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Guest Post: "Big Idea Solution": Radically Lower The Cost Basis Of The Entire Economy

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Submitted byCharles Hugh Smith from Of Two Minds

"Big Idea Solution": Radically Lower The Cost Basis Of The Entire Economy

Our choice is simple: either continue on the State-cartel path of complexity and rising costs that leads to a death spiral, or re-energize the forces of the market and community.

We are constantly told all our problems are too complex to be addressed with simple "big idea" solutions. Complex problems require complex solutions, we are assured, and so the "solutions" conjured by the Central State/Cartel Status Quo are so convoluted and complex (for example, the 2,319-page Dodd-Frank Wall Street Reform and Consumer Protection Act or the 2,074-page Obamacare bill) that legislators say they must "pass the bill to see what's in it." (What If We're Beyond Mere Policy Tweaks? February 6, 2012)

The real "solution" is to see that complexity itself is the roadblock to radical reformation of failed systems. Complexity is the subterfuge the Status Quo uses to erect simulacra "reforms" while further consolidating their power behind the artificial moat of complexity.

Over the next three days, I will present three "big idea" solutions that cut through the self-serving thicket of complexity. Nature is complex, but it operates according to a set of relatively simple rules. The interactions can be complex but the guiding principles can be, and indeed, must be, simple.

Big Idea One: Radically lower the cost basis of the entire U.S. economy. The cost basis of any activity is self-evident: what are the total costs of the production of a good or service? The surplus produced is the net profit which can be spent on consumption or invested in productive assets (or squandered in mal-investments).

We can understand surplus by way of simple examples. If it costs two barrels of oil to extract one barrel of oil from a well, there is no surplus at all to this activity; rather, it is a losing proposition. If it costs $100 to plow, plant, nurture and harvest $50 of crops, there is no surplus generated by this economic activity.

Anyone pursuing these kinds of zero-surplus activity will soon go broke and be eliminated from the financial "gene pool" of investors.

Central States and cartels by definition face no market forces on their cost basis. Central States (governments) have no competition and so there are no market pressures to contain costs. As a result, governments are intrinsically incapable of radically reducing the cost basis of their activity.

Cartels (the sickcare industry, the defense industry, etc.) by definition profit by fixing prices, not by adapting to competition, and so rising costs are simply shifted to consumers, with the aid of an over-regulating, moat-building "complex" Central State.

I cover this dynamic in depth in my books Survival+: Structuring Prosperity for Yourself and the Nation and Resistance, Revolution, Liberation: A Model for Positive Change.

Unproductive layers of activity are essentially friction within the economy ( How Much of Our Economy Is Essentially Friction? September 20, 2011), and as with a machine, when the friction consumes all the surplus, the machine freezes up. Greece is an excellent example of this dynamic.

As I explain in Resistance, Revolution, Liberation, there are three fundamental forces in society: the State, the market and community (i.e. the non-market social order).

As friction from the State and its crony-capitalist partners, the various cartels, inevitably rises, the surplus left to distribute via entitlements or invest shrinks.

The State has two mechanisms to counter this decline in surplus: it raises taxes on the productive enterprises and people, and redistributes that money to less productive dependents of the State via entitlements. Secondly, it prints money and redistributes the new cash.

Both are short-term expediencies that inevitably lead to collapse. Once taxes skim the economy's surplus for consumption, there is not enough left over to invest in productive assets that increase productivity. This triggers a death-spiral (positive feedback loop): as productivity stagnates, so does the surplus generated by economic activity. This leads to lower tax revenues, so the State raises taxes on the remaining productive elements, further bleeding the economy of funds that could be invested in future productivity gains.

Printing money debases the purchasing power of the existing currency, and over time this destroys the value of the currency and the wealth of those holding the currency. As people retreat to gold and land, the liquid capital necessary to invest in new ventures dries up, adding to the death-spiral described above.

In essence, the State and its cartels raise the cost basis of getting by from $10,000 to $40,000 by letting unproductive friction absorb all the economy's surplus. Layers of bureaucracy, paperwork and outright fraud consume roughly half of the funds spent on healthcare in the U.S.--not coincidentally, this aligns with the fact that the U.S. spends twice as much per person on sickcare compared to our developed-world competititors.(The "Impossible" Healthcare Solution: Go Back to Cash July 29, 2009)

The State overcomes this by raising taxes on the productive and printing money. The State's "solution" isn't to reduce its own fiefdoms' spending or dismantle the high-friction cartels: it's to tax or print $30,000 and send this money to those making $10,000, so they can consume as much as those earning $40,000.

As noted above, consuming the nation's surplus in consumption and friction starves the nation of market-driven productive investment, which then leads to the death spirals of lower productivity and rising unproductive friction.

The only way to lower the actual cost basis of the economy is to reduce the role and power of the Central State, dismantle its favored cartels and re-empower community and the market forces of innovation and competition. The Central State and its cartels are incapable of innovation or reducing costs because they dominate the market and the community.

