The economics priesthood assumes that humanity lives in an environment of economic scarcity so that there is unlimited "demand" for additional goods production. That may be true. But what there visibly isn't, is demand by people who have unlimited income money to buy the goods they would like to have. Importers have to "earn" money, by producing and selling stuff to other players. Importers are not allowed to simply create their own money to buy stuff from exporters (unless the importer is the USA who enjoys the privilege of "issuing" modern gold, the international payments currency, the mighty US$).
Real demand is simply people wanting stuff. Effective demand is people who have money to buy the stuff they want. "The market" does not respond to real demand. The market responds to effective demand. But producers/exporters do not accept the arithmetically limited ability of consumers/importers to pay for their stuff. Producers believe in the unlimited virtue of producing stuff. They cannot understand how it could be that consumers have no money to buy all that great stuff.
So under the mesmerizing spell of an economics priesthood that blinds humanity to the simple workings of actual arithmetic (the New Arithmetic is a delusion), bankers create and lend all the money to buyers of the stuff that is produced, who pay the money to the producers. Producers earn and own all the bank-issued money. Consumers borrow, spend and owe all the bank-charged debt.
Using a relatively fixed supply money like gold as the global payments currency constrained the buildup of unpayable debts. As long as national economies remained largely self-sufficient so that they didn't critically need imports that they had no gold to pay for, the international gold standard worked well enough. But as industrial development concentrated in just a few of the world's nations, and the industrial economy advanced to global supply chains, the gold standard proved to be an impossible impediment to the financing of the industrial system. So gold was abandoned as the international payments money.
Nothing replaced "the discipline of gold", and today trade is utterly un-balanced. The trade imbalances are countered with capital movements -- loans of money. Trade deficits are financed with debt, not paid with gold.
And just like Germany vs Greece, there are powerhouses who build up vast trade surpluses, and non-powerhouses who build up vast debt owed to the powerhouses. But the Greeks of the world can never pay the debts, not unless they reverse economic roles with the powerhouses. Which ain't gonna happen.
So we get the kind of impasse we see in Europe today, between stiffed creditors and bankrupt debtors. It's a problem of money-debt arithmetic that would never have been allowed to happen under prudent macroeconomic management. The macroeconomics priesthood does not "believe in" money and debt and money-issuing banks, so they "couldn't see it coming". Now that it has happened, the only way to solve it is with an arithmetic solution.
Within a currency union combined with a fiscal union (like the USA), the government taxes dollars from rich States (the German producers) and gives the dollars to poor States (the Greek consumers), who use the dollars to buy stuff from the rich States. Fiscal transfers circulate the money to keep the system working. The eurozone is a monetary union that shares a single currency -- the euro -- but it is not a fiscal union that redistributes money from producers who sell stuff and earn money, to consumers who need stuff and need money to buy the stuff.
Next Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
8
5
3
