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Today’s Contemplation: Collapse Cometh LV–Expediting ‘Collapse’: Financialisation of Our Economic System

February 4, 2024

Today’s Contemplation: Collapse Cometh LV

Expediting ‘Collapse’: Financialisation of Our Economic System

A very short contemplation that deviates from the ‘series’ I’ve been writing on several psychological mechanisms that impact our cognitions regarding overshoot and collapse. This is a brief comment (with a slight edit) on an article by The Honest Sorcerer whose writing I discovered a few months ago and have found to be quite excellent (probably because I get positive, confirmatory ‘feedback’ in the sense that their philosophy/analysis aligns with a lot of my own thinking; in fact, some commenter has actually accused me of being The Honest Sorcerer) — I highly recommend reading their work.

Apart from the inevitability of diminishing returns on investments in resource extraction (particularly energy-related ones) that you highlight brilliantly, I have to wonder about the role of some other phenomena in our complex global industrial civilisation that are leading us quickly towards ‘collapse’ (to say nothing really about our fundamental predicament of ecological overshoot).

In particular, I look at the extreme financialisation of our economies — especially via interest-bearing credit/debt expansion — that has led to pulling resources from the future that necessitates the pursuit of the perpetual growth chalice (and, as you point out, this is a pointless endeavour given the harsh reality of physical limits on a finite planet).

The financial industry (central, private, and shadow banks particularly), along with the complicity of our political class, has allowed/cheerlead the explosion of debt instruments that I would contend does not only allow us to avoid reality for some time but also contributes to price inflation as we have gargantuan amounts of ‘wealth’ chasing decreasing resources.

The real kicker I agree is our bumping into physical limits that not just dampen our pursuit of growth — that is required to keep the gargantuan Ponzi scheme that is our economy from expanding — but very likely is the pin that has burst the biggest economic bubble in our relatively short history on this planet. Ponzi schemes have a tendency to collapse when they can no longer expand and physical limits on a finite planet ensure the one we’ve created to ‘sustain’ our global economy is on its way to implosion.

Of course, overshooting limits (be they biological in nature or economic) can carry on for some time before the actual ‘pain’ is felt — the human penchant to deny reality helps here in the extreme. This is perhaps why Black Swan events are the ones that create the greatest impact on us; in our denial (and our inability to assess risk very well), we fail to prepare for possibilities that increase our anxiety — like collapse. Better to live in a fantasy world of human ingenuity and technology always being there to rescue us than accept that we are simply walking, talking apes that don’t understand complex systems and how our tinkering with them always, eventually backfires.

Is It Time for a New Direction?

April 11, 2020

Is It Time for a New Direction?

If Americans are not doing some serious soul-searching in the midst of this crisis, they need to start. Where America goes from here is not some sort of esoteric debate. What we do at this point has life or death consequences. Get it wrong, and suffer more death, suffering, and impoverishment. Get it right, and America moves toward life, health, liberty, peace, prosperity, and harmony.

What everyone needs to recognize is that they are facing a choice of systems, not a choice of people. Either stick with the same systems or switch over to new systems. That’s the choice now facing the American people.

Let’s examine four systems under which we currently live and have lived for decades.

America’s economic system

This is a centrally planned and centrally managed system run by the federal government. Its central aim is to “wage war on poverty” by forcibly taking money from everyone and redistributing it to people in need, such as the elderly and the poor. It is based on massive confiscation of income and wealth by the Internal Revenue Service, in the form of income taxes and payroll taxes.

America’s healthcare system

This too is a centrally planned and centrally managed system run by the federal government. It is based on big, powerful central planning agencies like as the Centers for Disease Control and the FDA, as well as massive socialist programs like Medicare and Medicaid, both of which are responsible for foisting a never-ending healthcare crisis onto the American people consisting of ever-increasing healthcare costs that have bankrupted people or sent them into deep debt.

