle is operative and that the Kondratiev winter has effectively been overwhelmed by this larger-degree up-thrust.”
the k cycle has indeed been overwhelmed by a larger (down) cycle, which is the ending of population growth. Sorry to labout this point, but the entire K-cycle theory is conceived of and measured (in past cycles) against a background of steadily increasing population. The fact that this background variable will now be inverted for the supposed new cycle makes the whole k-cycle analysis inapplicable in its current form to the future.
Extrapolation of k-cycle reasoning into the future is a case of confirmation bias, which will end up failing you. You might retort that the population issues will simply amplify the depth and severity of the k-winter, but the key difference is this:
In past k-cycles, economic participants had expectations of future population growth, hence could assume a return to growth at some point in the future following the final removal of excessive debt from the economy. In this cycle, such expectations will fall away, resulting in a sea change in cultural, and hence economic, thinking that will result in a rejection of the current economic paradigm, which will be realised to be unsutainable. At this point, k-cycle theory will be invalidated.
September 11th, 2009 at 10:37 pm
Oh, and in past k-cycle inflexions we didn’t have fiat money, nor the information technology infrastructure to make it viable.
September 11th, 2009 at 11:22 pm
How are any of these aged care schemes different, other than quibbling over the exact percentages and figuring out who gets to make the investment decisions?
Socialised aged care means taking (by force) from the those who are working, and transferring to those who are not working. Superannuation in Australia means taking (by force) from those who are working and giving it back when they are not working. The implied time shift in accounting does not apply to physical objects — apples and bananas can’t be time shifted. This “community / family” aged care merely substitutes community norms and peer pressure for government force and police — the end effect is the same.
The old age care scheme that creates something out of nothing doesn’t exist.
September 11th, 2009 at 11:30 pm
As a lifelong technocrat, I’ve seen people believe that technology will save them from anything you care to name, and I’ve seen people (like the above) write it off entirely. I’m yet to see anyone get it right on the nail.
Oil is most useful for maintaining air forces and keeping air superiority over our desirable land property. Other than that we have plenty of (slightly inconvenient and mildly more expensive) alternatives. The air situation is changing, a great many people are looking at this problem. Change you can believe in
September 11th, 2009 at 11:34 pm
“How are any of these aged care schemes different, other than quibbling over the exact percentages and figuring out who gets to make the investment decisions?”
They differ in how the wealth/surplus of the young is to be transported into the future to be spent when they are old. If we assume for a moment that real output of the economy is declining slowly over time as a result of demographics, then monetary wealth cannot be trasported into the future at +ve interest rates, which is rather like saying it cannot be transported without loss. The further in time to try to move it, the more you lose.
Of course a surplus today can be transported temporally as other forms of promsies which travel better under conditions of declining output, after all a debt is just a promise denominated in currency. For example, I as a school leaver promise to work 2 man years now in service to a number of my elders, on the basis that I will receive a similar outcome when I’m old. When I’m old, if population has been aging, a man hour of labour will be more valuable than when I was young.
Therefore a debt denominated in man-hours would be a better form of stored wealth than a debt denominated in currency for these purposes. It’s also interesting to note that these man hour debts could be made fungible in the same manner that debt is made fungible by having an intermediary that performs both an introductroy and risk mitigation service.
September 11th, 2009 at 11:36 pm
Hi AlexLloyd,
Great idea, and I will definitely arrange it. And thanks for helping out with the funding–much appreciated.
BTW everyone, so far we’ve raised A$205. Keep it up please: that’s enough to cover a reasonable hotel room for one night, but I’d prefer to be able to get enough for 3 nights plus some contribution towards Michael’s airfare.
Thanks very much to all the contributors so far!
September 11th, 2009 at 11:37 pm
Tel, air superiority is irrelevant in an era in which military attack vectors are biological or nuclear.
That said, I agree that binary views of technology (either as a panacea or as being doomed) are generally wrong and tell us more about the agenda of the holder of that view than they do about reality. I think this generalises to societal ultra-doomers and ultra-optimists as well.
