האסיר שלנו

אדם אחד פושע מועד, שישב בכלא עבור רצח, בשל התנהגות אלימה, שמו אותו הסוהרים בצינוק לתקופה ארוכה. הצינוק היה חדר חשוך עם ריצפה וקירות מבטון אפור, ללא גוונים וללא כתמים, בקיצור כלום. האסיר הזה אבל לא נואש, והתחיל למשש את הקירות. מאחר והיה לו הרבה זמן, הוא עשה את זה ימים ולילות, שבועות אף חודשים, עד שמצא שהקיר הוא ממשות שניתן למצוא בו את העולם ומלואו. הוא פיתח כלפי הקירות יחס אישי. נתן לקיר אפילו שם “לוהימא”. הוא גם התחיל לחפש משמעות בשמו של הקיר האהוב, והתחיל להרכיב מילים מהאותיות. כך למשל מצא שלוהימא אפשר להפוך לאימהול, או לוהאים, או מילוהא. הוא גם חישב, לשם “לוהימא” יש 6 אותיות, אותם ניתן לערוך ב 36 אופנים. הוא בדק לעומק כל שם בנפרד וגם את כולם ביחד. הפך אותם הלוך על הפוך, לשם כך הוא בנה גם מתמטיקה שמשלבת צורות עם מספרים, פיתח גם נגזרות וסדרות, סימטריות ואסימטריות, הפוך ושב. הוא גם בחן איזה ווריאציה יותר נשמעת לו מתוך 36 האפשרויות. במיוחד הוא אהב את הקונבינציה, “מילוהא”, והתחיל ללחוש אותה ללא הפסק, לאהוב בכל מעודו, עד שזה עורר בו רגש עמוק, אהבה, התמסרות מוחלטת, אפילו ארוטיקה. הוא גם התחיל לחשוב על הממשות של הקיר בהגיון. שאל, “מה למעשה הקיר הזה עבורו”? והגיע למסקנה, שהוא מהות הכל. הוא לא רק בורא העולם, אלא בעל ניסים ונפלאות, ובעל ידע מדויק בכל מצב, מה זה טוב ומה זה רעה. אפילו לא תמיד היה מובן לאסיר שלנו מה הם שיקוליו, הוא תמיד הצדיק אותו, ואמר בליבו, הוא יודע את האמת, הוא ברא את העולם, ברא אותי, ברא הכל. וכך עברו שנים, עד שיום אחד באה הסוהר, שכול יום נהגנ להשאיר בתאו צלחת דייסה. הפעם פתח את הדלת ואמר לאסיר שלנו, אתה חופשי ללכת.

והאסיר לא זז.

“מה יש לך”, שאל אותו הסוהר, “אמרתי לך, אתה חופשי”. והאסיר לא זז.

“צא כבר, עלינו לנקות את התא שלך, עבור משהו חדש.”

והאסיר שאל, את הסוהר, “אוכל ללמד את האסיר החדש על האמת?”

הסוהר הביט בו לא מבין.

“את האמת על לוהימא”, הוסיף האסיר.

“לוהימא? לא מכיר”.

“איך לא מכיר,” אמר בקול נרגז האסיר שלנו, “הרי הוא הכל, הוא הבורא של הכל, כולל אותך ואת צרור המפתחות שבידך.”

הסוהר הסתכל על צרור המפתחות החלודות, הזיז את כתפיו בתנוע של חוסר אימון, ואדישות, והשאיר את האסיר לעמוד בתא עם הדלת הפתוחה.

בלכתו חשב לעצמו, שיהיה לי בריא.

Russia, unpredictable war was at the doorstep, (a prophecy written in September 2021)

19.9.2021

Manoël

Mano: I’m facing an open window to history

First thing, I realised that ethnic Russian are not that much. 79% of 144 millions people. Around 113 millions. 12th GPD of the world. Just ahead of Spain

Is it really a great power? And if yes how? How can they do so much with so little

Eugen 

1. At least half of the population of Kazakhstan and parts of Ukraine, and other post Soviet countries are ethnic Russians. Most of the population of former USSR speaks Russian as second language. 

2. Economically they are very backwarded. During the Soviets Russian economy was very much concerned in heavy industry and military spending. The soviet economy neglected the consumerism and wellbeing of its citizens. It rather used the country’s resources to support the political aims of the Soviet regime. 

Russian and the Soviet empire was and is as to territory the biggest country in the world, (USSR was twice as big as USA). They invested most of their resources in their imperialistic policy. For example their investment in cosmology was mostly done for propaganda reasons, to show of the scientific achievements of the Soviets as compared to the capitalist countries. The Soviets also tried to support militarily regimes, that opposed the western influence. So they supported despotic regimes and leaders in Africa and in the Arab world, as Mengistu, Bokassa, Assad, Sadam Hussain, Qaddafi, etc. The result was, impoverishing of the  Russian population, devastation of Russian environment, overexploitation of natural resources, urbanistic devastation of cities by creating dense prefabricated dwellings in all the big cities in the whole communistic block, without any infrastructure. 

3. After the collapse of Soviet empire, Russia has very little to sell to the world, except of natural resources, as natural gas and row materials, while all the consumers goods they need, they have to import.

4. The result is economy in size of Spain, with big army and relatively big military industry.

5. Except in Moscow and Saint Petersburg and some other big cities, the standard of living is among the lowest in the world. 

6. The communistic regime was based on local and regional bosses, who had total authority to bully the local population, repress the intellectuals and independently thinking and acting people. Not much has changed in this political system. Putin’s regime, that prevails for more than 20 years, puts again the regime survival, and its subversive anti Western policy above the wellbeing and prosperity of Russia population. 

7. Still, Russia, in spite of all, has many good scientists, artists, they still have great writers, theatre, excellence in many forms of arts. They are very creative people. Most of the US Universities are full of Russian scientists, (by the way, many of them Jews.)

8. Israel itself was created by Russian Jews. At 1990  about 1 million Russian Jews immigrated to Israel, adding about 20% to its population.  Much of the good things that are happening in Israel today in sciences, technology and arts, is due to their contribution. As opposed to Russia, Israel knew how to let them express their talents, and utilise it.

9. Still Russia has very little cultural influence out of their country. They have cultural inferiority.  Even if they have great tradition of writers, movie makers, musicians, etc. they still are looking upon the English and French speaking culture as something to copy or imitate.

To your question, “How can they do so much with so little”, i would answer, how can they do so little with so much? And the answer to this is, ther political system is fucked up, and always was. Most of the Russian population is kept ignorant about what’s outside of Russia itself. If 30 years ago they closed hermetically their own borders, and they kept out everything that had in it anything compromising for the regime, today by impoverishing most of the population, they still keep them in their ignorance. If in the past they persecuted millions and kept most of the population in fear and horror, today they eliminate the intellectual elite by marginalising them, delegitimize them, and sometimes persecute them. 

[19/09, 19:00] Mano: Very interesting. But why Russia doesn’t simply give up its anti-western policy? In your message you approached the subject by telling the Russian government is trying to keep his people ignorant of what is going on outside Russia. The anti-western policy would be a mean of internal control. But at the opposite of the spectrum you have what happened between France, Australia and America about the submarines. France is a country with a better economy than Russia and also a good advancement in military technologies.,it could have against the Anglo-sphere. Could those two postures only be explain by the necessities of internal control ?

Eugen

Russia geographically lies between Europe and Asia. As a Christian nation it always wanted to be part of Europe,  at least since Peter the Great. When accepting the Christianity,  they got it from Bizantine. That’s why they have Eastern Christianity and use Greek letters and not Latin. They saw themselves part and later defender of Easter Christianity against the Ottomans.This became critical, when Russia and Serbia signed a mutual defense pact, that became one of the reasons of outbreak of WWI.. 

Russia became an imperial force with Ivan Grozny, (grozni means terrifying in Russian). He inherited Kingdom around Moscow, fought successfully against the Tatars, and less successfully against the Ottomans and the Poles. After two russian adventurers discovered the wast land of tundras, Siberia, by crossing the Ural mountains, until then the end of the known lands, they annexed whole Siberia to Russian kingdom, Russia became an Imperium to be reckoned with..

At times of Napoleon wars, France had more than 27 million people, while Russia less than 22 million. Most of the Russians were ignorant illiterate peasants, (muzsicks) while the French people after the revolution were well educated and politically self aware. The Russian elites got French education. Some of them spoke only French. 

After annexation of Poland after Waterloo, Russia became a country of European importance, and after Waterloo one of the leading countries in European politics. 

Until 1906 Russia was an Absolutistic kingdom, that has changed after the 1905 Russian revolution. Still the half retarded tzar and his wife, without any real reason decided to enter war against Germany and Austria. This decision became the main reason for WWI, causing the Russian revolution, the death of whole family of the tzar, and all what happened since then in history.

Russia as a state and as a nation, always saw itself as an Empire, with pretension to have strong say in the European politics and history. Suddenly at 1992  Russia lost not only their grip on Eastern Europe, but also lost Ukraine and Belarus that always was part of the Russian tsardom. Above that, they lost the Baltic states, territories in the Caucasus, and in Middle Asia. Someone as Putin and other KGB people, who were trained to play chess game on the world scenario, it is hard for them to give up their position without fight. But Russia of today is not anymore a closed country, that can pull the rubber to the infinity. What i see in their politics is a last trial to achieve influence in the previous East European countries as Czechia, Slovakia, maybe Hungary and Bulgaria. But at the end the numbers will speak for themselves. Russia’s population is decreasing very fast, its population is getting old. I don’t see the future Russians fighting some imperial wars in Syria, Ukraine or Caucasus. 

[19/09, 23:21] Mano: So many topic to discuss here! After the Napoleonic wars Russia became the rival of UK. The British were afraid to see there road to India cut by the Russians. That why they invade Afghanistan and also contain the ambition of the Russian in caucasus and eastern Europe (war of Crimea, help to maintaining the Ottoman Empire etc). This rivalry also show it self in Iran befor and after the WWI. The position of Russia, in the center of Eurasia make it a potential threat for a talasocratic Empire which use comptoir or bases to control key theritories. Yesterday England with the road to India, today USA with middle east or whatever. I’m wandering if such an Empire could stand to have Russia behind his back.

If Russia itself is no match for USA, it could be a great territory of expension for European capitalism with space and resources. Keeping Russia out of the western family is for America a way avoid the constitution of a real rival. A  continuation of the politic of UK alway keep Europe devided by struggling again the main forces in the continent (France, Germany…). As you probably see I’m not a specialist of the history of Russia but I do believe that  if they accepted to submit they would be cut into pieces. Is it not what Yeltsin period were about? Is that not what explain the rise of Putin to power? (it’s a real question. I only have vague ideas about this period).

Eugen 20.9.

I’m also not a specialist of history of Russia.  Know pieces of its history. But I’m old enough to know about Russia since the twenty century.  My grandfather, whom i never knew, because was murdered in Auschwitz, was a POW in Russia during WWI, between 1914-1921. He must have been one of the first POW of WWI, and left maybe as the last one. His stories were part of my family mythologies. 

I would like to look more as to the future of Russia and Europe than try to be a historian of Russia. 

The history of Russia and Europe we can use as background to explain contemporary recognisable processes, 

As to Europe and Russia, if to compare it to the rest of the world, meaning Americas, China, India, East Asia, the Muslim world and Africa, they are culturally very close.

If to categorise the world culturally, as the engine of dynamics of historical development, I would make a division between countries with high population growth rate and countries with stagnating or declining population. The first block of such countries is Europe-Russia, Japan, Korea, USA, and the second all the rest. China is a special case, since its population stopped to grow, because of government policy and not natural developments. Today the highest population growth is in subsaharian Africa, then the Muslim world, followed by India and South America. Demographic development and technology is the major issue, that moves the world history in these days. Countries with high population growth have also more traditional family structure, less educated population and many times denying basic human rights from woman, to let then be educated and rightful members of the society. Then in many cases, mainly in Africa and the Muslims world, the Muslim and African countries don’t have functional governments, that respects “liberty, equallity, fraternity”. I would add to these also legality. So lets call them countries without “liberty, equality, fraternity and legality”, or WOLEFL countries. Even Russia with its half dictatorship, respects values of LEFL, so let’s call the Europe-Russia and USA the LEFL countries, as contrary to Africa and the Muslim world, that are WOLEFL countries. If you look at the list of countries according to their demographics, you can see clearly this division. 

