Oct 162017
 
 October 16, 2017  Posted by at 2:00 pm Finance Tagged with: , , , , , , , , ,
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Marc Riboud Zazou, painter of the EIffel Tower 1953

 

Central bankers have never done more damage to the world economy than in the past 10 years. One may argue this is because they never had the power to do that. If their predecessors had had that power, who knows? Still, the global economy has never been more interconnected than it is today, due mostly to the advance of globalism, neoliberalism and perhaps even more, technology.

Ironically, all three of these factors are unremittingly praised as forces for good. But living standards for many millions of people in the west have come down and/or are laden with uncertainty, while millions of Chinese now have higher living standards. People in the west have been told to see this as a positive development; after all, it allows them to buy products cheaper than if they had been made in domestic industries.

But along with their manufacturing jobs, their entire way of life has mostly disappeared as well. Or, rather, it is being hidden behind a veil of debt. Still, we can no longer credibly deny that some three-quarters of Americans have a hard time paying their bills, and that is very different from the 1950s and 60s. In western Europe, this is somewhat less pronounced, or perhaps it’s just lagging, but with globalism and neoliberalism still the ruling economic religions, there’s no going back.

What happened? Well, we don’t make stuff anymore. That’s what. We have to buy our stuff from others. Increasingly, we lack the skills to make stuff too. We have become dependent on nations half a planet away just to survive. Nations that are only interested in selling their stuff to us if we can pay for it. And who see their domestic wage demands go up, and will -have to- charge ever higher prices for their products.

And we have no choice but to pay. But we can only pay with what we can borrow. As nations, as companies, and as individuals. We need to borrow because as nations, as companies, and as individuals we don’t make stuff anymore. It’s a vicious circle that globalization has blessed us with. And from which, we are told, we can escape only if we achieve growth. Which we can’t, because we don’t make anything.

 

So we rely on central bankers to manage the crisis. Because we’re told they know how to manage it. They don’t. But they do pretend to know. Still, if you read between the lines, they do admit to their ignorance. Janet Yellen a few weeks ago fessed up to the fact that she has no idea why inflation is weak. Mario Draghi has said more or less the same. Why don’t they know? Because the models don’t fit. And the models are all they have.

Economic models are more important in central banking than common sense. The Fed has some 1000 PhDs under contract. But Yellen, their boss, still claims that ‘perhaps’ the models are wrong, with it comes to inflation, and to wage growth. They have no idea why wages don’t grow. Because the models say they should. Because everybody has a job. 1000 very well paid PhDs. And that’s all they have. They say the lack of wage growth is a mystery.

I say that those for whom this is a mystery are not fit for their jobs. If you export millions of jobs to Asia, take workers’ negotiating powers away and push them into crappy jobs with no benefits, only one outcome is possible. And that doesn’t include inflation or wage growth. Instead, the only possible outcome is continuing erosion of economies.

The globalist mantra says we will fill up the lost space in our economies with ‘better’ jobs, service sector, knowledge sector. But reality does not follow the mantra. Most new jobs are definitely not ‘better’. And as we wait tables or greet customers at Wal-Mart, we see robots take over what production capacity is left, and delivery services erase what’s left of our brick and mortar stores. Yes, that means even less ‘quality’ jobs.

 

Meanwhile, the Chinese who now have taken over our jobs, have only been able to do that amidst insane amounts of pollution. And as if that’s not bad enough, they have recently, just to keep their magical new production paradise running, been forced to borrow as much as we have been -and are-, at state level, at local government level, and now as individuals as well.

In China, credit functions like opioids do in America. Millions of people who had never been in touch with the stuff would have been fine if they never had, but now they are hooked. The local governments were already, which has created a shadow banking system that will threaten Beijing soon, but for the citizens it’s a relatively new phenomenon.

And if you see them saying things like: “if you don’t buy a flat today, you will never be able to afford it” and “..a person without a flat has no future in Shenzhen.”, you know they have it bad. These are people who’ve only ever seen property prices go up, and who’ve never thought of any place as a ghost city, and who have few other ways to park what money they make working the jobs imported from the US and Europe.

