Monday, December 05, 2016

Our "Gaslight" Financial System

Perhaps the ultimate gaslighting in human history is our current fiat money creation system that benefits the few at the expense of the many.
The terms gaslight and gaslighting are entering the political media lexicon, with partisans of both parties accusing the other side's candidate of gaslighting in the presidential election. The terms refers to the 1944 film Gaslight in which Charles Boyer subtly manipulates the environment to cause Ingrid Bergman to question her memory and sanity.
Generally speaking, gaslighting has been used in the context of personal relationships to describe a manipulative person's attempts to undermine and control their romantic partner.
As I understand it, gaslighting refers to a specific set of manipulative techniques:
1. Questioning, belittling, discounting and undermining our experience of places and events.
2. Overwriting our memory of events with false memories, again by undermining, questioning and belittling our memories.
3. Discrediting and marginalizing our definitions of self and identity, in favor of the manipulator's definition of our identity and place in the world.
4. Using authority and "experts" to disqualify and discredit dissenting views.
5. Denigrate and deny our lived experience and memory by repeating the institutionalized authority-approved narrative of "what actually happened."
6. Disorient, discredit and destroy dissent with a torrent of false statistics, false narratives, false accusations and false claims of our errors.
Correspondent C.D. suggests gaslighting can be applied to the entire financial system. Here are his comments in reference to last week's post Beyond Income Inequality:
Do Wallerstein or Picketty (or any mainstream economists) ever talk about larceny via extortion, fraud, artifice, forgery, false pretense, and conversion, among other types of theft? Do they talk about interest-bearing, debt-based money? If they don't, I think they're missing two gargantuan pieces of the puzzle.
Nations have lost trillions (in today's money) from theft/larceny since the 15th century and have paid many more trillions in interest.....often to the same criminals who stole these vast amounts of money. Economists that don't look at these things are like a business owner who just looks at his costs and sales without looking at the employees who are fudging their time cards and stealing money from the till and then wonders why he isn't making any profit.
It seems to me that only crimes committed on a small and moderate scale are punished; the large crimes are rarely punished. Indeed, people venerate various systems that systematically plunder whole nations and give it a name that ends in "ism" and then the big players in the system are protected and even lionized.
We have a fundamental problem with dishonest weights and measures.... in this case, money/currency. What would happen if someone was using false scales to buy and sell grains? They would go to prison (hopefully). What happens when someone uses pieces of paper that are used to measure ones work/time/effort (money/currency) where there is built in scarcity and an inexorable decline in the value of the that paper due to its debt-based, interest bearing nature? Well, they get to live high on the hog and hire people at banks, government, and universities, who then convince everyone that this paper is good and provides security and prosperity.
The convincing of people to accept this system is a form of gaslighting done by psychopaths. We have been gaslighted so much in our lives, most people can't imagine what life would be without it.
We are bounced from one extreme to another where the "isms" fight over who will steal from whom and how much, all the while, the thieves at the top (who often develop the theories that become "isms") get more and more at the expense of the rest of us. If you have not done so, I urge you to research the concept of gaslighting. I think it will help you in further understanding why things are the way that they are.
Thank you, C.D., for an eye-opening application of gaslighting to our entire money/financial system. I have addressed the role of centrally created and distributed money many times, for example If We Don't Change the Way Money Is Created and Distributed, We Change Nothing (December 24, 2015).
Exposing the racket at the very heart of our money is one key topic in my bookA Radically Beneficial World: Automation, Technology & Creating Jobs for All.
Here's the reality: our currency (money) is created at the top of the wealth/ power apex, by central and private banks. This money is borrowed into existence, so somebody (either taxpayers or borrowers) must pay interest on the new money.
None of this money is created at the bottom of the pyramid where the 99.9% live. You want some new money? You'll have to borrow it and pay interest.
Our entire money system is a "trickle down" racket: the banks and financiers can borrow unlimited sums into existence, and some of this "trickles down" to the 99.9% via mortgages, auto loans, etc., or perhaps a few service jobs if a corporation that's close to the money spigot expands operations in the U.S.
But as I have explained many times, most recently in Why Our Status Quo Failed and Is Beyond Reform, those close to the new money spigot can outbid everyone else for income-producing assets, and scoop up the national income without hiring even one more worker.
The "crazy" alternative to the money only benefits the .1% racket I propose is to create money at the bottom of the pyramid when someone performs useful work in their community. In my view, it makes sense to create new money when useful labor is performed, not when a bank or financier needs nearly-free money to buy assets or issue credit cards carrying 23% annual interest rates.
Labor-backed crypto-currency sounds "crazy" until the whole money-only-serves-the-top-.1% system collapses under its own weight. When all the "money" that's been created to serve the central and private banks vanishes in a financial supernova--a possibility considered "impossible" by the mainstream, along with rising interest rates and inflation--then what is "crazy" and "impossible" change rather radically: the "impossible" becomes not just possible but inevitable, and the "crazy" suddenly makes perfect sense.
Perhaps the ultimate gaslighting in human history is our current fiat money creation system that benefits the few at the expense of the many. We've been manipulated into believing this is the only possible monetary system and the only possible financial system.
Not true. Wake up, people. There are other ways to create and distribute new money, and other ways to arrange a financial system to serve the many rather than the few.
The status quo apologists will of course angrily deny this reality (see above graphic). Their own place at the trough requires them to defend the indefensible. Their denial and anger are indicators of gaslighting and their own sad acceptance of servitude.