High population growth countries is not only about birth rates, it is also about statehood without functioning political and economic system, that is NOT providing wellbeing for its population, not securing political rights, racial and ethnic equality, with no respect of basic human rights. All these countries have despotic governments and despotic social structures. Sometimes the despotism in these countries is not connected to wealth of the countries. A good example is Saudy Arabia, a very rich country, still very despotic on whole level of society. More than a third of Saudi population are foreign workers, many from Asian muslim states as Bangladesh and Pakistan, where the local Arab population behaves to them as to slaves. In Africa you also have slavery of women and children. 

Yet, with their demographics, young population, that out of desperation are ready to take personal risks, that no LEFL country population can even comprehend, are winning the contest. 

Russia and Europe are from this point of view on the same side of the boat. While Europe is trying to cope with the problems of illegal immigration  from Africa and the Disintegrating Muslim countries, without to lose its LEFL values, Russia’s problem is and will be Chines economic superiority, that will eventually overtake Siberia, that is only natural, to where the Chinese economic expansionism will take place. 

I personally believe there are two kinds of conflicts between nations, one caused by contradicting cultural differences between nations, and conflicts caused by contradictory interests of ruling elites. I don’t see conflicting cultural differences between Russians and Europeans. If letting them fairly and freely to chose, probably the Russian population would rather join the EU. Of course the wealthy Western countries, such as France and even Germany, don’t want to let the impoverished Russians to join the EU. They don’t even let Ukraine with about 50 million people to join the EU, and are also very reserved towards the post communistic countries,  except maybe Czechia, Slovenia and Slovakia. But this is a temporary state, where the economic and political elites try to stick to the horns of the altar. 

Unfortunately the ruling elites, mainly when it is a dictator, who imposes himself on the people without obvious legitimacy, during his reign can commit horrible crimes and atrocities, out of his personal  tendency to dehumanise the “other”. There always will be enough people, who are ready to join the club of Us, against those Others. The whole European and World history of twentieth century is all about this. And the result is, Europe and Russia,  as two boxers after 15 rounds of punching each other, cling to each others, shoulder to shoulder, still trying to give the final blow, while the audience, the Chinese, and the Americans, clap their hands with enjoyment. 

You are right, the racional politics would be to create one club of European countries, including Russia and all the rest.

 All the major problems today are global, while all the politics is local. Yet cultural differences creating conflicts among the neighbours, cannot be erased just like that. It takes generations to understand, that your neighbour is just like you, while your partner overseas, like the French Indochinians or the Arabs are very different, and  many times in conflict with you. 

The very best example of conflict sustained by leaders, against the wish of the people was the East West conflict, sustained artificially by the comunistic leaders. Noone asked the people of Russia, or the East European countries, if they want this conflict, if they want to live behind barbed fence. In contrary, it was done against the wishes of the people behind the fence. My wife, while living in USSR, uses to say a joke. She and her colleagues used to say, “Today i would love again to visit Paris “.  In reality, they never visited Paris, just yearned for it. This doesn’t sounds to me as enomisity to Western Europe.

The rising conflict between secular Europeans and faithful Muslims is of different nature. This is about clash of cultures, and cannot be erased just like that by some compromise. In mean time the Muslim countries are in internal conflicts, and their countries belong to the WOLEFL kind. Yet, the political situation in Muslim countries can change every day. There is a yearn among the believers for a new Messiah. The Islamic State and Al Qaeda is the expression of this yearning. Nothing good can come out of this yearning. And this is the real enemy of Europe and Russia, and not the artificial conflict, Putin tries to keep alive. 

Donald Trump

——————
It’s time to try to evaluate President Donald Trump (Trump) from historical perspective, To evaluate his failures and achievements we need to look at it from economic, political and moral  point of view.

The last US president with significant positive achievements in historical dimensions. G.H.W.Bush’s presidency was between 1989-1993. Under his presidency the USSR fall apart and finally at 1992 USSR was dismantled. Now from historical perspective it may look as an obvious development, but at the time it was not so obvious. After all USSR was a major nuclear power, that held its nuclear arsenal all over USSR including new countries as Ukraine and Kazakhstan, that suddenly became a major nuclear power, after USSR held its nuclear arsenal all over USSR including countries as Ukraine and Kazakhstan. The collapse of USSR was not only collapse of an enemy, but shift in world power structure, and destabilisation of the old world order.

Other achievement in Bush’s presidency was his successful first US-Iraq war. After Sadam invaded Kuwait in August 1990, G.H.W.Bush assembled a multi-national coalition, to oppose the invasion. G.H.W.Bush successfully pacified Sadam Hussain, without the need for post war US involvement in the post war Iraq politics, saving from USA long term occupation with all the costs it had.

During Reagan presidency years, the national debt of US started to increase  and G.H.W.Bush had to try to cope with this long-term damaging phenomenon. Bush also advanced the NAFTA agreement, what was a major step towards economic policy of globalisation. But it came at the time of entering the Russian, East European and Chinese economy into the world economic stage, process its enormous economic consequences at the time hardly anyone could estimate. Definitely at the time it was hardly understood, to where the world economy is heading too. As Russia since 1992 became a major supplier of energy and raw materials, and China a major industrial production factor, in parallely their markets were opened to Western products and capital, it caused a major shift in the hlobal economic realities. During this time, the new globalised economy started, and G.H.W.Bush definitely contributed to this process.

G. H. W. Bush policy included tax increase, that was opposed by his own Republican party and proposed budget cuts opposed by the Democratic party. It was also the time, when the Republican party definitely abandoned its support for restraining the public deficit by tax increases.

At the end G.H.W.Bush’s budget cuts and tax increases came when the US economy was already in a stagnation and unemploymen relatively high unemployment. As a result of it, even if this economic trend was short termed and transitional, G.H.W.Bush’s was not reelected, in spite of his great achievements in international politics and his responsible economic policy. Instead was elected Clinton, who enjoyed the fruits of G.H.W.Bush’s policy in economics and international politics, and rather strengthened his predecessors policy of economic globalisation than opposed it.

The globalisation economic process since then created strong opposition mainly in the Western highly developed world, who in relative terms paid the price of the relative increase in living standard in many economically underdeveloped regions,  mainly in Asia, and especially in China. This opposition doesn’t take into account the added value of globalisation to the western world in terms of price stability that continued in USA in spite of huge and ever growing public deficit in the western countries, and very low saving rates of private households, especially in the USA.

Because the political ideological tendencies are coming, metaphysically speaking; from guts, while the intellect comes from the brains, the ideological propensity of the human individual is many times stronger than his intellectual understanding. If someone claims, I’m a Republican or I’m a Democrat, it all comes from the guts. And it is no use to talk to the guts. It is like trying to train right handed to be left handed. Democracy is great when it works, but it can bring in some circumstances,  mainly in times of overall crisis disastrous choices of the electors.

The major achievement of modern democracy is the instrument for change of leadership, that is composed into the Democratic system. Democracy is not the best to choose the best leadership. On the contrary, the masses when choosing politicians make many times mistakes. Democratic politics is about local short term interests, while since the rapid industrialisation most of the problems democratic leadership have to cope with are long term and global problems. Some US presidents, whose policy was not isolationist and Great Britain until end of WWII, understood this. Most of the US presidents in twentieth century were focused in internal USA policy, and tried to be neutral to many inter European conflicts. This could work until the US interests were not endangered. Change from US internal to whole global external policy happened to Wilson in WWI, and Roosevelt in WWII, and continued since then. 

——————

George Bush, Junior was elected to focus US policy in internal problems, mainly improving the economic performance, even if Clinton’s presidency was rather successful, without major conflicts, or international policy breakthroughs.

No one expected that Bush would have to cope with the post September 11 situation. And when he had too, at beginning he, or rather the US generals in the Afghan war, achieved relatively easy victory. US military supporting the tribes in the northern region of Afghanistan, who with US air force support have overwhelmed the Taliban in few month.

But this easy victory caused to Bush Junior to become uncautious. He deepened his involvement in Afghanistan, imposing an illegitimate very corrupt government, and did not pull back the US army, as his Father did a decade before.

Bush’s next major mistake was to invade Iraq. This disastrous war started not so much for failure of the US intelligence, as due to ideological prejudices of Bush Junior’s administration. The Bush administration disregarded intelligence reports by Paul Pillar, the CIA’s national intelligence officer for the near east and south Asia, who two months before the invasion of Iraq expressed his concern about  the war. In his report was warning that a war could unleash a violent insurgency and rising anti-US sentiment in the Middle East.

Danny Ayalon, who was Israel’s ambassador to the United States at the time of the Iraq invasion, and who sat in on the Bush-Sharon meetings, was directed by Sharon to warn all Israelis visiting Washington not to encourage the American scheme for war in Iraq.

Department’s policy planning staff and later chief of staff for Secretary of State Colin Powell said, Israel tried to convince the Bush administration that the main problem in the region was Iran, not Iraq.  According to Lawrence Wilkerson, Israeli officials warned the George W. Bush administration that an invasion of Iraq would be destabilising to the region and urged the United States to instead target Iran as the primary enemy. Wilkerson, then a member of the State Department’s Policy Planning Staff and later chief of staff for Secretary of State Colin Powell, recalled in an interview with IPS that the Israelis reacted immediately to indications that the Bush administration was thinking of war against Iraq. “The Israelis were telling, Iraq is not the enemy Iran is the enemy.” Wilkerson describes the Israeli message to the Bush administration in early 2002 as being, “If you are going to destabilise the balance of power, do it against the main enemy.”  Wilkerson notes that the main point of their communications was not that the United States should immediately attack Iran, but that “it should not be distracted by Iraq and Saddam Hussein” from a focus on the threat from Iran.

Israeli Prime Minister Ariel Sharon asked for a meeting with Bush primarily to discuss U.S. intentions to invade Iraq. In the weeks preceding Sharon’s meeting with Bush on Feb. 7, 2002, a procession of Israeli officials conveyed the message to the Bush administration that Iran represented a greater threat, according to a Washington Post report on the eve of the meeting. After that meeting, the Sharon government generally remained silent on the issue of an invasion of Iraq. As late as October 2002, there were still signs of continuing Israeli grumbling about the Bush administration’s obsession with taking over Iraq. Both the Israeli Defence Forces’ chief of staff and its chief of military intelligence publicly dismissed the Bush administration’s position that Saddam Hussein’s alleged quest for nuclear weapons made him the main threat. The Israeli chief of military intelligence, Maj. Gen. Aharon Farkash, said Iraq had not deployed any missiles that could strike Israel directly and challenged the Bush administration’s argument that Iraq could obtain nuclear weapons within a relatively short time. He gave an interview to Israeli television in which he said army intelligence had concluded that Iraq could not have nuclear weapons in less than four years. He insisted that Iran was as much of a nuclear threat as Iraq.

The cost of the Afghan and Iraqi wars is estimated of about 1 trillion dollars. Bush Junior’s policy of public deficit, since then supported by the Republican party and his presidents, was the major cause of the economic collapse in 2007-2008. Bush Junior listened to his economic advisers, and injected, then unprecedented trillions of public dollars into the financial system. All what’s happened in US economy since then is only the backfire of the economic events in 2008.

The colossal failure of Bush Junior’s economic policy, supported by the Republican party, didn’t change anything in the party. On the contrary. It made it even more short sighted, arrogant and disastrousas to long term US interests.

Obama was expected to be the reaction and complete opposite to G.Bush Junior. He was intelligent,  wonderful speaker, gave hope for everyone who was tired of US politics and its failures. But he failed. His failure came partly because of the fierce opposition to his policy by the Republican party, opposing everything he tried to do. The peak of the Republican party cynicism was to put a stop to the public deficit.  The sama Republican party that under Donald Trump a few years later supported tax cuts that caused the annual public deficit to reach almost a trillion dollars.

