Our development follows a predictable pattern. People work so they can separate from their parents. They want to rent and furnish a place to live independently. The next major expense is when these children have their own children. The last concern is having enough money to retire, and leaving an inheritance for the children.
Saving and investing, like budgeting and gambling, implements a plan to quietly shift a burden onto others. In general, people are taught and follow the economic strategy that their parents experienced. Economics, as much as cooking, politics and religion, are part of conventional familial wisdom. The rich teach their kids how to stay rich through calculated risk. The poor teach their kids how to keep their job. Rich or poor, the baseline plan is to have more money than our needs. Since all income is someone else's expense, the burden has to fall somewhere, and it will continually shift onto the next generation and into our alchemistic accounting ledgers.
The struggle we experience when starting out as a young adult remains constant. People want to maximize their positive budget ratio in the hopes that when/if it starts decreasing, that they will die from old age before they run out of money. The fixation on retirement within our culture is a symptom of the lack of stewardship and commonwealth. The competitive marketplace offers no comfort for anyone, even for those who seemingly have all the advantages of age. Transactional economics indicates that our needs will change as we age, and that our experience is dependent upon the role we get to choose. There is a generic formula that explains all activity within the economy: C=M+L. Capital equals Money plus Labor.
Capital is an all-encompassing word. It is both the means of production and the result of production. It can be the services we provide to one another, a durable or consumptive product, a short-term want or a long term necessity, physical or intellectual, a man-made or natural resource. Capital is the sum of all our activity to produce and consume, and at the micro level of a single transaction. Capital requires Labor to come into existence. Because we have made the commitment to use Money, M needs to be part of the formula, too. Hence, C=M+L.
If there were no money, then Capital would equal Natural Capital plus Labor. (C=NC+L). The Native Americans understood the value of Natural Capital. They could produce and consume in rhythm with nature. Money has an innate risk, which can lead to the depletion and extinction of resources and species, and create tremendous imbalances within society. The abuse of power and privilege is a social risk for society with or without money, but money introduces a mathematical risk, where the numbers end up running the people, rather than people running the numbers.
Survival always requires a division of labor. The next choice is to use money or not. If we are to use money, then we need to be clear on how it is to be used. The youth need to be trained and become active contributors within both types of society (C=M+L or C=NC+L). However, the unemployed, underemployed, and overworked are common symptoms of a money system. Distortions within M cause distortions within L. Being young or old was not a problem under the C=NC+L system. One contributed as one could, and whatever they produced was enough. It was not necessary to hoard indiscriminately for ones entire life, or to fear retirement. There was no distinction between life and labor. In a system without money, aging and labor are symbiotic.
Before modern finance and paper money, C=M+L did not work because the M value was based on any possible number (2+2=?). Modern finance attempted to fix the M problem, which was believed to be a shortage of money, rather than an issue with valuation. With more money, we still had the original problem.
We can clearly see the challenge was in how percentages were applied. Under a barter system, the problem would have been hidden under haggled negotiations, with one side wanting more or less eggs exchanged for a single chicken. A fair trade is difficult to define because of human emotions. Trading labor, time and skill are difficult to quantify, but the root problem is still mathematical in nature.
Karl Marx focused on the creation of value, but his formula of M-C-M+ ignored the labor component, ironically. He claimed that the fundamental economic conflict was between management and labor, but actually the contradiction is between buying and selling, a dual role that we all share.
The emotional component of an economic system is critical, too. A system must be accepted spiritually. Revolution is a common habit of mankind, and it is always in response to some inequality, real or imagined. A system can only endure if it balances the abstract, the emotional and the physical. Dissonance must be purged, and the laws of mathematics respected. A sensitivity to commonwealth makes all things better, which is why the prophets have perennially warned about profits. It is as easy to do the right thing for the wrong reason as it is to do the wrong thing for the right reason. Enlightenment is doing the right thing for the right reason.
Modern finance has had some successes. It got everyone busy and changed the quality of life and the standard of living. It put an end to the belief in alchemy, as it was no longer necessary to turn lead into gold. The process of discovery shifted to a more useful purpose like science and manufacturing. We are significantly more savvy about the world around us than previous generations, but the ends cannot be used to justify the means. Discovery has been a permanent part of mankind's journey, and it has not been dependent on democracy or capitalism.
Some wisdom cannot be improved upon, and adding to it becomes a loss. As Leo Tolstoy put it: "Truth, like gold, is to be obtained not by its growth, but by washing away from it all that is not gold." In the same way, adding percentages destroys value. There is a tension between what we should add or subtract, like separating the wheat from the chaff. Improvement requires rejection. We should be rejecting percentages.
Modern finance made the problems with inflation and debt considerably worse. Valuations become the new alchemy, particularly in regard to real estate. Every nation in the world now uses deficit financing, and it is mathematically impossible to prevent the debt from compounding. We have old problems, but with much larger numbers. Computers are programmed to wrestle with the administrative overhead of inflation and debt. A tool that could make life easier is commonly used to make it worse.
More money increased the levels of corruption, war and poverty, rather than eliminating them. Democracy removed the figurehead that was easy to blame. Instead of commonwealth, we have had more division. Salesmanship and propaganda replaced wisdom. We are now discarding materials almost as fast as we produce them. We have created cumbersome procedures that are regarded as efficient. On a colossal scale, there is a waste of human and natural capital. The FIRE economy does not work.
The FIRE Economy
Money is an invented thing, and it needs a connection to something that is real. As the name implies, there is nothing more real than real estate. Man needs the Earth to survive. It is our womb and tomb. Surplus money gets pumped back into the FIRE economy, either directly or indirectly.
Next Page 1 | 2 | 3 | 4 | 5 | 6 | 7
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
1
1
1