For what it's worth, my copy editor reckons Inequality and the Collapse of Privilege($3.95 Kindle ebook, $8.95 print edition) is my best book. It is, if nothing else, highly relevant to today's economic/social schisms.


Join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

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Sunday, December 04, 2016

A Disintegrative Winter: The Debt and Anti-Status Quo Super-Cycle Has Turned

With this list of manifestations in hand, we can practically write the headlines for 2017-2025 in advance.
How would you describe the social mood of the nation and world? Would anti-Establishment, anti-status quo, and anti-globalization be a good start? How about choking on fast-rising debt? Would stagnant growth, stagnant wages be a fair description? Or how about rising wealth/income inequality? Wouldn't rising disunity and political polarization be accurate?
These are all characteristics of the long-wave social-economic cycle that is entering the disintegrative (winter) phase. Souring social mood, loss of purchasing power, stagnating wages, rising inequality, devaluing currencies, rising debt, political polarization and elite disunity are all manifestations of this phase.
I have covered the cyclical nature of human social orders many times, most recently in We've Entered an Era of Rising Instability and Uncertainty (July 18, 2016)
Historians David Hackett Fischer (The Great Wave: Price Revolutions and the Rhythm of History) and Peter Turchin (Ages of Discord) have assembled data and models for these long-term cycles.
Based on the history painstakingly assembled by Fischer and Turchin we can anticipate:
-- Ever higher prices for what I call the FEW Essentials: food, energy and water.
-- Ever larger government deficits which end in bankruptcy/repudiation of debts/new issue of currency.
-- Rising property/violent crime and illegitimacy.
-- Rising interest rates (until very recently this was considered "impossible").
-- Rising income inequality in favor of capital over labor.
-- Continued debasement of the currency.
-- Rising volatility of prices.
-- Rising political unrest and turmoil (see "Revolution").
With this list of manifestations in hand, we can practically write the headlines for 2017-2025 in advance.
Gordon Long and discuss these overlapping/ reinforcing social, political and economic cycles in a new video Cycles: Anti-Globalization and the Debt Super-Cycle. Here is a chart from the program that displays the rise of political polarization:
As for rising wealth/income inequality, the apex controls the money and thus the power:
Gordon and I also discuss the many different cyclical analyses that are now overlapping. Cyclical analyses based on demographics, socionomics, debt, wages and prices are all issuing the same conclusion: we're in the Disintegrative Winter phase of a multi-decade socio-economic cycle.
Here's our discussion of Cycles: Anti-Globalization and the Debt Super Cycle (30 minutes):
Gordon's abstract of the program: Cycles and the End of the Debt Super-Cycle

For what it's worth, my copy editor reckons Inequality and the Collapse of Privilege($3.95 Kindle ebook, $8.95 print edition) is my best book. It is, if nothing else, highly relevant to today's economic/social schisms.


