Thursday, 7 June 2018

The Wizard of Oz Gives Gifts. Lets do More Good with Less Kakistocrats.

I find it helpful to think in terms of “two economies” – intimately connected, of course, but thinking of them individually helps our understanding.
The first or “real” economy is an energy system. Energy is essential for all of the goods and services that we use. The scale of this economy is determined by access to energy, after the deduction of the energy cost of accessing energy (ECoE). This energy economy is the senior of the two systems.
The second or “financial” economy is subservient to the first. It consists of money and credit, whose only value is as claims on the “real”, energy-determined economy of goods and services.
The financial system introduces a time element into the “when” of who consumes the output of the energy economy. Lending defers consumption for some, whilst borrowing brings consumption forward for others. But this process does not add to the output of the energy economy.
The system of money and credit is a management tool for the real economy. It can help us to manage the real economy better, or lead us into managing it worse. Like any management process, it is capable of being misused and manipulated, and that’s part of what we are living through now.
The process by which money is “loaned into existence” makes credit creation the driver of the scale of claims (on the real economy) that are created. But creating claims doesn’t add to the quantity of goods and services for which these claims are exchanged. The creation of excess claims (money and credit) simply means that this excess has to be destroyed at some time in the future – destroyed, because they cannot be honoured by the real economy.
The destruction of “excess claims” explains the GFC process. This mechanism could be discussed here in a future article.

Then on rubble of scummest malarchy
Down with luck we'll see Ecclesiarchy
Our fellow's craft is just not for sharing
He's not an intimate secretary!

The Ex-? Inspector Inquisitor
The Demockery lust streets master
Are you part of this kakistocracy?
Is this greeting the type that's meant for me?

Hi Tim , I think you summarise the position very well.
The Real and Financial economies is a useful demarcation.
That one is subservient to the other as an Axiomatic fact of life
is quite true and it is the denial of that Axiom in the current
stage of Late Stage Financialised Capitalism which is causing the problem.
There is a Management problem, There is a Confidence problem and there is an Imagination problem.
The Management problem is that The Financial Management Tail is Wagging the Real economy Dog.
The Confidence Problem is summed up by the Old Roosevelt Line. “We have nothing to Fear but fear itself”
The Imagination Problem is a problem of Kakistocracy. Under a regime of deep corruption, there is much more Buggins turn and Placeman allocation of positions of Authority, The wrong incentives attract the wrong sorts this may be summarised as the Spivs have taken over the Asylum.