Fire Economy De-programming Toolkit

[strittmatter]

Re: Fire Economy De-programming Toolkit

Thanks Rajiv,

It's funny I watched the Crash Course again this week and I seem to recall Martenson talking about Bartlett in probably the most interesting and compelling part of his talk. The link to Bartlett lecture looks like gold to me but haven't gotten to it yet. Others I will follow up on. Thanks for the resources.

You've gotten some hellacious feedback here odd. It's great. Funny how the answer lies within the answer......baby steps......etc. Couple months ago I "handpicked" two local friends whom I thought would be receptive to the depth and weight of Crash Course and Bartlett. I told them, not ask, but told them to find enough quiet time no matter what, and watch both. They have since passed-it-on in the same manner.

I always liked Malcom Gladwells, "Tipping Point" http://books.google.com/books?id=MMl...um=5&ct=result
after reading the book I ordered the audio and would play it continuously while driving for about six months straight.

[oddlots]

Re: Fire Economy De-programming Toolkit

Oddlots,

I would start with The Crash Course -- follow it up with The Most IMPORTANT Video You'll Ever See , Money as Debt and then follow it up with some of Hudson's work.

I think in some ways these videos help lay the groundwork for understanding what is happening today. If you want to follow up on the basic corruption in the system today, you may want to look at the thread Wall Street: Crime of the Century. Also useful - in the same vein Ricardo's Law - The Great Tax Clawback Scam

Thanks Rajiv,

It's funny I watched the Crash Course again this week and I seem to recall Martenson talking about Bartlett in probably the most interesting and compelling part of his talk. The link to Bartlett lecture looks like gold to me but haven't gotten to it yet. Others I will follow up on. Thanks for the resources.

[oddlots]

Re: Fire Economy De-programming Toolkit

But we still have the paradox that insufficient money exists to pay interest on ''self liquidating debt'' unless the debt is interest free,

I'm not sure what you're driving at here. If you're pointing to periods of negative real interest rates this is an interesting point. But I don't think it's fatal to the argument. At the risk of acting like an economist - someone who, when confronted with a mechanism that works in the real world asks smugly, "Ahhh, but does it work in theory" - it seems to me that in theory the economy can get driven so far out of wack by its reliance on asset price bubbles that enough overcapacity is produced to almost make investment unprofitable in aggregate. (Have you seen those photos of empty malls in China.) One of the striking experiences of investing in the last few years is the realisation that there is no-where to hide (except reverse ETFs and (hold nose) treasuries. It's the other guy's leverage that gets you. Similarly - if you are pointing to negative real rates - I think its wrong to think these are somehow "market based" in anything but a procedural sense.

[raja]

Re: Fire Economy De-programming Toolkit

The public is suffering from a psychosis similar to that of a battered wife. Any decision to move toward "escape" and away from their co-dependency on this abusive system must come from the individual themselves.

For people to accept what is happening, they will have to admit that they've lost a huge chunk of their wealth (for those invested in the stock market, that is).
They don't want to do that.
Thinking that what's going on is a temporary glitch, and hoping for a return to "normalcy", is much less painful . . . .

[*T*]

Re: Fire Economy De-programming Toolkit

1. Turn off the television and bin the newspapers
2. Ask 'why?' a lot
3. Try to answer 'why?' yourself
4. Have courage

[open4]

Re: Fire Economy De-programming Toolkit

But we still have the paradox that insufficient money exists to pay interest on ''self liquidating debt'' unless the debt is interest free,

[Rajiv]

Re: Fire Economy De-programming Toolkit

Oddlots,

I would start with The Crash Course -- follow it up with The Most IMPORTANT Video You'll Ever See , Money as Debt and then follow it up with some of Hudson's work.

I think in some ways these videos help lay the groundwork for understanding what is happening today. If you want to follow up on the basic corruption in the system today, you may want to look at the thread Wall Street: Crime of the Century. Also useful - in the same vein Ricardo's Law - The Great Tax Clawback Scam

Re: Fire Economy De-programming Toolkit

----nm----

[GRG55]

Re: Fire Economy De-programming Toolkit

...You have to let it and yourself go. It is the only way that it, and you, can make the leap necessary to see things how they are vs. seeing things the way that others want you to see them. (In my personal experience, anyway.)

jtabeb: I only have one question. How many G's were you pulling?