Join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
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Saturday, December 03, 2016

A Moment of Gratitude for My Readers and Supporters

Ultimately, this site is about solutions.
I want to take a moment to thank every reader who took the time to email me after spotting oftwominds.com on the Washington Post's absurd "list of Russian propaganda sites." You all got the joke, so to speak, and so we enjoyed the laughably bogus list together.
I also want to thank everyone who chose this moment to become a patron of my work via patreon.com or PayPal. Dozens of you backed up your support with cash--moving your commitment to independent journalism up a very big notch.
Every $1/month pledge means a lot to me. Money is tight for most people nowadays, and $1 or $5 per month means there is a bit less disposable cash at month's end. I am acutely aware that your commitment is not cost-free.
While I understand the necessity and appeal of year-end fundraising by many of my fellow bloggers, I don't have any formal fundraising effort or drive. The site is free, and patrons/ contributors of $5/month or more receive a weekly Musings Report filled with goodies reserved for the Inner Circle of oftwominds supporters.
This is my way of thanking the financial supporters who keep the site going.
I also appreciate everyone who takes a moment to place their amazon.com order through this site. The modest commission paid to this site doesn't add a penny to your cost. To place your order to the benefit of oftwominds.com, just use the amazon.com search box in the right sidebar.
Max Keiser and Stacy Herbert asked for my reaction to being on the WaPo propaganda list; here is my commentary (also included in Max and Stacy's 1000th episode Keiser Report #1000: The Memewar Has Started.)
Ultimately, this site is about solutions. I have written numerous books outlining solutions for the individual/household and for the society/economy as a whole. Please take a quick glance at my eleven books on our systemic problems and the many potential solutions.
If you are unfamiliar with my work here on oftwominds.com, I suggest reviewing my voluminous archives on the shrinking middle class. Here is a small selection of recent essays on the structural/ systemic decline of the middle class.
Neofeudalism 101: Strip-Mining the Upper Middle Class (April 8, 2015)

For what it's worth, my copy editor reckons Inequality and the Collapse of Privilege($3.95 Kindle ebook, $8.95 print edition) is my best book. It is, if nothing else, highly relevant to today's economic/social schisms.


Join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Chris T. ($10/month), for your outrageously generous pledge to this site -- I am greatly honored by your steadfast
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Friday, December 02, 2016

