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QE, Parallel Universes And The Problem With Economic Growth
Authored by Brooks Ritchey - MD, K2 Advisors - via Beyond Bulls and Bears blog,
What do quantum mechanics and the theory of relativity have to do with global central bank policy? Years of aggressive central bank policies haven’t resulted in the type of accelerated global growth one might expect, so Brooks Ritchey, Senior Managing Director at K2 Advisors, Franklin Templeton Solutions, wonders if there is an alternate universe where that is in fact the case. He breaks down the role of monetary and fiscal policy in generating growth, and what investors need to think about when such policies aren’t delivering it.
The current and prevalent view among some modern theoretical physicists is that our universe is not the only universe, but rather there are many parallel or multi-verses that likely exist alongside or in tandem to ours. In the book The Hidden Reality: Parallel Universes and the Deep Laws of the Cosmos, author and physicist Brian Greene makes a compelling case for this remarkable possibility. Greene describes that “the mathematics underlying quantum mechanics … suggests that all possible outcomes happen, each inhabiting its own separate universe. If a quantum calculation predicts that a particle might be here, or it might be there, then in one universe it is here and in another it is there. And in each such universe, there’s a copy of you witnessing one or the other outcome, thinking—incorrectly—that your reality is the only reality. When you realize that quantum mechanics underlies all physical processes, from the fusing of atoms in the sun to the neural firings that constitute the stuff of thought, the far-reaching implications of the proposal become apparent. It says that there’s no such thing as a road untraveled.”
Bizarre. Greene goes on to describe that in addition to quantum theory, cosmological theory supports this freaky notion as well.
So what purpose the Cliff Notes lesson in theoretical quantum physics? It suggests that there could be a universe, maybe multiple among the multi-verses, where the outcome to all of the central banks’ quantitative easing efforts post-2008 has been sustained growth. One where the Federal Reserve’s (Fed’s) Keynesian plan has worked accordingly, GDP growth is firmly and organically established, and everyone is living happily ever after. Just next to that universe there may be another in which qantitative easing (QE) also worked to jump start the economy, but then an asteroid smashed into the Northern Plains of North America and all of humanity was destroyed—truly unsettling. Fortunately for us there has been no asteroid, however growth has not yet taken hold either—and that is decidedly unfortunate.
The Universe of Economic Growth—or Lack Thereof
According to statistics from the International Monetary Fund, the G20 in aggregate appeared to be growing at a respectable 3% in 2013, but when examining the developed world’s portion of that data, the “reality” that emerges is much less optimistic. The European Union (EU) grew 0.1% in 2013 and looks to be on a similar trajectory this year. The United Kingdom and United States saw growth of 1.7% and 2.2% respectively in 2013. Growth in France was near 0% and this year France, along with Japan and Germany, could be flirting with possible recessions.
Putting these statistics into perspective, despite the developed world having engaged in what is likely the most comprehensive monetary stimulation effort of the last 200 years, growth can best be described as middling. Without the fortunate shale revolution in the Northern Plains of the United States (and thankfully not the asteroid) growth there likely would be much lower, probably not much ahead of Europe today.
The good news about the universe in which we find ourselves, at least according to Modern Portfolio Theory, is that a truly diversified portfolio of uncorrelated and negatively correlated strategies/assets is still of value, in our view. Unsustainable fiscal and monetary imbalances often leave in their wake alpha capture potential—alpha being a measure of performance on a risk-adjusted basis—so we’ve got that going for us. The bad news is that there is no easy solution to the many problems and structural headwinds the developed economies of the world face, and without change I think our global economy could likely remain stuck in a long gray plod of disappointing economic growth for who knows how long … infinity???
Two Schools of Thought
Before we imagine a universe that provides a path out of this economic quagmire, let’s take a closer look at what got us here in the first place.
The arguments for QE and against QE can for the most part be distilled down to two very distinct schools of economic thought; schools that have served as the framework for the majority of modern economic and market theory taught in academia today. On one side we have Keynesian economics, theory based on the ideas of British economist John Maynard Keynes. On the other we have Austrian economics, based on the ideas of a collection of academics—some of whom were originally citizens of Austria-Hungary (no surprise). At the risk of over-simplifying what are without doubt two extremely deep and detailed theories, to help structure our discussion I thought I would attempt to summarize each:
Keynesian Economics
In the simplest of terms (and we do mean simple), Keynesians argue that private sector business decisions may sometimes lead to inefficient outcomes, and therefore government intervention is occasionally needed to step in with active monetary policy actions. These actions may be coordinated by a central bank. Generally, the Keynesian view believes that spending is what drives economic growth, and that deficit spending in a recession can be offset via fiscal surpluses in an expansion (and therein lay the rub).
Simplifying even further, let’s consider Keynesian to be “the school of short-term economic planning.”
Austrian Economics
Austrian theory on the other hand argues for very limited government intervention in the economy, particularly in the area of money production. Indeed, the Austrian school believes that central bank manipulation of economic cycles with artificial stimulus does more long-term harm than good, ultimately creating bubbles and recessions that are far worse than would be experienced in a natural economic cycle. This then would be “the longer-term school.”
Who’s Right?
To summarize, the Austrian school suggests that markets are self-correcting mechanisms that follow fairly smooth cycles, and that it is better to let nature run its long-term course (so to speak) as opposed to intervening when things may be less than optimal (i.e., recession). Keynesians on the other hand believe economic cycles can be smoothed with tactical short-term government monetary intervention, and that fiscal policy may be modified occasionally to better guide market cycles. So which view is correct? Is it better to ease aggressively—and then ease some more when things are still not improved, or should the Fed simply remain on the sidelines and let the markets sort themselves out on their own? As they say, there are two sides to every story—and then there is the truth. Put differently, we do not live in an “either-or” world (or should not anyway), and the optimal application of economic theory?in my humble opinion of course—probably lies somewhere in the middle of these two diametrically opposed views. Perhaps in some universe out there this utopian equilibrium has been established, but clearly not in ours—at least not yet.
In practice, Keynesian thinking has generally guided most of the Fed’s policy decisions post-World War II, and has certainly been front and center in the aftermath of the 2008 Lehman Brothers bankruptcy. Most would agree that the exceptional measures introduced by central banks around the world at that time - most decidedly Keynesian in nature - could be deemed appropriate in that they succeeded in restoring financial stability, while also preventing a full-blown global depression.
Subsequently, as the financial system stabilized, the justification for further QE became more rooted in the belief that such policies were again required to restore aggregate demand, particularly after the sharp economic downturn in 2009.
With each successive round of easing, however, the effectiveness of such policies in stimulating sustained growth is increasingly questioned, while the potential for longer-term negative consequences increases. Murmurs from the Austrian table in the back of the room begin to resonate.
So here we are with a global economics engine that has never really fully kicked back in, despite QE’s one through three, and now the policies of Japan’s Shinzo Abe and the ECB’s Mario Draghi dubbed “Abenomics” and “Draghinomics.” Where does it all end?
Armchair Quarterbacking
I do not presume to know more than those running the Fed in terms of economic policy making, however this of course does not preclude me from offering opinions on the matter.
While monetary weapons can be a good first step to remedying an economic crisis, they are clearly not enough on a standalone basis to return an economy to stability and growth. Monetary medicine cannot heal fiscal ailments in the areas of budgeting, regulation, taxation and related policies. To return any economy to stable and organic growth the aforementioned fiscal roadblocks need to be addressed—sounds Austrian I know (more likely I’m somewhere in the middle).
My concern is that there has been an almost total academic capture of the mechanism of the Fed and other central banks around the world by neo-Keynesian thinking and hence policymaking, while the executive and legislative branches of the government have turned a blind eye to the necessary reforms.
So while the plan has thus far worked brilliantly for Wall Street, what central bankers have succeeded in doing is preventing, or at least postponing, the hard choices and legislative actions necessary by our politicians to fully implement a sustainable and prosperous future for our children—and theirs.
When I allow my thoughts to run in these directions it can naturally be distressing at times. I remind myself then that I can only focus on the variables in my life that I can control, and among those are investment portfolio positioning. I often use a vehicle metaphor when discussing markets with friends and colleagues. When things are “risk-on” it is okay to take the red convertible sports car for a lively jaunt. When things are “risk-off” perhaps the solid sedan is a better option.
Today I view the world as “risk-uncertain,” and in these instances I recommend the armored vehicle. That is a suitably diversified portfolio of alternative strategies, one that is focused on capital preservation and non-directionally driven market gains through strategic and tactical strategy allocations.
Alternative investments cover a varied set of asset classes and strategies that go beyond traditional stocks and bonds. Alternative investment asset classes include real estate, real assets (e.g., commodities, infrastructure) and private equity, while alternative strategies primarily consist of hedge strategies, including use of derivatives. Hedge strategies typically have the ability to utilize short positions (i.e., seeking to profit on a decline in value of an individual security or index) in contrast to traditional mutual fund strategies which typically permit only long positions.
I believe the prudence of such an approach to investment management is underscored given the current environment. That is unless you find a way into another universe.
________________________________________
Brooks Ritchey’s comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.
This information is intended for US residents only.
What Are the Risks?