Obama when started presidency, had the supermajority that could enabled him to make legislation in major economic social issues, US needed urgently to implement . And those were:

A. Public infrastructure. (Electricity grid, fast trains, etc.)

B. Public education.

C. Health care system  ( the US health care system is twice as expensive as the European and still not covering tenths of millions of Americans).

D. Environmental policy.

E. Reform in the financial system, when the banking system was knocked down after 2008.

All these changes are about solving long term problems of the USA and as such are also problems of the world. Since Obama failed to implement most of the needed reforms, he happened to be just an another politician, who looked above his shoulder to the next election, and didn’t want to be blamed for the fiasco of the midterm elections of the Democratic party, that came anyway.

To Obama’s sake can be said, he entered the office, when the economic crisis was at its peak. He inherited an economy on its knees. But the expectations from him were so much higher than he performed,  that the reaction to Obama’s failure to deliver what was expected from him, together with the annoyed white population in the small US cities in Mid West, who couldn’t stand the idea, of a coloured president, brought Trump to presidency.

——————
So what’s so bad about Donald Trump’s economic policy? After all, his 4 years of presidency, he can be hardly judged. Three years after his presidency started, covid epidemics completely shuffled the cards.

US politics  is not just politics as of any other nation. When establishing USA, the founding fathers had no precedent at the time of a Democratic Republic. Europe before French revolution was ruled by kings and emperors. French revolution hadn’t started yet, Industrial revolution was an unknown term, Germany was divided among many kings and prince hoods, England was kingship with Parliament, Austro-Hungary was a monarchy, Russia was ruled by an absolutistic Tzar, Italy was divided, South America was Spanish colony, Brasil a Portuguese colony, Asia, Africa were all colonies, except of very few independent kingdoms, China was ruled by Cisar. Even Nederland by then had kings. The only previous precedent for Republic was Rome and Greek city states from more than 2000 years ago. What existed were philosophical writings about politics of  Plato, Aristo, Hobs, Lock, Rousseau, etc. Based on these ideas of philosophies, the USA was created, with it’s declaration of independence. The words, “…self-evident truth, that all man are created equal”, were not self-evident at all, at the time, (1776), when kings and aristocrats ruled everywhere. Just three years later followed by the French revolution, and the ideas of Republic, or at least constitutional kingdoms became self evident. It took less than 50 years, and most of South America get rid of its colonial rulers, etc.

In modern politics prevail two different kinds of political concepts. The one, that is built on the platform of independent institutions, civil society, human rights, and equality in front of law. The second is based on monopolistic governmental structure, built hierarchically from top to bottom, where the law is not applied equally on commoners and the ruling elites. The extreme case of such a system at present is Putin’s Russia, Iran of Ayatollahs, etc.

To judge Trump’s performance as president,  we need to judge his performances in economics, foreign policy, internal policy, and political morality.

Economy:

The major economic issues defined by Trump as problems to deal with, were, unemployment, national deficit, imbalance in international trade deficit,  and economic growth. It is very hard to judge how much Trump failed or was successful in achieving any improvement in these goal, since the result of any change in major macroeconomic policy will have full effect only a few years after the economic decisions were made. But after the third year of Trump’s presidency, covid epidemic started, and soon enough with it came huge economic disruption. So if we have to judge Trump’s policy according to the parameters emphasised by Trumpas as major macroeconomic goals, that can be measured in data as;; rate of unemployment, trade deficit, national debt, economic growth.

To analyse the effectiveness of Trump’s economic policy, we need to find some major shift in trends in economic data in the three years following the Obama’s presidency in these above mentioned parameters.

One of the major economic decisions Donald Trump and Republican party have done, was to cut the corporate tax rate from 35 percent to 21 percent at december 2017 just one year after Trump became prerogative. At the time, the Trump administration claimed that its corporate tax cuts would increase the average household income in the United States by $4,000. Did it?

Accordingly  this proclamation means policy of increased economic growth, employment and household income.

To analyse Trump’s economic politics performance, we need to start with the period previous to Trump’s presidency.

The unemployment rate when Obama started his presidency was about 10%, the highest since the great depression of 1929-1933. When he left his office 8 years later it was 4.7%. During Trumps presidency, two years later, before the pandemics, the unemployment reached 3.5%. I would say this achievement was a continuation of the trend Obama started. Full employment is considered to be about 3% unemployment, and if lower, it is considered to be inflationary and not stable. So the unemployment rate of 3.5% is pretty close to this figure. Overall, unemployment rate didn’t change substantially before the epidemics, but there was no need to make major corrections to the existing trends, to achieve this decrease in unemployment rates. On the contrary, the correct economic policy would have been to put brakes on the government deficit and monetary expansion, what Trump definitely didn’t do. When the federal reserve increased the interest rate, as a response to inflation pressures, Trump, because of his frustration with stock market losses, at end of 2018 tried to fire Powell, the Federal Reserve chairman. To his surprise he discovered, he had no authority to do it.

Another of Trump’s declared major economic issues was the US economic growth. Under president Obama on average the US economy grew annually by 2.3%, , while under Trump before the pandemic it grew at a rate of 2.5%. Again the same conclusion as with the unemployment rate, there was no major change in the economic growth rate compared to pre Trump presidency, rather it was a continuation of the trends that started during Obama’s presidency.

The third major issue Trump emphasised was reduction of National Debt. National Debt is result of accumulated government deficit through the years. High national debt has to be covered by Government loans, are becoming government debts in form of government bonds or cash money (M3) in the local currency. Such accumulation of financial liquidity, held in domestic or foreign entities, causes financial instability and potential for an outbreak of inflation.

At year 2000, when Clinton’s presidency ended, the national debt was 55% of the GDP, and the government budget ended with surplus. At year 2009, when Obama took over the presidency, following the Presidency of Bush Junior, in the middle of the deep economic crisis, the national debt was already about 82% of the GDP, and the US and world economy was in the middle of the economic crisis. The need to cope with deep economic crisis, at the time, the National debt growth was at the time a necessary. The full extent of National debt was not fully expressed in the data at the time. Most of the increase in the national debt during the Bush administration was caused by the costs of war in Afghanistan and Iraqi war, and bailout of the financial system in the last year of Bush Junior presidency.

The major cause of the economic crisis that started during 2007-2008 was a result of accumulated deficit in balance of payments, caused by low savings rates of US households and high government deficits mentioned above, that can be seen also as negative saving rate. These debts of USA had to be transformed back in some form to the exporting countries.

The private US financial institutions, took the opportunity,  and introduced intermediary activities of financial assets, accumulated due to these financial imbalances in forms of liabilities of institutions, seen as too big to fall, or connect to US government housing policy. The obligatory agreements of these private entities, appearing as backed by the US government, were wrapped in parcels (CDOs), and were sold to the net exporting countries, as solid US government backed financial assets. This financial machination came to its end in 2007-2008 with the subprime mortgage crisis, that peaked with the collapse of Lehman Brothers bank.

On the background of the economic crisis, with about 10% unemployment and negative economic growth, Obama’s policy of increased government deficit was understandable and justified. During Obama, the National debt reached 105% of the GDP. But the National debt growth as percentage to GDP was stabilized at this level between the years of 2016-2018, while in the last two years of Obama’s presidency, it started a very slow and mild correction trend.

At 2019, before the pandemics outbreak the National debt increased to 107% of the GDP, and the annual government deficit grew from about 3% of the GDP between 2014- 2017 to 4.6% in year 2019. This increase in the deficit ratio before the pandemic was a direct consequence of Trump’s economic policy of tax cuts, from which mainly benefited the corporation. This tax cut created free cash in corporations  that invested it into their own stock buybacks, and not into real investments. These buybacks caused unprecedented increase in the share prices, and the stability of stock exchange prices became a major macroeconomic factor, that can endanger macroeconomic stability itself.

Policy of government deficit was implemented by Trump in times of full employment, when it is more correct to squeeze the public deficit, with expectations for the potential troubled times, when the deficit is the right tool to help the economy. The economic crisis that followed the outbreak of the pandemics at the beginning of 2020 resulted huge increase in the national debt to 129% of the GDP at the end of 2020, year that was also the end of Trump’s Presidency.

The last economic issue, Trump promised to solve, was imbalances in the trade and trade deficit.

The only way to treat problems of trade deficite in the short term is to increase the national savings that can be achieved by reduction of aggregate demand, and release of resources to increase exports or/and decrease imports. On the long term the deficit in trade balance can be corrected through economic growth. An immediate change  can be achieved by devaluation of the local currency, decrease of disposable income of the households, and/or decrease of the government deficit.

But Trumps tried a different policy, not implemented since the policy of globalisation, of creating administrative obstructions on the imports. Trump attacked the net exporting countries, mainly China, but also Canada, Mexico, Germany and Japan. This policy caused mainly disturbances in international commerce, but caused very little change in the US balance of payments, and the trade deficit. At 2016 the trade deficite was about 400 billion dollars, 2.7% of the GDP, 2019 the year before the pandemic it ended at about 600 billion, and in the following year 2020, the US current account deficit reached almost 700 billion US dollars.

The conclusion,  Trump’s economic policy  didn’t change the trend of the big deficit in US trade balance, but it  caused disruptions in international politics, mainly with China, but also with the closest friends of the USA, as Canada, Mexico, European Union, and Japan.

So overall, Trump’s economic policy, i would dare to say was a failure.

New strategy suggestion against Putins Russia

I have a suggestion for new strategy how to stop the Russian-Ukraine war and Russian threat to use nuclear weapons. The EU parlament should invite Putin to become a life long president of the EU, and let him manage the EU politics. This will bring eternal peace and wealth.

While USSR ruled Eastern Europe, it subsidised by cheap energy these countries, (75% under worldprices) and impoverished the Russian population. Europe should let Putin do the same.

Discussion with authentic Russians

Dima Voroblev

My life in the USSR was good.

By the time it all came crashing down, I was building a good career, with generous pay and cool colleagues. I’m ethnically Russian, and my father was a hero of WWII which gave me pride and the credentials I needed to further my career. I lived in Moscow, which a very strict Soviet system of resident permits (“propiska”) made an impossible dream for a large majority in the provinces. Unlike most of the Soviet population, I had an unhindered access to Western media and could interact socially with Western nationals. I traveled a lot, and interviewed many interesting people who I wouldn’t have met if I were not in the service of the Soviet state.

(And hey, I was young! It felt so heavenly to be young. Too bad I’m only now fully aware of that.)

But the rest of the nation decided that life in the USSR was not so good after all. So they sent my country to the landfill of history. I can’t blame them for that. Everyone looks for a better life

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My answer to Dima;

And what about destruction of Russian culture and spirit, by murdering most of the intellectuals, who couldn’t accept, that 2+2=5? What about families of millions murdered just because they were in the wrong place in wrong time? What about people brain washed by Soviet propaganda, that were educated according to the “Soviet values”, pretending to prefer the needs of society upon their own individual needs, while in reality they cared only about themselves and their petty advantages upon others. Aren’t you ashamed to admit, that you were part of the system and even enjoyed to have petty advantages, like right to travel and communicate with people out of USSR, while the others were inprisoned in the biggest prison in human history, the USSR? By the way, in the West everyone could communicate with everyone without the fear to be incriminated for that, what was not the case in USSR.

So you and your “privileged friend”, were nothing more than petty thieves in a huge criminal organisation called USSR.

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I just served my country, Sir, as best I could.

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Yes, many people under pretext of serving their country, have done it mainly to enjoy some petty advantages upon their fellow citizens. Like no need to stand hours in queues for basic food. Never asked the question, why those queues exist at all?

Could you explain me, way is your country so important to you, that you fell it right to serve it, even if it murdered and persecuted your friends, neighbours, family members, etc? Isn’t more important certain level of human decency in interpersonal relations, than serving country, that enslaves it’s own citizens? Wasnt it morally better, if you would demand from the country to serve you instead?

