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The Fantasy of Central Bank “Growth” Is Finally Imploding

The Fantasy of Central Bank “Growth” Is Finally Imploding

Having destroyed discipline, central banks have no way out of the corner they’ve painted us into.

It was such a wonderful fantasy: just give a handful of bankers, financiers and corporations trillions of dollars at near-zero rates of interest, and this flood of credit and cash into the apex of the wealth-power pyramid would magically generate a new round of investments in productivity-improving infrastructure and equipment, which would trickle down to the masses in the form of higher wages, enabling the masses to borrow and spend more on consumption, powering the Nirvana of modern economics: a self-sustaining, self-reinforcing expansion of growth.

But alas, there is no self-sustaining, self-reinforcing expansion of growth; there are only massive, increasingly fragile asset bubbles, stagnant wages and a New Gilded Age as the handful of bankers, financiers and corporations that were handed unlimited nearly free money enriched themselves at the expense of everyone else.

Central banks’ near-zero interest rates and trillions in new credit destroyed discipline and price discovery, the bedrock of any economy, capitalist or socialist.

When credit is nearly free to borrow in unlimited quantities, there’s no need for discipline, and so a year of university costs $50,000 instead of $10,000, houses that should cost $200,000 now cost $1 million and a bridge that should have cost $100 million costs $500 million. Nobody can afford anything any more because the answer in the era of central bank “growth” is: just borrow more, it won’t cost you much because interest rates are so low.

And with capital (i.e. saved earnings) getting essentially zero yield thanks to central bank ZIRP and NIRP (zero or negative interest rate policies), then all the credit has poured into speculative assets, inflating unprecedented asset bubbles that will destroy much of the financial system when they finally pop, as all asset bubbles eventually do.

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

Mid-Sized Meditations #11: Thoughts on Localism and Resilience

Mid-Sized Meditations #11: Thoughts on Localism and Resilience

[Cross-posted to Front Porch Republic]
Yesterday, I had the opportunity to speak to the “Resilience Group,” an informal gathering of environmentalists, activists, and interested others that meet regularly at the home of Wes Jackson, in Salina, KS. My short remarks–which were mostly inspired by the material in this post–gave rise to a robust and enlightening discussion, or so I thought. Here are a few take-aways, for whatever they’re worth.

1) The growth-centric paradigm which dominates so much economic activity around the world isn’t really the result of politically powerful actors; it’s the consequence of a worldview. Thus fulminating against the defenders of–in some ways undeniably beneficial, but also socially and culturally harmful, not to mention ecologically unsustainable–globalism, whether their motivations are libertarian like the Koch brothers (whose influence is omnipresent in Kansas) or statist like the Davos bunch(whose influence around here doesn’t really exist beyond the paranoid fears of a few black-helicopter-watching Tea Party types in our legislature), is to mistake symptoms for the disease. That’s not to say particular actions by particular actors shouldn’t be organized against; they should be. But we need to recognize that, as important as, say, an overturning of Citizens United might be to getting the message for local and economic democracy out there, simply accomplishing that, without a paradigm-changing language to explain why it’s important to do so, probably won’t change much.

2) The language that defenders of steady-state economies and local democracy need probably won’t be political in nature, and probably won’t emerge from the major cities or the state-based political entities of the world, despite those locations and polities being the site of so many productive nodes of intellectual input.

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

Olduvai IV: Courage
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Olduvai II: Exodus
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