All investments involve risks, including possible loss of principal. The market values of securities will go up or down, sometimes rapidly or unpredictably. Foreign investments are subject to greater investment risk such as political, economic, credit and information risks as well as risk of currency fluctuations. Investments in derivatives involve costs and create economic leverage, which may result in significant volatility and cause losses that significantly exceed the initial investment. Short sales involve the risk that losses may exceed the original amount invested. Liquidity risk exists when securities have become more difficult to sell at the price they have been valued.
1. Source: IMF World Economic Outlook, October 2014. © by International Monetary Fund. All Rights Reserved.
2. Correlation is a statistical measure of how two securities move in relation to each other. Negative correlation indicates a relationship in which one increases as the other decreases. Diversification does not guarantee profit or protect against risk of loss.
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hellz ya money and parallel universes! you are here
.
The problem with that (and your) perspective of parallel universes (or lines) is that they never intersect.
If one accepts that (philosophical and physics) limitation, and also accepts that Austrians and Keynesians occupy the same universe (which I do not believe anyone has bothered to actually prove yet) then I would recommend adopting an Existentialist/Absurdist framework for finding a solution.
http://www.zerohedge.com/news/2014-10-17/handelsblatt-four-german-banks-...
Yeah!
Wut you said!
Now where's my scotch???
Banker Suicide Record
List of 31 Bankers / members of financial industrie that committed suicide in 2014:
http://www.mmnews.de/index.php/wirtschaft/24988-selbstmordwelle-bei-bankern
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Port Authority sold rights to World Trade Center name for $10 in 1986
September 8, 2013, 1:20 PM
By SHAWN BOBURG STAFF WRITER | The RecordFor more than four decades, the World Trade Center — whether standing majestically over lower Manhattan, lying in the ruins of a terrorist attack, or awaiting resurrection in a new form — has been one of the world’s greatest public landmarks.
But in a quiet deal nearly 30 years ago, the Port Authority of New York and New Jersey sold off the rights to the iconic buildings’ name to a non-profit organization established by one of its powerful executives.
The price was $10.
Until his death this year, the former executive, Guy Tozzoli, earned millions primarily by licensing the name through the group, the World Trade Centers Association. And the Port Authority is among the hundreds of licensees around the world paying thousands of dollars each year for the privilege of using the words “World Trade Center.”
Now, with the Port Authority hoping to sell branded souvenirs and merchandise next year after the new One World Trade Center skyscraper opens, the World Trade Centers Association is requesting free office space worth more than $500,000 a year in exchange for use of the trademark.
“I am gravely concerned that a secret deal, years ago, sold the name of the World Trade Center for 10 bucks,” said the Port Authority’s deputy executive director, Bill Baroni, an appointee of Governor Christie. “And I’m going to look into the initial contract and look into where we are today with regard to this organization.”
The deal with Tozzoli’s group came out of an era when the Port Authority — which runs the region’s airports, major bus terminals, PATH train system, seaports — was often criticized for leading an imperial, self-interested existence in which its executives were rewarded with travel and other perks unusual in government.
The sale of the trademark turned out to be perhaps the biggest financial benefit of Tozzoli’s long, accomplished career during which he oversaw construction of the Twin Towers. In 2011, his last year as president of the non-profit, according to WTCA tax filings, Tozzoli received $626,000 for working an average of one hour per week.
After all of this time, why does it anti-matter??
Ah ha!
Because there is no time!
"Keynesians argue that private sector business decisions may sometimes lead to inefficient outcomes, and therefore government intervention is occasionally needed to step in with active monetary policy actions. These actions may be coordinated by a central bank."
Keynesianism systemically collapses when governements and their central planners surcome to fascism and proflicacy caused by chrony capitalists and corrupt politicians.
In 1948, Henry Kissinger, a 23-year-old American intelligence officer, recruited Nazi expatriates to serve in top positions in American military, aerospace, and biological science and medicine. Twenty years later, he left Harvard’s esteemed faculty and resigned a lucrative position as Nelson Rockefeller’s foreign policy attache’ to become President Nixon’s closest advisor and director of the National Security Council. Seeking alternatives to tactical nuclear weapons to bolster America’s “diplomacy” abroad, the paranoid and egomaniacal Kissinger quickly ordered the Army’s Chief of Staff to requisition $10 million from Congress for the development and testing of EBOLA & AIDS-like viruses. Within ten years, the AIDS and Ebola epidemics erupted coincidentally in the regions of Africa ravaged by CIA military covert operations also ordered by Kissinger.
In 1984, Dr. Robert Gallo, of the National Cancer Institute, claimed credit for discovering the AIDS virus. He announced it most likely originated from a monkey virus which spontaneously mutated and naturally jumped species. Dr. Gallo was a biological weapons contractor for the CIA’s top secret “Project: MKNAOMI,” and was paid to produce and test EBOLA, AIDS-like viruses as early as 1970.
EBOLA – CIA Project Codename MKNAOMI & Hi-Tech AssassinationsEconomics is not a hard science nor an either/or exercise, rather it's typically a negotiation.
That said, there are rackets, and privately held central banking is the biggest racket of all.
I came over fom a parallel universe around the year 2000, my doppelganger pushed me into this one from a more sane one.
He was trying to get to the universe where there is no FED and Chuck Norris is President.
He probably wound up in the one where QE worked and Kim Kardashian is President.
Look at nature. Sooner or later, everyone loses.
Tripe.
Remunerating excess reserve balances induces dis-intermediation among just the non-banks (the actual conduits between savers and borrowers, i.e., where savings are “put to work”). The 1966 S&L credit crunch (a lack of funds, not their cost), is the savings-investment paradigm. Dis-intermediation amongst the “shadow banks” during the Great-Recession (via the remuneration rate), can be likened to what happened when the BOG & FDIC raised Reg. Q ceilings for the CBs in Dec 1965, i.e., after 5 successive mounting resets in deposit ceilings for the commercial banks, the NBs finally couldn’t compete (& the NBs were already deregulated). So the size of the NBs also shrank, but the size of the CB system remained unaffected (sound familiar?). The 1966 S&L liquidity squeeze resulted in the mal-distribution of available credit (impounding savings within the CB system), which stopped the segmented flow of funds allocated for residential construction.
It's not so much about the differences between CB and NB lending/investing net interest rate profit margins (or ROAs), and the opportunity to make bankable loans. It's about the relative wholesale money market funding cost’s differentials between the CBs & the NBs in their individual “borrow-short” to “lend-long” business models.
The inequitable cost structure’s disparity derives from the fact that all CB savings deposits originate from within the commercial banking system (but the Board blithely uses the criterion, “equalization of competition for savings” - sic). But there cannot be an “inflow” of new savings deposits and the growth of savings deposits cannot per se increase the size of the CB system – because the growth of CB held savings doesn’t alter the “footings” of the consolidated balance sheet. And as long as monetary savings are held within the commercial banks, in whatever deposit classification, the rate of turnover of these savings accounts is zero (exerting a dampening or depressing economic effect – i.e., subpar growth). E.g.,“breaking the buck” interrupts the circuit income velocity of funds.
That is, from the standpoint of the system, when the CBs make loans to, or buy securities from, the non-bank public, they simply credit the account of the borrower (unlike the NBs, no outside funding is required). For monetary savings, from the standpoint of the banking system, is a function of velocity, or rate of turnover of deposits, it is not a function of volume. Demand deposits are the result of lending - not the other way around. And the source of all time (savings) deposits, are other CB liabilities (the indirect consequence of prior bank credit creation), directly or indirectly via the currency route, or thru the CB’s undivided profit’s accounts. From a system’s perspective, the CBs simply pay for existing deposits, ones they already own (affecting their distribution) – as anyone who has applied double-entry bookkeeping to the CB system (on a national scale), should already know.
Thus, the CBs (because of the .25% remuneration rate exceeded all money market rates), forced a contraction in the size of the NBs, & created liquidity problems in the process, by outbidding the NBs for the non-bank public’s voluntary savings (the NB’s wholesale money-market funding is differentiated by its position on the short-end segment of the yield curve).
Thus, Bankrupt U Bernanke destroyed NB lending/investing (destroyed the financial intermediaries). In short, dis-intermediation” is an economist’s word for going broke. The reverse of this operation cannot exist. Transferring saved deposits through the NBs cannot reduce the size of the CB system. Deposits are simply transferred from the saver, to the NB, to the borrower, etc. Thus dis-intermediation for the CBs is not predicated on the level of interest rates (as it is for the NBs). The NBs are not in competition with the CBs. It is one of the puzzles of money, that the welfare of the economy and the CBs, is dependent upon the welfare of the NBs. Note that this conclusion is opposite of the direction of political-economic instruction of the last 57 years.
This unequal and unnecessary competition allowed the CBs to outbid the NBs during quantitative easing. And remunerating reserves helps provide the incremental leverage that determines which counter party’s bid will be accepted by the FRB-NY’s “trading desk” (esp. pronounced under the remuneration rate’s “umbrella”). This has emasculated the Fed’s “open market power” (decoupled the legal link between total reserves and the money stock). In fractional reserve banking this connection is known as the money “multiplier”. The expansion coefficient was predictable as long as reservable liabilities, and reserve ratios, remained constant (but they were drastically reduced in the early 90’s – until contractual reserves were no longer “binding” restraints on lending).