[World Traveler]

Re: Fire Economy De-programming Toolkit

I subscribe to the AA rock-bottom theory. Alcoholics have to hit their personal version of "rock bottom" before they desire to change. They were meeting some personal need by drinking and that has to be overcome by the horror of hitting rock bottom. Until that point, they really won't listen to you and don't want change.

Above theory helped me understand why so many people were not seeing the world as it really is - I started reading iTulip in 2000 and Michael Hudson in 2003, so I haven't had any illusions for a long time. But most friends and family did, and did not want to listen me.

The U.S. citizenry is in the process of hitting rock bottom. Due to the stock market and housing crashes, they're not as rich as they thought they were, and on an asset basis an increasing number are in negative net worth. And now they are losing their jobs in great numbers.

Hope is the last to go, but even that is starting to fade. So they are angry and want change.

I believe we will see some changes, and that Wall Street and the banksters will be reined in to some extent. Because the populace no longer trusts them and because the government must respond to this anger.

The real question is how much change will we see. I believe Washington, now the big player, will to try to patch up and fix the current system so it is a little more equitable. If that doesn't work, they will just keep experimenting till they find what works.

How much and how far away from today's system they have to experiment to patch things up, will create the new world we will live in.

What will that new world look like? Question can't be answered yet, we're still too early in the game.

[vinoveri]

Re: Fire Economy De-programming Toolkit

- explain how this has led us to the present predicament where the "greater fool" theory leads logically to the state becoming the only possible bagholder for the system by taking over-priced assets out of private hands at above market prices because they hold the economy hostage

I really like this summary statement of how it came to this point (although I don't agree that it's a necessary outcome) - the taxpayer is the last greater fool making him and her the greatest fool. Remember, there are lots and lots of "lesser fools" who made out to a greater and lesser degree during the boom.

The economy being held hostage is a a misrepresentation by the fear mongering extortionists; what they mean by economy is the "current system". People have been working, creating, trading, buying and selling since time immemorial. The absence of mega-banks and wall street investment banks will not wreck economy, but will wreck the corrupt system that we've come to know as "the economy".

Once americans left the farms for urban areas to work in factories, the death knell sounded for a nation of "independent" and self-reliant individuals. The vast majority simply do not have the means or know how to survive without the system which we have built for better and worse.

Having 3 acres and cow used to be (and for now still is) an indication of poverty, but its looking pretty good right now to me.

[vanvaley1]

Re: Fire Economy De-programming Toolkit

People won't "de-program" until there is a persuasive new "program" to install in their hardware.

I agree. If ya put a blindfold on me and walk me out to the end of the diving board and tell me to jump, I'm gonna peek to make sure there's some water in the pool before I do so.

[mcgurme]

Re: Fire Economy De-programming Toolkit

Oddlots,

I think the Matrix is a perfect example here. You've got the red pill (reality), and you've got the blue pill (ignorance is bliss) . You can offer the red pill and try to force "the truth," but some people just want none of that. They want the blue pill. They choose ignorance. Because the truth is too scary.

I believe that most people know that things have changed. I see many hints of it in many conversations and actions. But I also think that they don't want to admit it, least of all to themselves. And by trying to force the red pill upon them, that just raises defensive barriers.

I have been warning people for about two years now (ever since I started asking the question, "what is happening with all that debt?" and then discovered iTulip). Only recently have some of those people come back to me and said "I wish I had listened to you". But it was a long, slow process - they had to see things play out in front of their own eyes.

The process is slow, and frustrating. But I think there is little that one can do to force warnings upon people about "the truth". People will take the red pill in their own time. It is just too easy to pretend that "reality" will go on as it did, by swallowing that blue pill.

Hey jtabeb. Granted. But I'm not thinking personally. I'm really thinking in terms of communicating to others. I'm sort of disappointed in my ability to explain effectively what I think I've learned here to my family and friends. (My sister lives in London and I think is kind of at sea with it all. I've not helped her understand it ultimately.) The example of Hudson's always trenchant commentary not seeming to get through to people - at least when paraphrased by me! - was a case in point.