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We believed at the time that our country showed the way to the rest of the world

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Thanks for your honest words. It is very interesting psychological issue. How could you believe in Sovietism? (I refuse to call it socialism). If i understand correctly you lived in Scandinavia. You could see and compare USSR with the most liberal, socially most advanced countries in the West. How come you still believed, the Communistic way is the right way? Maybe people like you suffered from Stockholm syndrome? https://en.m.wikipedia.org/wiki/Stockholm_syndrome

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If you’re born into Real Socialism, it’s the only thing you know. Filial Imprinting is a much better term for what you’re trying to say

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That’s strange, i was born and grew up in Estern Europe, occupied by the Soviets. I remember most of my scholmates understood in what a shit we live in compared to the West. But maybe we didn’t represent the majority of the population, just as today the Russian as in most of the democratic world, the intelectual elites don’t represent the ignorant majority.

There are rare times in history, when the ignorant majority is ready to submit itself to the leading intelectual elites, and then the politics becomes positive, but in most of the history since WWI, the ignorant majority, or their “representatives “ ruled under flag of right or left ideology, and it was disaster. But Plato knew about this already 2400 years ago, nīl sub sōle novum.

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Exactly ideological cohesion, was the thing that kept together this monstrous regime. Honestly, now that you are most probably retired, do you see ideological cohesion as a positive or negative thing?

Other thing, USSR never had allies in Eastern Europe, it had colonies of worse kind. The other colonial powers as GB or France gave something positive to colonised countries. Without British colonial rule, there would be no India today. The same with Morocco and Algiers. In India the people use English language and in Algeria and Morocco French. Noone speaks Russian in Eastern Europe, even if they speak Slavic languages, close to Russian.

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In humans it is well known, part of the capacity to think is innate. Of course the materialistic behaviouristic philosophy, you probably grew up in, refused this notion. But as in most of faith systems, be it religious or ideologically based, there is no refuteability or evidence that can oppose the ONE truth.

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It seems Putin and his clan of supporters from KGB have problem seeing in their peripheral countries, the previous Soviet colonies in Central Europe and the Baltic states prospering, and having stable, democratic regimes. Ukraine tries to go the same way, and it seems to Russian bullies too much. They have no problem with despotic regimes in Bielorussia, Kazakhstan, Azerbaijan, etc. But to have a prosperous democratic Ukraine, as a show window to Russian people, seems to Putin too dangerous. It can give some dangerous thought to the Russians themselves.

You wrote, the regime in Ukraine is not stable, i would say in contrary. In Russia where the regime is based on one dictator, even if not despot as Stalin, is a very unstable regime. Try to check with what difficulties was transferred the power in USSR, with the death of the dictator. Competitors murdered or outposted from politics. Historical experience teaches us, the same head of any regime after more than 10 years is a very bad thing. The regime after 10 years necessarily becomes corrupt, more and more despotic, more and more resources are allocated for sustaining the regime itself, and too little is left for the people. At the end the collapse is inevitable. This is what happened to USSR. All the propaganda machinery, indoctrination, censorship, investment in indoctrinated education didn’t help. At the end no-one, except of the bosses wanted to fight for this regime. Even the politburo members, when they surprised understood, no-one is behind them, they turned to the well know medicine, VODKA.

For how long is Putin in the reign? 20 years. For how long more he will stay? 20 more years. This is a stable regime for you? No!!! It is a stagnating regime, making mistakes on mistakes.

Russia had a chance to join EU and NATO 15 years ago. By now, it would be a leading nation in EU, economically and politically. It would mean to democratise Russia. To let political opposition grow and establish itself. But instead of that, Putin has chosen the road of confrontation, to ensure his regime will exist “forever”.

Pity, i feel pity for the Russians. Russia used to be culturally very influential in Europe. Not any more. It exports cultural people, but not culture.

Russia doesn’t need war, its leadership needs paradigmatic change. It is it’s only hope to save itself.

Do not forget, in the meantime the Eastern Dragon is watching, with its 10 times bigger population, already now more than 10 times bigger economy than Russia. Waiting until the fruit, all the territories East of Ural, will be ripe to pick it up. Eventually the great “patriot”, Putin will handover Siberia to the Chinese on golden plate. But it will be in the last year of his reign, in 20 years from now.

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Ukraine isn’t prosperous or democratic. Nobody in Russia envies it.

Russia, unstable? Russia’s okay. Better than some of our neighbors, that’s for sure. What inevitable collapse? Everything suggests against it.

Russia wanted all of that, but that was not in NATO or EU’s interest to let Russia join. Russia is too strong to control. Especially now that it has regained some strength.

Russia needs to be ready for war because NATO, US, Ukraine are readying for war.

China doesn’t need to be imperialist. They can buy anything they need.

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Dear Maxim, if you want to have a serious discussion on your article please do not put my comment out of context.

I never said Ukraine is a prosperous democratic country. Non of the Post USSR countries is. It takes dozens of years to correct the way people think about themselves and about their relationships with their associates, colleagues, friends, subordinates, bosses. Economically prosperous democratic country is all about these relationships. As contrary to Russia, Ukraine tried after few unsuccessful attempts, to make the very first steps toward correcting these relationships. It needed a revolution and several failed trials to kick out partly the corrupt leadership. But Putin didn’t like to let the Ukraine people choose freely their representatives, for good or for bad. So he invaded Krym, then Other parts of Ukraine. No, it is not about Russian security, it is about the imperialistic policy of Putin.

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No, Russia doesn’t need to invest in its military. Noone dares even to think of attacking Russia, with or without its Atomic arsenal. No country, its political representatives must think about the prosperity of their population, which is not the case in Russia, want war. Only a president, who doesn’t need to worry about the next election, as Putin, can think seriously about war.

Look what writes your citizens about life in Russia. Wouldn’t it be more wise, if Putin would invest resources into everyday life, than in military and wars?

https://truthaboutrussia.quora.com/https-www-quora-com-How-do-Russians-perceive-

https://truthaboutrussia.quora.com/https-www-quora-com-How-do-Russians-perceive-their-government-and-place-on-the-world-stage-answer-Misha-Firer?ch=3&oid=61668151&share=c9a4f110&srid=ulM1px&target_type=post-government-and-place-on-the-world-stage-answer-Misha-Firer?ch=3&oid=61668151&share=c9a4f110&srid=ulM1px&target_type=post

One more thing. You and me, we probably have very different options about a stable regime. To me a regime building its legitimacy on repression is not stable in today’s modern world, with the internet and other means of mass communication.  The proof you can find in the Arab countries, and also in USSR, that collapsed not because of the US military,  but because their own people became fed up with all the lies and mismanagement, such dictatorships suffer from.

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At the end there is a soldier who has to aim and pull the trigger. What seems logical and obvious, the soldiers, not even the officers of the Russian army understand, what the goal of this war is. If it would be a walk, and Ukrainian beauties would wave to them on margines of the roads, this would be an another story. But no. Ukrainians already tasted what it means democracy, very chaotic democracy, but still better than being abused every day in every step in your life by some bully, who is part of some anonymous power structures, called KGB, NKVD, Soviets, central committees, you name it. Who the hell are the Soviets? Noone knew these people, only their vicious primitive footman, who if disconnected from some anonymous apparatus, are completely useless.

So yes Russia can destroy Ukraine, it can destroy the whole world, itself also. Do you believe they would do it? Are they as desperate? I would say in contrary. Russians, even under the regime of Putin, still live the best life they ever had in their history. Why would they destroy everything? It sounds too crazy to me to believe in it.

We all know, Russia can destroy Ukraine and the whole world, including Russia itself. The questions are:

A. If Putin is ready to destroy Ukraine or/and the world.

B. If there is a tool in Russian top decision process,  that will stop him to do it.

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You put it funny in a surreal way, but in real life it’s sad to see so much loss of life and tragedy on both sides of the conflict for the sole sake of power games, geopolitical calculations and historical imperial dreams. Russia should have never attacked Ukraine. The two nations are distinct, but culturally and emotionally related.

A few days ago I found this quote from Erich Hartmann about the nature of war: War is a place where the young kill one another without knowing or hating each other, because of the decision of old people who know and hate each other, without killing each other.

Maybe, those old men on the corridors of power everywhere in the world should pause for a moment and think this through.

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Putin, is as unpredictable as any other dictator in late stage of his rule. 

I’m not expert on Putin’s regime. I don’t know what Putin is capable. I don’t know, if there is chance, someone in his inner circle, or in his commander structure will wake up and oppose him? I am reading the comments of Russians living in Russia on the web, and see most of them are totally blindfolded by Putin’s propaganda. Every lie, even the most improbable, is accepted. They believe, Russia is fighting some imaginary enemy,  they call him Nazi Bondar elements. If Putin would call it spagety dragon, it would work as well. Very few Russians, have the capacity to differentiate reality from lies. 

Just like Donald Trump supporters. 

I talked once to a republican supporting American friend of mine. He told me he doesn’t believe in people from Academy. I asked him, if you don’t believe in academics, whose thinking is based on critical thinking and scientific method, to whom do you believe? Donald Trump he said. Donald Trump? who can say in one line two opposite claims? Who, if says sometimes truth, it is only by accident, and most probably he is not even aware of him saying truth.

 If China will use this opportunity to grab Taiwan, as some people suggests, the humanity is probably done. In mean time, what i see, China is rather watching from the side what’s happening,  with rather negativity towards Putin. When Lavrov, Russian minister of foreign affairs said, someone dragged us to this war, he meant most probably China. 

Yes China is playing double game. China needs weak Russia, even better completely destroyed economically and militarily. So it can take over Siberia’s resources. China’s leader is much smarter than Putin. He understands that sovereignty has no value, if it doesn’t feeds your countryman. Putin started this war for achieving political sovereignty upon Ukraine. Even if achieved, it will only cost Russia economically, with no reward. And Xe sees, how costly and unpredictable can be an unjust war against people used to freedom, be it freedom with corruption and incompetence. There are only costs, with no economic benefit. If China needs chips, it can buy it and doesn’t need to make a very costly war against Taiwan.

So  I trust more China than the US and the West to prevent WWIII. 

And what Mr. Doom man suggests? To bomb by nukes Moscow? If his prediction is correct,  then there is no use to be worried anymore about anything,  everything is anyway out of our control and most probably we are all doomed. SORRY.

I start to miss the old communists upon Putin

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To my opinion a regime, who puts in its head a leader, (fuhrer in German), who stays there for more than 10 years and cannot be removed from his position,  necessarily will create evil. Political power is based on loyal people. Dostojevsky wrote, that the strongest way to create loyalty is by joint criminal act. Political leadership, that have to make decisions on daily basis, makes mistakes,  and those mistakes it never admits,  rather it tries to correct them by more mistakes. That’s how a kind of political leadership, that suffocate criticism by persecuting free flow of information, like Putin’s regim acts.

The best historical examples are all those kings and dictators, who couldn’t be removed, but by murdering them, or natural death. You have so many of them in Russian history. 

Look at history of Communistic regime in Russia.  How they accumulated mistake on mistake, and never made correction, in contrary, until the life in Russia and its colonies became unbearable, and it fall apart as a house of cards. Unfortunately it took whole 80 years to happened, and in mean time the Dostojevskys, Tolstoys and other potential great Russian intelectuals were murdered, or emigrated to US, to Israel, to the West. Who do you think Americans are? Many of them of Russian origin. In Russia they would be murdered or silenced, and in the western liberal countries they thrive. Even Dostojevsky was almost murdered by Russian regime, and if would be, he would never have the chance to write his books, that are the top of the top of human cultural creation. How many Dostojevskies were scielenced or murdered by Russian despotic regimes, of Tzars, Lenin, Stalin and his descendents? Noone knows. All we know, Russian regime is what it is, and noone wants to live under its reign voluntarily. Not the East European countries, not Baltic states, not Ukrainians, and not even Belarusians, who would happily overthrow their dictator, if this choice would be given into their hands. 

Truth is i know very little about the war in Donetsk. Yet I read somewhere on the web a preference poll of Donetsk separatists themself, claiming that the public support of ethnic Russians in their land raised already to 20%. (Later they claimed that this publication was a mistake, but other sources verified this survey and a bit even corrected the data not in their favour. You can find it on the web). If it is truth, it doesn’t sounds to me as they are an army of liberators. My conclusion, definitely not verified is, all this story about genocide in Donetsk, is just and another propoganda lie of Putins regime. 

The fact is more than a million refugees, mostly woman and children left Ukrain in last week. And other millions are on their way. It doesn’t look to me like Putin’s army is on liberating operation in Ukraine. It more looks like it is doing genocide.  