Contrary to the IMF, when open market operations [sic] of the buying type (POMOs), were conducted, the commercial bankers won the bidding wars (on all securities, all along the yield curve). The net results of these auctions were principally asset swaps (gov’ts for IBDDs), as juxtaposed to between 1942 and Sept 2008, the CBs minimized their non-earning assets (excess reserve balances) - by buying short-term securities (a countercyclical and self-correcting liquidity infusion – obviating any need for gov’t intervention), from the non-bank public (thereby injecting new money and bolstering aggregate monetary purchasing power). Whereas with Bankrupt U Bernanke’s IOR policy, the non-bank public was broadly circumvented – in order to float the burgeoning federal deficit - which was the direct result of his monetary policy blunders.
Using interest rates as the monetary transmission mechanism destabilizes the economy and introduces added risk for investors. What is the proper policy rate consonant with the level of economic activity (employment and inflation mandates), which would have prevented the recent market downswing? The answer is that there isn’t a proper level. The money stock (and thus AD), can never be managed by any attempt to control the cost of credit (pegging rates can’t be relied upon to counteract the distributed lag effect of money flows (which can be inherently sudden, and incessantly temporal). Thus the Fed’s always “behind the curve”.
The NBs are not in competition with the CBs. It is one of the puzzles of money, that the welfare of the economy and the CBs, is dependent upon the welfare of the NBs. Note that this conclusion is opposite of the direction of political-economic instruction of the last 57 years.
if i understood everything you wrote in your long post, you are saying that corporations ( the non-banks) and human beings with lots savings aren't going to invest them into actual businessnness or into consumption because the cetnral bank is printing more money to buy whatever good 'debt' is left making the yield on any investments pretty fucking shitty DESPITE all the money printing.
yes, of course there is no competition between central banks and non-banks, THAT IS THE WHOLE POINT OF THE SYSTEM. you are only pointing out that monetarism is a big lie. it is and it isn't.
if the central banks all went bust, along with the fed, in 2008 , there would have been a political failure of the system. the system wasn't designed to handle mass defaults. and thus a mjoar CHANGE would have had to occur to accomodate massive unemployment and massive overturning of the american business sector. more important-----a HUGE change in the way money is created in this country would have had to occur. even a complete consolidation and rechartering of the federal reserve would have been very very siginifcant, and possibly, like the weimers, the united setates government may have simply outright nationalized the banks. [ though this seems very unlikely though andrew jackson did it].
so in that scenario---the big lie of monetarism would have been realized and we would be happily picking up the pieces right now and actually rebuilding our country instead of watching it die a prolonged death while the powers that be front run the entire collapse.....and make money doing it.
either way, the people on the bottom are always fucked. money never changed that, and it never will. social status , hierarchy, and casting, exists EVEN IN CHIMPANZEES. it existed in homo sapien far earlier than the times where homoS created money.
CB time/savings deposits, unlike savings-investment accounts in the “thrifts”, bear a direct, one-to-one relationship, to transactions accounts. As TDs grow, TRs shrink, pari passu, & vice versa. The fact that currency may supply an intermediary step (i.e., TRs to currency to TDs, & vice versa) does not invalidate the above statement.
Monetary savings are never transferred to the intermediaries; rather monetary savings are always transferred through the intermediaries. Indeed, as evidenced by the existence of “float”, reserve credits tend, on the average, to precede reserve debits. Therefore, it is a delusion to assume that the intermediaries can “attract” savings from the CBs, for the funds never leave the commercial banking system.
Consequently, the effect of allowing member CBs to “compete” with financial intermediaries (non-banks) has been, & will be, to reduce the size of the intermediaries/non-banks (as deregulation did in the 80’s) – to reduce the supply of loan-funds (available savings), to increase long-term interest rates, to increase the proportion, & the total costs of CB TDs.
Contrary to the DIDMCA underpinnings, member commercial bank disintermediation (an outflow of the bank’s deposit liabilities), is not, & has not been, predicted on interest rate ceilings. Disintermediation for the CBs can only exist in a situation in which there is both a massive loss of faith in the credit of the banks & an inability on the part of the Federal Reserve to prevent bank credit contraction, as a consequence of its depositor’s withdrawals.
Prior to the Great Recession, the last period of disintermediation for the CBs occurred during the Great Depression, which had its most force in March 1933. Ever since 1933, the Federal Reserve has had the capacity to take unified action, through its "open market power", to prevent any outflow of currency from the banking system.
However, disintermediation for financial intermediaries- (non-banks), is predicated on their loan inventory (& thus can be induced by the rates paid by the commercial banks); earning assets (e.g., mortgages), with historically longer term structures & lower net interest rate margins/spreads (between short-term borrowings & longer-term lending).
In other words, competition among commercial banks for TDs has: 1) increased the costs & diminished the profits of commercial banks; 2) induced disintermediation among the "thrifts" with devastating effects on housing & other areas of the economy; & 3) forced individual bankers to pay higher & higher rates to acquire, or hold, funds.
Savers (contrary to the premise underlying the DIDMCA in which CBs are assumed to be intermediaries & in competition with thrifts) never transfer their savings out of the banking system (unless they are hoarding currency). This applies to all investments made directly or indirectly through intermediaries.
Shifts from TDs to TRs within the CBs & the transfer of the ownership of these deposits to the NBs involves a shift in the form of bank liabilities (from TD to TR) & a shift in the ownership of (existing) TRs (from savers to NBs, et al). The utilization of these TRs by the NBs has no effect on the volume of TRs held by the CBs, or the volume of their earnings assets. I.e., the non-banks are customers of the deposit taking, money creating, CBs.
flow 5 , you are getting technical on this shit. and you lost me. i am highly self educated but really do lack the detailed knowledge of the inner workings of different accounts. i see the forest, but know not many of the trees.
i would like to learn more. what is your background and do you have advice for as how to read/learn more.?
Here's an interesting take about life after death from a particle phycisist:
http://www.dailymail.co.uk/sciencetech/article-2503370/Quantum-physics-p...
Before I began exploring particle physics I sought orgination, seeking God. The answers I received was that all things have happened, are happening and will happen again but with slight deviation based on radiation.
The problem with organized religions is they become lazy and state an answer without explaination. Like a student that knows the answer to an equation but can't explain the process. What I was told is evolution is a process that effects all living things and "God" is a rotating chair.
I conducted experiements with my PC with electrons and reversing polarity of electrons to create quantum tunneling. Partcles can exist simultaneously at two places at once. It ties into quantum entanglement and potential teleportation of consciousness from here to other dimensions. Space travel in the classical sense is a waste of time. I continue to study and love particle physics. It tells me more of what is going to happen and why in this world then any chart or historian can.
I recommend you to try DMT.
Quantum Darwinism - Great screen name.
No need for DMT. Adrenaline increases beta brain waves. Just fast for a few days to starve your body of nutrients and have adrenaline replace it. My understanding of this process was accidental, I suffered from the same anxiety disorder (caused by diverticulitis) as Georg Cantor, inventor of Cardinal Sets in math and math beyond infinity. Now through research, I conrtol the process at will.
i reccomend you save some brain cells , money and time, and don't try dmt.
watch someone try dmt, speak to them after and attempt to discern whether or not the experience of chemical delusion is one that is worth your effort, let alone the risk.
even without knowing you, i propose , the answer is most liklely no.
Math defines for humans what already exists.
Knowing how to count does not make anyone a more or less mortal miracle.
Ebonwortb - Why bring up "miracles". Math is how and why and that to me is as important observations of it just "is".
Example: We all conclude the sun is bright. Fine. But why? The why is tye learning that is critical to evolutionary involvement of the advancement of our species.
Math is your religion, and that is okay.
Yes, got censored there. Too many dumb fucks to rail against. Got the downswing from 10/1 to 10/15 (end of the seasonal drop). As stocks immediately recovered, Vt must have accelerated. Time to buy gold. Oil will turn by Dec. Fed to jack rates by 1st qtr.
