Productivity Can Return If The Central Banks Would Give It A Chance

Tyler Durden's picture




 

Commodity-king Andy Lees (ex-UBS and current manager of ALM Macro) explains that today's declining global productivity is and was always a consequence of government policy of taxing productivity in favor of social transfers. The gradual dumbing down of capitalism and move towards social democracy over the last 50 years relied on building a Ponzi scheme of financial innovation to keep the illusion alive. But, he offers hopefully, system dynamics of the natural environment (how land that was once lost to the desert by over taxing it can be returned to a productive use) offer hope that this ponzi trend can be broken.

As Andy Lees writes,

This video looks at the system dynamics of the natural environment, and how land that was once lost to the desert by over taxing it can be returned to a productive use.

 

 

To do so you need to put the land aside stopping all animals feeding on the land. Immediately you get back grasses which forms a perennial root system which allows microbial communities to live. The grasses stop the sunlight irradiating and sterilizing the land, and instead the root system allows rainfall to be absorbed into the land rather than washing it away. The system becomes accumulative rather than dis-accumulative system of less micro matter, less biomass, less water and less “biodiversity”, all of which sounds very familiar to today’s economy.

 

All systems work similarly. Unfortunately today’s economic equivalent is the declining global productivity resulting in factor mobilization and the consumption of the so-called Mises Reserve fund, or productive surplus generated in excess of the scarce resources needed to sustain a society’s capital and existing standard of living, that is being depleted. The economy is in this dis-accumulative phase which means the slowing productivity of recent years and declining productivity of last year will compound at an increasing pace unless the economy is allowed to restructure. Without productivity, the growth we have today is unsustainable , but the good thing is, it can be turned around.  Unfortunately a lot of today’s deserts highlight that societies are not willing to make the short term sacrifice for the long term gain.

As Andy concluded previously,

The positive is that the present mess is of our own making, and that it can be reversed if we so choose. Growth is not being constrained by a technology frontier, but rather by the systematic misallocation of the factors of production that has been central to government and social philosophy. By transferring capital from productive to unproductive uses, we are altering the time preference for money and thereby borrowing directly from the future. Given that the difficulty of scientific advancement gets harder and harder, and needs more energy and more computational power and thinking to get over that hurdle, there is a limited amount of time before the present system of factor mobilisation or horizontal expansion has consumed down our balance sheet to the point that advancement is no longer possible. Whilst I think and hope that is still a long way off, the closer we get to that level, the greater the rationing of capital away from present unproductive uses will have to be. Marginal policy change will have less and less impact.

 

The system has to change. The issue is whether government and ultimately society can survive during the change; whether the public can unite behind a leadership that can implement tough decisions and allocate capital productively, or whether further sacrifice will be needed first, and how that sacrifice may come.

* * *

What will it take for someone to choose short-term pain as the necessary solution to longer-term destruction?

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Sat, 07/05/2014 - 14:52 | 4927013 agent default
agent default's picture

So in order to get out of the present situation, the existing system has to abolish itself.  Not happening.

Sat, 07/05/2014 - 22:46 | 4928053 StychoKiller
StychoKiller's picture

"It's MY social Security 'cause I paid for it!"  Deal with that stoopidity first...

Sat, 07/05/2014 - 14:59 | 4927017 Sudden Debt
Sudden Debt's picture

Yeah... A credit line for small companies is still over 19%... and money in the bank isn't just a risk but now nearly costs more in fees than it earns not even concidering inflation.
And if you don't put your house against that credit line... Forget about it.

Sat, 07/05/2014 - 16:28 | 4927205 JohnG
JohnG's picture

 

 

Now the state will just seize the deposits, retroactive to Jan 1 :

http://www.libremercado.com/2014-07-04/la-banca-no-podra-repercutir-a-lo...

Yeah, "only" 0.03%, but the precedent is alarming.  Wonder who needed a few mil to balance.

"impulsar el crecimiento económico y la creación de empleo."

To stimulate the economy and create jobs.

Just how does THEFT do that???- Seguir leyendo: http://www.libremercado.com/2014-07-04/la-banca-no-podra-repercutir-a-lo..."