Community must play a central role in lowering the cost basis. The market cannot address all problems, though its ideological boosters wear blinders that demand allegiance to nothing but the market.

Community gardens are non-market social orders that enliven and empower communities and neighborhoods, yet their "market value" is negative: on a strictly cost basis, the food produced by agribusiness is cheaper on a kilocalorie/dollar basis than the food raised by community members in their garden. But this calculation is akin to reducing a human to a handful of ash and valuing that person at the market value of the calcium and other minerals in the ash.

Much of value in human life is beyond the market. Agribusiness would rather the State send money to people so they can sit at home "consuming" TV and media and then go out and buy highly profitable packaged food that sickens their bodies and spirits. That is the end result of an economy dominated by the State and cartels: a deeply and perniciously pathological society and economy.

Market forces in housing see the "solution" as wealthy Elites and corporations buying up all the housing and then renting it to recipients of State aid for high rents. Co-ops, co-housing and a host of other community housing solutions that radically lower the cost-basis of housing are rejected because they don't generate large profits. Their purpose is to lower the cost of housing while greatly enhancing its liveability and non-market value--"assets" that the market simply doesn't recognize unless they can be exploited for high profit margins.

This is why both the non-market forces of community and the market forces of efficiency and profit must share the economy if the cost basis is to be radically lowered. If people only make $10,000 in the market economy, the State's solution is to redistribute or print $30,000 so their consumption can equal that of people earning $40,000.

The solution I suggest is to radically lower the cost basis of the economy so those earning $10,000 can live simply and well on what they earn.

This solution does not compute for the Central State and its protected cartels, as they would lose their dominance over the economy. They have chosen the death-spiral for our future, and that's what we'll get until we restore some equilibrium between the State, the market and the non-market commmunity.

 


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Wed, 05/30/2012 - 12:41 | Link to Comment Upswaller
Upswaller's picture

Tort reform?????

Wed, 05/30/2012 - 13:01 | Link to Comment Sequitur
Sequitur's picture

This is the least of our problems. Lawsuit costs and payouts are nothing compared to the truly gargantuan bank bailout, entitlement, soveriegn debt, and pension debt supernova which will incinerate the United States. I don't like frivolous lawsuits, and not all tort lawsuits are frivilous (look at the energy workers killed at that Massey Mine deathtrap or the disgusting Deepwater Horizon rig). But the court system is a rounding error compared to the trillions, upon trillions, upon trillions of state and federal debt a la borrowings, bank bailouts, entitlements and pensions.

Wed, 05/30/2012 - 13:13 | Link to Comment greyghost
greyghost's picture

charles...no comment...to painful

Wed, 05/30/2012 - 13:21 | Link to Comment narnia
narnia's picture

It is arguable that the patent system & related regulatory compliance structures (FDA, FTC, Dept of AG, WTO, UN) + the massive unnecessary scope of our Department of War (Defense) have lowered our standard of living more than any financial system intervention.     

Wed, 05/30/2012 - 13:55 | Link to Comment PivotalTrades
PivotalTrades's picture

The Patent System really? Best laugh of the day.

Wed, 05/30/2012 - 14:20 | Link to Comment narnia
narnia's picture

it comes down to a basic understanding of what wealth really is. you may want to invest some time on the link below. you might learn something. science is not a public good: http://youtu.be/C_PVI6V6o-4

Wed, 05/30/2012 - 13:37 | Link to Comment Plymster
Plymster's picture

Absolutely.  Keep your eye on the ball and don't get distracted by the shiny tort reform calls, gay marriages, voter fraud false flags, War on Christmas, etc.

Wed, 05/30/2012 - 13:43 | Link to Comment Spastica Rex
Spastica Rex's picture

Divided they fall. Fell.

Wed, 05/30/2012 - 15:40 | Link to Comment falak pema
falak pema's picture

in one fell swoop drowning by numbers, or one cut at a time. Oops that is ghoulish. Its like that naked cannibal clown. 

Wed, 05/30/2012 - 16:12 | Link to Comment Spastica Rex
Spastica Rex's picture

Was that a Peter Greenaway reference? One of my absolute favorite directors.

Ghoulish is good.

Wed, 05/30/2012 - 13:17 | Link to Comment whatsinaname
whatsinaname's picture

Regardng the cost basis for the entire global economy, nothing has contributed to global poverty and inequality as much as the inflated cost bases for the various cost inputs of the economy thanks to the ad infinitum inflation of risk assets with fiat money. We need to flatten everything and start all of it from scratch. Wonder where gold will end up at that point ?

Wed, 05/30/2012 - 14:10 | Link to Comment NotApplicable
NotApplicable's picture

Somebody's pocket. Guaranteed.

Wed, 05/30/2012 - 14:45 | Link to Comment eclectic syncretist
eclectic syncretist's picture

1. End Lobbying/skimming taxpayer money.  Call it what it is, bribery, and in the future send them to jail, along with any politicians who accept the bribes.  This should be done so as to, at a minimum, eliminate the financial, insurance, and legal industries business models based on lobbying to legalize skimming from taxpayer earned value.