* = bottom's in
1/1/2014 ,,,,, 0.158 ,,,,, 0.344 2/1/2014 ,,,,, 0.126 ,,,,, 0.381 3/1/2014 ,,,,, 0.139 ,,,,, 0.315 4/1/2014 ,,,,, 0.154 ,,,,, 0.333 5/1/2014 ,,,,, 0.146 ,,,,, 0.39 6/1/2014 ,,,,, 0.128 ,,,,, 0.344 7/1/2014 ,,,,, 0.168 ,,,,, 0.337 8/1/2014 ,,,,, 0.141 ,,,,, 0.315 9/1/2014 ,,,,, 0.099 ,,,,, 0.278 10/1/2014 ,,,,, 0.072 ,,,,, 0.298 * 11/1/2014 ,,,,, 0.076 ,,,,, 0.288 12/1/2014 ,,,,, 0.088 ,,,,,0.224
Flow5 - I am curious. Did they delete comments or suspend your account? A shame, you are brighter than most and add value with your charting and opinions to preserve posterity.
what if the AUSTRIANS AND KEYNESIANS ARE NOT AT ODDS WITH ONE ANOTHER BUT SIMPLY PART OF A SPECTRUM ???
there is a third way of looking at things----a way which actually tries to understand how the relationship between the savings and payment network we understand to be 'money'------and the underlying human activit(ies) from which the expectation that 'savings' can be converted into 'human labor or loyalty applied to x,y,z'
to truly understand savings, and what 'savings' mean , you must think of human beings as squirrels. to understand the nut, you have to understand what the squirrel is , what he does, and what might happen both when he hides his nuts ( the creation of savings/money) and when he digs up his nuts ( the act of attempting to 'use' the savings)
it is a useful exercise in learning about human activity and money to study the difference between austrianism and keyneism, but this dichotomized bifurfacted view of the world is , in many ways, a limiting and narrowing of the lense of human activity, to one specific door.
that door is now so popular as to comprise the 99% of the rhetoric of what passes for economic debate these days . therefore this useful exercise can also be like doing ONLY dead lifts in the gym in and out over and over again.
it can be bad for you if you do to much and blinds you to the other exercises and ways of toning the body.
keynsian/austiran yin/yang is not the only yin/yang out there and not the only way of thinking about human activity . it is however, the current 'voices of the day' and will dominate the talk of those who consider themselves thoughtful and intellectual especially on matters of economics. not only does austrianism not give people a lock on predicting the future , as no economic philosophy really can help you TIME the future for trading and speculation, but it doens't really give you a lock on understanding the potential thrusts of human history . for example.
austiranism didn't really predict the outsourcing led financing bubble that allowed cheap chinese and emerging market labor to be used as a leverage tool for financing entire economies ( lending u.s. dollars money into china ) . could this have happened without government intervention. almost definintely. yes, trade can happen without government. but because of the nature of trade , and the nature of borders and shipping lanes, government inevitably gets involved.
financing trade isn't about keynsiansim--despite the fact that money is printed by the shit-ton---to accomplish it.
monetarism and fiscalism are both issues which austrian 'theory' approaches separately, but through its own specific lens. there are other lenses.
First, there is no ambiguity in forecasts: In contradistinction to Bernanke (and using his terminology), forecasts are mathematically "precise”:
(1) “Money” is the measure of liquidity; the yardstick by which the liquidity of all other assets is measured;
(2) Income velocity is a contrived figure (fabricated); it’s the transactions velocity (bank debits - Vt) that’s statistically significant (i.e., financial transactions are not random);
(3) Roc’s in nominal-gDp are the product of roc’s in monetary flows (M*Vt) (or aggregate monetary purchasing power), i.e., our means-of-payment money (M), times its transactions rate of turnover (Vt);
(4) The rates-of-change (roc’s) used by economists are specious (always at an annualized rate; which never coincides with an economic lag). The Fed’s technical staff, et al., has learned their catechisms;
(5) Friedman became famous using only half the equation (the means-of-payment money supply), leaving his believers with the labor of Sisyphus;
(6) Contrary to economic theory, & Nobel laureate, Dr. Milton Friedman, monetary lags are not “long & variable”. The lags for monetary flows (MVt), i.e. the proxies for (1) real-growth, & for (2) inflation indices (for the last 100 years), are mathematical constants. However, the FED's target (interest rates), is indirect, varies widely over time, & in magnitude;
(7) Roc’s in (MVt) are always measured with the same length of time as the specific economic lag (as its influence approaches its maximum historical impact (not an arbitrary date range); as demonstrated by the clustering on a scatter plot diagram);
(8) Not surprisingly, the companion series, ....(their roc’s), corroborate both of monetary flows’ (MVt) distributed lags –-- their lengths are identical....;
(9) Consequently, since the lags for (1) monetary flows (MVt), & ...., are synchronous & indistinguishable, economic prognostications (using simple algebra), are infallible (for less than one year);
(10) Asset inflation, or economic bubbles, are incorporated: including housing, commodity, dot.com, etc. This is the “Holy Grail” & it is inviolate & sacrosanct: See 1931 Committee on Bank Reserves Proposal (by the Board’s Division of Research and Statistics), published Feb, 5, 1938, declassified after 45 years on March 23, 1983. http://fraser.stlouisfed.org/docs/meltzer/bogsub020538.pdf;
(11) The BEA uses quarterly accounting periods for real-gDp and the deflator. The accounting periods for gDp should correspond to the specific economic lag, not quarterly. Because the lags for gDp data overlap roc’s in MVt, the statistical correlation between the two is somewhat degraded. However the statistical correlation between roc’s in MVt, & for example, the bond market is unparalleled;
(12) Monetary policy objectives should not be in terms of any particular rate or range of growth of any monetary aggregate. Rather, policy should be formulated in terms of desired roc’s in monetary flows (MVt) relative to roc’s in real-gDp;
(13) Combining real-output with inflation, to obtain roc’s in nominal-gDp, can then be used as a proxy figure for roc’s in all transactions. Roc’s in real-gDp have to be used, of course, as a policy standard;
(14) Because of monopoly elements, & other structural defects, which raise costs, & prices, unnecessarily,& inhibit downward price flexibility in our markets, it is advisable to follow a monetary policy which will permit the roc in monetary flows (MVt), to exceed the roc in real-gDp by c. 2 – 3 percentage points;
(15) Monetary policy is not a cure-all, there are structural elements in our economy that preclude a zero rate of inflation. In other words, some inflation is inevitable given our present market structure and the commitment of the federal government to hold unemployment rates at tolerable levels;
(16) Some people prefer the “devil theory” of inflation: “It’s all Peak Oil's fault", ”Peak Debt's fault", or the result of the “Stockpiling of Strategic Raw Materials/Industrial Metals” & Soaring Agriculture Produce. These approaches ignore the fact that the evidence of inflation is represented by "actual" prices in the marketplace;
(17) The "administered" prices would not be the "asked" prices, were they not “validated” by (MVt), i.e., “validated” by the world's Central Banks;
Flow5 - Wow! Great stuff. I wonder if your the same persona as I saw amd admired on Seeking Alpha for years. In any event, thank you for the contribution.
flow 5 are you are positing that a complete description of any economy is fully precise and complete? that there are no mysteries about the complex EMERGENT system that we call an economy?
people have suggested if you could digitize all money and require an automatic parralel system of notification of each and every transaction to a central bank, that the money system could be informationally complete for study.
i highly doubt this is the case, but even so------money is not close to being totally digitzed as of yet. and so the only hard numbers and figures, that aren't a product of imperfect sampling are top down figures that we can presume aren't fixed or hidden. but this too is in doubt. the fed doesn't allow it's balance sheets or accounts to be audited. it's creation of foreign money through swap agreements is documented through prevented from being quantified.
i am not alleging what you are sayign is wrong, i'm just asking you , WHAT ARE YOU SAYING?
i'm confused. and would like to learn more. i am willing to listen and learn with an open ear. i am unwilling to accept the proposition that economics is a closed science with settled complete analytical framework for describing the reality of human interaction through networks of promises and payments that we call money systems. that system comprises many subsystems itself, and is extremely complex and growing in complexity by the day.
however , from the birds eye view, there may be many simplications and reductions that are useful to accept for the purpose of understand various feedback loops , control systems, and over-views of the functioning of the entire monetary 'climate' ( if you will. )
i would however, be curious as to what parts of what you are saying can provide me useful incite into your lense, your vision.
can you pm me a message? i'd be happy to correspond via email.
You are on the Right Track......
Neither are "Right" or "Wrong" but rather ..."part of [the] spectrum"......
It is the Confluence of Mathematics and Human Nature.....
Inflation and Deflation, as Night is to Day........
Past is Prologue.......
Quantum Physics and Religion are irrelevant to the matters....
And most Spot on is this observation...
"99 % is Rhetoric".....
Indeed......
The balance between Keynesiam and Austrians (should be called Freidman economics but I digress) is the argument about the marginal utlility of debt. It indeed has it's place but it seems those in power as per norm are making poor arguments as to why they should continue this cycle to spend beyond means which really means indirectly taxing the citizens to remain in power a little longer.
No worries powerheads, history shows 2/3 of you still remain in some seat of power but that power is more widely distributed. The central bank model has some merits regarding power sharing (ergo shifting reserve currency to China) but decreases purchasing power, in other words you people are drastically overpaid in the skim for what little value you do provide. Make banking a 4th branch of government and the nation issue its own currency is the solution but your resistance to the inevitable means WW3 will make you wise up the hard way. And yes, YOU personally will be effected.
if banking is goign to lead to an incremental/gradualist shift of power, or that is it's aim, wouldn't you argue that internationalist banking is perhaps one fo the things potentially DELAYING the ordinary course of aggression that might have led to ww3 long long ago.
the u.s. military and other international military loci of power have been agitating for ww3 for quite some time. perhaps the bankers are more than happy to take advantage of the next war by financing it, but not all of them can benefit equally, only those at the top. thus, perhaps banking has , to a degree mitigated the rush towards the next set of conflicts and will continue to do so as long as the chinese and american financial systems can be mediated calmly and MUTUALLY through an arbitrator system where the status quo benefits both the chinese AND The american power structures.
once those relations change. and mutual benefit ceases, or the power structures themselves independently change via revolution---------[ seems less likley] then perhaps the moderating profit seeking impoverization of u.s. peasantry to benefit the chinese peasantry ---influence will stop and war shall begin?