September 12th, 2009 at 12:32 am
labour the point all you like scepticus, think your on to something ,
obvously nothing like a an ecological disaster or two, or perhaps a major nuclear confrontation to thin the ranks by a few billion, to get the population engine re started again.
lets hope the future is about steady declines in population due to demographic transition, and a shift to a paradime of energy efficiency as oppossed to one overwhelmingly focussed on economic yield.
im all for more asceticism less conspicous consumption,
we wont have a choice anyway,
one america is bad enough, having nine americas if the rest of us go down that path, well we will have rapid de population well before we get there probably by our own strangeglovian hands
September 12th, 2009 at 12:48 am
“im all for more asceticism less conspicous consumption,”
less consumption of what? If we observe that currently healthcare costs are unsustainable and will become more so as both with population ageing and advanced medical technology increase demand, then clearly the solution is to reduce costs of these by ensuring the production of these services goes up. Accordingly, production of other stuff – consumer goods – must go down to compensate.
One could still view a society who’s main focus is on consumption of medical, care and life extension services as being a ‘consumer’ economy. Today we characterise a consumer economy as being mainly focussed on consumption of its own (and others) output, and an export economy as being mainly focussed on production for consumption by others. In my hypothetical healthcare/care economy, all such economies are by definition both consumer economies and service economies.
Such an economy can be very healthly – both economically and physiologically! since if one posits an effectively unlimited future demand for such services, it is easy to see from a demand/supply perspective how high employment can be maintained. We could see the current upheavals as part of this transition from a globalised economy focussed on consumer GOODS to a de-globalised economy focussed on quality of life SERVICES. I think much of the long term doom and gloom is coming about because people are thinking about the future in terms of the past, and therefore can’t see new sources of demand, and see instead huge costs. Thinking about the future in terms more relevant to it, the picture isn’t as bad, however we still need to find a way of organising the economy for aggregate decline in output.
So I would characterise a future successful economy being one that is focused on the domestic services demand of an aging population and the sustainability of investment and employment under a regime of gentle negative interest rates. Happily, factories and ‘re-industrialisation’ are not required to make this a reality, and further this type of knowledge and service economy is very compatible with reduced usage of physical resources.
September 12th, 2009 at 1:17 am
There is an article in The Economist that asks what’s changed one year after titled “Survival of the Fittest”. I am interested in everyone’s thoughts on it.
http://www.economist.com/printedition/displayStory.cfm?Story_ID=14416804
Scepticus
“air superiority is irrelevant in an era in which military attack vectors are biological or nuclear.”
Currently there’s not a lot of ABC (Atomic, Biological & Chemical) weapons being used (Can you tell me where they are being used?). Air superiority is still VERY important as it has been since the capability was developed. Today’s conflicts may very well be asymmetric but they are still pretty conventional (guns, bombs, planes, helos, tanks, cars, ships, boats, death and destruction).
I don’t think that you have thought very much about what you said.
September 12th, 2009 at 1:53 am
DrBob, that artile is bullshit. The economist has a track record of defending lassyfaire in general and in trying to shift blame away from the banks in general. I could point out all the flaws in that article one by one but what’s the point? The craponomist is an intellectually and morally bankrupt publication whose sole purpose is to cheerlead for the neo-classical status quo and stroke the blubbery egos of the crony capitalists.
Regarding ABC/NBC, the reason they’re not used is because none of the current or recent wars are taking place on the soil of nations armed with such weapons. Air superiority is essential in assualting poorly armed neighbours but not in national defence of major nations. That’s what nuclear subs are for – since a territory cannot be defended against ABC attack, the only option is to credibly threaten MAD.
September 12th, 2009 at 2:17 am
Air superiority is defined in the NATO Glossary as “That degree of dominance in the air battle of one force over another that permits the conduct of operations by the former and its related land, sea, and air forces at a given time and place without prohibitive interference by opposing air forces.”
http://en.wikipedia.org/wiki/Air_superiority
The problem with ABC weapons is that they destroy rather than allow the capture of the occupied territory.
September 12th, 2009 at 2:41 am
Biological, chemical or neutron weapons can and will be engineered to target population before eventually decaying to a mostly harmless residue and are the perfect WMD for capturing territory and infrastructure. A variety of delivery methods exist and can be conceived against which an airforce is defenceless. An airforce is defencelss against a standard nuclear assualt from submarine launched ICMBs in any case.
