If you want it
done precisely your way, you better do it yourself!
—
Ancient Chinese Proverb
Late
last week I bought a new over the air TV antenna from Costco, no more cable or
satellite television for me. Now just the twenty minutes of advertising per
hour rather than paying around an additional hundred bucks a month for the
privilege of watching hundreds of channels I care nothing about, and I suspect few
supply much positive influence to change our nation or the world.
To
celebrate I decided to watch the Saturday evening Republican Debates. This was
debate number 15, or so I was told. They all seemed like decent, somewhat
committed guys, but I didnÕt see a national messiah amongst the crew. But just
like the current incarnation of our president, it seems that they all still
believe that the federal government is the source of the solutions to our
current woes.
Over
the past three years we have learned that Barack Obama was not the national
messiah either. But in the first real job he ever had, it seems that he was
amazed, just as much as most of his supporters, that achieving nirvana in this
world was not an easy task. Falling back to a more realistic desire shown in
MachiavelliÕs The Prince, he also
seems not to have either the talent, the ambition, or the constitutional
ability to achieve that desire either.
When
you look around the world, even though there seems currently a little temporary
stability coming to the United States, we still seem incapable of even dealing
with our universe of ever expanding debt; solutions are just as far away as
they were a year ago; yet the current plight remains a juggernaut to a stable
future.
What
all this means is things are going to get worse, possibly much worse before
they get significantly and sustainabiy better. In the context of last weekÕs
article on The Normalcy
of Deviance, this climax may
probably come about not through a slow demise of prosperity but rather a global
stupendous collapse. Could it be the MayanÕs got it right, long ago, for
reasons they could not understand?
It
seems that the universe of hopeful messianic solutions extends well beyond
politics however. The whole concept that you can solve the debt crisis with
more debt is an evolved thought pattern well beyond the intellectual capacity
of common mankind; its implementation truly impossible for even the highest
elitist collective potential.
That
takes us to a very brief study of economics and our means of measuring it, as
GDP. The standard mathematical formula states GDP as equal to spending associated
in Consumptive spending,
plus gross Investments,
plus Government spending,
plus the net value of eXports
less iMports. This is
represented in the formula:
GDP
= C+I+G+(X-M)
So
where is the debt in this? In reality debt is determined by the surplus or the
deficits of either exports or imports. That essentially means in a global
world, national prosperity is determined by the surplus of exports over
imports, so then to solve the debt crisis around the world all countries need
to become net exporters. This sort of makes the old concept of selling the
Brooklyn Bridge — really just a bridge to nowhere.
None
of these calculations really relate to a real enterprise world where monetary
policy, inflation, true wealth creation or any number of other factors operate
essentially not so much by an invisible hand, but rather the unintended
consequences of the worldÕs financial markets. In other words the potential for
a normalcy of deviance catastrophe is directly related to the unintended
consequences of the wishful thinking of the banking, political and financial
elites, both nationally and internationally.
Furthermore
it is an elitist top down view of the world, as they hope it really would be;
and never has been. In reality it only tangentially touches the real world,
what is called in pejorative terms Main Street, entrepreneurs, and working
folks. What we need to do is to modify this formula so in some more credible
way it takes into account the real world, its risks and rewards; for it is only
in this way that we can in some way move from all financial transactions taking
just and itsy-bitsy no risk cut of the action, into a world where we
acknowledge true risk, rewards and new (real) wealth creation. Check this out:
MADP
= (C+I+T[E-M])*1 + V%(W+N+R+O)
MADP:
Modified Alternative Domestic Product
C:
Consumer goods and services
spending
I:
Traditional financial cartel Investments
T: Trade [Exports
- IMports]
V%:
Value Added as an aggregate
positive or negative decimal percentage
W:
New Wealth
N:
INflation - deflation
R:
Risk premium
O:
PrOductivity
The
strength of this formula at the present time is not any alternative product
numbers it might produce, but rather its alternative look at parameters not
covered in the current formula. For example if you add in a 3 percent inflation
rate in conjunction with a 7 percent risk premium with little or no wealth or
productivity increases, you can quickly not only forecast a true business cycle
recession, but even perhaps a normality of deviance episode.
In
that illumination, the driver of the equationÕs MADP increase is driven by the
value added components of new wealth creation and productivity. Breaking them
out separately, it is not hard to infer that the American jobs and prosperity
problem is that the financing required to provide economic growth is hidden in
twentieth century debt leverage and risk denial, where risk denial is not a
river in Egypt, but oceanic lakes of excessive-debt-leveraged-fiat-money parked
in financial centers around the world.
Money
is just electronic bits and bytes unless it is energized, not by itsy-bitsy no
risk transaction fees and compound interest, but rather the true profit
potential of the human desire to pursue happiness. The pursuit of happiness
requires a historic access to capital. With the closing of the physical
frontier we transferred the exploitation and the wealth creation potential of
distant places to the exploitation of neighbors. In recent decades our consumer
debt leverage was followed by indebted government spending and taxpayer funded
bailouts, which are really just unsustainable sovereign debt extensions.