The fixation on monetary policy issues ignores the (Republican) elephant in the room, the systematic blocking of fiscal stimulus sufficient to end the recessionary unemployment situation. The congressional Republicans sacrificed this nation's economic growth in a deliberate attempt to destroy Obama's presidency.
In a time when the nation's infrastructure is crumbling, there are may unemployed, and government can borrow at low cost, even an idiot could see that a big public works fiscal stimulus program would make sense. This is what Keynsian fiscal policy would dictate. If we had not had the inadequate stimulus that Obama managed to get through congress, we would be in the same sustained downturn as austerity-obsessed Europe.
Krugman was right, and the debt and inflation worriers were wrong. Each day brings further evidence to that effect.
Kantbelieveit - The only spending worth a damn during the last Great Depression was WPA building electricity producing dams. This time around, it happened but the citizenship wasn't included (more fascist than the 1930's and yes America was fascist then too) Democrats are worth nothing, Republicans worth barely next to nothing. Neither party is conservative or looks out for national interests.
Unless money (& money flows), expand at least at the rate prices are being pushed up, output can't be sold and thus jobs will be cut (i.e., there is insufficient upward & downward price flexibility within our economy, e.g., "sticky wages").
even an idiot can see that 30 trillion in debt is far better than 18 trillion.It's way better than the 8 trillion the democratic God Obulshit started out with.
Why I am surprised that we don't just print GDP, say 12 trillion, each year and retire everyone. Just think, we could be the first nation in the world to retire en masse. We could sit around drinking and laughing at those stupid nations that think you actually have to work to have an economy. If only everyone knew what you knew, all we need is print, print, print.
Even the Beatles knew it,
Print, Print, Print, Print, Print, Print, Print, Print, Print.
There’s nothing you can do that can’t be done.
Nothing you can sing that can’t be sung.
Nothing you can say but you can learn how to play the game
It’s easy.
There’s nothing you can make that can’t be made.
No one you can save that can’t be saved.
Nothing you can do but you can learn how to be you
in time – It’s easy.
All you need is Print, all you need is Print,
All you need is Print, Print, Print is all you need.
Print, Print, Print, Print, Print, Print, Print, Print, Print.
All you need is Print, all you need is Print,
All you need is Print, Print, Print is all you need.
It is OK to print money to kill Muslims. It is OK to print money to build nuclear missiles. So how is it not OK to print money to build schools, hospitals, and train stations? The roads in my town are full of potholes, but I live in the richest nation on Earth. My taxes go to pay for the THEATER OF TERROR, not for the public good.
We can't fix our roads because the banks and weapons makers have concentrated lobbying power, and they can pay for the propaganda that keeps getting crazies re-elected. The Congress is full of creationists, warming deniers, xenophobes, and war mongers - all keeping the money flowing to the biggest corporations.
A third of the American electorate are functional illiterates who can be riled up by a regular dose of hate propaganda electronically administered a few times a week. They can be made to declare war on any people on earth in 72 hours by the hate merchants. Reasonable people are shouted down by cries of TERROR, TERROR, TERROR, and our country continues to sink into third world decay.
A good basic article.
It accomplishes a first step to taking the "religion" out of this discussion.
Interesting ....like playing Dungeons and Dragons....not really of much practical use...but for those without much other intellectual stimulation...perhaps a way to fill a boring afternoon.
Call me when they call from a multiverse where I am king...or Fed Chair.
Ok Riddick
i like your pink toenails.
riddick as fed chair. hell yes.
As long as we continue to use private debt issued script, all discussions should be through the lens of how a farmer best looks after his herd.
Period.
pods
" thinking—incorrectly—that your reality is the only reality."
That is man's greatest curse ever! Think about it, and realize a lack of knowledge of underlying physics allows mankind to act very stupidly, when really getting the reality of the world opens you to new possible ways of acting and thinking. Physics is only explainable, I believe, Quantum mechanics is only explainable, I think, IF you work on the multiple universe theories. I hear people say Quantum Mechanics is strange, yes, but only if you believe that your reality is the only reality. It is not strange at all, if you accept multiple universes.
This is a lot of teeth gnashing over what the Fed should or shouldn't be doing to promote long-term growth.
When one accepts that the Fed's current actions have financial institutions' well being as a primary goal, then everything comes into focus and the hand wringing about Keynsians and Austrians can be left alone.
Economics is simple. Economic prognostications are infallible. What's wrong is that economists: don't know that aggregate monetary demand is measured by monetary flows (MVt), not nominal-gDp; don’t know the difference between the supply of money & the supply of loan funds; between means-of-payment money & liquid assets; between financial intermediaries & money creating depository institutions; don’t recognize that interest rates are the price of loan-funds, not the price of money; don't recognize that the price of money is represented by the price level; don't realize that inflation is the most important factor determining interest rates, operating as it does through both the demand for and the supply of loan-funds.
POSTED: Dec 13 2007 06:55 PM |
The Commerce Department said retail sales in Oct 2007 increased by 1.2% over Oct 2006, & up a huge 6.3% from Nov 2006.
10/1/2007,,,,,,,-0.47,,,,,,, -0.22 * temporary bottom
11/1/2007,,,,,,, 0.14,,,,,,, -0.18
12/1/2007,,,,,,, 0.44,,,,,,,-0.23
1/1/2008,,,,,,, 0.59,,,,,,, 0.06
2/1/2008,,,,,,, 0.45,,,,,,, 0.10
3/1/2008,,,,,,, 0.06,,,,,,, 0.04
4/1/2008,,,,,,, 0.04,,,,,,, 0.02
5/1/2008,,,,,,, 0.09,,,,,,, 0.04
6/1/2008,,,,,,, 0.20,,,,,,, 0.05
7/1/2008,,,,,,, 0.32,,,,,,, 0.10
8/1/2008,,,,,,, 0.15,,,,,,, 0.05
9/1/2008,,,,,,, 0.00,,,,,,, 0.13
10/1/2008,,,,,,, -0.20,,,,,,, 0.10 * possible recession
11/1/2008,,,,,,, -0.10,,,,,,, 0.00 * possible recession
12/1/2008,,,,,,, 0.10,,,,,,, -0.06 * possible recession
Trajectory as predicted:
BERNANKE SHOULD HAVE SEEN THIS COMING. IN DEC. 2007 I COULD.
"that deficit spending in a recession can be offset via fiscal surpluses in an expansion"
Herein lies a huge if the the entire flaw of the Keynesian policy as implemented. We do not use fiscal surpluses in an expansion to offset recessions. We spend the surpluses and then spend even more during recessions. Always more, more more... It doesn't work this way. Never did. Never will. Not even ever intended to work this way. Complete missapplication of even the basic theory.
And none of this has to do with monetary policy which the Fed using using to rape the middle class out of existence to save the banker class. Actually it's not even saving at this point, it's vaulting them to heights never before seen in history while the middle class disintegrates.
Relax. Nothing is under control.
"Risk Uncertain"?.... bullshit. It's a big risk having banker and economists captured by a perpetual rent-seeking money machine at everyone else's expense. But I like the Armored Car approach, very much. Thinking about getting one and putting some girlfriends in the back and calling it an Amoured Car so it won't arouse suspicion.
What an inapt analogy! There is nothing physics-like about economics. The reason QE has been an abject failure is because there is no velocity of money thanks to the "you didn't build that" economic agenda that has prevailed for the past six years. If the economic agenda becomes more business friendly, continued QE would cause loan demand to soar and inflation would jump (which was their stated intention). So it would have worked to jump start the economy under the proper circumstances and could have been much more limited in scope. The reason they have had to do unending QE isn't because QE doesn't work - it's because the economic conditions suck for businesses and entrepreneurs.
Hmmm, might need to read up on physics.
"nothing physics-like about economics???"
"abject failure is because there is no velocity of money"
Velocity is a vector measurement of the rate and direction of motion or, in other terms, the rate and direction of the change in the position of an object. http://physics.about.com/od/glossary/g/velocity.htm
"QE would cause loan demand to soar and inflation would jump"
Everything about this is physics. An action, or energy input (QE) causes a reaction, demand soars, inflation jumps. Soaring and jumping have physics written all over their concepts.
I could get real detailed and go on ad infinitum, but its Sunday, so I will give it a rest.
Inapt? I think perhaps you were looking for inept.
The one thing I would like to interject is a thot about eternal growth. While it is often pointed out that one cannot have infinite growth on a finite planet. I think it even more interesting to compare it with endless growth or expansion on a universal scale. Our current thinking is that dark energy counteracts gravity. Therefore the universe is on an accelerating and perhaps endless expansion. The end result of that expansion is that every atom expands away from every other atom. Perhaps even the pieces of the atom fly apart and this leaves the universe cold, unchanging, and fundamentally without form; useless to life.
Applying this to economics suggests that the harder the dark energy (.gov) pushes the economy the colder it will become. Until, one day there will be no life left; no energy left to rebuild with. There will be no way to bring the pieces back together. Life, heat, and discernable relative motion in the economy will cease to exist. Furthermore, economic gravity (the opposite force of expansion) will have no power over the pieces. There will be no implosion. We will just drift away.