Of course no-one can stop Putin, unless people like you will face the ugly unpleasant fact, that you are part of a political system, that is aggressive and despotic, wherever it is, be it in Ukraine, Georgia, but also in Russia itself. Most of the economic resources, found in Russland, this regime sells to the west, to enrich themselves,  and generate enough wealth used to stick to political power and disorient people of Russia as you, who belive in well structured lies and propaganda. (And please don’t answer me, that US has also aggressive policy, because i agree and i wrote against it as well. Also please don’t show me photos of Ukrainian neo Nazis. Of course they exist, as they exist everywhere,  even in Russia).

These are the facts, you can deny, yet still 2+2 is 4, even if you don’t like it.

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I wonder, what is it so attractive for Russia to annex other territories? Russia has difficulty managing its own territory.

If the aim is economy, war never pays off.

Sovereignty? What it is all about? Drawing new maps? It is just a headache.

Honestly i have no explanation, why would anyone in Russia, already far the largest state in the world, with declining population, stagnating economy totally dependent on exports of commodities, want to annex new territories?

Unless!!! Putin is like Vizard from Oz, that at the end all what is behind him is a loudspeaker.

You start with small piece of land, then you have to defend it. So you annex the neighbours. But then you have to defend the new territories, so you annex again the neighbours. But then you have to defend the new territories, so you annex again the neighbours. But then you have to defend the new territories, so you annex again the neighbours. But then you have to defend the new territories, so you annex again the neighbours,………

Western Civilization

Umair Haque in his essay “The Beginning of the End of Western Civilization”, said many right things, but made also many incorrect claims.

https://link.medium.com/rUnAciB9mhb

Umair’s claim is:

 Descartes, Darwin and Nietzsche, are to be blamed for the necessary collapse,  the Western civilization is heading too. Of course Western Civilization is much more than these three philosophers. But even if taking seriously the claim, that rationalism, individualistic competition and nihilism invented by these three philosophers, resulted the contemporary trend of self destruction of Western Civilization, still there is no other civilisation, who could take over the game.

What Umair is criticising is not the western civilisation created by Descartes, Darwin and Nietzsche, but capitalism driven by competition for the highest possible yield on investment, that is the foundation of economic system based on voluntary cooperation, through competition, and prices fixed on free markets. The capitalistic system stands in contrast to a system based on cooperation, either enforced by central power (communistic party leadership) or having decision processes implementing democratically decided decisions, enforced by democratically elected leadership ( cooperative production or service provider entities,  or cooperative  houses, or settlements) In practice the democratic cooperative system never existed at the level of national state. At the level of cooperative legal entities, many times it failed to sustain itself, due to corrupt leadership, elected, while politicaly manipulating the election in the cooperatives. 

The important thing is, the Western civilization invented both economic political systems, that are the only game in the town. Chinese system,  so called “Communistic”, follows Marxism, and if Indian civilisation is democratic competitive system, it follows western philosophy of Utilitarisme. All the known social, economic, political systems are Western civilisation systems, because nothing else exists. The only existing global alternative system to Western system is Islam, that was nowhere implemented as an economic system, but in some very wealthy Islamic countries, who could afford to have very inefficient economy, financed by income from selling oil. Other Islamic countries without such income, failed economically and politically,  when trying to implement Islamic economic laws. 

What Umair attacked is not the rationalism of Descartes, the competing for limited resources system of Darvin, or the Nietzschian nihilism, but the human egoism, its lust for power and for more and more possession of commercial stuff. 

The competitiveness of human beings is part of the Human DNA. The communistic leadership understood this need for competitiveness. They didnt abolish it, but tried to upgrade it from level of individual egotism to the level of whole national egotism. This was the reason behind the huge investments of communistic countries in sports, space exploration, and arms race. 

The communists failed, because their economic system, happened to be less efficient than the capitalistic system, and failed in effective allocation of resources. Their economic system was a tool to ensure political power, and not the opposite. The individual human egoism, its lust for power and desire for more and more possession, wellfare, and individual freedom of choice, became a major political factor, and caused loss of legitimacy, while traying to enforce cooperative economic system. 

While the communistic system, negkected intentionaly the global environment,  to achieve short term advantage upon countries with the capitalistic system, the legitimisation of individuals human lust for more and more, in the capitalistic countries, together with the unprecedent growth of human population mainly in the non western countries, since the end of WWII, necessarily drives the human civilisation towards collapse and annihilation. The first to feel it are the poor countries, with no functioning political system, like countries in Africa, most of the Muslim countries, but also some of the South and Latin American countries. 

If after the collapse of civilisation, predicted by Umair, some civilisation will continue to exist, it will be definitely a Western Civilization, and not in contrary. 

Trade deficite and reserve currency

Asked lately why trade deficit of the US economy is connected to being the US dollar a reserve currency, here is my explanation. Reserve currency means, that the currency is saved in other countries, than the country of reserve currency’s origin. The saving can be done by private corporations or public entities, or even private individuals, who prefer to hold the reserve currency, as media of savings, because of higher trust the world population has in value holding capacity of the reserve currency, compared to the local currency. By doing so, the country holding foreign currency reserves, creates demand for reserve currency itself, disconnected from the need for money for immediate commerce with the country of reserve currency origin. It makes the reserve currency a commodity by itself.
The reserve currency is an item of value, because of the trust people all over the world relate to it. This trust is result of long history of reserve currency origin country’s military dominance, democratic political system, free competitive market economy, trustful private and public institutions and unchallenged right for private property and wealth. China, even with its size of economy, (a bigger economy than that of US, in production capacity terms) doesn’t have a reserve currency, because it couldn’t create the trust in its sincerity in most of the above mentioned issues. Europe was successful only partly in making the Euro a reserve currency, because of its history of world wars it initiated, it’s member countries with loose political connections, with nationalistic tendencies. All these have their consequences on trust in European currency. Even 70 years of peace in Europe, was not enough time to create enough trust in Europe’s currency, to give it enough relative value, comparable to trust given to US, with a long history of continuous respect for the values mentioned above.
The need for holding reserves of reserve currency exists in many countries with doubtful economic performances, history of inflation and monetary mismanagement. In these countries, to create trust in local currencies, the governments and central banks need to create enough reserves from the reserve currency. Just as in the past precious metals like gold or silver, made the currencies trustworthy, today holding US dollars makes local currencies trustworthy.
The exchange rate of reserve currency, in relation to other currencies represents the potential promise for exchange of the currency for goods and services from the country of origin of the reserve currency and also the promise of stability of its relative exchange rate compared to other currencies. But, if there is demand for reserve currency, not as media of exchange, but as value holding item, its price, or exchange value will be influenced by this demand, without the question, if exists enough additional production capacity to satisfy the value of potential demand, that reserve currency promises. As result of it, the relative prices in the country of origin of reserve currency, have to be higher than in countries that accumulate the reserve currency. Technically it is done by creating surplus in trade with country of reserve currency origin. To be capable to accumulate these reserves, the country holding the reserves must create enough production capacity to be capable to produce more than it consumes, and this more to sell to the country of origine of the reserve currency. Such a surplus can be created only if the local currency value of the net exporting country is undervalued relatively to the reserve currency, meaning, in the reserve currency origin country, the prices are relatively higher. Then the other side of this surplus of the net exporting country has to be trade deficit of the reserve currency origin country. This trade deficit is sustainable only if the net exporting country continues with its policy of low relative prices.
Such relation of continuously existing net exporter and net importer country, causes adoptation of production capacity, meaning the net exporting countries have to create increased production capacity compared to the net importer country.
Another consequence of this state of net exporter – net importer countries is relatively higher saving rates in net exporter countries. Does relative higher saving rates in net exporting countries mean also increased wealth of its population. It is not. Wealth accumulation is a long term process, while trade surplus and deficit are short term events. Trade surplus results a trend of balancing wealth between countries of deficit and countries of surplus.
This trend of relative enrichment and relative impoverishment, causes in countries with the trade deficit feeling of loss, and political dissatisfaction of those parts of the population who pay the price. The result is political phenomena of anti votes, as it happened in US when electing D.Trump and in Great Britain voting for brexit. In both these countries, with reserve currency and trade deficit, parts of the population employed in production processes feel to be impoverished, as compared to those employed in financial services, that are involved in processes sustaining the position of US dollar, respectively the British pound as reserve currency.

דור שני

גם אני דור שני, אחותי אומרת,

דור שני של חוויה אחרת,

אבא שותק, אמא מדברת,

הוא כועס, היא מתמרנת.

חמישה צעדים מפינה לפינה סופר,

חשבונות על אבני שייש וגרניט לוחש,

הלוך ושב, הלוך ושב הוא חוזר,

חול וצמנט לפונדמנט של קבר בורר.

מספר אותיות שמו של קונצ’פט סופר,

באנחת צער את שם מוישלה לפתע זוכר,

Szegény gyerek, szegény gyerek, הוא אומר.

בעוד שם הוריו מוחק הוא כצורר.

אין צורך בשמו של אדם שקברו לא נודע,

למי שאין מקום קבורה, אין לו גם מצבה.

Szegény gyerek, szegény gyerek,

מוישלה!!! לפתע הוא זועק,

הולך וצועק, הולך וצועק,

מבט שחור עיניו הבוהות הוא זוכר,

szegény gyerek ,szegény, gyerek.

מולו עומד, זכרון שאינו חולף,

כאב, חוזר ודואב, צער לעולם חוזר,

על אף שזיכרון מושא אהבתו דוהה,

הולך ודוהה, הולך ודוהה,

רק הצער והכאב, איננו הולך.

Deficit, National debt, Money

The stability of the US economy due its size, (about 25% of the world economy), is critical to the economic stability of the world.

Due to the Covid-19 rescue package, and economic policy of previous administration, the year 2020 ended with a deficit of above 3.1 trillion US Dollar, and national debt of about 27 trillion US dollars. To  see the more comprehensive picture, the US GDP in 2020 was about 20 trillion dollars, making the 2020 deficit 15% of the GDP.

In 2021, the projected GDP grow will be about 5%, and the GDP above 21 trillion dollars. The 2021 deficit is projected to be about  2 trillion US dollar. The US public debt will increase by  about 7% and the national debt is expected to grow above 30 trillion US dollars, or close to 150% of the GDP. What does it mean? Anyone remember the 100% strop of the debt installed by the congress, during the presidency of Obama?

To try to answer these question, i will try to analyse the US national debt:

• 6 trillion are intergovernmental debts, out if it 3 trillion intergovernmental holdings, mostly reserves for social security, civil and military servant retirement payments.
• 7 trillion held by Federal Reserve bank, 
• 7 trillion by foreign entities – (in July 2020, Japan owned $1.29 trillion and China $1.07 trillion of U.S. debt, which is about a third of foreign US debt holdings)

The remaining 7 trillion are subdivided as follows: 

• Mutual funds: $2.5 trillion
• State and local governments, including their pension funds: $1.14 trillion
• Private pension funds: $819 billion
• Insurance companies: $244 billion
• U.S. savings bonds: $150 billion (June 2020)
• Other holders such as individuals, government-sponsored enterprises, brokers and dealers, banks, bank personal trusts and estates, corporate and non-corporate businesses, and other investors: $1.79 trillion.

1. About 80% out of the 6 trillion intergovernmental debt are reserves for government employees retirement and social security payments, that are by definition long term savings. These reserves for retirement have low liquidity, and have no significant short term impact on the economy. 

The remaining US debts are of three kinds.

2. Federal Reserve holding of US debt, result of Quantitative Easement policy, introduced by the Federal Reserve in 2009, to cope with the economic crisis of 2008 and 2020. As a result of this policy, the total assets in the federal reserve bank grew from 1 trillion at 2008 to 4 trillion until 2019. Since the outbreak of the pandemics it reached more than 7 trillion dollars, at the end of 2020. 

https://fred.stlouisfed.org/graph/?g=AOn6

The treasury securities purchased by the Federal Reserve bank, or US government debts are assets in the balance sheet of the Federal Reserve, controlled by the government itself. This debt has no direct influence on the economy  But the liability side of these assets in the Federal Reserve balance sheet is cash money printed to finance the asset purchases on the secondary market.