America’s monetary system

…click on the above link to read the rest of the article…

Money is no Object

January 11, 2019

Money is no Object

Chances are, most of what you’ve learned about taxes and the economy is wrong. In fact, the key principles at work in our economic system are very different from what we’re taught.

If you find you’re one of those who’s been misled, it’s not your fault. A system such as ours – where eight individuals control as much wealthas half of all humanity – can only be maintained with force and deception. As the industrialist Henry Ford is said to have opined, “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

It’s commonly believed that:

• Today’s money has intrinsic value. (It doesn’t.)

• Taxes fund government spending. (They don’t.)

• Automation inevitably threatens jobs. (It doesn’t have to.)

• Federal budget deficits must saddle future generations with debt. (Not so.)

In fact, to fund needed social programs – like free national healthcare, free education, jobs for all, a reduced work week with no reduction in pay, cleaning up the environment, rebuilding infrastructure, converting the economy from fossil fuels to renewables, and more – the federal government could simply print more money. Wait a minute, you say, it can’t be as simple as that! But read on. The enormity of the deception promoted by those at the top is that funding human needs really is that simple.

One of the biggest misdirections of all time is expressed in the well-known aphorism: “Money doesn’t grow on trees.” While it’s true that wealth doesn’t grow on trees, money and wealth are not the same thing. Money itself is available in whatever quantity society needs.

…click on the above link to read the rest of the article…

Giorgos Kallis’ Degrowth | A review by Sarah Hafner

November 17, 2018

Giorgos Kallis’ Degrowth | A review by Sarah Hafner

Rethinking our economic paradigms is an urgent and fundamentally important task. Giorgos Kallis’ new book Degrowth is adding to a joint endeavour of postgrowth thinking, CUSP PhD candidate Sarah Hafner finds. It offers both, a justification as well as a vision and new imaginary for the degrowth agenda.

Rethinking the prevailing economic ‘growth’-paradigm in economics is an urgent and fundamentally important task. Equally important is it to think about ‘socially and environmental sustainable’ alternatives and the transition towards these alternative/s (see Jackson, 2017; Martínez-Alier et al., 2012).

Giorgos Kallis, Research Professor at the University Autònoma de Barcelona (UAB) and well-known for his contributions in the degrowth literature, opts exactly for this endeavour in his new comprehensive summary and thought-provoking book Degrowth. This blog provides a short review.

Economic approach / Economic system

The author himself situates his work at the interface of two approaches: the economic and the political or utopian one. This is also how this book review is structured.

The reader of the book learns quickly that in Kallis’ perspective degrowth “is not an economic theory, much less of an economic contradiction” and so, he clarifies from the beginning that his book doesn’t engage with tackling traditional growth and economic theories (see e.g. Lange, 2018 for an overview on the latter; as well as e.g. Jackson, 2017 and Jackson and Victor, 2018 for economic modelling work on this topic), and is focusing instead on the interrelations of the economic system with the political and societal/social system.

Degrowth, as developed in the book, stands in clear contrast to the prevailing capitalist system (see also Foster, 2011 or Jackson, 2017); well-being as a function (up to some level) of income and relative income (i.e. related to status and positional consumption; e.g. Kahnemann and Daeton, 2010; Easterlin, 1975), Kallis argues, is not a universal fact, but heavily related to the emphasized values in the current (capitalist) system.

…click on the above link to read the rest of the article…

The Viable Economy – and Viable Finance

May 11, 2018

The Viable Economy – and Viable Finance

via openclipart.org

It is all too clear that our economy is precarious, economically, socially and ecologically. Steady State Manchester promotes the Viable Economy¹, which means greater resilience, localisation, and balance as economic activity is treated not an end in itself, but rather as a means to deliver a sufficiently prosperous future without continual “growth”. The Viable Economy aims to bring the economic system under the control of society, building a culture that favours equality, solidarity and cooperation. Finally, a viable economy recognises the finite nature of ecological resources and embraces an ethic of stewardship by minimising imbalances to the planetary systems – including the climate, biodiversity, and nitrogen and phosphorous cycles – upon which human life depends.²

Any economy requires a sound financial system to facilitate its necessary transactions. Here we take a look at some current and recent financial innovations, asking whether they might help us move in the Viable direction.