Day after day I'm more confused
Yet I look for the light through the pouring rain
You know that's a game that I hate to lose
And I'm feelin' the strain, oh, ain't it a shame?
Oh, give me the beat, boys and free my soul
I wanna get lost in your rock 'n' roll and drift away
Give me the beat, boys and free my soul
I wanna get lost in your rock 'n' roll and drift away
Won't you take me away?
Dobie Gray
The entire global economy is mathematically destined to implode
in unto itself over time. Central planners cannot find growth because
growth is not the algorithm post-fucking-Bear Stearns @ 11:00am
March 10th 2008 time. Search for yield is fruitless unless one is fully willing to bet against growth entirely. The Hegelian Spiral continues on ad infinitum and the ruling classless kleptocrats are left holding the bag of loot when the masses [see my bro Karl Marx] finally get the picture and rise-the-fuck-up out of their old World view of a paradigm [Casino Capitalism]
and realize that the ruling classless kleptocrats are really in bed with de Rothschilds Bank and a scheme to siphon off every bit of 'wealth/assets/et cetera' that you own eventually. When they de-regulated Glass-Steagall the intention to steal your assets was already planned. In brief, when Glass-Steagall was done away with the ability
to invest with public money was left with no breaking system or oversight on risk. Bankers like to take risk with public money, but when it comes to risk with Banker money that is another matter entirely, SUCKERS.
NOTE: I will sell the algorithm for $30 trillion to the first buyer with
physical gold as currency.
"... return an economy to stability and growth ..."
Since the stability of previous economic growth was based on the industrial revolutions being able to strip-mine the natural resources of the planet at an exponentially increasing rate, using "money" made out of nothing as debts to "pay" for doing that, and since we are reaching real limits of diminishing returns from being able to continue to strip-mine the planet's natural resources, it is IMPOSSIBLE to ever "return an economy to stability and growth!"
NONE of the old-fashioned economic theories, such as outlined in this article above, can cope with the transformations which are going to be forced to happen through evolutionary ecologies adapting to fundamentally changing conditions.
This kind of article fails to address the most important facts, that the ONLY connection between human laws and natural laws is the ability to back up lies with violence. The foundations of our political economy are enforced frauds. Since NONE of the mainstream ideologies address that fact forthrightly, NONE are able to go through adapting to the real problems caused by too much success, for too long, of those enforced frauds.
QE was merely the same systems of enforced frauds, developing at the same rates of exponential growth, as they had already been doing for several decades. The real limits are those of a finite planet, which limits require facing the facts that endless exponential growth is absolutely impossible. However, that actually means that there must emerge new death controls to limit growth. Since the established systems, and their controlled opposition, are ALL based on triumphant systems of organized lies operating robberies, which do so by lying about that as much as possible, we are necessarily headed towards those debt slavery systems of enforced frauds generating numbers which are debt insanities, which will provoke death insanities.
There are NO solutions possible within the frame of reference of the established systems, and NONE are being proposed by the controlled opposition groups, because their previous successes were based on being able to operate within the frame of reference of the enforced frauds, which became the foundation of the political economy. Therefore, the most probable future will be that we will continue to high-grade ourselves to hell, because everything is based on strip-mining the planet, which sustained exponential growth, until that will collapse into crazy chaos.
The only genuinely better resolutions would require profound paradigm shifts in political science, which neither the ruling classes, nor those they rule over, will develop until it is too late. Since Neolithic civilizations were based upon the ability to back up lies with violence, with "human farming," or human slavery, at the core of everything else that was farmed, those basic social facts are the essential problems, which have become runaway criminal insanities headed towards psychotic breakdowns, due to the degree that our society is totally dominated by the biggest bullies' bullshit, which includes all of the currently significant theories of economics.
NONE of the publicly significant theories of economics can be reconciled with environmental ecology, and general energy systems, because they refuse to address their central facts, that the established systems are legalized lies, backed by legalized violence, because the ONLY connection between human laws and natural laws is the ability to back up lies with violence. Since those who were the best at doing that were also the most successful by lying about that the most, there are no ways for enough human beings to face more of the radical truth about themselves ...
It's comments like this one, RM, that prove that not only are you the best writer here, but that your analytical ability is also nonpareil.
As you may know I too am a huge fan of 'diminishing returns'. I believe that capitalism -- the gran capitalism of the West -- is suffering from a gran mal seizure of 'diminishing returns. And eventually diminishing returns lead to NO RETURNS. AND NEGATIVE RETURNS. (just saying)
Aren't Capitalism and America doppelgangers? The Declaration of Independence and the Wealth of Nations both published in 1776. America the Tower of Capitalism. Capitalism the strength of America.
They thrived together as one and now it looks like they will expire together.
Yes, sad. But, as they say, 'the moving writes, and having writ moves on'.
Has Manifest Destiny just stepped on us and ground us into the pavement like a burned down cigarette butt?
I wonder what the Chinese characters are for 'pastures new'?
I know we've had our disagreements, RM, but I do want to be friends.
I feel that one of the best authors that gets republished on Zero Hedge is Gail Tverberg, whose own Web site is: http://ourfiniteworld.com/
The phrase "Diminishing Returns" I adopted from her emphasis of the importance of that concept. She stresses how our fundamentally fraudulent financial systems will be the FIRST FRONTIERS where the effect of environmental limits will significantly manifest. However, in my opinion, she tends to make excessive use of Hanlon's Razor, in the sense of not facing the degree to which the established systems were made and maintained through backing up lies with violence, which is how and why those established systems have such evil attitudes of deliberate ignorance towards rational evidence and logical arguments regarding the facts that the planet is finite. ... Even IF there were technological miracles to realize new energy sources, which is theoretically possible, the basic issue of waste heat would not disappear.
Yes, she does.
In her discussion of the collapse of the price of oil in the last half of 2008, she fails to tell her readers that the rise and fall of the price of oil was one of the biggest scams in the market place. In a league with Enron.
You know how these criminals operate.
Allow me to introduce you to De Broglie-Bohm Theory, a perfectly valid interpretation of Quantum Mechanics that does not require infinite universes and is deterministic.
http://plato.stanford.edu/entries/qm-bohm/
One must be careful not to confuse the science of quantum mechanics with the philosophical interpretations of quantum mechanics. The multiverse interpretation is popular metaphysics not physics and Bohm's interpretation, whilst not widely known, seems much less confusing in my opinion (and it is just an opinion because this isn't science here, it's philosophy).
I'm not surprised the OP led with this common mistake though, given that he spent the rest of the article revisiting the tired old Austrian vs Keynesian "debate", seemingly ignorant of the fact that Keynesianism was dethroned in 1971 by the neoliberal banksters (I include Hayek and Friedman in that group).
QE is a Monetarist creation, with just a sprinkling of Keynes on top. Yet despite Monetarism being the Fed's dominant school of thought for many decades, not once is Monetarism mentioned in the OP. Perhaps this is a lingering sentiment from the time when Monetarists and Austrians were allies in the battle against Keynesians (enemy of my enemy is my friend silliness).
In truth, all the Schools of Economics are full of shit when they make claims to "righteousness". Everything is a power play, stay suspicious.
Profoundly correct comment, Mediocritas:
"One must be careful not to confuse the science of quantum mechanics with the philosophical interpretations of quantum mechanics. ... stay suspicious."
Hey RM, let me grab you while your attention is here.
I was reading one of your posts a few days back (hard to find things here on ZH) in which you elaborated (with a logical sequence of statements) upon why you think it is wrong-thinking to call economics unscientific. As I recall something along the lines of:
- Warfare employs scientific techniques. The "truth" filter is survival (the strategies that don't work die) and the commander is a scientist seeking to discover warfare "truths".
- Politics and economics (both independently and as siamese twins) are simply forms of low-intensity warfare: they are sub-categories of warfare. [I hereby extend this to include law].
- Therefore economics, politics and law are scientific in the sense that they embody the "science of warfare".
I certainly agree with most of this (I view most economics as politics in disguise and politics as civilized warfare, therefore most economics is civilized warfare in disguise), but I still balk at the thought of referring to any of these as science.
There is a large overlap between engineering and science. On the cutting edge of science, engineering is required to prototype hardware that enables new observations to be made (eg, the Large Hadron Collider is a triumph of engineering on the way to getting at some conceptually relatively simple science). On the cutting edge of engineering, science is required to prototype hardware that the world has never seen before (eg, Walter Brattain experimenting with semiconductors).
Modern science and engineering can't progress far without each other and they often work so closely together that the distinction between the two is blurred, the distinction between applied science and engineering being especially small. However, I do see a clear distinction between engineering and science that makes me think economics is better described as social engineering rather than social science.
Engineering has an agenda and when engineering uses science, then it is applying science with an agenda. The agenda is the desired outcome, known in advance and well articulated in the project specification (or at least it should be; many a failed project is doomed from the start by poor project definition). Engineers go about trying to build a system that will meet the stated requirements and, in so doing, must act and think scientifically. The process often results in accidental discoveries that spawn off new science (engineers are, in my opinion, the greatest originators of scientific discovery), but the entire goal-directed process is not science, it's engineering.