Assets: Securities Held Outright: U.S. Treasury Securities: All: Wednesday Level

This newly printed money is accumulated in the private sector, and most of it was deposited in the commercial banks accounts and other depository institutions. The depository institutions, overwhelmed by the cash, partly redeposited the available cash into federal reserve bank as excess deposits, 

https://fred.stlouisfed.org/series/EXCSRESNS

The excess reserves deposited in the Federal reserve bank were at 2020 about 3 trillion dollars. These excess reserves are highly liquid, so the Federal Reserve started to pay minimum interest on them, to achieve certain level of control of it. 

This money only partly went to sustain the aggregate demand of the economy that collapsed due to Covid-19 epidemy. Big parts of the cash money went to public corporations, they repurchased their own shares, and/or invested into value holding assets such as real estate, crypto currencies, gold, shares, etc. their price inflated to unprecedented hights.  

More than that, Quantitative easement policy had caused a major redistribution of wealth, while those possessing non-monetary assets (company shares, real estate, private business owners,  etc.) entities became richer, due to zero interest rates, while those, holding monetary assets, as bank deposits, pension funds, and employees became relatively poorer. 

C. Bretton Woods, post WWII international trade agreement, made the US dollar convertibility to gold at a fixed exchange rate of $35 an ounce. The United States had the responsibility of keeping the price of gold fixed and had to adjust the supply of dollars to maintain confidence in future gold convertibility. The other currencies were peged to the dollar. The West European and Japan economies, that recovered  by the early sixties from WWII, needed more international reserve currency to secure monetary liquidity and stability. 

The global gold stock could not meet the world’s demand for international reserves at fixed price for gold. Consequently, the United States provided dollar reserves by running a persistent balance of payments deficit and promised to redeem those dollars for gold at $35 per ounce. However, the amount of dollar claims outstanding US began to exceed the US government’s stock of gold and the Bretton Woods system could  not precede, when the foreign-held dollars exceeded the US gold stock at a fixed price. As a result, in 1971 US stopped to exchange their dollars for gold; in effect, the international monetary system turned into a fiat money system.

Even if the dollar became a fiat money, due to trust in the US economy, that was dominant at the time, it became the reserve currency, to which all the other currencies were pegged. It meant the other foreign countries needed to accumulate in their central banks US dollars to stabilise their own currency. This caused relative appreciation of the US dollar against other currencies and consequently increased the trade deficit of the US.

https://www.stlouisfed.org/~/media/Publications/Regional-Economist/2018/Third_Quarter_2018/lead_fig1.jpg?la=en

The new policy of Donald Trump against China seems to have done very little to the trade deficit between China and US until 2019. The deficit is a result of low saving rates in the US. Increased public deficit caused by reduced taxes implemented by the Trump administration didn’t help to increase the US saving rates, if so, it didn’t reduce the trade deficit.

https://fred.stlouisfed.org/series/WSAVNS#0

The US saving rates are historically very low, compared to China, with saving rate of about 44%, and Japan’s saving rate of close to 30%. This high saving rates of Japan and China are transferred to the US, and enables US citizens to live with very low saving rates and high standard of living. This resulted trade deficit.

Since the outbreak of the pandemic the saving rates in USA increased dramatically from 7% to more than 30% but then it dropped back to below 15%. Even if the saving rate went through correction, they are still at a higher level, than before the pandemic outbreak. Consequently it caused sharp fall of the US trade deficit. 

https://fred.stlouisfed.org/series/PSAVERT#0

https://fred.stlouisfed.org/series/PSAVERT#0

Is it a long term trend? Or temporary phenomenon? It is hard to predict. If the US saving rates will remain high, it will have deflationary cosequences,  and either in countries as China and Japan the saving rates will decrrase, or it will cause a worldwide economic deflation, due to lack of demand. 

The foreign entities are holding about 7 trillion dollars of US debt. Among the major foreign holders are countries such as China with 1 trillion and Japan 1.2 trillion dollar, but also Ireland 330b, Luxembourg 270b, Cayman islands 220b, typical tax haven countries. According to a report from the Institute on Taxation and Economic Policy, 366 of the country’s 500 largest companies maintain at least 9,755 tax haven subsidiaries, where they hold over $2.6 trillion in accumulated profits. As example, Apple is at the very top of the offshore cash pile, booking $246 billion all based in Ireland. It means that out of 7 trillion foreign debts in reality only 4.4 trillion at most are held by foreign countries as reserves, while at least 2.6 trillion dollars are held by US corporations, that are subjected to their investment policy.

On the other side, in 2019 among the biggest foreign investors were safe haven countries, as  Ireland and Luxembourg that together invested more than 500 milliard dollars in US. 

https://www.statista.com/statistics/456713/leading-fdi-countries-usa/

Even more interesting are the data about the Foreign Holdings of U.S. equities and Long-Term Securities. As to June 28, 2019,  the Department of the Treasury

Federal Reserve Bank of New York published in April 2020 list of the biggest foreign US equities holding countries. The biggest out of US equity holding states are:

Cayman Islands, holding 1.084 trillion dollar market value equity, 

followed by United Kingdom holding 1 trillion, Canada 956 milliard, 

Luxembourg 663 milliard,

Ireland 456 milliard US dollars. 

Obviously, from above, at least 2 trillion dollar valued equity holdings are in reality foreign entities, many of them from US. 

The consequence of the overvalued US dollar, the US had at 2020 an annual trade deficit of about 700 milliard dollars, while China and Japan together made about 350 milliard dollar trade surplus. These two countries are also holding about 2.2 trillion dollar of the US foreign debt, that is half of the 4.4 trillion US dollar foreign debt mentioned above. (US has with some countries trade surplus). To  make their export oriented economy more competitive, China and Japans currency exchange rate policy is keeping their currency in relation to the US dollar weak. Is this trend sustainable? Sudden shift in currency policy of a major US debt holder can cause sudden change in the relative price of the US dollar and its devaluation. 

Yet devaluation of the US Dollar would increase the competitiveness of the US economy, compared to the other countries, and also dilute the real value of foreign currency reserves and other assets connected to US dollar held by the US debtors. Consequently the living standard of the US citizens, relative to other countries, will have to decrease. Reduction of investments in US assets means for net exporting countries also allocation of these reserve dollars to domestic assets, that may cause price increase in their local economies.

Observing the latest developments in countries, their economies were damaged by US policy, they tried to base their international trade on bilateral agreements, detouring the need for useage of the dollar in international commerce. China since 2008 is gradually reducing its US treasury bonds holdings. In 2021 China plans to introduce E-Yuan, a new currency, based on blockchain technology. If accepted by the public as currency used for international transactions, it may compete with the US dollar. EU is also planning to introduce it’s own blockchain technology based e-currency. All these are in a way endangering the hegemony of the US dollar, as a reserve currency in the world. 

This shift from US dollar to alternative currency will have consequences on the US and the world economy as well. 

Conclusion,

According to the above analysis,  the US national debt, even if causing several long term structural problems, as declining industrial production capacity, low saving rates, overinvestment in overpriced assets, it is far for being unsustainable. As example, the Chinese holding of the US debt are stagnating with downward trend since 2010. 

Even if the US debt to foreign countries can be managed, the structural realities trade deficit causes cannot be changed overnight. 

US for years was the vacuum cleaner of the world overproduction capacity, mainly of the East Asian countries, but also of Europe, the oil producing countries and lately Mexico. This enabled high standart of living in the US, but also adiction to trade deficite. If US dollar would lose its value relatively to other currencies, this would cause major disruption in the economies with surplus. Would the process of devaluation of US dollar be gradual, US, as well as the surplus countries could adopt themself to the new situation. Yet the US public deficite at levels, of 5% and more, while the GDP growth rate is half and less, can cause mistrust among the debtor holders, and search for alternative reserve currency and monetary tool. This may bring a sudden collapse to US dollar, if the change of reserve currency from dollar to some other monetary tool will not happened in international cooperation. 

E-Yuan, E-Euro, and other Es

A question. What is the difference between a dollar and e-yuan? China can increase the volume of e-yuan, any time it wants?
Bitcon, on the other hand has fixed number of bitcoins, not controlled by anyone, this is a special feature of bitcoin. The block chain is a nice feature, but which government will give up this control to know who sold to who to check if taxes were paid?

EugenR: The difference is what government you trust more, the Chinese government or the US government. Printing money is not an intention but a result of economic policy. If you have a government policy, where income is less than expense, or deficit, the result is either government sector taking over the private sector, by increased interest rate, and it also means shrinkage of the economic basis that pays taxes in the future, or printing money, what is by necessasity dilution of value of the currency against other items, be it consumption items or investment items as shares, real estate, other currencies, crypto urgency, etc. That’s what is happening now in the US. US luck is, that China has no internationally recognised and usable currency, and Europe has also deficit due to Covid-19. But at the moment, the covid will be over, and Euro zone will return to its normality, what is balanced trade balance, and/or China will have an internationally functioning currency, while US will continue its policy of deficit, because it is in the genetic of US economy. Otherwise it would mean increasing taxes, or reduction of government expenses, (less wars, what is imposible), the dollar will lose its relative value.

Unless, unless US global corporations will be forced to bring back to US their enormous profits accumulated in tax shelter countries, and now its called foreign investments, then it is all
“As if”, כאילו.
https://www.marketwatch.com/story/how-did-ireland-become-the-us-governments-third-largest-creditor-2017-09-20

An other question:
About digital currency – if the question is trust – China or the US – why China creates e-yuan instead of regular yuan? Why e-yuan is more trustworthy than yuan?

EugenR: currency is not only about trust. International reserve currency needs behind it a trustworthy payment and deposits system. And if it is possible also an absolute commitment for securing secrecy of information. This third condition, due to the anti terrorist acts, in last decades, was weakened, and the governments started to force banks to supply them information also on tax issues.
Yuan doesn’t have non of these attributes, or at least noone believes it has. On the other hand, Bitcoin do has all the attributes, except the security of the deposits. If someone breaks into your account it can take all your deposits, and it is irreversible and non chargeable. Except of that, if the inflation and interest rate would grow, bitcoin has no instrument to compensate you for loss of value by paying you interest. Except of it, bitcoins value is very volatele and speculative.

Conclusion, it depends what will be the solutions of e-yuan to all these problems i mentioned above. I would rather trust e-Euro, that is ready to be introduced next year too. Euro zone economy is comparable in size to the US and Chinese economy. It will also force the Scandinavians and some other EU countries, as Czechia and Poland to join Euro zone.

Libra of facebook had solution for all these problems, and was based 50% on US dollar and nothing of Chinese Yuan, what would solve the debt problem of the Dollar, but the banks and Federal Reserve didn’t like it, and Trump probably didn’t understand how important this issue is, so just let it be. So US government has no answer for these new developments, or at least i am not aware of, that it has.

The Swiss were the first to understand all this very well, and prepared their own version of reserve e-currency, but there is no economy to collect taxes behind the Swiss Frank, and no military force behind Switzerland, so if foreign governments demand information, they are forced to expose it.

Trump is a bully

The most important issue in democracy is peaceful transfer of power between elected politicians. All the rest are relatively neglectable issues. Transfer of power not only gives to the political system chance to change trends, stop to continue with mistaken decisions, every ruler by necessary makes, but it prevents accumulation of corruption, that is innate in every political system, and raises its head, if there is no upheaval of the leadership from time to time.
I’m not surprised, Trump doesn’t accept the fact, that he lost the election. He never was good at accepting realities that didn’t suit his own personal interests. He claimed already in his election in 2016, that the only outcome of the election that he accepts is his victory. The same he said continuously in the last year. It was clear, the only way to remove him from his post of presidency is by force. What does it mean for America? What does it mean to the world. Probably it means, democracy is not a sustainable political system on the long term.
What are the alternatives? Plato said already 2400 years ago. Tyranny or Oligarchy. Trump is both. Tyran and oligarch in one person. Plato’s preferred political system was government of intellectuals, what Trump definitely isn’t. But this was just an utopia. Politics is for those who are good in manipulating political power structures, kind of political bullys. Intellectuals are not very good at it. They are frozen by their doubts. Trump is gold medalist in bullying, and thats why he is surprised not to be a winner. But eventually it seems he has overdone the bullying, thats why he lost to “Sleeping Joe”. Coalition of his victims, women, coloured people, Mexicans, intellectuals, journalists, scientists, etc. happen to be more than Trump’s cowboys, who’s life is all about bullying and been bullyed.
From now on Trump is going to bully the Republican party itself. As he declared he is candidate for 2024 elections, all the party and all the cowboys, who are the majority of the republican party, will be recruited for this aim. Anyone who is opposing Trump, will be out of republican party. So all of them will be pro Trump, who is a bully, so all the republican representatives will be bully.
Against them will be the women, coloured people, Mexicans, intellectuals, journalists, scientists, etc. He will call them communists, non Americans, even Chinese, but his base demographically is shrinking. And people who never really participated in election, went to vote, just to oppose him. And this trend will go on.

