A Minsky Singularity
Jul07
on July 7, 2012
at 3:22 pm
Below is Steve’s recent interview on Capital Account with Lauren Lyster that talks about the Debt Black Hole that economies around the world have unknowingly been sucked into. Steve discusses the fundamentals of his unique analysis on using rising debt levels to finance economic growth. A fantastic renewed perspective on the current financial crisis!
“Or because Govt are not running higher deficits as the current economic environment requires.”
RJ, are you serious?
The government gets money one of two ways; take it from the private economy [taxes/fees] or create debt. Since adding more debt is not going to help in a debt crisis, and taking it from the private economy will only insure more mal-investment [while decreasing private-sector economic activity], how do you believe this can work?
You can not spend your way out of a debt depression any more than you can think your way into finding the truth.
Mickeyc,
That third world credit is to build currently NON-EXISTENT infrastructure (and to bribe complicit elites). No one is saying that Finance cannot attempt to build NON-EXISTENT INFRASTRUCTURE. The VALUE of that which has already been built however….IS a communal asset. Very important distinction.
Production is not the problem. The problem is DISTRIBUTION.
And…”I’m not sharing the results of decades of sacrifice with someone who believes he should get paid for being born.”…..is just a petty, unwise capitalist cultural hangover.
“your utopian socialism is somewhat hilarious.”
Incorrect. Social Credit is an evolution of PROFIT MAKING systems. A ssytem where private property, free enterprise and profit ACTUALLY, FINALLY FUNCTION WELL…..is a curious kind of socialism.
“Contrary to what lazy people believe businesses do not run by magic and production doesn’t just happen.”
I’m a business person myself, so I DO know how difficult it is to work, maintain and build a business. I just haven’t let the cultural biases of the society creep in quite so deeply that I reject viable and needed solutions.
The temporal universe is a BOTH/AND world. Just keep saying that over and over and you’ll get the REAL big picture. To weigh too much one side over the other is to insure imbalance. The current age is WAAAAAAAYYYYY over balanced, obsessed with and has FAITH, emphasis FAITH in the material side of the mutually real dualism.
But the kingdom of heaven is within. And if ye had faith even as small as that of a mustard seed…..in the power of the inward reality you’d begin to see how important basing systems on both….is the route out of the wasteland.
Machinery-material reality
Progress-non-material reality
Humans-Body
Humans-Mind/soul/spirit
Cosmos-material reality
Cosmos-intention to be conscious
Evolution-random selection
Evolution-unconsciously intention directed
Big Bang-Beginning of this universe
Membrane collision/Multiple Universes-Pre-existent universe(s)
It’s a BOTH/AND……multiverse.
The scientific, yea the one eyed scientistic bias of the current age is the biggest stumbling block to Human progress. Its the biggest and and most unbalanced viewpoint that needs to change.
impermanence
July 9, 2012 at 4:13 am | #
“The government gets money one of two ways; take it from the private economy [taxes/fees]
“This is not correct”
Taxes are just used to DRAIN RESERVES which are released when the Govt pays someone. So taxes are not for getting money. I
Govt payments for good and services create new central bank reserves
Taxes and bonds drain central bank reserves
Govt debt is completely different to non Govt debt.
Non Govt organizations or people need to obtain bank credit from a commercial bank or holder of bank credit. The bank has the power to say yes or no and to charge the appropriate interest rate.
Monetary sovereign Govts just issue reserves (via the central bank as a commercial bank asset to back the bank ‘bank credit’ liability). The banks must take these reserves usually at 0% interest. SO THE GOVT HAS ALL THE POWER NOT THE BANKS.
“SO THE GOVT HAS ALL THE POWER NOT THE BANKS.”
In the nation-state model, it is ALWAYS the government that has the power. But, like everything else, somethings that matters not!
The bottom-line here is that once labor-value is abstracted into its money-form [and much worse, credit], all Hell breaks loose, as human beings come up with all kinds of methods to cheat, steal, defraud, etc.
It’s the same process that characterizes all human social activity.
“SO THE GOVT HAS ALL THE POWER NOT THE BANKS.”
This ignores the fact that the government is captured by the Banks and Central Bank who are a duopoly in turn. This tri-opoly must be broken up.