That alone would go a long ways towards improving America's current economic model.

 

Wed, 05/30/2012 - 12:43 | Link to Comment beaker
beaker's picture

It may be too soon to say, but if the USD/GOLD correlation today may mean that the Euro has crossed into new territory.  What would you do if your Eurodollars were in a bank with all this talk of runs on deposits? Holding your wealth in gold seems like a pretty reasonable thing.  OR maybe JPM has no further need to liquidate good assets for collateral calls.  (Or both?)

Wed, 05/30/2012 - 12:43 | Link to Comment Dr. Engali
Dr. Engali's picture

Solutions don't protect the status quo. The reason the " solutions" have to be complex is to make the sheeple think it requires MBA's and PHD's to fix it.

Wed, 05/30/2012 - 12:56 | Link to Comment Umh
Umh's picture

Or just to hide the simple fact that the "solution" will not fix the problem.

Wed, 05/30/2012 - 13:00 | Link to Comment midtowng
midtowng's picture

On the contrary. Reducing the cost basis of the economy is done in a way that protects the status quo: impoverishing the workers of America.

   This is done in two ways: 1) paying the workers less (and busting labor unions in the process), and 2) reducing taxes on the wealthy and large corporations, which in turn force cuts in services that the workers of America actually need.

   It never fixes the economy, but it certainly protects the status quo. It's what we are seeing now, and what we will continue to see.

Wed, 05/30/2012 - 13:03 | Link to Comment jiggerjuice
jiggerjuice's picture

Our economy runs on FARTS. Forced ARTificial Scarcity. Good old David Wong.

http://www.cracked.com/article_18817_5-reasons-future-will-be-ruled-by-b...

Wed, 05/30/2012 - 13:05 | Link to Comment Dr. Engali
Dr. Engali's picture

My point was .. It's silly to think they really want solutions. The whole premise of the post is based on a false assumption.

Wed, 05/30/2012 - 13:46 | Link to Comment ITrustMyGut
ITrustMyGut's picture

exactly. 

they are creating this destruction and even greater wealth consolidation.. they are NOT interested in logic or solutions..

Wed, 05/30/2012 - 13:47 | Link to Comment Spastica Rex
Spastica Rex's picture
  • Clear Skies Act
  • Affordable Care Act
  • Race to The Top (Fed Dept of Ed)
  • etc.

It really sucks to be duped.

Wed, 05/30/2012 - 14:03 | Link to Comment tarsubil
tarsubil's picture

My all time favorite is the Paperwork Reduction Act. All it does is create paperwork!

Wed, 05/30/2012 - 14:13 | Link to Comment RiverRoad
RiverRoad's picture

True.  End the farces.  Might as well just apply a whopping reverse-split concept to everything out there with a value or a cost in fiat currency terms.  That's where the world's headed anyway.  Water will eventually seek it's own level whether we like it or not.

Wed, 05/30/2012 - 23:38 | Link to Comment Newsboy
Newsboy's picture

Charles specifically advocated reducing the cost basis of the economy by eliminating cartels, which parasitically drag the productive economy by pulling off fees for useless churn at every layer which they add. Helathcare is a prime example. It is all boged down by procedure and protocol and payment systems and computer systems, which change yearly. Doctors are secondary in all this, just a bridge resource until bureaucrats figure out how to get people to enter their symptoms directly into the computer and get prescriptions. Ptaients are tertiary in this, just a fluid market...

He advocates eliminating massive systemic parasitism, not squeezing the peons harder.

Wed, 05/30/2012 - 13:53 | Link to Comment tarsubil
tarsubil's picture

I have a PhD and I have a solution. I was sitting in a file room of a Federal building yesterday thinking, "This would be so easy to fix. A little gasoline and a match. No one has to die."

Wed, 05/30/2012 - 19:31 | Link to Comment Kayman
Kayman's picture

The "solution" must always be complex, so theft looks like a helping hand.  You know, like the Hank Paulson thing- $700 billion for the self-designated TBTF.  How's the warm urine feel to you ?

Wed, 05/30/2012 - 12:45 | Link to Comment CreativeDestructor
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Let Chuck Norris cut the costs!

Wed, 05/30/2012 - 13:01 | Link to Comment midtowng
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By using a roundhouse kick??

Wed, 05/30/2012 - 13:09 | Link to Comment slackrabbit
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They obviously missed out on the Chuck Norris postings this morning... ;-)