Given the likely prohibitive cost of conventional military action in an era of oil shortages and shortages of young people, stealthy population targetted NBC attacks would be the preferred method of attack, especially if it leaves the assailant anonymous.
Unless the attacker remains anonymous, an attack against a nuclear armed or allies state will likely result in the destruction of the attackers homeland, followed by the much of rest of the world. I therefore don’t see much value in air power as a defensive measure.
September 12th, 2009 at 2:57 am
[ABC weapons]…”will be engineered to target population before eventually decaying to a mostly harmless residue and are the perfect WMD for capturing territory and infrastructure.”
Can you point me to a reference that backs up these claims?
That might be in the mid-term future, but for the short-term future I still maintain that air power is far from irrelevant.
Anyway let’s get back to economics
September 12th, 2009 at 3:02 am
http://en.wikipedia.org/wiki/Neutron_bomb.
yes, lets get back to the economics
September 12th, 2009 at 8:34 am
Please forgive my profligacy, but I found this astrology on google which made me laugh out loud (astrologers and central bankers , charlatans both), I posted them to mish and will repost them here by way of apology for previous pedantic badgering about air superiority. enjoy!
Deflation comes to astrology:
this from my google frontpage made me laugh:
“Cancer
By Rick Levine
Keep your credit cards in your wallet today because your good taste can get you into financial trouble if you see something that you really want. Your eye for beauty is keen now, yet you won’t necessarily base a purchase on value. Consider what you need rather than what you want; only buy those things that you would consider to be essentials.”
and this, from my actual starsign which is scorpio:
“The restless Gemini Moon can pull our feelings all over the map today, yet it’s opulent Jupiter that creates the real mischief. Charming Venus in dramatic Leo can put on quite a show, and her opposition to Jupiter encourages overindulgence and extravagance. Meanwhile the Sun’s irritating quincunx to Jupiter makes it difficult to know where to draw the line. Establishing limits sounds like a good idea now, but heeding them can be quite the challenge.”
I wonder what starsign bernanke is…? Seeing as the astrology seems so in tune with the times, I had to check: here’s bernanke’s (aquarius):
“A close friend may surprise you with a generous gift or a lovely time, putting you in the mood to enjoy yourself. You might feel so good that you cannot contain your enjoyment and, in turn, want to do something special for your partner. If all these positive emotions escalate out of control, you could inflate your expectations so high that you cannot help but face disappointment later on. Don’t wait until it’s too late; balance your optimism with a dash of practical reality.”
LOL, astrology and inflation targetting!
September 12th, 2009 at 11:03 am
Hi Steve,
[Biblical practice of “Debt Jubilees” to overcome our modern dilemma]
Just like to comment on this as a solution to our GFC crises. I don’t know how this might work, really, but like to review this idea(should a video of the talk becomes available). The reason I showed scepticism to the above approach is that we are predominantly dealing with animal instincts/greed/wealth amassing by a few very cunning and intelligent neo-bonobos, whose idea of wealth is to continually amassing resources(whether it’s money/assets/corruption via power or huh… Mad-off etc). They are ruthless in their approach and the end of the game is that they are not the ‘last in line’ in the PONZIs scheme they’d designed!!
Say if we allow a ‘debt jubilee’ as proposed, wouldn’t that be a field day for the neo-bonobos to restart a TOXIC debt-cycle guaging by the ‘herd mentalilty’ that was driven by these animal-instinctive colonies..? Just a laymen thought.. It does sounds like taking all the i.o.u.s-bananas away from the neo-bonobos, then stick them in an island(s) and then fly a helicoptor over the island(s) and perhaps air-drop real-bananas over them. The neo-bonobos hasn’t change , they are just redeployed!!
Ps. I also put my money where my mouth is(like AlexLloyd). It isn’t much but this is ‘universal participation’ in supporting a genuine alternative approach..
September 12th, 2009 at 11:09 am
Thanks for the donation D2D!
On the debt jubilee, it would only make sense when also combined with a redefinition of capital assets that stopped it happening again. Comments here earlier (by Scepticus I think) outlined the mechanics of Jubilees in Biblical times, and they suited the economic and social structure of those times. We need some degree of adaptation to sensibly replicate that today.