Here’s my response to one of your posts over on Mish’s blog in this regard:
BFWR
And RJ. The additional credit for the dividend/discount is extended TO THE INDIVIDUAL AND INDIVIDUAL BUSINESSES from either the government or better yet a separate monopoly busting entity with the mandate to crunch the monthly price and retail sales numbers and then make them balance out. If you harp that it HAS to be government debt etc. you’re just not looking at all issuing possibilities.
Also, what of my journal entries
Debit – Cultural Heritage Fund
Credit – Individuals and businesses
Already existing and future progress has value. Only a one eyed, scientistic, overly materialistic, culturally biased outlook would reject this notion, right?
It’s kind of like the value of a banking “license.”
From over on Shedlock’s blog where on the prior thread they were discussing and pooh-poohing Steve’s debt jubilee idea, and the current thread is on the progressive persistence and lengthening of periods of unemployment:
Production is not the problem. Distribution is.
Alstry’s technological singularity is a valid insight, and the value of Social Credit’s Cultural Heritage of productive capacity is real. If your cultural horizons do not permit you to understand that…..thats not the problem of those of us who can see such.
The idea of a citizen’s dividend is a paradigm changer. It makes unemployment a “problem.”
The BOTH/AND perspective is real, valid and acknowledges the big picture perspective on Life and the cosmos correctly. The material world isn’t quite as dead as it has been scientistically made out to be.
Steve Keen, being an academic must be wary of acknowledging this truth or he’d have every parrot of the hypnotized current age deriding him…instead of only 90% of the current economic establishment, I understand this.
That doesn’t alter the larger reality, or make the current unbalanced world view any less invalid than it currently is.
Wisdom, not profit or work is the appropriate basis for BOTH personal AND systemic policy. It’s either Alignment and bind back with half of reality or Alignment and bind back with its totality.
What is the sound of one hand clapping? No cheating. The hand must clap by itself and without touching anything. Rationally answer how this might happen. Concentrate on it. Try and keep trying to make it happen. Maybe it will help you understand.
“Debit – Cultural Heritage Fund
Credit – Individuals and businesses”
The debit is part of your fantasy world.
I prefer the operate in the real world.
impermanence
July 9, 2012 at 7:22 am | #
In the nation-state model, it is ALWAYS the government that has the power. But, like everything else, somethings that matters not!
Agree. The govt not the banks have all the power. This is the key. We pretend otherwise though and collectively give our power away election after election but we have the power to give away.
Euro countries have given this power away to an appointed ruling elite without the power to take it back through the ballot box unless they leave the Euro. And they are or will pay a heavy price for this foolishness. So it does matter.
Steve Hummel
July 9, 2012 at 10:06 am | #
“What is the sound of one hand clapping? No cheating. The hand must clap by itself and without touching anything. Rationally answer how this might happen. Concentrate on it. Try and keep trying to make it happen. Maybe it will help you understand.”
Come back to planet earth. This nonsense is fine for a short period in the appropriate environment. But not to get lost in it.
“The debit is part of your fantasy world.”
The value and productive factor of technological progress is real alright. Your unwillingness to confront it is the only thing preventing you from seeing it.
“I prefer to operate in the real world.”
You live in the smallest of one eyed worlds. There are none so blind as those who WILL NOT see.
And you have a lot of company. You can take comfort and feel secure with that I’m sure.
“Come back to planet earth. This nonsense is fine for a short period in the appropriate environment. But not to get lost in it.”
I am not lost. I am very securely oriented mentally, emotionally, intellectually and physically I assure you. You could benefit greatly from contemplating a Zen koan. Your biggest problem is your mindset refuses or fails to understand this.
And right here in this hard headed mathematical, academic, scientistic kind of forum is where the BOTH/AND perspective is probably most needed. The supposed “real world” of economics and money systems doesn’t lack for the airy existence of abstractions. However, these are probably more intellectually compartmentalized than most modern disciplines. INTEGRATION, particularly with human wisdom, is what it needs, not more abstract skewing off into orthodoxies and authoritarianisms….and scolds of those who advocate such integration.
Philosophy, the love of wisdom, underlies theory, the exact (or inexact) operation of any present system and/or its policies, and because that is the REAL point from which any REAL change will take place…..it is needed here.