Wed, 05/30/2012 - 12:45 | Link to Comment francis_sawyer
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Threadjacking alert... Todays OT comic interlude...

~~~

Zuckerberg falls off 'world's richest' list

http://www.baltimoresun.com/business/technology/chi-zuckerberg-0530,0,5620304.story

Wed, 05/30/2012 - 12:59 | Link to Comment CrashisOptimistic
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Rather than warning you are about to threadjack . . . why not just not threadjack and post a comment on the subject matter of the article.  There have only been 80 zillion facebook articles you could have posted on.

Wed, 05/30/2012 - 12:46 | Link to Comment Oh regional Indian
Oh regional Indian's picture

So many bright minds, cannot see one simple reason for the madness..

This is the end of the age of oil as we know it.

Ergo, end of the age of machinery as we know it.

All war is fought with oil and machinery (basically).

End of the age of war as we know it (Stux net et. al.)

That is the true turning point. All this financial babble is just the enabler.

The cracks are in the industrial seam (DWH, FUKU.....)..

The big question is, who is going to build the post-industrial future that does not look like Mad Max or Water world?

????????????????????????????????????????????????????

ori

the-great-machinery-death-cult-wake-up

 

Wed, 05/30/2012 - 12:50 | Link to Comment kengland
kengland's picture

The US is drowning in natgas. 

Wed, 05/30/2012 - 15:37 | Link to Comment falak pema
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natgas with a depletion curve of 90%...

Wed, 05/30/2012 - 13:05 | Link to Comment Marginal Call
Marginal Call's picture

And Charles was so close to the truth when he mentioned using 2 barrels of oil to produce one.   Maybe next time.

Wed, 05/30/2012 - 14:38 | Link to Comment AnAnonymous
AnAnonymous's picture

So many bright minds, cannot see one simple reason for the madness..
___________________________

They see it but can not admit it.

Expansionists want one thing: expand and they do not accept the impossibility of expansion as a solution.

Wed, 05/30/2012 - 12:45 | Link to Comment q99x2
q99x2's picture

How bout this: Get rid of the Federal government--that criminal gang of vermin in DC.

Wed, 05/30/2012 - 12:46 | Link to Comment Cognitive Dissonance
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This assumes that "they" want to fix our "complex" problems. I never assume this to be the case.

For example........the tax code could be greatly simplified. But then where could our dear leaders leverage the only thing they have to sell, their vote?

Wed, 05/30/2012 - 12:48 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Bingo CD. And in a fractal world, that is true in every aspect.

The complexity is by design.

ori

Wed, 05/30/2012 - 12:50 | Link to Comment GottaBKiddn
GottaBKiddn's picture

"They' have no intention whatsoever of "fixing" anything, since they designed things this way and it's working perfectly for them. They are the same people who are telling us that "we" have a problem, and that we need to send them more money to fix it.

Wed, 05/30/2012 - 13:20 | Link to Comment Marco
Marco's picture

That is so 4 years ago ... sure part of "them" are still telling us we need to give them more money through printing or directly, but a significant part of them has already shifted towards the end game and are calling for austerity. Once there is nothing left unencumbered by debt or owned outright by them what the hell do they need big government for any more?

Wed, 05/30/2012 - 12:56 | Link to Comment SheepDog-One
SheepDog-One's picture

Right, these guys believe theyre all just 'struggling to find a solution'...thats total BS this was all designed.

Wed, 05/30/2012 - 13:03 | Link to Comment cougar_w
cougar_w's picture

I really don't know what ever happened to the idea that if one needs the cash then one sells their body for sex.

There is a not less mischief in common prostitution. This whore-by-proxy thing is ruinous.

Wed, 05/30/2012 - 13:09 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Nice to see you around cougar_w.

How are the sisters?

Wed, 05/30/2012 - 19:21 | Link to Comment cougar_w
cougar_w's picture

Oh the Sisters are having a wonderful time!

Fortran is in love. Everyone can relax for a while.

Diamond bitch-slaps a bunch of gold-stealing card-carrying Fascists and in the process declares open war against the entire United States Department of Internal Security. All because they totally piss her off. She's a little out of control sometimes, but what do you expect from the destroyer of the world?

EDIT: annnnnd... it's up

http://madscienceunlimited.com/fiction/thisHeartOfGold.html

You got your phizz right? You got a big safe full of the shiny right? So how does it feel to be a terrorist, Al-Qaeda-boy? When The G Man comes knocking the cat is really out of the bag.

Wed, 05/30/2012 - 12:48 | Link to Comment Fanakapan
Fanakapan's picture

Cost Basis Economy would place at least 50% of the population who are stupider than the Police should allow, in a position where their inadiquacies would be self evident each and every day :)  ergo, it aint never going to happen, failing a return to the status quo of the 18th century, and how likely is that ??

 

Yet another, lets turn the clock back to 'Simpler' times thesis, the sort of crap that pedlars of 'Ism's' come up with on a daily basis :)

Wed, 05/30/2012 - 13:19 | Link to Comment BigJim
BigJim's picture

That's right!

Because if we revert back to the size of government we had back in (say) 1905, all the technology developed in the intervening years would just vanish. You'd wake up and your iPad would have turned into a mini abacus, and you'd step outside and your BMW would have transmogrified into a horse.