September 12th, 2009 at 11:19 am
Thanks Sceticus@23.. the Bernanke’s star readings made my day, in particular..LOL…
“If all these positive emotions escalate out of control, you could inflate your expectations so high that you cannot help but face disappointment later on.”
Perhaps the astrolgy says a ‘W’ recession….lol
September 12th, 2009 at 5:14 pm
hi scepticus,
my impression is more and more people are getting sick but the unit costs of curing the sick arnt going down, infact its going up and is being born by the tax payer, so i dont know how we arrive at the conclusion that a greater demand for health services will actually reduce the cost of provision on a per capita basis.
i’m not sure whether the demand driven by an ageing population is going to be met by governmwents,
im not totally discounting your future probable world line
but the opposite is just as likely imo,
i have the feeling as a long run consequence of this and other furure GFC’s there will be a re negotiation of the social contract between governemtns and the population and the potential collapse of the welfare state and the whole sale revision of taxation arrangements.
if the chartalists dont get their way, then one way the state will reduce costs is not by providing more services and products to an ageing population, but by reducing services and product,
to put it bluntly if you get sick enough , you die, and knowones going to be making any expensive medical interventions,
so may be we had all better get use to providing our own health care if we want to have along and healthy life
September 12th, 2009 at 5:17 pm
oh and i forgot to add,
the quality of life services may end up being self serve
September 12th, 2009 at 6:32 pm
“We could see the current upheavals as part of this transition from a globalised economy focussed on consumer GOODS to a de-globalised economy focussed on quality of life SERVICES”,
trading blocks and currency enclaves very much part of the end game of the GFC,
funnily enough i dont think it will come as a consequence of endogenous economic factors but as a consequence of exogenous geo political factors which will tear apart the current tenouse economic framework.
currency monopolists can always spend their way out of trouble, they cant spend their way out of natural resource limits, or being blindsided strategically in the south china sea
September 12th, 2009 at 6:55 pm
hi debttodeath,
i think its a bit harsh on our bonobo cousins that they should be tared with the same brush as us,:)
the way we have conducted ourselves over the last 5 millenia, perhaps its we who should be sitting at their feet seeking any pearls of wisdom as to how we can improve our manners
,
or better still hire them to run the reserve, or rio tinto or any other such miss managed ediface,
its entirely possible they would do a much better job
September 13th, 2009 at 3:48 am
It wasn’t me with the biblical takes of jubilee – but how is a jubilee different to monetising the debt?
A jubilee will possibly be hyperinflationary, since every debt forgiven turns credit money into high powered money – since the original loan is still circulating yet has no attached liability.
A jubilee could only work if a sunstantial amount of the credit creationmachinery is permanently destroyed. That means, a lot less banks.
September 13th, 2009 at 1:05 pm
Hi Scep@31,
I agreed with the hyperinflationary aspect of a ‘debt jubilee’ in a broad sense. It means forgiving debt in one go, whilst in the Biblical times, the notion and extent of the ‘debt tentacles’ were not so TOXIC and far reaching.
Steve,
Take for example(a laymen discussions on economics with my next door neighbour),
(1) if the Government(s) of the world and the Central Banks(The Supreme neo-Bonobos) were to announce tomorrow that on the 1st of Oct 2009, all debts will be forgiven, won’t the debt-junkies go out tomorrow and spend as much as they could possibly buy, with credit? Knowing jolly well that at the end of the month they don’t have to pay the bill. That’s the reason for agreeing with your take on hyperinflation(Scepticus).
(1.1) Now, extent this to futures, derivitives, options and the share market, ‘debt jubilee’ becomes an unknown quantity.
(1.2) For those who have toxic debt, suddenly their toxic debt becomes liquid(cos’ now the debt doesn’t have to be repay). It’s like rewarding the ‘thieves’ who stole, with the goods they thief!! Things as it stands, we are already rewarding the neo-bonobos WITH monies they created in the form of interests from toxic debts.
(1.3) Even if it is cast in stone, that debt jubilee would only cover debt up till the 15th of Sept 2009 and not after, the debt-junkies will still borrow more… WHY?…. cos’ it’s an addiction!!
(2) Now that I have taken a lot of goods in hand THANKS to the notion of a debt jubilee, who would then pay for the goods I have taken in debts? Someone must pay the bills.. a bit like the conservation of energy(in a loose sense, money).