Science (pure basic science) is, at its core, agenda-free (with an admission that yes, science funding often comes with strings attached, so I'm not being entirely pragmatic here). A pure scientist (free from bureaucratic constraints) is an explorer, actively seeking out observations that will expose the workings of nature. In a sense, a passive scientist is a neutral observer and an aggressive scientist is a reverse engineer.
(A distinction between scientist and mathematician is that a scientist must limit himself to the physical world, whereas a mathematician is free to explore entirely imaginary worlds. Both are concerned with what is true, but a scientist has less room to move and therefore less potential to screw up in a puff of fantasy).
"Truth" for an engineer, particularly in a project that is FUBAR, all too often ends up being "whatever fuckin' works". Throw shit against the wall, see what sticks and bootstrap on that. They don't particularly care why something works, just that it does and that it does so reliably. Making sure something works reliably requires scientific behaviour (iteration, testing, limit finding, etc), but it can't be called pure science until the why is also investigated. Engineers are defined by their pragmatism, leaving a trail of academic boffins behind them to explore the deeper issues of why something exhibited the properties that it did.
So I cannot therefore accept the notions that warfare, economics, politics and law are forms of science. In my mind, they fit better under engineering and the term social science is a misnomer: it should be social engineering. Economists deceive themselves that they are scientists because they use some scientific techniques, but they are not scientists, they are social engineers kidding themselves otherwise.
(One example of economics being truly scientific is in neuroscience (eg, NMRI scanning of peoples brains as they make "economic" decisions), but this hardly deserves to be called economic science, it already has a name and that name is neuroscience).
These fields have an agenda. The warrior, economist, politician or lawyer knows in advance what the outcome must be and will set about trying to achieve that outcome at all costs. He will use whatever means necessary (often employing scientific techniques), testing to find that which works to get him closer to the goal and discarding that which does not. He doesn't much care why something works (or doesn't work), only that it does. This is engineering moreso than science.
To reform the "social sciences" first requires admission that they are "social engineering" and then set about making sure they conform to sound engineering principles (which they currently do not). At the most fundamental level, these social engineers fail to even communicate the desired outcomes and attributes of the system to be constructed. This is currently avoided as the "project managers" are an oligarchic few who depend on hiding the nature of their desired system from the cogs (people) that will comprise it (and be consumed by it).
I'd argue that economics is essentially a form of genetic engineering as, when applied, it results in a selection pressure upon humanity, turning us into Homo economicus, of various ecotypes. Perhaps one day even leading to a speciation event into lords and serfs (though this is unlikely as history demonstrates a predator-prey (Lotka-Volterra) cycle between masters and slaves).
Another excellent reply, Mediocritas, thanks! (Many people might say you summarize my position better than I do.) I must agree with your way of defining that "the term social science is a misnomer: it should be social engineering."
I think it is extremely difficult, if not personally impossible, for anyone to be sufficiently sublime to be "scientific" about their participation in political experiments that can determine whether they live or die, or are wealthy or poor. To attempt to approach being more purely scientific about society, one should attempt to appreciate in a more sublime way the WHY behind how energy was conserved in those patterns. However, political experiments can take one's entire life, in more than one way. It is therefore difficult to be sufficiently scientific in a sublime sense, when what "works" from a social engineering aspect can end up resulting in the degree to which one is rewarded or punished by other people, ranging from becoming richer or poorer, to being able to live better, or be murdered.
Ultimately, "absolute truth" can only be approached asymptotically. All relative truths added together may be "absolute truth," but that can not be experienced, because that experience tends to become blinding white light, so bright it can not be seen, or roaring white noise, so loud that it can not be heard. "Absolute truth" can no longer separate the observer from the observed.
That is one perspective that I take on your comments regarding the difference between more sublime science, versus more practical engineering. It is difficult to respect "the truth" more, when one's life depends upon that. As a famous quote from Upton Sinclair stated: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
Doing political experiments, in order to engage in political science, may put one's life on the line. In that context, it is difficult not to care what the outcome may be. It is difficult to attempt to be an objective observer, whose primary interest is discovering more of "the truth," rather than be an engineer, who mainly cares about whatever may "work," especially when what "works" can have such profound impacts upon one's life, not to mention those of one's family and friends too!
I'm just a peer reviewer here making minor language change suggestions to your thesis ;-) (That's how I see it anyway, I don't think there's much to be added or edited conceptually).
In return, I've already pinched many of your turns-of-phrase and absorbed your "peer-review" to better state my own position on these things.
A shame not all conversations can be so productive.
Mediocrates - Good link. To avoid mystycism the "how and why" to understand process is critical, that is if we want to utilize quantum mechanics for practical life extension (to 30 billion years verse 100 years).
Still, most of my studies point to our existing binary system of "light and darkness" of matter and anti-matter or more simply "as it is above so it is below" as Hermes taught. To me a portion of your particles exist here and other places but that does not mean your entire rememberance, stored as energy does.
Physisists have models up to twelve dimensions. That's fine to hypthosize and probably some of the math relating to those theories are true. However, why not focus on reaching the other side of the Atlantic first so to speak?
Why not understand and continue focus on 4D first? We're punching holes in 4D with the quantum computer, why not consider coordinates (acceleration and position) next for practical application? Mythology of quantum mechanics is trying to extend and speculate beyond capabilities, in my opinion perhaps no different than religion recognizing your point. First walk, then learn to run.
The concept of Newton's Flaming Laser Sword - which is one of the razors [ http://en.wikipedia.org/wiki/Razor_(philosophy) ] - neatly sums up my position which I think is also the position you are describing (I confess to being confused).
An extended description is linked below that also synchronizes with my views on philosophy in general:
https://philosophynow.org/issues/46/Newtons_Flaming_Laser_Sword
I like to imagine a sort of triage system for thinking. We have finite time on earth and finite brainpower, so we ought to (in my opinion) apply it to intellectual exercises that are most likely to lead to firm conclusion. It's certainly fun to think about scientific possibilities, but what moves us forwards is actually testing them.
Thought exercises that cannot (yet) lead to a test for correctness should be logged for potential future use, but not given higher priority than the rest (applying this would remove most of economics from politics).
While the philsophical interpretations of Quantum Mechanics are certainly interesting and I have my preferred interpretation (Bohmian), I don't think any serious person should make it a first priority to wage war for any particular interpretation (religious war). We simply can't know (yet) what's true and what's not so there's no point arguing about it. I'd rather focus on the collection of observations that provide us with solid insights into Physics.
If that's what you meant by talking about walking before running then yes, I agree. A vivid imagination is required for both philosophy and science, but the leash of reality must be regularly checked when hoping to advance science.
dupe
excellent, golden Mediocritas
"QE is a Monetarist creation..."
yes, but from a political point of view, QE, ZIRP and the various megabailouts like TARP, TALP, etc. have an agenda, too: save the current international banking system
your other excellent sub-comment explores it more in detail, but for sake of this argument, all "social engineering" is political engineering, and yes, politics is the art of the possible
when this last megacrisis blew up, Hank Paulson pushed for an agenda of "fixing things up", based on "save the whales", first directly, and then indirectly. in all this, neither Austrians, Monetarists or Keynesian had a "say", in that
if I build a huge dam over one village, and this dam is breaking... well, the first, immediate discussion is not about the sense of organizing water distribution that way. the first, immediate discussion is if the villagers are going to evacuate or will all help to fix the dam. once you have embarked in the second option, it's even more difficult to come back to the original discussion of how water should be channeled, stored and distributed. we just put so much effort in fixing the dam, remember?
the FED's QE has two political reasons: one is about NY's (and London's) megabanks, the other is (China's) currency war. Yes, "Everything is a power play"
No arguments here. QE is a monetarist creation, but its use is hugely political. Generally, I see economics as a tool of politics (though sometimes it can work in reverse (with respect to government politics) if the power players behind the applied economics are more powerful than the power players in government). I think of economists as similar to the chief priests of old, masters of ceremony and obfuscation, hiding the true game from the believers in the service of their masters (the true power players and HUMAN to boot).
The politics of QE1, 2, Twist, 3, N are fascinating and each is different (though the technique in each case is all the same). I think I have a pretty good instinct for the underlying politics in each case (overwhelmingly driven by bankster power maintenance with some internal power battles and certainly very little to do with employment and price stability, as parroted by the media), but I can't be sure without fly-on-the-wall testimonies.
I hope that there will one day be written a comprehensive history of financial events following the crisis (providing insights into the political struggles under the hood). I doubt we'll ever see it though because our bankster overlords require secrecy for their power to be maintained.
Also, in case there is any misunderstanding, when I use the word "politics" I am not referring to the activities of elected governments (just one component of politics), but rather the entire landscape of power-seeking (private and public, individual and group); power being the currency of politics. You can assume this global meaning whenever I refer to "politics" without a qualifier in any post.
We are political animals, as are all social animals. Like a fish swimming in water, we swim in politics and we're generally unaware of it until influenced by a suddenly changing condition (swift current, pocket of altered temperature, etc). Seeking power has a causative relationship with genetic continuance, as power provides better access to resources, including breeding partners, so evolution has selected for excellent politicians and it's best not to kid ourselves otherwise. Almost every single thing we do - that has a social component - involves a power consideration, eg. something so simple as choosing what to wear when going outside. We rarely just slap any old thing on do we? Why not?