Wed, 05/30/2012 - 13:43 | Link to Comment Fanakapan
Fanakapan's picture

I suspect that Government wanting a Bigger Johnson is NOT a phenominon that is new ??? so its likey that the Government of 1905 was relatively Bloated ???  In any event how do you equate technological advancement with government size ? I have an idea the two are not connected in a Direct way :) 

Wed, 05/30/2012 - 12:50 | Link to Comment NetDamage
NetDamage's picture

Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium.

Wed, 05/30/2012 - 12:52 | Link to Comment Frankie Cokeupt...
Frankie Cokeupthenozza's picture

And I think complexity is a defense to criminal behavior. How you you prosecute what you can't convey or understand!

Wed, 05/30/2012 - 12:54 | Link to Comment verum quod lies
verum quod lies's picture

I liked the counter-meme of the solution to too much complexity isn't more complexity but simplicity. One way to reduce the cost basis is to nullify the tens of thousands of pages of new laws and regulations that are produced each year; and, of course, stop subsidizing the parasites (actually just send them home).

Wed, 05/30/2012 - 12:57 | Link to Comment gatorengineer
gatorengineer's picture

Wow deflate and deregulate..... who woulda thunk..... Two minds, not a brain between them......

Wed, 05/30/2012 - 12:58 | Link to Comment gatorengineer
gatorengineer's picture

Let me take a shot at the second big idea..... Hyperinflation, and close regulation of critical services....

Wed, 05/30/2012 - 13:00 | Link to Comment gatorengineer
gatorengineer's picture

Now let me give you the third and correct solution....

 

Let the Mother Fucker Burn...........  No bailouts, no printing.  FDIC guarantees are all ya got

Wed, 05/30/2012 - 13:06 | Link to Comment CvlDobd
CvlDobd's picture

FDIC "insurance" is akin to printing.

Wed, 05/30/2012 - 13:11 | Link to Comment gatorengineer
gatorengineer's picture

I dont disagree but I think that is the minimum necessary to maintain a level of rule of law...........  But I think the amount given the average americans savings and FDIC caps is a few hundred billion, and many regional and local banks will survive....

Wed, 05/30/2012 - 14:02 | Link to Comment CvlDobd
CvlDobd's picture

Yeah, I'm just saying its plenty to hide behind if they raise insured amounts to one gazillion dollars per account.

I like your point though.

Wed, 05/30/2012 - 14:01 | Link to Comment Bawneee Fwank
Bawneee Fwank's picture

http://www.youtube.com/watch?v=sgUuGuQov7U

 

Burn! Burn! Burn Motherfucker!

Wed, 05/30/2012 - 12:57 | Link to Comment CvlDobd
CvlDobd's picture

Death spiral? Charles, just yesterday we were decoupling! Remember that?

Wed, 05/30/2012 - 12:57 | Link to Comment cougar_w
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Lowering the cost-basis of the economy is incompatible with the Feds efforts to evaporate debt via moderate inflation.

Wed, 05/30/2012 - 13:09 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea theyre just going to evaporate about a quadrillion of debt Im sure that will work great.

Wed, 05/30/2012 - 14:06 | Link to Comment cougar_w
cougar_w's picture

That is completely totally absolutely undeniably 100% of their plan.

It won't work the way they think.

It won't work at all.

But that doesn't matter because that is their plan and they are going forward with the plan.

Wed, 05/30/2012 - 13:00 | Link to Comment carbonmutant
carbonmutant's picture

This sounds like something that's going to require a couple of committees....

Wed, 05/30/2012 - 13:11 | Link to Comment takinthehighway
takinthehighway's picture

What a Super idea!

Wed, 05/30/2012 - 15:12 | Link to Comment ebworthen
ebworthen's picture

Exactly, several CONgressional committees, sub-committees, working groups, press conferences, grants and studies, then 2,497 page legislation.

They'll get right on it as soon as they figure out if Clemens had ass shots of steroids.

Wed, 05/30/2012 - 13:11 | Link to Comment Mercury
Mercury's picture

Community gardens are non-market social orders that enliven and empower communities and neighborhoods, yet their "market value" is negative: on a strictly cost basis, the food produced by agribusiness is cheaper on a kilocalorie/dollar basis than the food raised by community members in their garden. But this calculation is akin to reducing a human to a handful of ash and valuing that person at the market value of the calcium and other minerals in the ash.

Actually "community gardening" has a pretty good track record of turning humans into ash.  Loose the Velveeta if you must but cheap food staples isn't really a top 10 force of oppression right now.

Wed, 05/30/2012 - 13:05 | Link to Comment HungrySeagull
HungrySeagull's picture

One word.

Jubilee.

Everyone has a wage of 10,000 dollars a year and go from there.

A bit tight ay?

That fat 140,000 government worker suddenly only costs 10K and you can hire a baker's dozen to move the paperwork faster.

Wed, 05/30/2012 - 13:12 | Link to Comment CynicLaureate
CynicLaureate's picture

Jubilee was great when everyone was the property of the King.

In today's world, one man's debt is another man's asset.

So Jubilee is only good if you're worth less than $10,000.

 

Wed, 05/30/2012 - 13:34 | Link to Comment BigJim
BigJim's picture

 In today's world, one man's debt is another man's asset.

No, in today's world, whole countries' debt is several oligarchs' assets.

Defaulting on sovereign debt is going to happen one way or another - either outright, or through inflation. Seeing as most of the debt was whisked up out of nowhere via fractional reserve banking, and they shouldn't have borrowed it in the first place, I know which option I'd go for.