Personally, I feel ‘debt jubilee’ in the form of bankruptcies is still a better option. It reverts the debts back to the neo-bonobos who have created it in the first place. It means that ‘the establishments’ in the chain of debts is now taking responsibilities with their ponzi actions(ie NINJA creditors and its subsidaries). It also admonishes the NINJAS’ themselves. It’s akin to mum(the law) telling a badly behaved boy/girl(the NINJAs) to go to bed(not to spend money you can’t afford).
In conclusion, my take on debt jubilee would only mean deferring debt repayment towards the future(like a debt moratorium), and at the end the queue will be our childrens holding onto to a bit of Ponzi titles of low intrinsic value…. however, I like to see what Micheal proposes.. it is equally likely that he’s looking at a solution and I stand to be corrected(I do have an open mind).
Mahaish..
A thousand apologises to our Bonobo cousins south of the river, it really meant to elevate their status to ‘Pano Sapiens’ and devolute the neo-bonobos to ‘Homo Panicus’. Perhaps I should change the term neo-bonobos to neo-homopanicus…LOL.. like I once was..
September 13th, 2009 at 1:46 pm
Inflation is a debt jubilee. Inflation transfers wealth from the lender to the borrower (unless the lender has the ability to crank up interest rates) and it transfers wealth from everyone to the stimulus recipients.
Obviously the Federal Reserve is a great supporter of your work Steve, because they love the idea of an international debt jubilee. Mostly, inflation is a way for the USA to shrug off it’s debt to China and various other parts of the world — a debt jubilee for the wealthiest nation, so they can stay wealthy.
September 13th, 2009 at 2:05 pm
scepticus stated on September 11th, 2009 at 8:19 pm that:
“Debt is the vehicle for transferring wealth inter-generationally, but when the population pyramid is inverted one must either find a new way of transferring wealth (there isn’t one), or one must transfer the wealth at negative real rates.”
However, contrary to the view expressed above there is “a new way of transferring wealth” from the adoption of “ecological” property rights to land, buildings, firms and money as set out in my Brisbane presentation in June this year on ‘Building Sustainable Communities on Ecological Principles’,to a conference on ‘Building Community Centred Economies’ that can downloaded from: http://ssrn.com/abstract=1402063.
Ecological property rights provided the idea for my 1975 book on “Democratising the Wealth of Nations” posted at http://ssrn.com/abstract_id=1146062. The book was launched by Dr Jim Cairns then Deputy Prime Minister whose review is posted at http://cog.kent.edu/lib/cairns.html.
One of my refereed journal articles explaining how tax incentives could change the current perpetual, static and exclusive property rights to time limited, dynamic and inclusive rights was selected for re-publishing with the seminal contributions of international scholars in the Corporate Governance volume of the “History of Management Thought” published by Ashgate in 2000.
However, it seems that economists, even those that are Heterodox are not aware of how to transfer wealth without taxes or welfare?
September 13th, 2009 at 4:55 pm
Hyperinflation is a currency event not an economic event, it is completly different to bubble inflation, which is what you are confusing.
September 13th, 2009 at 5:26 pm
The banks learned a valuable lesson — brinkmanship works. With this information they know they are safe to do what they like with other people’s money. If they get into trouble, just cause a crisis and get bailed out again.
September 13th, 2009 at 8:51 pm
Shann.Turnbull,
Your proposal might be interesting but still quite utopian to me – the description of the system contains little details which I would question to exploit the main idea – that a decentralised, kind-of grass-roots, system can be created to make the idea viable.
“Today, stamp scrip could be created in electronic form that could be stored on the sim cards of cell phones. Cell phones that can transmit money electronically and/or be swiped at check-out counters have already been introduced in some countries”
Yes it can but with a small string attached – it will not be a local, decentralised system.
Note: I don’t know the exact technical details of the system used in Bahrain. But I worked on a similar system.
The way secure communication with mobile phones works is as follows:
Mobile phones can be relatively easily hacked but not SIM cards. So SIM cards are used to seal off the communication channel. Encrypted binary SMSs are sent and received.
Encryption and decryption of binary SMSs has to occur on both the server and SIM card sides to make secure communication possible. SIM cards are in fact 8-bit microprocessors running their own embedded operating system and offering Java programming interface. (Practically the same features are available on bank smardcards).