So when I say everything is a power play, I really mean almost everything from the lowest, molecular genetics sense, right through to huge population dynamics. Survival of the fittest, for social animals, means genetic continuance for the best politicians; cue Radical Marijuana's lies backed by violence, it's all the same thing.
"We are political animals, as are all social animals."
Given that we could not exist at all, without the "sexual politics" between our parents, and their parents before them, that truism goes very, very deep, down into the genetics, far, far below the cultural superstructure based on the ability of that genetic code to enable beings with neural networks, operating through cultures, that can thereby understand themselves using words like "generations."
By the time we get up to the level of the monetary system effecting the lives of billions of people, we are in realms of social facts which require LOTS of language to even perceive exist, must less attempt to test which fomulatons of that language provide better models of the ways those social facts actually operate.
I think it is theoretically possible to apply "Newton's Laser Sword" to the monetary system. However, one has to be standing on LOTS of shoulders of giants to begin to do that adequately! By the time that "power" is channeled through the politics of perception (as that power becomes such symbolic information), we are deep into the realms where political experiments, while still possible, are even more open to wildly different interpretations than how the mathematics of quantum mechanics may be philosophically interpreted!
Plus, because we are not biologically hard-wired into the population level systems (no nervous system connection), and must use complex language to describe the system, our perception of the system will always be hopelessly incomplete and out of date.
At best, we can find a few trim-tabs that appear to move large masses of people in generally predictable ways, but it only works so long as the people being moved don't start to recognize the trim tab and try to move it themselves. The monetary system is one such trim tab (with a copious amount of laws to stop us messing with it).
Money is a pretty good proxy for power because it can buy resources and people. There's an intrinsic problem here because money is used to transact in two forms of power: the physical form (measured in Watts, but let's use Joules to convert from a flow to a stock) and the social form (measured in Status).
Joules are finite, limited by available, convertible energy from our Sun and Earth. Status is unlimited and herein lies a problem because the same $s are used to buy both. From an energy point of view, a container of rice and the Mona Lisa probably have little difference in value (embedded energy). An animal would likely consider the rice of higher value (more edible). But we humans, via our status-seeking behavior (politics) have assigned great Status value to the Mona Lisa, making it far more valuable than the container of rice.
Seeing as humans will always jostle for status, even if there were only two humans left on the planet, and that power-seeking is always relative rather than absolute, there is no limit to which the value of Status Currency can exceed Energy Currency. This means that over time, our quest for Status (including our valuation of human time (wages)) causes our monetary system to lose touch with the realities of physical, energetic limits.
For example, I once calculated that the human-equivalent value of a litre of petrol is 128 hours of hard physical labor, and that's an understatement given that no amount of human muscle can directly match the qualities of liquid hydrocarbons (can't power a jet airliner with passengers on bikes).
That litre of petrol has a relatively fixed value for all buyers on earth, regardless of status. Yet the same 128 hours of equivalent human effort has a much greater value and is highly variable depending on the status of the wage earner. Said another way, petrol has no status, despite it being so incredibly useful to civilization. It is the modern day replacement for a slave work force, worth very little due to low status.
Our $s therefore reflect little more than social power and have lost touch with Joules, thereby enabling us to build a monetary system that is incompatible with physical reality (limits).
For a time, back on Hanson's discussion lists I considered the possibility of solving this with a dual currency system in which all things had two prices, a $J (joule price) to represent embodied energy and a $S (status price). A buyer would have to meet both prices and it would be illegal to create $Js out of nothing as energy cannot be created from nothing.
However, it takes very little time to destroy this concept as there is no way to prevent the trade of one currency for the other and prevention of conversion is required to effect meaningful change that would keep the monetary system and economic activity within a sustainable ecological footprint. Status has always been able to buy Joules (and vice versa) and once this happens, we're straight back to regular $s.
I still think about it from time to time as it seems an obvious starting point. Finding a way to force the monetary system to be more scientific and conform to thermodynamic limits, which means separating away the system of human status-seeking to some place where it can't destroy everything. (Or at least dampening status-seeking behaviour through legislative processes (eg limiting CEO / worker pay disparity), education in appropriate philosophy, redistributive governance models (that already exist) or, at the extreme sci-fi end of it, genetic engineering to dampen our more aggressive animal instincts).
Perhaps it's not a solvable problem.
Mediocritas, perhaps it is a problem that has been solved many, many times, in history
I was hinting lately that the current problems are very similar to the mess Solon found in ancient Athens. Plenty of credit to everyone was enslaving half the population, to the point that even the Oligarchs were of the opinion this could not go further
what did Solon really do? besides the annulment of many debts and the state-buying of former Athenian citizens from their sold-for-debt slavery abroad?
he brought... Timocracy. Which is something that persisted, in various forms, up to the beginning of the 20th Century
and, in it's simplified form, it's nothing else then an exchange of resources from the rich for... honours in the state. Money for Status
you are an Oligarch? here, buy a warship for the state, we need 300 of them. you can name your warship
You see, the Quest For Status can be brought away from personal consumption to social consumption
redifine Status away from burning oil or wasting resources to something Status Seeker can actually do for... everybody
just look at the American Suburbia Phenomenon. I guess half of the poor critters living there don't even want a garden... they do it in order to appease the status-seeking of either themselves or... their womenfolk
redirect Status Seeking, this powerful human source of action, based as Radical hints to, on sexuality, to more sensible things and you tame half of the beast
we do it all the time, nowadays, for the Status Seeking of... corporations. just look at charity in the US and corporate sponsoring. this is the more or less unchanneled form
Theory of Forms/Allegory of Cave (Plato).
Seeking status among men is a spiritual weakness and will eventually lead to corruption and civil ills no matter how you cut it.
Can work in short term though, towards achieving some certain goals in certain circumstances, unless we are trying to establish Kingdom of Heaven here.
Well I don't think it's ever been solved because it's still here ;-)
Managed, to a limited extent yes! It's popular to pour scorn on our OECD current government systems, which is a shame as they have actually proven quite effective at managing the harmful effects of status-seeking, particularly after WWII though they peaked in the 1970's and have been sliding since. They're imperfect and worthy of criticism (but not of scorn). [In the same vein, I do not scorn Keynesianism as it did prove highly effective in its day].
The example you present is a fine one. We couldn't have built civilization without taming / redirecting the more harmful animal instincts and our civilizations will continue to fail in the future when our managment becomes inept. I never meant to infer that managing status-seeking was impossible (just that solving all the problems it causes is beyond us).
Redirecting status-seeking into harmless channels (eg the sports-mad public I have mentioned in the past) and limiting harm through social regulation are all we can hope for. I doubt there is a solution, but limiting harm with an aim to foster peace and prosperity is a worthwhile goal and requires a concentrated focus on regulating the factors that lead to extreme inequality, wherever and however they arise.
In a world with nuclear weapons we simply cannot afford to allow status-seeking to lead to a situation in which nuclear engagement seems an appropriate option. For this reason I have tempered my criticism of the European project in recent years as I've come to realize that the aim isn't to create heaven on Earth, but to prevent hell on Earth. (Though I do think that, as it stands, the euro component of the project may well cause the very thing the project seeks to avoid: large economic imbalances breaking down in hostility).
The current management throughout the world is doing a poor job of avoiding future war by using, or allowing, the banking system to exploit status-seeking and convert it into grand inequality. (Keeping up with the Jones's magnified by easy credit, ultimately feeding those that control the credit and impoverishing the rest: violence to follow).
Mediocritas, you are correct, you can't solve human nature. you can only try to temper human nature
in the same spirit, you can't bring Divine Justice On Earth and so Build A Heaven On Earth. but you can try to redress injustice and try to avoid Hell On Earth (cue in the American pre-millenialists and post-millenialists that are convinced of the opposite, one in one direction and the other in the opposite direction)
the EUR component has got a lot of criticism. but as I often do, I hereby invoke the old question: "how would Europe look like without the EUR?"
a eurozone still in the currency grids of the past would have had immense external and internal political pressures to unlock the grid. and so have a intra-european currency war, all NBs happily buying dollars against their currency, and devaluing as if there was no tomorrow, and so further inflaming the global currency war
I maintain that this is not what most ferocious but well-meaning EUR-haters really would want. I maintain they don't see the options, neither the past ones nor the future ones
the seen and the unseen
The big factor is that Keynesian Economics allows government to print free money for themselves to buy votes in the short term.
If the economy was healthy and balanced we would not be experiencing slow growth while massive amounts of money are being printed and poured into the system. The crux of our problem remains in the fact that both people and governments have lived beyond their means by taking on debt they cannot repay. Over the last several decades we have created entitlement societies built on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances.
Promises were made on the assumption that the advantages we enjoyed would continue in both Europe and the US. Ever greater prosperity and entitlements were to be sustained through debt financed consumption growth. In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about evermore growth. Debt does matter and the following article delves deeper into why kicking the can down the road will ultimately fail.
http://brucewilds.blogspot.com/2014/08/modern-monetary-theory-is-wrong-d...