Wed, 05/30/2012 - 17:40 | Link to Comment CynicLaureate
CynicLaureate's picture

It's tempting to think that the "creditor nation", "big bank", or "big company" is evil, but pension funds hold people's retirements; oil company stock is owned by pension companies, and banks have lent my bank account to god knows who.  For every bankster or oligarch there are thousands of people who've saved a little for their retirement who are going to want to get it back.

Jubilee as an idea benefits some and hurts others.

If you're in the first camp, it's easy to think of it as a solution.

In either case, where does the $10,000 come from?

 

Wed, 05/30/2012 - 13:07 | Link to Comment Stuck on Zero
Stuck on Zero's picture

I look forward to Charles Hugh Smith's solution to the Tainter Collapse.  This should be good.

 

Wed, 05/30/2012 - 13:13 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

That guy really has been getting weak analysis posted, hasn't he?

Wed, 05/30/2012 - 13:12 | Link to Comment guinea
guinea's picture

This article kind of read like "The secret to world peace is..... a peaceful world."

No shit.

Wed, 05/30/2012 - 13:15 | Link to Comment slackrabbit
slackrabbit's picture

OK I'll play along.

How about we legalise drugs and tax it. No more drugs wars, smaller police and defence spending and we get stoned cheaper.

 

 

Note: I expect to be payed for that consultation - no paper, no cheques, no bonds please

 

btw farebook at $28.20 - 20 more cents down and i get a new PC

Wed, 05/30/2012 - 13:20 | Link to Comment sudzee
sudzee's picture

All would right itself if taxes were made voluntary. If the big boys have to come begging for a few extra billion you can just kick them in the nuts if they fuckin up.

Wed, 05/30/2012 - 13:25 | Link to Comment odatruf
odatruf's picture

Charles, there is so much wrong with this article that it is impossible to respond with information and logic that might be useful.  In theory, squeezing costs out of the system is a great idea.  In the US, we spend way way too much over engineering and over lawyering almost everything, to be sure.  But the glib assertions you make are unsubstantiated and laughable on their face, which undermines your entire point.

Wed, 05/30/2012 - 13:29 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Interesting thought.  When the gains of the productive are given to the non productive people it takes away the discretionary purchasing power of the productive.

Where by if the productive were allowed to keep the fruits of their labor they would be able to spend more.  It would also cause the non productive people to produce for their own survival instead of a hand out based on the gains of someone else.  This would also increase the over all consumption by the people.

Wed, 05/30/2012 - 13:36 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

The only thing is that the word Entitlement now encompasses both Social Security and Welfare.

I agree with you if what you appear to be saying is Welfare as most of the people on Welfare could work and never paid into the system.  Where by the people on Social Security paid in to the system for their lifetime for the benefits they receive.

Wed, 05/30/2012 - 22:59 | Link to Comment StychoKiller
StychoKiller's picture

Get over it!  The US Govt rooked you (and everyone else!) with the Social Security "System!"

Wed, 05/30/2012 - 13:52 | Link to Comment BidnessMan
BidnessMan's picture

Well intentioned, but I am reminded of my wife's recurring comment "I could fix all this if I was in charge".  Hitler and Chairman Mao thought the same thing.  Or else John Kerry droning "I have a plan" without ever saying what the plan was. Those details - so inconvenient.  

Anyway, agree with most posters that there is no political will to "fix" things, because for the political and Wall Street class, it is working great.  Not broken for them, so the last thing they want is to fix it.  Get elected to Congress, shamelessly pontificate about the "sacrifice of devoting their lives to public service", all the while raking in contributions and traveling around on military private jets on junkets, and then go get a lobbying job afterwards to rake in the really big bucks.  Almost all exit elected office as multi-millionaires.  The optimal career path for Political Science majors.

Let's stop wasting time on useless discussions on how to "fix" things.  No politician is going to voluntarily change a process that works great for them.  There was no fundamental change in Rome or any other empire until the empire finally collapsed.  The can will be kicked down the road until it can't be anymore.  Would be far more useful to spend brain cycles on how to get best through the crisis and do well on the other side.  Maybe not for me personally, because it might be a 10 - 20 year process, and some (maybe lots of) people will not make it through the transition. But absent a total catastrophe like Fukushima storage pools collapsing in another earthquake, the sun will still rise every morning, and the physical assets will still exist.  Just a matter of who owns them.     

Wed, 05/30/2012 - 13:56 | Link to Comment amadeusb4
amadeusb4's picture

OK, I'm all for dismantling the cage I'm in, but what about the hungry tigers pacing outside? What's to prevent corporations from pouncing on my community solutions? If the author is as smart as he/she portrays themselves then the lack of discussion of this issue must be taken as willful.

Cartels are very innovative. They innovate around regulation and market forces all the time.

Wed, 05/30/2012 - 14:10 | Link to Comment web bot
web bot's picture