Types of financial innovation

We will organise what follows in terms of the following categories, even though they do overlap somewhat.

Financial institutions that serve the interests of the community.

Community investment
Community-based currencies
Non-monetary community exchange schemes and credit.

We will not be discussing monetary reform, popular among some parts of the alternative economics and degrowth movements: we have critically discussed one set of proposals in this area previously.

Financial institutions: Community banking

A movement is now gathering pace to fill a gap in the UK’s banking system, that of mutual or co-operative, regionally-based banks, orientated to the local economy, and specialising in offering financial services to smaller enterprises, as well as local citizens. As Greenham and Prieg (2015) noted,

The UK lacks … a local stakeholder banking sector, particularly in certain key markets. We use the term ‘stakeholder banks’ to include any ownership or governance structure that has a broader remit than simply to maximise returns to shareholders.

…click on the above link to read the rest of the article…

Cursed to live in interesting times

April 19, 2018

Cursed to live in interesting times

In this article I connect the fall in the growth rate, with its roots in the rising costs of energy extraction and generation, to declining resilience in the economic system. These are in turn related to a more conflict ridden geo-politics. There is an increased vulnerability to shocks which will be catastrophic unless and until there is a new conventional wisdom in society about what is wrong and what has to be done about it. Things would still be hard if we had a better understanding of what is wrong but society would be in a better position to do something about the predicaments that face us all. Unfortunately those with a vested interest in current arrangements are not likely to change their world view any time soon. With their control over an extraordinarily servile mass media there is a grave obstacle to society understanding its predicament and responding appropriately. The global system is entering an extremely dangerous phase for life on the planet.

Growth and stability go together – like balance and momentum on a bike

Let me start by using the metaphor of riding a bicycle. With forward momentum it is possible to balance on a bicycle – as soon as the bike and passenger stops it becomes almost impossible. There is an analogy here for the capitalist economy. If it is growing a capitalist economy will stay economically stable. If it is not growing then, after a time, it automatically becomes unstable. Account books can be balanced, bills paid and debts serviced when individuals, households, companies and government are in surplus because incomes are rising. However a surplus requires growth. In general terms in a contracting system the incomes are more likely to be inadequate to cover outgoings. Some of the costs cannot be paid when revenues do not cover those costs.

…click on the above link to read the rest of the article…

Investment as a Commitment. Tim Jackson at the Summer School of the Club of Rome in Florence

September 17, 2017

Investment as a Commitment. Tim Jackson at the Summer School of the Club of Rome in Florence

Tim Jackson speaks at the 1st Summer School of the Club of Rome in Florence, Sep, 2017 (image courtesy Daniel Reinhardt)

There have been several interesting talks at the Summer School on Sustainability in Florence, but the one by Tim Jackson has been among the most focused and relevant ones. Jackson is the author of the book “Prosperity Without Growth” (2009) and he goes straight to the core of the problem, which lies in our financial system. We are geared for growth, everything in the system pushes for growth, all the financial structures are rewarding growth. And, as Jay Forrester was perhaps the first to note, economic growth is what’ leading us straight to the Seneca Cliff.

So, we need to re-examine the basics of our economic system and propose ways to defuse the ticking bomb that we ourselves have created. There is much to be discussed about Jackson’s proposals, but one that I noted, in particular, was the concept of “investment as a commitment.” I asked Jackson how this is supposed to be different than the current way of investing, and his answer was that, today, investors tend to see the market as a “gamble” in which they may gain or lose; but their main motivation is for big, short-term gains. Clearly, this is not the way that will take us to a saner and safer world.

The key point of the whole thing, as I see the situation, is in the financial system. If we found a way to divest from fossil fuels and to move financial resources to the transition in the form of renewable energy and the related infrastructure, then there is still hope to avoid the Seneca Cliff, at least in its most brutal form.