To understand Trump

It is acknowledged, generals, officers, journalists, doctors, social workers, teachers in schools and academy, scientists, public administrators, public workers, all these professionals are trained people, means in their curriculum is motivation for service to public. Service to public is a concept that lies outside the orbit of the zero-sum game, because in service to public you give to others rather than take from them. Gambling is a zero-sum game. Trump is a gambler, a zero sum player, and claimes, service is for “suckers”. 

This is the reason, Trump is opposed so badly and one-sidedly by all these professionally trained people, indoctrinated to serve the others. On the other hand, Trump is surrounded and supported by all these zero sum players, ready “to kill” the others for their own. The others are those with different appearance, different faith, different hobbies, different opinions, different “race”, different language, different accent. 

As to Trump supporters, the environmental problems are problems of others, social problems are problems of others, economics is to satisfy their immediate “needs”, desires. The others let them rotten, let them behind the fence. 

Few understandings about the post Covid-19 economics.

As contrary to often heard claims about expected inflation due to the huge influx of money into the economy, caused by central banks monetary policy, I don’t expected in the foreseen future consumer price index inflation.  My reasoning is based on the following understanding:

A. Even a temporary drop of 10-15% on the GDP, with it the high unemployment will have deep effects on the agregat demand. 

B. The global economy started its slowdown trend already in 2019. As a reaction to it the Federal Reserve changed its interest rate policy already before the pandemic. It means, there was worldwide production overcapacity, globally and on the local level. 

C. The technology and sciences didn’t stop their research and development during the pandemics. New technologies and management systems, and new commercial networking continued to be created and introduced into the economy. 

D. the commodity prices halved at the beginning of 2020 and still are far bellow 2019 prices. Viz.

https://tradingeconomics.com/commodity/gsci

E. the inflation could raise locally in some major economy, if some major currency would depreciate substantially, meaning tens of percent. Such a dramatic change in exchange rates may happen due to some global change in the financial system of international trade. For example, if China successfully would introduce some kind of internationally accepted currency, that would replace the US dollar as a main currency for international trade. The same may happen, if Libra or some other kind of corporate money will be successfully introduced as a major payment system.

On the other hand, the central banks actions on the bond market, (Quantitative easing) means additional new money in the system that will look for investments in value holding assets. Since corporate and government bonds securities are with  almost zero yield, the only liquid alternative is share prices, commodity prices, esoteric currencies, as bitcoin and to less extent, less liquid real estate.

Some solutions for economic crisis.

With the outbreak of the pandemics at March 2020, the annual public deficit grew from 1 trillion dollars at 2019, number by itself unprecedented, to 4-5 trillion for year 2020 or 20-25% of the GDP. As explained in paper…..

https://rodeneugen.com/2020/06/13/one-swallow-does-not-make-a-spring/

The public deficit, indirectly results quantitative easing policy of the Federal reserve bank, that causes increase of US treasury security holdings by the Fed. 

Subject to understanding that there is no negative interest rate option, this policy reached its bottom with zero interest rate, caused by the policy of quantitative easing itself. The other monetary policy the Federal reserve bank can do is purchasing mortgage backed securities or corporate bonds instead of treasury securities. This means subsidising the mortgages by decreasing the interest rate on them. The next step could be corporate bonds, their price and consequently the interest rate on them will be disconnected from their real economic performances. How much of this money will be invested in increased production capacity and how much into buyback of their own shares, is to be seen. Purchase of non financial corporate bonds by Federal reserve, will make out of these non financial corporations money creating institutions. Just as the banks, when giving loans to non-financials, they create additional money in the monetary system, so will purchase of corporate bonds by the Federal reserve bank add  additional money into the economy. 

The result can be, that new emissions of bonds will be translated to new cash money in the system

https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

Since the beginning of 2020 to June the Federal reserve banks treasury holdings increased by 2 trillion dollars from 2.3 to 4.3 trillion dollars. This means, even if not formally, but in practice, the US government owns itself its debt at this level. The mortgage backed securities holdings of the Fed. grew at the same time from 1.4 to 1.9 trillion dollars between February and June 2020.

The composition of the Federal reserve holdings, 

https://fredblog.stlouisfed.org/2020/03/fourth-large-scale-asset-purchases-program-a-new-hope/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog

Consequently the increase in federal reserve balance sheet was translated to excess reserves of the commercial banks deposits in the Federal reserve bank and increase in M2 by 2 trillion US dollars. All this means more liquidity in the financial system, that reduces the capacity of the Federal reserve to control the money flow through the regular open market operation. If the crisis will continue, and the unemployment will be alongside with inflation, (stagflation), the Federal reserve will be forced to take regulatory acts, that will intervene in the financial markets. 

Inflation is a result of limited supply capacity, caused by shortage and consequent price increase in some major commodity or skilled professional workforce, crucial to achieve full employment of the production capacity in the economy. In the contemporary economy, due to globalization of the production capacity, there is hardly seen any such production capacity shortage that could disturb production and supply of the consumer markets and cause inflation. But political intervention into international trade, could cause blockage in international supply chains, as it happened to lower degree already before the outbreak of the pandemic. In this case the US government will have very little room to correct the economy with monetary means or additional tax release, that could be implemented immediately. 

According to the following chart, representing the annual trend of US imports from China, it seems, since 2018 there was downward trend of US imports from China since 2018, the year the US started its policy of disruption in the trade between these two countries. 

——

Since the outbreak of the pandemic the commercial banks credit increased by 1 trillion dollars from 13.9 trillion to 14.9 trillion between 14.2-1.5.2020, and then it suddenly changed its trend. The banks seem changed their credit policy due to increased risks, the new realities impose on the businesses.

https://fred.stlouisfed.org/series/TOTBKCR

Other changes in the monetary parameters is near to zero basic interest rate. That slightly went through correction, between 2016-2020 and dropped to zero again with the outbreak of the pandemic. 

https://fred.stlouisfed.org/series/FEDFUNDS

Since the economy after 10 years of near zero interest rates is adjusted to the low level of interest, meaning investments with potentially low yield and/or high risk were done due to low interest rate. Additional reduction or continuous zero interest rate will make little change in the economy. Introduction of negative interest rates has its limitations, since it would make the transformation to cash economy profitable. 

To translate the excess liquidity into economic growth and then to employment, demands transfer of liquidity to non-financial businesses in form of loans, that are invested into new additional production capacity. But new loans need more than liquidity. It needs new business opportunities, new markets, new technologies, new ventures, and banks that feel secure about future developments. 

The excess liquidity created after 2008 financial crisis were deposited into federal reserve bank that increased until end of 2014, when it reached 2.7 trillion dollars.  Since 2015 the excess reserves of commercial banks started its decreasing trend until 2.2020, when it started its dramatic climb and more than doubled within three month. 

https://fred.stlouisfed.org/series/EXCSRESNS#0

If to learn from the 2008 financial crisis, the credit to non non-financial sector decreased immediately after the crisis, and started its increased trend only from 2012, four years after the introduction of the quantitative easing policy. Most probably similar development is expected to happen with the covid-19 crisis.

https://fred.stlouisfed.org/series/CRDQUSAPABIS#0

Quite obviously the economy is in liquidity trap? 

Liquidity trap means, Very low-interest rates and still preference for saving rather than spending and investment, slow/negative economic growth and low inflation. 

Low inflation sounds a positive phenomenon, but in economy of high debt, only high inflation can reduce the debt level, necessary for economic revival. 

Assuming that boosting the aggregate demand and returning to the pre-pandemic narrative is the right solution to achieve long term sustainable prosperous economy, monetary policies seems to have limitats to achieve this goal. Even if almost unlimited money is poured into the economy, it still have to be correctly distributed, so that very little supply capacity will be damaged by bankruptcies, and the aggregate demand will stay at least in its previous level. The policy of Quantitative easing, is pouring liquidity into the banks and to non financial corporations, (if corporate bonds are purchased by the federal reserve bank). Reimbursement directly to private households could be a promising policy, but it can be done only as government  budget decision, that demands approval of the Congress, as contrary to Quantitative easing policy, that can be decided by professionals of the Federal reserve board. 

How will look the post pandemic economy, without centrally managed decisions? 

1. Unemployment level of 10-20% out of the workforce.
2. The income gap between rich and poor will farther deepen. 
3. Many mid and small sized businesses, mainly in tourism, retail, performing arts, etc. will be out of the business. 
4. The banks will be overwhelmed by financial liquidity, while there will be a credit squeeze for most of the businesses. 
5. In the banks will accumulated bad debts of businesses that didn’t do it through the pandemic. 

The only way to change this reality will be by heavy intervention of government. There are two major ways to intervene in this emerging reality on the most fundamental level. 

1. To introduce universal basic income policy.

Universal basic income (UBI) calls for the government to give every adult a fixed payment, regardless of work status, health, wealth, or other criteria, used today as a condition for social aid. Being basic, it is intended to provide foundational income for people’s most fundamental needs. There were several experiments with UBI in places as Finland, Kenya or other places.

https://www.weforum.org/agenda/2019/02/the-results-finlands-universal-basic-income-experiment-are-in-is-it-working/

The universal basic income policy would mean: “every U.S. citizen over the age of 18 would receive guaranteed payments to cover their daily needs. 

The main problem with this program is, it may cause decrease in work force participation rate. Shrinkage of workforce in the economy, where jobs aren’t disappearing but rather the nature of work is changing, means damage in economy, but also can negatively influence the economic dynamics, caused by shortage of new innovative workforce and decrease of entrepreneurial ventures. 

UBI is a very expensive program, and in most countries, with weak currency and limited capacity to borrow, will require substantial tax increases or spending cuts, that would farther deteriorate their economy. This problem could be solved by introducing global virtual currency, something like libra, currency presented as an option for future currency by Facebook, plan that in meantime seems to be freezed. 

Many of the most disadvantaged citizens would likely be left disconnected from the realities of economically productive activities. This would leave them in their state of relative poverty, and stigmatized by the society.

2. Initiate investments in public infrastructure, and communal services and needs.

Investments in public infrastructure and services is a very complicated and politically controversial policy. To be successful, it needs long process of planning, preparation of needed resources and recruitment of public support. In today’s political environment, it is hard to see, such a policy will be adopted. 

Still i would like to check, what fields of public services and investments could be those included in such a program? US is far behind Europe in investment in publicly financed investments as transportation in fast trains, 

ecologically friendly smart cities, and other investments in ecologically friendly urban and whole regional systems.

As to public services, the demand for public services is by its definition unlimited, while the supply has to be limited. Still investments in education, health care, social services, arts, basic sciences are the fields with potential to increase demand for new additional employees, that can have positive impact on the economy. 

3. Monetary solution 

The global monetary system will be flooded with cash money accumulated in bank accounts, waiting for investment opportunities. The interest rates will be close to zero for years, giving advantages to the wealthy, with collaterals to leverage against new, cheap bank loans. On the other hand, the earnings of those with regular, relatively low income, as wages, or pensions, will be diluted.

Close to zero interest rate will encourage investments in risky, sometimes white elephant projects. This means waste of resources, and damage in economic efficiency, and productivity. 