They undoubtedly think their wages will keep growing too, just like the ‘value’ of their flats. They’ve never seen either go down. But if we need to borrow in order to afford the products they make in order to pay off what they borrowed in order to buy their flats, everyone’s in trouble.

 

And then globalization itself is in trouble. The very beneficiaries, the owners of globalization will be. Though not before they have taken away most of the fruits of our labor. What are you going to do with your billions when the societies you knew when you grew up are eradicated by the very process that allowed you to make those billions? It stops somewhere. If those 1000 PhDs want to study a model, they should try that one.

 

Globalization causes many problems. Jobs disappearing from societies just so their citizens can buy the same products a few pennies cheaper when they come from China is a big one. But the main problem with globalization is financial: money continually vanishes from societies, who have to get ever deeper in debt just to stand still. Globalization, like any type of centralization, does that: it takes money away from the ‘periphery’.

The Wal-Mart, McDonald’s, Starbucks model has already taken away untold jobs, stores and money from our societies, but we ain’t seen nothing yet. The advent of the internet will put that model on steroids. But why would you let a bunch of Silicon Valley venture capitalists run things like Uber or Airbnb in your location, when you can do it yourself just as well, and use the profits to enhance your community instead of letting them make you poorer?

I see UK’s Jeremy Corbyn had that same thought, and good on him. Britain may become the first major victim of the dark side of centralization, by leaving the organization that enables it -the EU-, and Corbyn’s idea of a local cooperative to replace Uber is the kind of thinking it will need. Because how can you make up for all that money, and all that production capacity, leaving where you live? You can’t run fast enough, and you don’t have to.

This is the Roman Empire’s centralization conundrum all over. Though the Romans never pushed their peripheries to stop producing essentials; they instead demanded a share of them. Their problem was, towards the end of the empire, the share they demanded -forcefully- became ever larger. Until the periphery turned on them -also forcefully-.

 

The world’s central bankers’ club is set to get new leadership soon. Yellen may well be gone, so will Japan’s Kuroda and China’s Zhou; the ECB’s -and Goldman’s- Mario Draghi will go a bit later. But there is no sign that the economic religions they adhere to will be replaced, it’ll be centralization all the way, and if that fails, more centralization.

The endgame of that process is painfully obvious way in advance. Centralization feeds central forces, be they governmental, military or commercial, with the fruits of labor of local populations. That is a process that will always, inevitably, run into a wall, because too much of those fruits are taken out. Too much of it will flow to the center, be it Silicon Valley or Wall Street or Rome. Same difference.

There are things that you can safely centralize (peace negotiations), but they don’t include essentials like food, housing, transport, water, clothing. They are too costly at the local level to allow them to be centralized. Or everybody everywhere will end up paying through the nose just to survive.

It’s very easy. Maybe that’s why nobody notices.

 

 

Home Forums Globalization is Poverty

This topic contains 16 replies, has 10 voices, and was last updated by  Raúl Ilargi Meijer 4 weeks, 1 day ago.

Viewing 17 posts - 1 through 17 (of 17 total)
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  • #36516

    Marc Riboud Zazou, painter of the EIffel Tower 1953   Central bankers have never done more damage to the world economy than in the past 10 years.
    [See the full post at: Globalization is Poverty]

    #36517

    Hotrod
    Participant

    Definition of free trade: The ability to steal labor and natural resources worldwide. Also, the ability to move capital and use as a weapon worldwide.

    I have learned to enjoy the benefits of cheap, poorly made crap.

    #36521

    seychelles
    Participant

    Zioglobalism is closeted usury on steroids. The game never changes, only the anti-Logos words. The sooner the peripheries revolt, the better.

    #36522

    Dr. Diablo
    Participant

    If critical resources are all out-of-country, be it food or shoes, then to survive, they must be imported — at least in any proposed transition period. For them to move, it requires the middlemen.

    So if you annoy the international middlemen, well, then you may not get your critical goods. This is your globalization. The opposite of which is nationalism and sovereignty.