…click on the above link to read the rest of the article…

A Fatal Flaw in the System

April 11, 2016

A Fatal Flaw in the System

The Hard Rocks of Real Life

BALTIMORE – The Dow dropped 174 points on Thursday, the biggest fall in six weeks. Not the end of the world. Maybe not even the end of this year’s bounce-back bull run. As you’ll recall, stocks sold off at the beginning of the year, too. Then, investors were buoyed up after central banks got to work – jimmying the credit market on their behalf.

5o1rhrdw59wk Photo credit: Andrei Shumskiy

The Fed swore off any further “normalization” until later in the year. Central banks in Europe, Japan, and China all took bolder and more reckless action… with the Bank of Japan following some European banks by going into “full retard” mode with negative interest rates.

DJIA, 10-minute candles; the red rectangle bounds Thursday’s market action. A rebound attempt on Friday failed to go very far – click to enlarge.

Now, according to the narrative popular in the financial press, investors are beginning to worry that central banks are not very effective after all. As to that last point, they’re right; central banks can only do so much. They made the situation what it is. Now, they can only make it worse. How? By adding more of what made it bad in the first place. All they can do is add more debt to a world already drowning in it.

If anyone knows of a different way this story might unfold, we’d like to hear it. But for all the puzzling and preposterous guesswork and wondering, it is still the same tale: Debt builds up; debtors can’t pay; they go broke. It happens all the time.

In a healthy economy – with real money and honest banking – people make mistakes. They go broke. The bankruptcies are absorbed and disposed of in good order. Assets go on the block. Hungry investors and entrepreneurs snap them up… and put them to good use.

…click on the above link to read the rest of the article…

Fractional-Reserve Banking is Pure Fraud, Part I – Jeff Nielson

November 24, 2015

Fractional-Reserve Banking is Pure Fraud, Part I

This is a commentary which should never have needed to be written. What is euphemistically called “fractional-reserve banking” is obvious fraud, and obvious crime. By its very definition; it transforms the banking sector of an economy into a leveraged Ponzi-scheme, and as with all Ponzi-schemes, there is no possible “happy ending” here.

Mathematically-based principles are often illustrated best through use of an extreme, numerical example. We have no need to construct any hypothetical extremes, however, when we already have real-life insanity, in our current monetary/regulatory framework.

Here it is important to note that in order to conceal the fraud, crime, and insanity of our present system to the greatest degree possible, the bankers hide their dirty deeds within their own convoluted jargon. Thus presenting “fractional-reserve banking” to readers requires some brief investment of time in definition of terms, starting with this term, itself.

Fractional-reserve banking evolved literally based upon the temptation of all bankers to perpetrate fraud. Empirically it has always been observed, down through the centuries, that under normal circumstances, only a tiny percentage of depositors will come to claim their cash/wealth at any one time. Thus the temptation is for bankers to “lend” more funds than they actually possess, i.e. they are “lending” what does not even exist: “fractional-reserve banking” – the ultimate euphemism of banking and fraud.

It goes without saying that anyone or any entity which endeavours to “lend” something which does not exist is perpetrating fraud. But before examining this inherent fraud more closely, it is important to back-up, and look at the Law. Note that even when banks “lend” the money which they actually do hold on deposit (as trustees for the depositors) that this is already wholly/totally illegal. It is the crime known as “conversion”.

