The Greenspan Bug Curve
By Jerry Bannon
In “The Prosperity Myth” on March 23rd we showed the exponential growth relationships between the Dow Jones Industrial Average and the Federal Reserve Monetary Base. As we pointed out in that report, virtually all this exponential growth took place under the administration of Alan Greenspan at the Federal Reserve. It also just so happens that Alan saw fit to retire at the zenith of his proclaimed monetary genius in February 2006.
Is it all that difficult to see, that all this prosperity, we all became so accustomed, began to fall apart shortly thereafter?
Mr. Greenspan was replaced with Ben Bernanke, considered by many the leading expert on the Great Depression. Bernanke, shares with many other economists, the Great Depression was caused by stock market speculators and tight money. But is that the whole or real story?
Today in the Wall Street Journal in an article entitled “From Bubble to Depression?” Steven Gjerstad and Vernon L. Smith, from empirical evidence, make a pretty strong case that the Great Depression was caused by a similar housing bubble that began to collapse in this country later in 2006.
I have little formal training in economics, about the same in finance. What I do have however is a very diverse training in natural ecology. Natural ecology is governed by natural laws that can be verified by direct observational science. It is my contention that these same natural laws govern human enterprise. As with the results of all science, you may disagree with that hypothesis, but that disagreement or wishful thinking (from my perspective) is not going to change reality.
In the garden of God, growth takes place via two curve models, linear and exponential. Linear can proceed over long periods of time, I have called that the Toil Growth Curve. Exponential growth is of much shorter duration, which I have called the Bug Growth Curve, growth occurs for a season and then dies.
Growth is really quite easy to manage, either in the linear or exponential phases. It really gets difficult however once the zenith is reached and things begin the natural decline, many times resulting in death, death of the individual or the population.
Some ecosystems reach a climax state, which is really just a more specific term for sustainability. These climax communities can exist in harmony with their environment for long periods, like centuries, or even millennia.
So far all efforts to manage the housing bubble by both the Bush and Obama Administrations have focused exclusively on the hypothesis that loose money and more regulation will fix the problem. Disregarding the fact that we are not playing with reality with real wealth, but highly leveraged debt money, there is absolutely no emphasis other than restoring bug economic growth, whatever it may cost.
It is long past the time when we should have looked at the cost — benefit ratio of this charade. Toil produces long term sustainable growth. In economic growth this can only occur in a climate where there are known principles by which to build. So far efforts to resurrect the dead Greenspan Bug Curve have failed. In this case the impossible is really impossible.
The Europeans understand that, so does much of Latin America and Africa. Even the communist government of China has criticized America’s current monetary policy. What the Obama Administration has yet to learn is “Change you can believe in” must be anchored to a real natural world, not some shining vision of an unobtainable present utopia.
In “The Prosperity Myth” on March 23rd we showed the exponential growth relationships between the Dow Jones Industrial Average and the Federal Reserve Monetary Base. As we pointed out in that report, virtually all this exponential growth took place under the administration of Alan Greenspan at the Federal Reserve. It also just so happens that Alan saw fit to retire at the zenith of his proclaimed monetary genius in February 2006.
Is it all that difficult to see, that all this prosperity, we all became so accustomed, began to fall apart shortly thereafter?
Mr. Greenspan was replaced with Ben Bernanke, considered by many the leading expert on the Great Depression. Bernanke, shares with many other economists, the Great Depression was caused by stock market speculators and tight money. But is that the whole or real story?
Today in the Wall Street Journal in an article entitled “From Bubble to Depression?” Steven Gjerstad and Vernon L. Smith, from empirical evidence, make a pretty strong case that the Great Depression was caused by a similar housing bubble that began to collapse in this country later in 2006.
I have little formal training in economics, about the same in finance. What I do have however is a very diverse training in natural ecology. Natural ecology is governed by natural laws that can be verified by direct observational science. It is my contention that these same natural laws govern human enterprise. As with the results of all science, you may disagree with that hypothesis, but that disagreement or wishful thinking (from my perspective) is not going to change reality.
In the garden of God, growth takes place via two curve models, linear and exponential. Linear can proceed over long periods of time, I have called that the Toil Growth Curve. Exponential growth is of much shorter duration, which I have called the Bug Growth Curve, growth occurs for a season and then dies.
Growth is really quite easy to manage, either in the linear or exponential phases. It really gets difficult however once the zenith is reached and things begin the natural decline, many times resulting in death, death of the individual or the population.
Some ecosystems reach a climax state, which is really just a more specific term for sustainability. These climax communities can exist in harmony with their environment for long periods, like centuries, or even millennia.
So far all efforts to manage the housing bubble by both the Bush and Obama Administrations have focused exclusively on the hypothesis that loose money and more regulation will fix the problem. Disregarding the fact that we are not playing with reality with real wealth, but highly leveraged debt money, there is absolutely no emphasis other than restoring bug economic growth, whatever it may cost.
It is long past the time when we should have looked at the cost — benefit ratio of this charade. Toil produces long term sustainable growth. In economic growth this can only occur in a climate where there are known principles by which to build. So far efforts to resurrect the dead Greenspan Bug Curve have failed. In this case the impossible is really impossible.
The Europeans understand that, so does much of Latin America and Africa. Even the communist government of China has criticized America’s current monetary policy. What the Obama Administration has yet to learn is “Change you can believe in” must be anchored to a real natural world, not some shining vision of an unobtainable present utopia.