Sat, 07/05/2014 - 14:57 | 4927022 Colonel Klink
Colonel Klink's picture

More sacrifice is still needed at the alter of Mammon.  Next question!

Sat, 07/05/2014 - 15:00 | 4927026 Sudden Debt
Sudden Debt's picture

As long as people have money to buy a iphone they don't have the right to complain.
And even that, there's not a lot of people complaining out loud. Only those who lost it all are complaining and than it's to late because nobody listens to people who have nothing.

Sat, 07/05/2014 - 15:09 | 4927048 I am Jobe
I am Jobe's picture

Waiting on Amerikan brats to compalin about Christmas fucking presents that they did not get BMW and IPHONES. Fucking cunts. Time to get them to the whore house and the guys to Iraq or Syria. Amerikan pussies , next generation in the making. 

Sat, 07/05/2014 - 16:47 | 4927248 Lea
Lea's picture

Yes, great, I am Jobe. Send them to wage inane wars for corporate America should straighten them. Like it did in Vietnam.

 

Sat, 07/05/2014 - 15:02 | 4927031 I am Jobe
I am Jobe's picture

Does this mean less malls and highways in Amerika? No thank you. Amerika was built on looting and fascism. Cannot have it happen. 

Sat, 07/05/2014 - 15:10 | 4927052 Winston Churchill
Winston Churchill's picture

Saturday humour.

The power will have to be taken from their cold dead hands.

Same as it ever was.

Sat, 07/05/2014 - 15:13 | 4927055 blabam
blabam's picture

"public can unite behind a leadership that can implement tough decisions and allocate capital productively" LOL

Sat, 07/05/2014 - 15:18 | 4927067 kchrisc
kchrisc's picture

Nearly by definition, Rothschild (central) banks steal productivity and product of the producers in an economy.

To continue to mask, hide and cover-up their previous thefts, the Rothschild banksters must steal more product and productivity--A vicious cycle of theft that can only lead to poverty for the people and the guillotine for the perpetrators--at least the ones that can't "Return."

Sat, 07/05/2014 - 15:26 | 4927083 Ms. Erable
Ms. Erable's picture

Hah! As if government gangsters ever allocate capital productively. They just steal their cut to keep the racket going.

Sat, 07/05/2014 - 16:42 | 4927241 disabledvet
disabledvet's picture

Unlike the Great Depression the Federal Government does indeed have product here. Wall Street and "the Rothchild meme" has to take this into account when "doing the math" on productivity and in view far more importantly "just outright production."

The latter is what seperates the USA (and Germany and to some extent Britain and Russia) from pretty much the entire planet. "Just make moar." (Oil, natural gas, distillates, condensates, autos, trucks, etc.) the cheapest distribution of "getting to production" is by far North America...and in particular the "United" States part. There are many reasons for this...none of which I will bore you with. Suffice to say "if I can build a thousand foot long ore ship and transport internally from mine to industrial heartland" that is basically impossible to compete against.

Putting the "mean" in The Means of Production so to speak.

And as ridiculous as this sounds "we have NASA." (As well as a hundred plus fleet of nuclear reactors, plus hydro, plus the grid distribution system.) we couldn't even imagine such a thing in 1929...although by 1940 a lot of policy makers sure could. "Social Securirty, the thirty year mortgage, free education for vets returning from the War)...this all has to be factored in when calculating just plain old fashioned output.

The one "fly in the oinkment" is technology. That's only two economists: Schumpeter and "the King of Kings" Adam Smith. "Devices" can simply come into existence that by simply staying around and continuing to "produce" (a "square stamper" for example) simply "out produce" irregardless of the money being printed.

The technical term I believe is called "resource utilization."

A gold standard is still the best because when you have that you'll have VERY GOOD accounting! "Not a penny wasted"! It also ends too big to fail once and for all. The only thing "systemically important" is the maintenance of the peg of the currency to actual gold.

Sat, 07/05/2014 - 21:06 | 4927756 TeethVillage88s
TeethVillage88s's picture

Guessing that you are a Journeyman with lots of skills and hours in education.

Not sure my education or skills are in the shop at all.

But want to postulate that your narrative could contain more ideas or territory.