…click on the above link to read the rest of the article…

Extinction, the New Environmentalism and the Cancer in the Wilderness

October 31, 2015

Extinction, the New Environmentalism and the Cancer in the Wilderness

The word is in from the wildlife biologists. Say goodbye in North America to the gray wolf, the cougar, the grizzly bear. They are destined for extinction sometime in the next 40 years. Say goodbye to the Red wolf and the Mexican wolf and the Florida panther. Gone the jaguar, the ocelot, the wood bison, the buffalo, the California condor, the North Atlantic right whale, the Stellar sea lion, the hammerhead shark, the leatherback sea turtle. That’s just North America. Worldwide, the largest and most charismatic animals, the last of the megafauna, our most ecologically important predators and big ungulates, the wildest wild things, will be the first to go in the anthropogenic extinction event of the Holocene Era. The tiger and leopard and the elephant and lion in Africa and Asia. The primates, the great apes, our wild cousins. The polar bears in the Arctic Sea. The shark and killer whale in every ocean. “Extinction is now proceeding thousands of times faster than the production of new species,” biologist E.O. Wilson writes. Between 30 and 50 percent of all known species are expected to go extinct by 2050, if current trends hold. There are five other mass extinction events in the geologic record, stretching back 500 million years. But none were the result of a single species’ overreach.

I’ve found conversation with my biologist sources to be terribly dispiriting. The conversation goes like this: Homo sapiens are out of control, a bacteria boiling in the petri dish; the more of us, demanding more resources, means less space for every other life form; the solution is less of us, consuming fewer resources, but that isn’t happening. It can’t happen.

…click on the above link to read the rest of the article…

We need a new economic system

May 27, 2015

We need a new economic system

As the 2016 election begins to come into focus, economic populism appears to be the order of the day. The Center for American Progress, the Campaign for America’s Future and National People’s Action,Hillary Clinton, Bernie Sanders, Bill de Blasio and the Roosevelt Institute have all in the last few months released programmatic calls to action highlighting the need to tackle economic inequality. This is, of course, laudable — it’s not every day that virtually the entire spectrum of Democratic Party insiders and outsiders concurs that our increasingly unequal distribution of income and wealth is a central problem to be addressed. But are calls for reform and redistribution enough?

I am opposed to very little of what is being presented in these various platforms and proposals. They are, for the most part, perfectly sensible ideas — such as financial transaction taxes, increases to the minimum wage and using government funds to build and repair infrastructure such as roads and railways — that would be, for the most part, noncontroversial if we were living in an era of sensible politics. But the fundamental fact is that we are not.

Instead, we are living in the era in which the corporate institutions at the core of our politics, along with the radical financial inequalities our system now produces, have undermined the power relationships that once allowed for traditional reforms. The labor union — the fundamental institutional power base for tempering the excesses of a corporate economy — is regrettably in terminal decline, down to 6.6 percent of workers in the private sector. Long-term structural shifts in the political economy have rendered the program of regulation and reform more or less inoperative.

…click on the above link to read the rest of the article…

The Great Oil Game: Resource Crisis in Russia?

May 6, 2015

The Great Oil Game: Resource Crisis in Russia?

Weekly pageviews of “Resource Crisis.” My blog seems to be having a remarkable success in Russia, but do the Russians understand the problem of resource depletion?

Complex structures, such as states and empires, are always prone to collapse and they usually give little or no previous warnings. The collapse of the Soviet Union, indeed, had not been predicted by anyone and it came completely unexpected. In the present crisis, instead, Western analysts seem to have fallen in the opposite mistake, predicting the rapid demise of the Russian Federation. But that didn’t happen. On the contrary, the Russian economic system showed a remarkable resilience and it strongly rebounded after a bad moment, last year. (image below from Bloomberg).

So, predicting collapses is always very difficult in a world’s situation that looks more and more like a Russian Roulette (an appropriate name in this context), but played with nuclear weapons. It might well be that some states which at present look very solid could be the ones to experience a sudden and unexpected Soviet-style implosion (let me not say which ones these states could be).

Let’s go more in depth in this matter. The collapse of Russia was expected in the West mainly as the result of the recent crash of the world’s oil market. That repeated the situation of the late 1980s, when the old USSR was bankrupted by a similar effect: a rapid fall of oil prices which strongly reduced the revenues from oil exports.

…click on the above link to read the rest of the article…

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Today’s Contemplation: Collapse Cometh LV

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