    #36525

    Patricia
    Participant

    Yes, it is a most peculiar World we live in when the only way you can buy stuff you do not need is by borrowing the money you do not have!

    #36528

    Chris M
    Participant

    Again, for an economy to function, it must be in balance. The income of producers must be in balance with the income of consumers. Producers need consumers to provide the labor needed to bring their products to the marketplace, and for the demand to consume that product. Consumers need producers for the products they need to live, and for the wages to buy those products. It’s circular.

    Income is product X price. The product can be a physical good, a service, or labor. The important factor is price. You CANNOT cheapen your way to prosperity. If cheap is good, cheaper is better, and cheapest (free) is best. We know that’s ludicrous. The price of anything must be at parity, or in balance, with the cost to produce or the cost to consume.

    Trade is fine, especially if you can’t or don’t want to be self sufficient. But trade is not free if it is not fair. It is simply a form of tyranny. The value of my labor must be respected just as much of yours in the transaction, or the trade.

    What happens when income is not in balance? People go without, or borrow to consume. The problem with borrowing is that it throws the economy even more out of balance. Income that could be used for today’s consumption is siphoned away to pay for yesterday’s consumption, plus interest.

    #36529

    Nassim
    Participant

    ” Corbyn’s idea of a local cooperative to replace Uber is the kind of thinking it will need”

    I have developed a website that can go one better – to allow people to share lifts to and from work/school with their neighbours. That way the same roads/bridges/tunnels can carry far more people. In the cities of Australia, the average car can seat 4 passengers (plus driver) and only one out of 20 cars has any passengers during the rush hours.

    To try out my website, press the “Simulate” button. You can plan routes, waypoints and search for passengers or lifts. It runs on mobiles as well as PC’s.

    QBusters.com.au

    Uber is a crap idea as it cannibalises regular taxis – which are limited by statute and the medallions rationed and sold in an after-market. Many Uber drivers borrowed to buy cars they cannot afford and have no idea of the real costs of running the service. Additionally, Uber take something like 30% of the gross while my concept if for free.

    Uber Gets Run Over by its Own Subprime Auto Leases

    My website is based on an entirely different concept – the marginal cost of sharing a car that is going to travel the same route anyway. People can always walk 5 minutes at each end anyway. I can make it pay its way because I sell car parts online and if I know who has what, I can offer German car parts at an excellent price to them.

    #36531

    Nassim
    Participant

    A nation in decline: A ten percent increase in people seeking food relief across the nation

    Not only can Australia export vast amounts of coal and essentially bank the building of new coal-fired power stations, but it seems that we are also a large exporter of food – with masses of hungry families partly due to electricity prices that are almost 3 times as high as those of the USA.

    It is truly amazing what a bunch of idiot lawyers (Turnbull, Gillard etc.), crap scientists (Finkel) and social scientists (Hanson Young) are capable of achieving.

    #36532

    Nassim
    Participant

    Here is some of the nonsense the government-controlled ABC of Australia offers:

    Drought bites hard and drought maps questioned (22 September 2017)

    BOM says deluge across Queensland at levels not seen since Cyclone Debbie (17 October 2017)

    Please note how this classic “Queenslander” house is built on stilts and can easily handle another 2m (6ft) or water. 🙂

    #36541

    SteveB
    Participant

    Chris M,

    If you could get past the belief that it’s “ludicrous”, you might be able to see that the logical conclusion is that “cheapest” is not “free” but exchange-less. Not that anyone you were referring to sees it that way, but let’s not limit our thinking on their account. The way out can be through in that sense, though it doesn’t have to be. Instead, from here, now humans can simply choose to abandon exchange belief. To believe that that’s not true is to believe a lie. Can you overcome the lie?