In
the process we have abandoned any concept of the frontier as too risky, hence
we have abandoned wealth creation and only focused upon the exploitation aspects
of material greed, financed through debt.
We
live in a limited but open natural world, yet we have created a closed economic
system of severely limited human institutions, and divorced them from the
potential openness of a universe of human potential — the only natural
frontier that remains.
Capitalism,
at its roots, derives its strength from what is called capital or money in a
historic sense. Notice capitalism is not debtism, as it has been recently
practiced; yet really the people who have access to real capital are
essentially extinct. In that illumination the fractional reserve banking system
is really a function of this leveraged debtism, rather than drawing on any of
the virtues of true capitalism.
However
in a world of fiat electronic money, such an argument is really just a
discussion of the obtuse. Likewise hard money, based upon gold or other
standard that provides a natural reality tie, commits the economy to true
natural world limits, which thereby constrain any openness of opportunity.
In
other words, and in another world other than the present, money should function
as a medium of exchange and as such we can impute a temporal value, but that
can and should be controlled not only by the amount but also by the velocity by
which it changes hands.
The
nature of the entrepreneur is that any money to fund the startup of the company
must be real capital and not debt, especially because in the early stages of
the entrepreneurial enterprise, that capital has a very limited velocity, if it
has any velocity at all.
Contrast
this capitalistic entrepreneurial culture with our present day and future
desire for a restored consumer society.
The consumer, at least until recently, didnÕt care if his expenditures
were funded by debt or capital. Actually the use of real capital was frowned
upon because it couldnÕt provide the needed velocity to keep the money moving.
In reality you could spend the limit of a new credit card essentially
instantly, limiting the monetary velocity only by the time to make the plastic,
or approve the online application.
So
where am I going with all of this?
Why
not make entrepreneurs the first residents, or pioneers, of a new
entrepreneurial culture, as opposed to the consumer culture. If 70 percent of
AmericaÕs domestic product came from entrepreneurs there would be no
unemployment, there would be no inflation because of limited monetary velocity,
government would provide government services instead of enterprise fringe
benefits, and imports and exports would be balanced because entrepreneurial
growth will be exported to the rest of the world. The only problem with this
idea is the Investment
contributor to our current domestic product numbers.
In
this new world order, the amount of entrepreneurial transactions and enterprises
would greatly overwhelm Wall Street and the worldÕs current financial cartels.
These dinosaurs, behemoths, and troglodytes of the twentieth century would
disappear, because their ability to collect excessive itsy-bitsy no risk fees
and risk insurance would dry up.
We
began this week by looking for political saviors and found none. Yet the
solution the politicians all seek, attempt to tell us they have the answer,
when the solutions are simply to just create a mechanism to get real capital to
would-be entrepreneurs. These solutions could be instituted any number of ways,
from capital grants, to regional and local entrepreneurial pioneer areas, or
simply the removal of the stigma that all entrepreneurs are con artists and
Ponzi schemers and the SEC and investment bank clients in someway are better
job and wealth producing enterprises. In reality this is a gargantuan myth, if
not an out right fib.
However
all American enterprises would benefit greatly by regulations that would
encourage growth and limit unintended consequences to the maximum extent. The
best way is to grant that regulatory power as naturally close to the
implementation as possible and require sunset provisions.
That
would in time change the current American form of federalism to one better in
line with the original constitutional design. Furthermore such a change in the
way currently we do things would eliminate the need for a messianic figure to
be the president, but also would change the American proverb of bigger is
always better into one in which efficiency would be achieved through
decentralization.
If you want it
done precisely your way, you better do it yourself!
This
ancient Chinese proverb really isnÕt; I created it during my military,
corporate and early Business Ecology days, when Òmanagement by objectivesÓ was
in vogue. Managers were very willing to give the objective scope, but then they
would walk away, and if the objective was not implemented within their limited
concept, they would either kill the solution, if it threatened their position,
or steal it as their own, if they could get away with it.
We
have really changed this proverb into a national motto. We make these grandiose
statements about how entrepreneurs and small businesses are the backbone of the
American economy, yet we never provide them with the tools and resources to do
their jobs. We then criticize their results and increase their regulations and
compensatory overhead.
Our
long love affair for debtism has come to an end, yet the culture and leadership
has yet to acknowledge this reality. Entrepreneurs especially in America are
ready to create a new sustainable world order, yet they are shut out of access
to true capital, are belied has crooks or worse, regulated to extinction, while
we hope for a political and/or a financial messiah.
The
real question is whether these debt culture changes are going to be a long
muddle through solution, or in essentially and hour the whole establishment
will suffer a normalcy of deviance catastrophe. The new order will be either
built upon the old ruins, or the ashes, that is the choice we all must cope
with in 2012. Right now the probabilities tend to favor the normalcy of
deviance collapse, but that will make the rebuilding, go faster with more
opportunities for willing participants.
©
2012: All rights reserved.
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