You're going to get a lot of so called experts on this site that say a simple idea won't work. They are right, but wrong. They are right because they are inside the box. They are wrong because they are not looking outside of the box.

When this thing collapses... and it will, you're going to need to rebuild a banking system, global trade systems and a host of other mechanisms that are required for 7billion+ people.

I am willing to bet that HFT and hedge funds will be a phenomena of history. It's at that time that "simple ideas" will be required. You may want to think about what follows "after the collapse"...

I'm looking forward to the remainder of your articles.

Wed, 05/30/2012 - 14:11 | Link to Comment Clueless Bill
Clueless Bill's picture

Well, in a word, "No."  No one is ever going to choose your solution.  The largest part of the "cost basis" almost everywhere in the world is labor.  Almost all people everywhere (including most ZH readers) sell their physical or mental labor to earn a living.  People don't like pay cuts.  The only two ways to significantly lower the cost basis of a large economy are violent revolutionary dictatorship or severe economic depression.  People will (quite rationally) prefer muddling along as stooges of complexity.  We may soon see revolutions or a severe depression, but not by popular choice.

Wed, 05/30/2012 - 14:14 | Link to Comment darteaus
darteaus's picture

Ah, yes, but complexity enriches those in the know and impovershises those in the dark.

Wed, 05/30/2012 - 14:19 | Link to Comment Dr. Acula
Dr. Acula's picture

"The market cannot address all problems, though its ideological boosters wear blinders that demand allegiance to nothing but the market.

Community gardens are non-market social orders that enliven and empower communities and neighborhoods, yet their "market value" is negative: on a strictly cost basis, the food produced by agribusiness is cheaper on a kilocalorie/dollar basis than the food raised by community members in their garden."

All value is subjective.

There is no objective answer to the question of whether it's better to pay for and eat high kilocalorie/dollar food or whether it's better to produce and eat community-grown food.

These "ideological boosters" you speak of are either (a) straw men invented by your imagination, or (b) dullards who fail to grasp the most basic concepts in economics.

 

Wed, 05/30/2012 - 14:23 | Link to Comment Voamerica
Voamerica's picture

The thrust of the writers position is exactly what happened during the great depression. Prices dropped dramatically over a 5-7 year period. 20% of the population was out of work(vs. 16% today) a cup of coffee was 5 cents, and lunch was 10 cents. People stopped buying anything, and money stopped circulating. Germany finallly imploded due to their failure to right the German economy after WWI(think massive reprerations due the allied forces). As Germany fell off the economic cliff, the rest of Europe and then the US also fell off the economic cliff in response. The Nazi's promoted scapegoating to blame different groups for the stupid decisions of the German leaders. The Jews and Bolsheviks were blamed for the economic woes of the country. The common people suffered greatly, and it was all the fault of the Jews(i mean Bain Capital)and the Bolsheviks(Tea Party). It is time that the American people, look at the performance of their political leaders, not private equity or conservaties. Take a look at the Community Reinvestment Act(Clinton & Barney Frank). 3 wars and massive new programs(Bush 43), and of course the Trillions in new spending and Marxist policy drivel(Obama, Pelosi & Reed).

My suggestion would be a sign placed over the entrance to the White House, The Senate and House, from Dante's Inferno  "Abandon hope, all ye who enter here"

Wed, 05/30/2012 - 15:48 | Link to Comment Clueless Bill
Clueless Bill's picture

His thrust may be what happened during the great depression, but he is suggesting it as a solution.  I can't see that welcoming a depression makes it any more bearable.

Wed, 05/30/2012 - 14:35 | Link to Comment Antifaschistische
Antifaschistische's picture

I believe CHS is dead on in theory.  We do need a massive reset downward.  But we also know it won't happen for all the reasons other commenters have made.  Civilizations will always choose to inflate their way to destruction.  It's more insidious and easier to shovel conterfeit money to the world VIPs with an inflation strategy.

Now for my dissent...I fail to see how a clove of garlic; grown in China, harvested in China, trucked to the coast of China, loaded on a ship, hauled across the Pacific Ocean, unloaded in Long Beach, Trucked to a distribution center in LA, trucked to an air conditioned distribution center in Dallas, trucked to a local air conditioned grocery store where we will drive our car to, shop and drive home...consumes less kcal's that a garlic plant grown 20 feet from my back door.

TPTB HATE all DIYers (including gardeners) because it robs them of the opportunity to skim (tax) transactions.  This is exaclty why I shop local and pay cash to vendors that will not report income.

Wed, 05/30/2012 - 14:40 | Link to Comment AnAnonymous
AnAnonymous's picture

It consumes less because living in China consumes less.

Smithian economics, concentration of wealth.

Those are reality.

Wed, 05/30/2012 - 15:03 | Link to Comment I_Rowboat
I_Rowboat's picture

Here's my simple solution:

Own 5 acres outright, plus a home built (and afforded) by doing all of the work on your own.  Find land with good soil and a creek.

350LF of 7ft deer fencing.  150 row-ft of potatoes.  100SF each of snap peas, pole beans, kale/broccoli/cauliflower and tomatoes, 200SF each of cabbage, carrots, leeks, and onions.  Lots of cucumber and winter squash.  400SF of sweet corn, and an assortment of herbs, garnishes, etc.