    #36543

    regionswork
    Participant

    It wasn’t easier to pay bills in the 1950s and 1960s, but a ten cent raise was real money. Because the Cold War proxy wars were run on credit, not national sacrifice like WW-II and not-winning was part of the military-industial complex game, a false economy began to be built. Closing the gold window gave a boost to use of the petro-dollar as the world reserve currency. When inflation ensued and production in the U.S. began to get competition as other nations rebuilt from the WW-II ruble, credit had to expand to make up for stagnating income and industry moved away from their founding cities to get away from old technology and old labor relationships. First to the South and then overseas. Easy credit paved the way. Too bad there’s no easy repay. Turtles all the way down are remortgaged to their appreciating values, all because that is the game. An era of great emotional suffering lies ahead when the economy shrinks to what is sustainable.Ringmaster Donald entertains with an occasional truth, winking to vendors in the crowd as the fleecing proceeds.

    #36544

    Chris M
    Participant

    SteveB,

    I’m not familiar with your type of economy. If you would be able and willing to expound upon it, I’d greatly appreciate it.

    #36555

    SteveB
    Participant

    Chris M,

    It’s not an “economy”, at least not in the usual sense that we conceive of that concept. It’s life. Just like all other species. They live their lives. Humans could do similarly without this flawed belief in a concept (that doesn’t ever live up to its definition). Having large brains and other advantages only means that we would do so differently, not with the same limitations that other species have. The thought experiment: Assume that humans HAD TO live without the current belief in the concept of exchange–how would that logically proceed? Set aside preconceived notions and the horror stories about “savages”, “barbarians”, “uncivilized”, “primitive”, etc., and imagine a world that starts tomorrow with all existing technology, knowledge, skills, infrastructure, etc. but without a universally held belief. Don’t assume any other change to beliefs (like about government, private property, religion), just imagine the logical consequences of abandoning that one belief as a species/culture. Helpful hint: the good aspects of the world as it currently exists is possible tomorrow by subtracting the unnecessary layer of transactions and accounting (‘score keeping’) in the name of exchange belief, because all the transfers of surpluses *actually get done*! Meanwhile, the vast majority of the societal dysfunction would no longer be driven by profit seeking. Leverage goes away, as does accumulating (because how many houses can you live in, and how many do you really want when you probably have to maintain them yourself?). That should get you started.

    #36557

    Chris M
    Participant

    SteveB,

    I would like to live in this life you describe where everyone is charitable and gives away the excess of the fruit of their labors.

    But what do you do about greed and sloth?

    These questions are eerily similar to the ones I have after reading the article about George Bernard Shaw and universal basic income.

    #36558

    casamurphy
    Participant

    Raúl,

    Thank you for such a well written and insightful article.

    #36561

    SteveB
    Participant

    Chris M,

    Greed and sloth are nothing to do anything about in a post-exchange world. Greedy? Too bad. Slothful? You’ll get over it when you get hungry enough. That’s not to say that people would generally treat others uncaringly if they’re struggling, but no one would be unduly rewarded either. Theft would still be a crime, and people would need to ask for what they want and understand (or not, I suppose) that they might not get it. People are naturally active, creative, productive, cooperative, caring, and many other positives that get overshadowed by profit seeking behaviors and the stresses that come with them (about getting scammed, about not having enough money for an uncertain future, etc.).

    UBI would just temporarily adjust the playing field, but the game would continue, only to once again inevitably march toward inequitable distribution (the condition, not the action) of “wealth”, all the while polluting, extirpating, and despoiling as we stress, distrust, exploit, and kill each other. Starting another round of an unwinnable game must be in that definition of insanity that Einstein (or whoever) spoke about.

    Similarly, I’ve pondered every question that has been presented to me or arose in my own mind over the past six years about ‘what if?’ or ‘how?’ with regard to ending exchange belief as a global society. I’ve yet to come across one that’s not answerable. Not that most people ‘get it’. They (mostly men) mostly don’t. We’re not taught to suspend disbelief in this culture. I wonder why not?

    If you’re on FB you might check out “The Money Choice” page, which proposes ending exchange belief on October 15 of the upcoming year (or the next if it doesn’t happen this time, as it didn’t this year). The choice exists for all humans. Choosing en masse on a specified date (after adequate consideration) is perhaps the only way to go about it. Only a critical mass, not necessarily a majority is needed to get to a tipping point.

    #36589

    This article in Italian:

    La Globalizzazione è Povertà

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