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The Real Economy Cannot Totally Collapse, But This Is No Time To Relax

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I cobbled together the following hopefully helpful observations from recent personal correspondence with my best egalitarian friend. We are discussing the global financial crisis, and hearingever-more-dire expectations and predictions of full-on econo-socio-political collapse. While escalating fears of impoverishment and chaos are all too easily understood in light of events and people's degree of economic confusions, we'd like to add these considerations to the conversation:

First, the convulsion is in money and credit, not in substantial wealth. The substantial wealth is still there; the fields, the plants, the animals, the buildings, the people who labour.

Second, the response to the crisis will always be underestimating the size of the crisis - will always be "behind-hand" in facing facts. People will continue to respond late and inadequately they will be slow to look outside their paradigms - but there will be responses, which will be increasingly realistic, so there will be money and therefore some transport and trade. Collapse is never total, and every incremental collapse will increase realism and thus reduce suffering. The demands of the people will produce some response, for no ruling class can afford to secure themselves against a too-angry populace; they have to give something to keep anger sufficiently low for them to be safe.

[Note: This next is a reference to corrective "root and trunk' measures that elegantly solve all the branch, twig, stem and leaf problems growing from the tree of disaster capitalism - which measures Iwill post soon in more detailed explanation.]

The solutions offered by our plan are never irrelevant, because they are realistic. The trouble is that when there is no obvious trouble, people are too unreal to face facts and do anything practical, and when there is trouble, there is little leisure to consider solutions. Like with fixing the hole in the roof: no need to (they think) when it isn't raining, and no chance to when it is. The solutions we give are the realism that people will be driven to by crisis, and the solutions will reduce the crisis. The collapse will continue until people become realistic.

The collapse can be avoided at any time by countering the inequality insofar as people reduce the inequality, the crisis will be reduced - nothing else will reduce the collapse. There is plenty of substantial wealth; the only lack is distribution of means to trade (money).

People are thinking of a single sharp total collapse, but it collapses in stages, and some response is made never fully realistic, but partially realistic. It can't collapse to zero in one go. Loss of confidence in the money is a matter of degree. Even false confidence keeps the money up. And the more money evaporates, the more confidence there is in the remaining money. The money collapses towards reaching equality with the substantial wealth. The closer it gets to substantial wealth, the slower it falls. Eventually the substantial wealth (goods and services) holds up the money. Loss of money of course impacts on production, which requires trade, which requires money but money never collapses totally, but collapses in stages. All the safety nets in society do not disappear totally, at once, but in stages. And the more things fall, the closer they are to recovery.

Administrators come and go, but Governments have never fallen, never disappeared: there is always someone picking up the pieces and starting again. Government will disappear only when the second to last person disappears: as soon as you have group, you have government. People will always try to increase their safety, comfort, etc. There can be a degree of anarchy (using the term as commonly (if erroneously) understood to mean chaos, loss of beneficial social order), but there cannot be total anarchy, because people are not totally anarchic. Some people can have anarchic episodes, but all the people cannot have total anarchy all the time. If people were totally anarchic, they would never have planted a crop or built a house.

The functional value of money is proportional to confidence. When there is overconfidence, as we have experienced, and that confidence declines, money disappears but money is prevented from going to nothing by the work and people and products, which are the substance behind the money. There may be a period of under-confidence (after a crash), when people underestimate the value of money, but the substantial wealth will buoy this up will after a time show that people are underestimating the substantial wealth backing the money.

At any of these stages, all money is worth something, and a billion is ALWAYS worth a billion times as much as one dollar. Repeat: a billion dollars is ALWAYS worth a billion times as much as one dollar.

World wealth has dropped maybe 10% - "lost' trillions, of course, but not a big percentage of the total. It will drop further too maybe 20%, something of that order, but not 50% or 75%. The correction happens when the overvaluation is big enough to be visible to people and that is only 5% - something like that. Real estate has dropped 50% in places, in some countries, but the overall average for the whole economy is smaller.

We can remind nervous, concerned people that if they don't understand it all then they do not know that there is no solution. There is still land and people and work and systems and buildings and money. These will produce something, and the production will buoy the money to some extent. The fundamentals are still there the ultimate safety net is people, who do stuff. Forget money for the time and look at the fundamentals, the substantial wealth, which is everywhere: people, land, etc. As said, the money at the top didn't disappear - a billion is still worth a billion times as much as one dollar: a part of the value of every dollar disappeared. There will be a contraction, not a disappearance. The snail is pulling in his horns he's not vanishing. Part of the lifestyle will disappear something off the top a drop - but not to zero, but to 70% or 50%. Food doesn't disappear till you reach 1%. Luxury spending increased after the 1929 crash, because those who cashed up just before the crash could then buy cheap. So clearly wealth didn't disappear.

Pay justice is always a live issue, always the issue that cuts across all other issues *especially* in depressions! In good times, the people don't mind super-overpay. In bad times, FDR's appear. FDR nearly put a 100% tax on income over $25,000 ($300,000 in modern dollars) and regretted he didn't. The next FDR may do it in this bigger depression.

Again, total collapse is impossible. Under-confidence is possible for a time money is proportional to confidence confidence never totally disappears, because there is still people, workers, land, buildings, infrastructure, systems, etc. Even the unrealistic confidence (the delay in facing facts) holds up money. There can only be a correction to the overconfidence, which for a while produces an over correction, but this overcorrection gets corrected by the substantial wealth showing the value of the money. There cannot be a total collapse, because land and people and infrastructure do not disappear. The stages of the collapse may be terrible in local effects (riots, etc), but overall, the substantial wealth sustains in a substantial way. It may look like things are in freefall, and headed for zero, but the trampoline of substantial wealth is below the momentum of the fall to the trampoline drives the trampoline down below its level for a while, but the trampoline pulls the level of money back up to level.

Even if all the governments and money and trade disappeared, there would be people and work, options, efforts, rolling up of sleeves and fulfilling needs using whatever was available. The ultimate wealth is people and nature they produce everything, and will continue to do so.

Oil will decline over 50-100 years, the price of oil will gradually rise and there will be less and less movement, but food transport will be the last to go and local food use will happily increase; at the moment New Zealand is importing Italian kiwifruit! At the worst, we will go back to pre-oil lifestyle the lifestyle that got us through till 1900. The higher the price goes, the slower we will use up oil the more economical we will be with it. There is plenty of coal to make it to transition to clean renewables, and people will plant more trees if they need them just like they bred horses when they needed them.

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The human species will either rid itself of the geno-sadistic anti-justice idea to allow unlimited personal fortunes or we will succumb to the results of having the next and the next and the next wealthpower giants ad infinitum.
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