Beyond Income Inequality

Can the current iteration of global capitalism be reformed, or is it poised to be replaced by some other mode of production?
Judging by the mainstream media, the most pressing problems facing capitalism are 1) income inequality, the basis of Thomas Piketty’s bestseller Capital in the Twenty First Century, and 2) the failure of laissez-faire markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book and 2) the failure of laissez-faire markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book The Failure of Laissez Faire Capitalism.
These critiques (and many similar diagnoses) reach a widely shared conclusion: capitalism must be reformed to save it from itself.
The proposed reforms align with each analyst’s basic ideological bent. Piketty’s solution to rising wealth inequality is the ultimate in statist centralization: a global wealth tax. Roberts and others recommend reforming capitalism to embody social purpose and recognize environmental limits. Exactly how this economic reformation should be implemented is a question that sparks debates across the ideological spectrum, but the idea that capitalism can be reformed is generally accepted by left, right and libertarian alike.
Socio-economist Immanuel Wallerstein asks a larger question: can the current iteration of global capitalism be reformed, or is it poised to be replaced by some other mode of production? Wallerstein and four colleagues explored this question in Does Capitalism Have a Future? Wallerstein is known as a proponent of world systems, the notion that each dominant economic-political arrangement eventually reaches its limits and is replaced by a new globally hegemonic system. Wallerstein draws his basic definition of the current dominant system—let’s call it Global Capitalism 1.0—from his mentor, historian Fernand Braudel, who meticulously traced modern capitalism back to its developmental roots in the 15th century in an influential three-volume history, Civilization & Capitalism, 15th to 18th Centuries.
From this perspective, there is a teleological path to global capitalism’s expansion beneath the market’s ceaseless cycle of boom-and-bust. This model of ever-larger systems of global dominance has been further developed by Braudel disciples such as Giovanni Arrighi ( The Long Twentieth Century: Money, Power and the Origins of Our Times).
It is this latest and most expansive iteration of capitalism--one dominated by the mobility of global capital, state enforcement of privately owned rentier/cartel arrangements and the primacy of financial capital over industrial capital--that Wallerstein and his collaborators view as endangered.
Amidst the conventional chatter of social spending countering markets gone wild--as if the only thing restraining rampant capitalism is the state--Wallerstein clearly identifies the state's role as enforcer of private cartels. There is not just a function of regulatory capture by monied elites: if the state fails to maintain monopolistic cartels, profit margins plummet and capital is unable to maintain its spending on investment and labor. Simply put, the economy tanks as profits, investment and growth all stagnate.
This is why Wallerstein characterizes this iteration of capitalism as "a particular historical configuration of markets and state structures where private economic gain by almost any means is the paramount goal and measure of success."
Even those who reject this left-leaning description of free markets and the self-interested pursuit of profit can agree that the prime directive of capitalism is the accumulation of capital: enterprises that fail to accumulate capital lose capital and eventually go bust. As economist Joseph Schumpeter recognized, capitalism is not a steady-state system but one constantly reworked by “creative destruction,” the process of the less efficient being replaced by the more efficient.
If capital can no longer accumulate capital, this iteration of capitalism runs out of oxygen and creative destruction will usher in a new arrangement. (Wallerstein’s chapter in the book is titled why capitalists may no longer find capitalism rewarding.)
Though the status quo believes that amending the political-financial rules is all that’s needed to maintain the current centralized arrangement, Wallerstein believes that following the old rules will actually intensify the coming structural crisis. Piketty’s analysis offers a ripe example of the belief that the old rules are sufficient. To Piketty, capital’s ability to expand at faster rates than the underlying economy (as measured by GDP) has lashed the tiller on a course to rising inequality, and the only way to ameliorate the resulting social instability is to redistribute the wealth via state-mandated taxes.
Wallerstein and his collaborators see capitalism’s ability to accumulate capital as anything but fixed; in their view, capitalism is threatened by profound changes in wages and labor and the global environment. Economist Randall Collins fingers the displacement of human labor by information technology as the trigger for capitalism’s terminal crisis. Collins sees this inevitable trend as independent of economic and political theory and boom-bust cycles: “The structural crisis of technological displacement transcends cycles and financial bubbles.”
Collins acknowledges that the processes of financialization--roughly speaking, the commodification of all assets into tradable securities that are pyramided via leverage and exotic derivatives—has helped hollow out the middle class, but technology’s displacement of labor is the coup de grace that could eliminate two-thirds of the educated middle class. (His back-of-the-envelope calculation is based on the dominance of the service sector in developed economies.)
