Posted by
Steve Smith on
Jan 10, 2009; 5:26am
URL: http://friam.383.s1.nabble.com/Re-Financial-crisis-was-bye-tp2136719p2136756.html
Russ -
Well said.
A friend of mine once asked the following question:
If you were building a house, would you stop just because
you ran out of "inches"?
The analogy is that $$ are simply units of measurement for work or
useful assets. Do you cease to do the (same) work or (use) the assets
effectively just because the units you used to measure them changed in
some way?
Rumor has it that the depression ended pretty abruptly as the US geared
up (on credit to ourselves?) to provide manufacturing/hard resources to
the Allies in Europe to fight the Germans. If we thought of $$ as
hard assets (conserved quantities) themselves, then the "competition"
for "scarce resources" from Europe should have somehow *crashed* us
even harder... but instead it invigorated us.
I'm obviously/certainly not advocating (yet) more war... the"New Deal"
and "WPA" and "CCC" and the like had already created an "artificial
demand", when coupled with "minting more 'inches'" was helping...
I can't comment specifically on "Obama's Plan" (I'm just not tracking
it closely) but in principle, a re-organization and re-motivation of
our collective efforts could be a seriously positive thing to do about
now.
Refactoring our economy/society is both scary and maybe necessary (or
inevitable)? Are we on the verge of a Punctuation Mark in the
ever-famed Punctuated Equilibrium? Or is there a way for the system to
"re-organize" itself to absorb/dissipate the internal stresses without
cataclysmic change?
- Steve
So let's talk about the financial state of the world for a
while. It certainly is worth of a complex systems discussion list.
Here's my basic analysis. For the past 2+ decades we have been engaged
in a self-inflicted Ponzi scheme -- during more or less the same period
in which Madoff was doing the same thing but to other people. We (the
entire world) did it to ourselves. We recently reached the point where
it became clear that it really is a Ponzi scheme and that the money we
all thought was there isn't. That's actually not a particularly
complex systems issue. It's pretty straightforward. Lots and lots of
people have a lot less money than they thought they did. (See this
nice piece about bubbles.)
The question is: now what?
One of the interesting things about a financial crisis is that nothing
is actually destroyed. No manufacturing plants are damaged. No power
plants are destroyed. Nothing is bombed. The world's farm land has not
been poisoned. Nothing physically has changed. It's just that a lot of
people now know that they have a lot less money than they thought.
One thing that's happening is that people are a lot more careful about
spending money. That ripples through the economy putting people out of
work, which causes even less money to be spent, etc.
It would seem that it should be possible to achieve a new stable state.
But no one seems to know what that state will look like or what can and
should be done for people who are suffering during the transition. It's
also not clear whether the monetary and fiscal policies are helping us
get there.
So it seems to me that the basic questions are: what are the possible
new stable states and how can we get there with the least pain?
P.S. By a stable state I don't mean a government-run economy but one
that is in relative equilibrium -- but obviously not complete
equilibrium or there would be no evolutionary progress.
-- Russ
On Fri, Jan 9, 2009 at 6:21 PM, Phil Henshaw
<[hidden email]> wrote:
There
is much further to fall, and I think it's likely the Obama plan will
aggravate the failure of the system and push it over the next edge. It
will
certainly not relieve it of strain and allow it to heal.
The Obama plan is designed by the same theory that caused the collapse,
and
intended to pump up the process of harvesting multiplying returns from
our
diminishing, dangerously unstable, and increasingly unresponsive set of
physical resources. If we pull out all stops to continue on that path
as
intended it will probably push the system to a significantly greater
failure
that may be relatively permanent.
The only thing that will work is for the people who have financial
claims to
be paid more than the physical system was able to produce to rescind
those
claims, i.e. come to a realization that having taken too much money
out of
the system enough debts need to be forgiven or enough money put back as
needed to relieve the system of unachievable obligations to them.
Phil Henshaw
NY NY www.synapse9.com
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FRIAM Applied Complexity Group listserv
Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at http://www.friam.org
============================================================
FRIAM Applied Complexity Group listserv
Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at
http://www.friam.org