So here's my rough de-programmers toolkit

- start with housing
- use the housing bubble to demonstrate the difference between self-liquidating and non-self-liquidating debt
- use this as a demonstration of how price appreciation in financial assets mimics a real economy until the debt level outstrips the real economy's ability to pay
- use this - essentially the Minsky moment - as a way to explain the crisis that "nobody saw coming"
- ask the question, how is it that, if this phony economy is unsustainable it has lasted for so long?
- return to housing and explain that price appreciation was a result of falling interest rates (cheapening money = rising asset prices)
- explain that falling interest rates were made possible by mercantalist, export-led development in places like Japan and China ("savings glut" - cough)
- explain that these policies are in turn a response to the dollar reserve system
- explain how this structural advantage generates a bias toward financialisation of the economy (exporting manufacturing jobs with the chimerical reward of rising net-worth in the west as the bait in the "bait and switch")
- explain how this advantage motivates those who benefit most from the process to warp tax and industrial policy to accelerate "financialisation" of the economy
- explain how this has led us to the present predicament where the "greater fool" theory leads logically to the state becoming the only possible bagholder for the system by taking over-priced assets out of private hands at above market prices because they hold the economy hostage

Of course I doubt anyone would sit through all of this! But I think it demonstrates one thing to me: the key move is the analysis of self-liquidating versus non-self-liquidating debt. I even wonder whether this is appreciated by most economists. (Of course, it might be wrong - anyone disagree with Hudson on this?) The fact that debt-deflation theory is still seen as fringe economics does not bode well. And if you don't appreciate this distinction then whole crisis looks a lot more mysterious and Hudson's analysis looks cranky to say the least.

[oddlots]

Re: Fire Economy De-programming Toolkit

Also having trouble communicating the problems to friends/family. Like your toolkit very much. Could you please explain self-liquidating / non-self-liquidating? Any references?

Thanks!

Basically the idea is that the only debt that is good is debt that generates a positive flow of payments from which the debt can be re-paid (as opposed to having it re-paid from asset-price appreciation.) There's a really great little essay that I return to all the time called How Debt Money Goes Broke:

http://www.financialsense.com/fsu/ed...005/1212b.html

"Debt is self-liquidating when used to generate future income, from which interest is serviced and principal repaid. Used for any other purpose, it is non-self-liquidating and results in payment obligations with no countervailing source of income."

Basically its the same point that Hudson makes about the "magic of compound interest." LaChance again:

A debt-based monetary system has a lifespan-limiting Achilles heel: as debt is created through loan origination, an obligation above and beyond this sum is also created in the form of interest. As a result, there can never be enough money to repay principal and pay interest unless debt is continually expanded. Debt-based monetary systems do not work in reverse, nor can they stand still without a liquidity buffer in the form of savings or a current account surplus.

LaChance takes things further than Hudson in saying that this is an attribute of debt-based money. I'm not sure that this is true unless you add the premise that debt-based money systems have a tendency to favour non-self-liquidating debt (i.e., debt that relies on asset price appreciation to generate the interest payments.) Minsky might be providing this in the "Financial Instability Hypothesis."

Regardless I think this helped me understand both Hudson and Minsky and to see why the current crisis is so intractable.

Of course the confusing thing is that even housing can fit the model of self-liquidating debt if the investment generates an income (rent) above the carrying costs of the property. This actually becomes the measure of how out of whack, how bubble-like a housing market is: affordability. I think this is both

1) why there is so much aversion to what Hudson is saying from various itulipers (I think in part people think that he's saying all real-estate profits are un-earned as opposed to saying how far beyond this level of valuation and an "earned" income we are. It's like EJ says, its not that financial markets and assets aren't an important part of the economy, its simply that they shouldn't be the economy. I think that's Hudson's point too.)

2) why there is so much confusion as to why things have gone so horribly wrong. In form, there is little perceivable difference to an economic agent whether the debt is paid off from perhaps hidden capital appreciation or from debt self-liquidation through an income stream. Both produce a profit and so seem, to the individual agent, to be equally viable so long as the bubble is sustainable. Since at least a whole generation has grown up in these circumstances - Soros's super bubble - it's not surprising very few perceive the categorical difference. This categorical difference has just been demonstrated on a global scale and yet there is no language to articulate the problem (except here and in like-minded company.)

[Judas]

Re: Fire Economy De-programming Toolkit

People won't "de-program" until there is a persuasive new "program" to install in their hardware.