The card manufacturer can embed additional unique encryption keys (usually double-length 3-DES) on cards. (This may be the case in Bahrain – they wrote “swap your existing Zain SIM chip for the specially-designed Zain Wallet chip”). Primitives (functions) such as send an encrypted binary SMS and receive an encrypted binary SMS are available to applets (Java code) which can be provisioned on the card. An applet cannot read the key directly. An applet can do whatever we want with the open-text data – for example transmit data using the phone hardware to a Bluetooth reader at the check-out counter. Directly accessing SIM keys is prevented by the operating system residing on the card. Reverse-engineering of keys knowing open-text data and encrypted messages is impractical (would take too long for 3-DES).
Messages can only be decrypted or encrypted on the server side if the same key is used – 3DES is symmetric encryption (not a public-private key system).
One can imagine a system where no encryption / decryption occurs on the SIM card and encrypted data is passed directly to the checkout terminal.
Now the main point. The security of the system depends on the security of the key on the other side of the connection – at the server. Once the key has been disclosed the application is compromised and I can generate the same data on my PC using this library:
http://www.openssl.org/docs/crypto/des.html
A secure system for stamp script is not something what can be implemented without a centralised authority providing clearing services – which must be trusted by all the participants. The crucial data must be stored on the central server. Some encrypted information like a cache containing small amount of currency may be stored on the SIM card itself but the system won’t work without the central database. Mobile phones just provide a communication medium.
Nothing decentralised, gentleman. Otherwise it will be hacked instantly. If you provide me with a system design it will be my great pleasure to show you holes.
At least 2 entities must be trusted – the SIM card vendor (otherwise I could make my own SIM card and do whatever I want) and the clearing house (bank). The ISP may be involved as well (usually they are deeply involved and they run these services). ISPs can block such an activity if they don’t like it. ISPs order and distribute SIM cards.
What we ultimately get is another heavy-weight banking system with only slightly changed banking rules. In Bahrain “All funds held in the Zain Wallet are securely managed by BMI Bank BSc”.
No “Decentralised competitive private sector non-banks”. Scrip worked in 1930-ties because it was low-tech, local and people could verify that stamps were genuine. Also because the life cycle of a single scrip was short enough to make massive counterfeiting not profitable enough.
We may think about a kind of peer-to-peer infrastructure for scrip banking without a centralised server but again – the hardware must be trusted. SIM cards are unhackable without employing technology only available to secret services in the highest technologically developed countries. You would need to grind upper layers from the silicon structure to reverse-engineer the actual layout of the structure and get access to the contents of PROM memory containing firmware and data.
A system may be created where public-private keys are used for peer-to-peer communication but both the authority issuing keys and the hardware provider for electronic wallets must be trusted by all the users.
The main question is who can coerce banks to start using renewable scripts instead of making money in the usual way? Again I don’t believe in decentralisation. Running the system may be outsourced to local entities and this makes a lot of sense to me but the introduction of such a system must be backed by the relevant authority.
The only way I believe we can introduce a system based on environment-related measure of value is if states retrofit it to the currently existing capitalist system by means of taxation. Only a strong democratic state can impose it on the people (most of them may be in fact against this idea). Otherwise the informal and decentralised system will be instantly abused and cheated – what was the most common experience in real socialism.
The most of consumer electronics devices (including iPhones and similar gadgetry) can be easily hacked by thousands of underpaid and bored professionals churned out by our universities.
Reference:
http://en.wikipedia.org/wiki/Subscriber_Identity_Module
Note:
I didn’t include the most boring technical details in my post.
September 14th, 2009 at 1:40 pm
[...] Oct 14th – Lifting the Lid on the GFC, Melbourne Town Hall, with Steve Keen and Bryan [...]
October 26th, 2009 at 6:05 pm
I’ve got he footage of the Customs House evening, and am fiddling around shrinking it and uploading for web viewing, along with an audio only version. Please don’t harangue me about it, I’ll post a link when it’s done. It will most likely be a tiny embedded Flash player on the prosper site in the end, as a footnote to the ad. Tiny because it’s a 1.5 hour session that needs to be shrunk to a minimal file size. (SK shot a version also, but don’t tell him I told you.)