Deer on-the-hoof

4 beehives

12 chickens, including a rooster.

400 acres of wooded tribal land to the south (poached firewood)

Plans for a few pigs or cows.

Apart from all of that above, be satisfied with less.  Learn how to make all this stuff work now, so you'll know what to do before you have to rely on the results.

Wed, 05/30/2012 - 14:43 | Link to Comment AnAnonymous
AnAnonymous's picture

Quite weird to suggest that simple ideas should not considered as possible solutions to complex problems.
An artificial introduction to make up for the lack of substance of the article.

Because, US citizens are fond of complexity to hide how simple the situation is. The great gurus of humanity have rammed it hard so...

No simple ideas in the article, only si_mple fallacies that show how transparent US citizens are.

Wed, 05/30/2012 - 15:11 | Link to Comment WTFx10
WTFx10's picture

STFU

Wed, 05/30/2012 - 14:57 | Link to Comment mikesswimn
mikesswimn's picture

"The real 'solution' is to see that complexity itself is the roadblock to radical reformation of failed systems."

Okay...

"The solution I suggest is to radically lower the cost basis of the economy so those earning $10,000 can live simply and well on what they earn."

That sounds insanely complex...

I can only hope "Big Ideas" #2 and #3 have just as much irony.

Tyler, warn me when a "Guest Post" is Charles Hugh Smith.  I are thinking he be maker my stupiders.

Wed, 05/30/2012 - 15:23 | Link to Comment ebworthen
ebworthen's picture

The societal trend is to push channel distribution consumption of pre-packaged high profit items.

Until the WalMart food stamp crowd starts buying locally this trend will not be stopped.

People have and are being programmed to consume mass quantities of shrink wrapped crap.

Before long the newer generations will be buying toast because they don't know how to make it.

The Kleptoligarchy is intent on creating thought and behavior patterns that enrich it; original thought and the ability to forage, farm, kill, and cook what you eat is anathema (soon to be deemed unpatriotic and dangerous).

I see no political or social movement changing this other than debt jubilee, collapse, and rebuilding on the ashes.

Wed, 05/30/2012 - 15:41 | Link to Comment kevinearick
kevinearick's picture

Empires, Teenagers, & SH-SHows

Teenagers are like terrible twos. They see only themselves, assuming that’s all there is, with no intention of doing anything else. Some are better chameleons than others. On each income floor, you will find a leader walking in circles, followed by other teenagers, each pecking at the others, and all extinguishing outsiders, competing to be the leader. Empires are operated by and for teenagers competing to remain teenagers. Why would an intelligent parent spend 5 seconds training someone that does not want to learn?

Your elevator is a quantum switch between floors, and if that switch doesn’t make, the empire collapses in on itself. You don’t have to do anything. You can set it for free fall, phase fall, descent speed, or whatever you want.

Of course they fired him for saying that empires breed stupidity; that’s the point of the genome project. Gene expression depends upon environmental variables. Control leads to loss of control, in a positive feedback loop. Don’t join in peer pressure and expect anything else. Others may label you, but you must accept the label of your own free will for it to stick. They can stone your body, but your spirit will recover it quickly, if you expect the outcome with an intelligent design. Suspect purpose from the fire of emotion.

So, they labeled you a dead-beat whatever. So the f- what? You carry the load and you can drop it on them any time you want. That’s the privilege of working, while others seek credit for enslaving yet others to the derivative. Just cut the umbilical cord. I love that look on their face when they realize that they have completely and utterly f-ed themselves.

Biological robots are delay mechanisms. Let them cry until they choke on their own CO2. If they still don’t want to learn, replace them with AI, Al Sharpton or no Al Sharpton. The implicit economy is always the new economy, built in plain sight, and the explicit economy is always the old economy, hiding recognition.

So, there I was, Johnny Cochran just got done playing his part in the sh-show to get OJ off, and he shows up at the Port of San Diego event for minority contractors, with a whore in each arm, sporting a pimp suit, and the bosses are as far away as possible. I could have torched him, and many others, right there, but I had much bigger fish to fry.

Don’t waste your time playing with derivatives. There is civil law and there is military law. Both are all about family. Let the civil authorities have their way right up until they have all f-ed themselves. Navy is not about projecting power; that’s just the sh-show. It’s about defense of marriage, and the NPV window that results.

"Christianity may be OK between consenting adults in private but should not be taught to young children."

Wed, 05/30/2012 - 17:55 | Link to Comment Cole Younger
Cole Younger's picture

The reality is free trade needs to go away and a monetary system based on a commodity. It is too late for both so let the collapse begin..

Wed, 05/30/2012 - 21:01 | Link to Comment Redwood
Redwood's picture

"Central States and cartels by definition face no market forces on their cost basis." 

by far the best line in the entire article. explains everything from schools to roads.


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