I have to remember what I was saying (4th of July & all)

http://research.stlouisfed.org/fred2/series/INDPRO (Productivity is continuing to increase at this time, it looks like a very strong 30% or 35% increase (guessing) But business has changed with inventions and outsourcing and building final assemblies on shore.

The original article seem to focus on some recovery of productivity. I guess that would be per employee.

But again the GDP is a number for a "Dog and Pony Show" in Washington DC and everyone knows that.

How do we like being lied to and feed shit in the dark?

Fact is closer to the problem of Free Trade which is not free trade as the other countries are allowed to limit US Investment and US Imports. Plus they can use Slave Labor and no one will audit the activity. There are no "Worker Rights in China", but we have to compete against them. But don't worry... the problem is the flow of US Funds to Asia as dollars "Flee" to cheaper Labor (as well as flee to high yield investments in the markets instead of being invested in US Businesses).

Sat, 07/05/2014 - 15:33 | 4927100 Seasmoke
Seasmoke's picture

Barter !!! ....nothing else works, without skimmimg invoved

Sat, 07/05/2014 - 16:14 | 4927185 what's that smell
what's that smell's picture

fractional reserve ponzi-nomics will save the day.

parasites are good for the host.

ayn will lead us out of the wilderness.

the government sucks.

usury is good for the masses.

parasite Andy Lees wants to save civilization.

fucking. hilarious.


Sat, 07/05/2014 - 16:20 | 4927197 boeing747
boeing747's picture

I think 'microbial' in the article refers to small business.

Sat, 07/05/2014 - 16:25 | 4927207 tc06rtw
tc06rtw's picture

Like trying to replace a jet engine while the bird is in flight.

Sat, 07/05/2014 - 16:38 | 4927234 Loophole
Loophole's picture

When you hear someone preaching sacrifice, run.

Ayn Rand

Sun, 07/06/2014 - 09:58 | 4928752 d edwards
d edwards's picture

Yeah, they want YOU to sacrifice-not themselves!

Sat, 07/05/2014 - 17:29 | 4927314 RaceToTheBottom
RaceToTheBottom's picture

Darwinism should be the law of the land.  

Starting with the Banksters

Sat, 07/05/2014 - 18:07 | 4927389 NidStyles
NidStyles's picture

Some of you really need to go back to school.

Sat, 07/05/2014 - 17:33 | 4927326 bugs_
bugs_'s picture

The article premise that central banks just need to change policy misses it.  Main street now realizes that real economic growth will only occur when society abolishes central banks and central planning.  The good news is the common man's faith in the central bankers is POOF and even those that wait in line at midnight for their EBT to be filled have no faith in the system that provides their unearned expense account.  abolish because the only reforms that will come will be false.

Sat, 07/05/2014 - 18:59 | 4927499 crunchyfrog
crunchyfrog's picture

The dude is 0 for 2 on facts. You do not restore desert land simply by stopping grazing. If the land was historically forest, you plant trees. Historically grassland, you switch to mob grazing to duplicate the historical effect of bison or wildebeest, depending on your continent.

 

And global productivity is rising very nicely. It's just that none is accruing to the actual productive laborers. And you can feed probably a thousand welfare queens for the cost of one equally parasitic hedgie. (Cough, cough)

Sat, 07/05/2014 - 20:17 | 4927681 Magooo
Magooo's picture

WRONG.

 

THE PERFECT STORM (see p. 59 onwards) http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf

The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.

 

HIGH PRICED OIL DESTROYS GROWTH

According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.  http://www.iea.org/textbase/npsum/high_oil04sum.pdf

 

Sat, 07/05/2014 - 20:37 | 4927721 TeethVillage88s
TeethVillage88s's picture

WTF Productivity Problem?

The Fed Charts (Fred) and BLS charts show steady increase in productivity. However one analyst Steven Hansen states that you have to adjust these number for changing business practices. My guess is Economic Free zones in the USA where foreign companies assemble products,... Off Shore Production by US Companies, but we know that Automation & Robotic account for lots of the productivity.

Is this a problem?

The problem is we have to have a Lower threshold or floor in GDP & Productivity.

We expect more productivity under current conditions. And of course US "Games" the system by counting financial transactions that don't add value to the GDP, but are more like "Rentier" (middleman actions).

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