Collins rejects the commonly held optimism that new technologies always create more jobs than they destroy: “There is no intrinsic end to this process of replacing human labor with computers and other machines.”
Historical sociologist Michael Mann sees ecological crisis as the over-riding threat to global capitalism. This entirely predictable crisis has an unpredictable resolution because it derives from our era’s dominant institutions of capital, the sovereign state and consumerism all having “gone global.”
The other systemic threat is what Mann characterizes as “the treadmill of the nation-state’s obsession with growth.” The environmental degradation resulting from increasing consumption is jeopardizing the global system’s ability to stay on this GDP-focused treadmill. One need only glance at photos of choking smog in Beijing and New Delhi to grasp Mann’s point.
If the arrangement between these institutions changes radically enough, Mann envisions the possibility that the structural crisis “will stabilize into an enduringly low-growth capitalism,” a possibility with historical precedents such as 18th century Britain.
But this rosy outcome ignores the book’s key thesis that the foundations of the current system have no future because they’ve reached intrinsic limits: the returns on following the old rules are increasingly marginal. Financialization has run of out of assets to leverage into financial bubbles (what’s left to leverage--bat guano?), the middle class that has paid for its ever-expanding consumption with rising wages is in structural decline due to the displacement of human labor by software, and the state’s ability to manage structural crises while protecting global cartel profits is being undermined (in Wallerstein’s analysis) by the ever-rising costs of providing healthcare and income security and paying the external costs of environmental damage.
The old rules--inflating another credit bubble to bail out an insolvent financial sector, increasing taxes on the remaining employed, further centralizing authority and control--are no longer working; as Wallerstein observed, these are actively intensifying the structural crisis.
Wallerstein and his colleagues did not address another possible future, one that does more with less, an economic philosophy that rejects GDP as the arbiter of nation-state success and embraces the principles of the Degrowth movement (décroissance in French) that is gaining adherents in the developed world. In Japan, proponents speak of the de-Generation that is pursing Degrowth, de-materialism and de-ownership: advancement and success arise not from consuming more resources and capital, but by using fewer resources and less capital in pursuit of a more fulfilling, lower-impact lifestyle.
Piketty and Wallerstein alike overlook Nassim Taleb’s diagnosis of what’s wrong with the current state-capitalism. In Taleb’s view, wealth inequality arises not from capital’s expansion but from the state’s transfer of risk from private speculation to the public sector. As the financial crisis of 2008 illustrated, the state protects financial capital from losses and inflates asset bubbles that provide outsized returns for those with access to cheap central-bank credit.
Wealth inequality is generated not by intrinsic features of capitalism--the most important of which, in Taleb’s view, is that every participant has skin in the game, i.e. is exposed to the losses that go hand in hand with risk—but from specific state/central bank policies that reward leveraged speculation and enable financiers to play with no skin in the game.
(In Taleb’s trenchant phrase, financial inequalities are “one crash away from reallocation.”)
This suggests that one way to address both wealth inequality and speculative excesses is to rewrite the rules so that participants must have skin in the game. (Whether this is possible in an era of regulatory capture by the very financiers the rules aim to corral is an open question.)
Wallerstein and Piketty also overlook the transformative power of the factors Arrighi identifies as the key drivers of capital accumulation: attracting entrepreneurs and mobile capital.
What could replace the current iteration of global state-capitalism? If we assemble these three potentially transformative dynamics--Degrowth, the recoupling of risk and loss and entrepreneurial mobile capital--we discern a new and potentially productive teleological arc to global capitalism, one that moves from a capitalism based on hyper-centralization and obsession with rising consumption to a new capitalism focused on more efficient use of resources and capital via decentralization and localized innovation.
Rather than ask if such a “think globally, profit locally” alternative is possible, we might ponder the sobering conclusion that that current system of Global Capitalism 1.0 will be replaced with some new arrangement one way or another, and we might as well choose the more efficient, adaptive and sustainable decentralized model rather than go down with the statist-steered "the only solution is increased centralization" ship.
This essay was first published in The American Conservative magazine.

For what it's worth, my copy editor reckons Inequality and the Collapse of Privilege($3.95 Kindle ebook, $8.95 print edition) is my best book. It is, if nothing else, highly relevant to today's economic/social schisms.


Join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
 
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