RickW said:
I think the question you raise is spot on. I wonder if there really is a painless way to wiggle out from under these huge mountains of private debt, and if there is whether to do so would enhance social cohesion or not. There is a whole new group of dissident social scientists out there, which includes its fair share of economists, which asserts that punishment of free-riding, rent seeking and other anti-social behavior is necessary to maintain social and economic hygiene.
Converting private debt to public debt doesn’t seem to offer much promise for either Ireland or Spain. I suppose it could be argued that Ireland and Spain both lack monetary sovereignty, and this explains why the transmorgification of private debt to public debt hasn’t worked, nor is working, as billed. I suppose it could also be argued that what was done in Ireland and what is now being proposed to do in Spain is to throw a life line to the creditor class and let the debtor class sink.
However, it seems to me that all this monetary manipulation, regardless of how befogging and beguiling it might be, boils down to a question of how a society’s resources are to be distributed. This question has been with us at least since the apostle Matthew articulated what the Russian mathematician and evolutionary biologist Peter Turchin calls “the Matthew Principle”:
Turchin goes on to point out that the only effective means man has ever devised to counteract the Matthew effect is some sort of redistributive scheme. (Peter Turchin, War and Peace and War) Debt jubilees, which have also been with us since biblical times, fall within this category.
These redistributive schemes historically have never occured without a great deal of political and social conflict. There are winners and losers in these schemes. To believe the political and social conflict can be avoided by billing the redistributive schemes as monetary policy instead of fiscal policy seems to be a bit Utopian.
The Matthew principle truly does describe our present system. And the only way to bring about real change is a mass social movement that engages individuals on both the self interest level and a higher call like honor, duty or the common Good.
Both monetary and fiscal policy are important, but IMO monetary policy is the more important. A Distributive monetary policy potentially offers the individual more actual freedom and also enables fiscal policy more flexibility for both expenditures and budget cuts.
Utopias? IMO we are so far into the present dystopia of economic, monetary and mental slavery that I’m not very concerned about a utopia. Giving individuals both the money to make them economically secure and the time to do what they themselves find purposeful seems like a pretty good strategy for the good and happy society. History will never end, and the need for the acculturation of individuals will likewise always be needed, but if you had the two former circumstances in place and the conscious awareness of the populace that the society intended to truly be based on the ideas, values and experiences of confidence, hope, love and a sense of grace I cannot see but that the great majority of the healthy and balanced
would be happy to sign onto such.
Title: Curious
Steve,
How did you keep your mind clear while facing such beauty?
Steve H asked the classic question, “What is the sound of one hand clapping”.
It is the same as the sound of two hands clapping. To understand why, think of the following questions.
What is the sound of one hand whispering?
What is the sound of one hand laughing?
What is the sound of one hand coughing?
What is the sound of one hand screaming?
What is the sound of one hand whistling?
The question of how one hand might make any of these sounds is a separate question, often with the answer “It can’t”. However the question of what the sound might be is quite straightforward in each case.
I have a question about the debt/deflation scenario that Steve described.
Starting from a point where business and individuals have high level of debt that they wish to pay down and where banks do not wish to extend further loans it is clear that there will be downward pressure on AD that if not addressed will lead to a debt/deflation meltdown.
However could not the government or the central bank use monetary and/or fiscal policy to increase AD and make up for the shortfall due to net debt repayments ? They could for example finance tax cuts by money printing or subsidize final sales again via money printing.
Perhaps I misunderstood or didn’t listen carefully enough but Steve talks as though debt-forgiveness is the only available solution.
I would appreciate it if someone could clarify Steve’s views on this for me.
Derek R,
Correct. Regardless, its effectiveness in exhausting the rationalistic mindset (or the overly glib one to avoid considering the reality such exhaustion elicits) makes it a very good mental tool.
Correct. VG mental tool. Rational mindset?
Really? This is not the place for considering these issues but somehow I think you have missed the point. IMHO and I may be wrong of course.
“However could not the government or the central bank use monetary and/or fiscal policy to increase AD and make up for the shortfall due to net debt repayments ? They could for example finance tax cuts by money printing or subsidize final sales again via money printing.”
Agree.
By money printing I assume you mean deficit increases financed by Govt bonds.