NeedToUseYou
Posts: 2297
Joined: 12/24/2005
From: None of your business
Status: offline
|
No economist, but I'll try to give it a shot on the worldwide level.
In nearly every country, on every continent, back to before your great great grandparents were born, economic thought and planning has been based on the assumption of perpetual growth. For centuries this was a fine and justified assumption, as populations grew, there was new space to inhabit, new lands found, new everything was constant. The assumption of growth was inevitable for the span of anyones live in the 1800's.
The models reflect that, a model in a constant mode of growth on the average, can function differently than one that is more flat.
I believe we are ending that time at least until some other technological enabler emerges that allows for more growth, or rather growth at a higher rate.
Interest for one is of primary usefulness in an effectively perpetual growing system, as the new resources found will overcome the cost of the interest. A stable relatively non growth system, has no room on the whole for interest based economic thinking, there are not enough new things to value in the interest and sustain itself.
What we've seen evolve over the decades are more and more forms of investment, that offer new man made forms of growth, but nothing behind them, we've also seen an increase in the efficient applications of keeping current money churning at the greatest degree possible. Your checking account money is probably invested in something or loaned on the average somewhere in something. Margin accounts were a way to increase the cycle time of the backing money and keep it working, it may allow you more power but it always deflates to the actual real money in your account or worse, thus it is just a way of time shifting the use of that real money in an highly accelerated manner. Derivatives, were a way of creating another resource to treat as new resources, to treat as real investments but they aren't, they are human imagination.
What does all that mean, and why is it the problem, we simply don't have enough real things to invest in, that will offer a rate of return required to drive the growth of the system, therefore we create fake imaginative ways to fake growth, to decrease the cycle time for money turnover, to highly accelerate the activity. The problem with this is the simple fact that at the end of the day the non-collapsable value is in things, every other financial instrument can be traced back to a leveraging of some real item just like a margin account collapses to the value of the deposit. Whereas in the past most investment was based on real things, or only one derived layer above, real growth didn't require maintaining very rapid money turnover and near universal investment of all money at all times as new resources, population growth, and therefore items would be needed. However, the rate of growth required to feed the interest levels used to fund new enterprises requires a fair rate of constant growth. Birth rates are becoming more flat in this country and many other, meaning less consumers (interest paying), versus the more set (older general moneyed). This leads to problems like we see in social security, or rather in that case less taxpayers in proportion to retirees. The growth in more risky investments, is a result of chasing an ever more elusive rate of return required to fuel the interest, and maintain the growth.
It's all a big imaginative trick, that we've been growing much at all. The proportional growth in derived investments is a reflection of the degraded rate of return on more real world enterprises.
It is no error that every major religion that I've heard interest mentioned, say that it is an evil practice. It does lead to an inevitable point, a point to were it just stops and collapses. How many turtles can you stack before they fall over that is what we are experiencing, how many times can you create new value simply by repackaging and enhancing previous repackaged value. You can't do it forever, thus collapse is as probable eventually as 1 equals 1 in any system that requires growth to function.
The problem is the requirement of constant growth, in a world that is not getting bigger, and people only need so much stuff, and there are only so many resources to service them. Thus we can't ultimately continue under a system where most new money comes with an attached interest.
edited to add, all value is ultimately derived from people, and those things they require. Less growth in people ultimately leads to less economic growth, of course those people also require an amount of finite resources to enable their consumer habits. Once you hit a wall with either, the current system stops.
< Message edited by NeedToUseYou -- 11/1/2008 7:15:12 PM >
|
So Is There an Economist In The House? - 
Profile
.gif){kind=avatar}
New Messages
No New Messages
Hot Topic w/ New Messages
Hot Topic w/o New Messages
Locked w/ New Messages
Locked w/o New Messages
Post New Thread