Understanding Growth: Part 3
This is about Part 3 of the series on understanding growth.
"The debate on GDP growth frequently tends to be nonsensical. GDP growth can simply be influenced with the help of debt (and either through fiscal policy in the form of deficits or budget surpluses) or through the help of interest rates (monetary policy). So what sense do GDP growth statistics make in a situation with a several times larger deficit in its background? What sense does it make to measure riches if I have borrowed to acquire them?"
- Thomas Sedlacek in Economics of Good and Evil
Anything based on numbers that can be fiddled like that is not concrete enough to use in making decisions. I generally disbelieve the "unemployment numbers" because they rule out several large categories of unemployed people to make the number seem smaller than it really is.
Common consensus among our intellectual class is that debt doesn't matter. Perhaps more precisely: concerns over debt are less important than concerns over growth.
Debt matters to the point that it is the overwhelming driver of many people's lives -- most people who aren't rich, in fact. Refusal to acknowledge this divorces the discussion from reality.
The is the essence of Keynes. During the good years we save so that, during the difficult years, we can spend.
Note that this only works when there are good years, when people have a surplus. Nobody below the rich gets any surplus anymore. They suck it all up. Only they recovered from the Great Recession. When people don't have enough to live on, they can't save. If you want them to save, you must pay them extra. Same with insurance. If you can find a decent policy, it might be a good idea, but most of them are "the house always wins" gambling. People are not permitted to be financially responsible.
Nonetheless, consider that, with our unprecedentedly low interest rates, over the past decade we've been able to expand our national debt to nearly $19 trillion without increasing our annual debt service costs. At this point, for every 1% rise in interest rates, we are facing an additional $190 billion in interest expense -- more than double the Doomsday Machine of the sequester -- just to pay interest on our past spending.
Remember that debt, like money, is ultimately a figment. It's something humans created. So it's something they can do away with. It only exists on faith. And it can only continue existing so long as it seems possible to pay off. When people admit that it's ridiculously out of range and never going to shrink let alone get paid off, eventually they just say "Fuck it, this debt isn't real, I'm going to ignore it and go work on something else." When the debt is that big, it doesn't matter if the debt holders are enraged and attack the debtor by any means available. The wealth doesn't exist for them to extract, so the exercise is pointless. They might rip loose a few scraps if their victim is an individual or a company. When it's a country? That ain't happening. Even if they manage to destroy the country, they wouldn't get much -- and they would enrage other countries who are still powerful.
Now consider that most if not all countries are running on massive piles of increasing debt. A few of them, like Greece, are approaching collapse sooner. But once the first few say "Fuck it," others will follow in a rapid cascade, causing a massive readjustment of global finances.
As Sedlacek contends: "It's not a question of austerity: yes or no, but when."
Austerity only works when there is excess to cut. When there already isn't enough to go around, you can't wring out more. If you try to starve people, sooner or later they WILL riot. Why shouldn't they? Society is only worth supporting if it meets people's needs. If it does not, they should tear it down and try to build something better.
A more prudent approach would be to look for ways to create as much resource as possible that doesn't relate to debt. Not money, but other things -- food, renewable resources like trees, compost for topsoil. For fucksake, human pee turns into ammonia, a useful commodity, and we literally just throw it away.
We created a growth economy to serve us. Now we serve it.
Debt once served us. Now we serve it.
In particular, look at college. It is hyped as a way to boost earning potential, but then you have to ask: who gets that extra money? Today, it's not the graduates. It's their debt-holders. Going to college is so expensive that it makes it impossible for most graduates to do normal things like move out of their parents' house and start a family. They can't afford it. The system is simply predatory. It's evil, it eats lives, and it's destroying society.
Society needs bucking lessons.
What can you do? Disavow as much of it as possible. Cease to consider it legitimate. Don't accept the blame or the shame. The victims are not at fault. Blame the deciders. Don't ask if someone has a degree; ask if they can do the work.
"The debate on GDP growth frequently tends to be nonsensical. GDP growth can simply be influenced with the help of debt (and either through fiscal policy in the form of deficits or budget surpluses) or through the help of interest rates (monetary policy). So what sense do GDP growth statistics make in a situation with a several times larger deficit in its background? What sense does it make to measure riches if I have borrowed to acquire them?"
- Thomas Sedlacek in Economics of Good and Evil
Anything based on numbers that can be fiddled like that is not concrete enough to use in making decisions. I generally disbelieve the "unemployment numbers" because they rule out several large categories of unemployed people to make the number seem smaller than it really is.
Common consensus among our intellectual class is that debt doesn't matter. Perhaps more precisely: concerns over debt are less important than concerns over growth.
Debt matters to the point that it is the overwhelming driver of many people's lives -- most people who aren't rich, in fact. Refusal to acknowledge this divorces the discussion from reality.
The is the essence of Keynes. During the good years we save so that, during the difficult years, we can spend.
Note that this only works when there are good years, when people have a surplus. Nobody below the rich gets any surplus anymore. They suck it all up. Only they recovered from the Great Recession. When people don't have enough to live on, they can't save. If you want them to save, you must pay them extra. Same with insurance. If you can find a decent policy, it might be a good idea, but most of them are "the house always wins" gambling. People are not permitted to be financially responsible.
Nonetheless, consider that, with our unprecedentedly low interest rates, over the past decade we've been able to expand our national debt to nearly $19 trillion without increasing our annual debt service costs. At this point, for every 1% rise in interest rates, we are facing an additional $190 billion in interest expense -- more than double the Doomsday Machine of the sequester -- just to pay interest on our past spending.
Remember that debt, like money, is ultimately a figment. It's something humans created. So it's something they can do away with. It only exists on faith. And it can only continue existing so long as it seems possible to pay off. When people admit that it's ridiculously out of range and never going to shrink let alone get paid off, eventually they just say "Fuck it, this debt isn't real, I'm going to ignore it and go work on something else." When the debt is that big, it doesn't matter if the debt holders are enraged and attack the debtor by any means available. The wealth doesn't exist for them to extract, so the exercise is pointless. They might rip loose a few scraps if their victim is an individual or a company. When it's a country? That ain't happening. Even if they manage to destroy the country, they wouldn't get much -- and they would enrage other countries who are still powerful.
Now consider that most if not all countries are running on massive piles of increasing debt. A few of them, like Greece, are approaching collapse sooner. But once the first few say "Fuck it," others will follow in a rapid cascade, causing a massive readjustment of global finances.
As Sedlacek contends: "It's not a question of austerity: yes or no, but when."
Austerity only works when there is excess to cut. When there already isn't enough to go around, you can't wring out more. If you try to starve people, sooner or later they WILL riot. Why shouldn't they? Society is only worth supporting if it meets people's needs. If it does not, they should tear it down and try to build something better.
A more prudent approach would be to look for ways to create as much resource as possible that doesn't relate to debt. Not money, but other things -- food, renewable resources like trees, compost for topsoil. For fucksake, human pee turns into ammonia, a useful commodity, and we literally just throw it away.
We created a growth economy to serve us. Now we serve it.
Debt once served us. Now we serve it.
In particular, look at college. It is hyped as a way to boost earning potential, but then you have to ask: who gets that extra money? Today, it's not the graduates. It's their debt-holders. Going to college is so expensive that it makes it impossible for most graduates to do normal things like move out of their parents' house and start a family. They can't afford it. The system is simply predatory. It's evil, it eats lives, and it's destroying society.
Society needs bucking lessons.
What can you do? Disavow as much of it as possible. Cease to consider it legitimate. Don't accept the blame or the shame. The victims are not at fault. Blame the deciders. Don't ask if someone has a degree; ask if they can do the work.