The concept of virtual currency, similar to libra represented by Facebook, which was smashed from the table in the pre-pandemic world by regulators and political pressure, will probably become a necessity after the post-pandemic world. 

https://www.theverge.com/2020/3/3/21163658/facebook-libra-cryptocurrency-token-ditching-plans-calibra-wallet-delay

Such a currency if based on basket of existing reserve currencies, as the US dollar, Euro, Japanese Yen, British pound and Swiss franc, can be one of the solution, how to bring stability back to the financial system, overflowed by reserve currencies, due to enormous public debts in the countries with sovereign reserve currency. Such a currency should be rather a result of cooperation of major world economies, than initiative of leading global corporations. 

One swallow does not make a spring

To those who think all our economic problems are behind us, as President Donald Trump expressed itself, i would say, “One swallow does not make a spring”.

To those who think the stock exchange correction is a sign for the beginning  of the end of the economic crisis caused by coronavirus, I would say, it is a frenzied reaction to trillions of dollars poured to the financial system, by the Federal Reserve in a few months, since March 2020. 

The money poured into the system by the Fed. will land in bank accounts, and has to be channelled to some kind of consumption or assets. High unemployment and uncertainty of income for most of the people prevents increase of consumption as an option. When people don’t feel, their bank deposits are safe, the option of bank deposits, bringing zero interest, is a very bad choice.

Real estate is not a short term investment option that could react to such a dramatic influx of liquidity within few months. All that is left is investment into the stock exchange market. 

Sudden rise in employment that happened in May is probably a correction of very low level business activity, that in the US, (with a culture of very low solidarity between employees and employed compared to Europe),  immediately caused 15% unemployment, jump from less than 5% unemployment rate before the pandemic. Not surprisingly, people after 2-3 month without shopping, want to compensate themselves, and refill their stocks of “necessities”, at home. Just to remind you, in the US the household consumption is about 70% of the aggregate demand. Its increase has an immediate impact on the GDP and the employment, when the production capacity is there, in a dormant state. 

The fundamental imbalance of the US economy that existed before the outbreak of the pandemic is caused by low saving rates and rising debt, to cover the high consumption level of private households and public spending. No administrative regulation, or custom tax policy can change this reality, but fundamental change in US economic realities, and change in the position of the US dollar as major reserve currency. The strong position of the US dollar is not anymore based on economic performances of the US economy, but by weakness of alternative European political institutions that caused weakness of the Euro . The latest performance of US political representation, can disturb the faith in US constitutions, and with it the faith in its icon, the US dollar. 

As to the Chinese option, it failed until now to present an alternative to the US dollar, in a form of Chinese currency, supported by the largest production economy in the world, due to undemocratic institutions, causing necessary mistrust in its financial institutions. 

I wonder, for how long is sustainable US policy of borrowing from China on one hand, and attacking Chinese unfair practices in international trade on the other hand. I would guess, China is not dormant any more, just waiting for the right time to fight back. It can come in some form of international digital currency, supported by Chinese economic production capacity, or any other unexpected form. 

US National debt

At May 2020 federal debt held by the public was $20 trillion and intragovernmental holdings were $6 trillion, that makes the total national debt of $26 trillion. The intergovernmental holdings are reserves to cover future pensions and social security payments, and are stable and not speculative.  Out of the 20 trillion,

$4 trillion were held by U.S. households, companies, and governments, 

$3 trillion by asset managers, 

$4 trillion by the Federal Reserve, increased from 2 trillion since march 2020.

https://fred.stlouisfed.org/series/TREAST

$2 trillion by banks and insurance companies. 

$7 trillion, overseas, mostly by foreign central banks.

The foreign holders of U.S. Treasury securities share  have fallen from 43% of the US GDP at the end of FY 2013 to 36% at the end of FY 2018 (7% decrease, that represents about 1.4 trillion dollars in 2020 prices). Most of this decrease was done by China; its U.S. treasury securities holdings fell to 18% from 22% from December 2013 to December 2018, and Japan it’s share fell to 17% from 20%.

It seems, shift in the Chinese economic policy, of being the sole major foreign borrower of the US can be observed since 2010. 

https://www.investopedia.com/articles/investing/040115/reasons-why-china-buys-us-treasury-bonds.asp

Curent Deficit level

In 2019 the US trade deficit ended with 600 miliard US dollars, while the federal budget ended with a deficit of about 1 trillion US  dollars, that is about 5% of the GDP. These are figures before the outbreak of the pandemic. The public deficit had to be covered in some way, either by increased investments of foreign countries, or increased savings of private holdings or corporate and non corporate businesses. 

US Trade summary in 2019

 (Milliard US dollars)

Economic region	US Export	US Import	deficit
China	106.6	472.5	366
Canada	292.2	326.6	34
Mexico	256.4	361.3	105
Japan	74.6	147.0	72
Germany	59.8	123.0	63
South Korea	56.9	80.0	23
Vietnam	10.9	69.0	58
UK	69.1	64.0	-5
Europe Excluding Germany, UK	220	300	80
Others	430	438	8
Total US Goods	1,577	2,381	804
Total US Services	923	719	-204
Total	2,500	3,100	600

The trade deficit of US its not only generating debt, but it represents lack of efficient production capacity  in the US to supply enough goods for prices available today. Any kind of administrative restriction on import, will cause an immediate price increase in products produced by China in the short term.

Private households

It seems, according to the below data, private savings didn’t change significantly since the 2008 economic crisis, and remained between 6-8% of disponible income until the outbreak of the pandemics, when the personal savings has jumped from steady 7% to an unprecedented 35% from the disponible income. This happened despite the expected decrease in personal income.

https://fred.stlouisfed.org/series/PSAVERT

The net worth of the private households has increased in the last 10 years from 70 trillion to 120 trillion US dollars. Most of this increase was result of stock exchange price increase. 

Balance Sheet of Households and Nonprofit Organizations

https://www.federalreserve.gov/releases/z1/dataviz/z1/balance_sheet/chart/

Out of the net worth at 2018, 41% were financial assets, that include stocks and bonds.

Nonfinancial corporate

As to the nonfinancial corporate savings, it has continued its trend since 2010. It increased in 2019 by 1.5 trillion dollars, and since 2010 by about 8 trillion dollars. 

https://fred.stlouisfed.org/series/TFAABSNNCB

Relatively very little of the savings of US non financial corporate businesses, are holdings in form of US treasuries. 

https://fred.stlouisfed.org/series/TSABSNNCB

On the other hand the debt of the nonfinancial corporation grew from about 8 trillion to 14 trillion between 2010 to 2020 and from 40% of the GDP to 47%. Usually in corporations is expected, that most of the debt is invested into production capacity or yield generating assets, but it seems, part of this increase in debt was used for buyback of shares, and other non productive investments.

The repurchase agreements, seem to be in correlation of with the Federal reserves Quantitative easing policy.

https://fred.stlouisfed.org/series/SRPSABSNNCB

Federal Reserve Bank

The Federal Reserve bank itself, increased its treasury securities holdings by about 2 trillion dollars between 2008- 2018,  by its quantitative easing policy, that between 2015-2019 ceased as seen in the following chart.

https://fred.stlouisfed.org/series/TREAST#

With the outbreak of the pandemics the Federal reserve increased its US treasury holdings by additional 2 trillion dollars by mid May, within 2 month. All this means, additional 2 trillion dollars in the monetary system deposited in the banks, while the banks have very limited options to increase loans and credit, as an immediate response to the increased liquidity. The result is increased excess reserves in the Federal reserve bank from 1.3 trillion to 3.2 trillion dollars. 

https://fred.stlouisfed.org/series/EXCSRESNS

In the short run the additional 2 trillion dollars are deposited back in the Federal reserve vaults. 

Public deficit and its consequences

The question remains, what does public deficit of trillions of dollars mean? Does public debt matter at all? Or what matters in the economy is inflation and unemployment and not the financial structure of the monetary base?

In the following chart we can see again more than 2 trillion US dollars increase in the system, in form of M2, (M2 is a measure of the money supply that includes cash, checking deposits, and easily convertible near money. Investopedia.)

https://fred.stlouisfed.org/series/M2

M2 is cash money or bank deposits, and is the other side of the public debt. What does it do to the whole economic system, based on prices as a major tool to balance between the demand and the supply? 

Since M2 is the most liquid form of money, ready for immediate use, the 18 trillion US dollars stand against the 20 trillion dollars of annual GDP. 

Here comes into the picture the velocity of money. 

The velocity of money is a measurement of the rate at which money is exchanged in economy. It is the number of times that money moves from one entity to another. … The velocity of money is usually measured as a ratio of gross domestic product (GDP) to a country’s M2 money supply.

https://fred.stlouisfed.org/series/M2V

As immediate response to the additional liquidity in the monetary system is sharp decrease of the money velocity. It seems, the velocity of money is in correlation with M2, that increased since 1990 from about 3 trillion dollars, six fold to 18 trillion dollars in june 2020. At the same time the urban consumers price index doubled itself.

https://fred.stlouisfed.org/series/CUUS0000SA0L1E

As seen from the chart above, the rite of price increase is steady in the last 20 years. Even if the rate of price change will not change significantly, after all the pandemic did not damage the potential production capacity of the economy, still remains the question, who will benefit from this policy of excess liquidity, and who will pay for it?

The money’s value, just as of any other commodity, represented by its price, is dependent on its scarcity. Money price is the interest rate paid for either borrowing or lending it. In market economy, the demand volume for any commodity, goods and services (CGS), is regulated by its price, fluctuating according to preferences of those demanding and supplying the CGS. 

But what happens, when the commodity price is zero? Theoretically the demand for this item should be infinite. But in the real world the capacity to absorb CGS is limited, unless the CGS can be stored without cost. The result is limited demand for most of the CGSs in the real world. 

Does this apply for Money as well? It seems, there is no storing cost for money, (unless negative interest rate is introduced on deposits), so there can be infinite demand for money in case of zero interest rate.

But infinite doesn’t exists in the real world, limited by the size of the globe. This is why many, historically free of charge commodities, such as water, air, environmental balance, etc. at certain level of usage, started to have a price. The expected price for money, as to the money holders, has to come in form of negative or very low interest rate, or inflation, or both. On the other hand the lender sees as price of money real term interest rate, (inflation rate substracted from nominal interest rate).

Excess liquidity

The expected result of excess liquidity is inflation. It didn’t happen after the 2008 crisis that ended with the policy of quantitative easing, because of the global economy was with excess production capacity. The same doesn’t have to happen in 2020. The disruptions in international trade caused prior to the outbreak of the pandemic by the US, may cause price increase.

Inflation creates new redistribution of wealth and income. Usually the sectors in the economy, with higher level of flexibility gain more from an unsteady economy, while those with less flexibility and income from wages and pensions are on the side of losers. 

As to the question of employment and real economic activity, how does this dramatic increase of liquidity in the monetary system express itself? This question has to be divided into different time horizons. 

The short term, until the time when an effective vaccine is developed, estimated time is until midd 2021.

The middle term, time of restructuring of the economy. 2-3 years from vaccine development.

The long term. New economic reality. 

The table bellow presents the different sectors of the economy and their share in the GDP and employment, and the expected effect of the pandemics on them in the short term. It seems the economy can be divided into 3 equal sectors, with positive, neutral and negative impact of the pandemics on them. To my opinion the only sectores positively influenced by the pandemics are financial services due to expected monetary developments, professional advisers in finance, information, and legal issues, activities directly dependent on federal government decisions, such as education, social services and investments in infrastructure (subject to expected increased investment of the public sector into the economy), and information. The sectors with negative impact are real estate, manufacturing, arts entertainment and trade. Needed to mention, while the negative impact on the economy was immediate with introduction of quarantine, the positive impulse will be gradual. 

Industry sector	% of GDP	Number of employees in millions	Effect of Covid-19(assumption}
Real Estate, Renting, and Leasing	13	2	negative
Finance and Insurance	8	5	positive
Professional and business services	13	19	positive
State And Local Government	12	19	neutral
Educational services, health care, and social assistance	9	22	positive
Durable Manufacturing	6	8	negative
Nondurable Manufacturing	5	4	negative
Retail Trade	5	15	negative
Wholesale Trade	5	6	negative
Information	5	3	positive
Arts, entertainment, recreation, accommodation, and food services	4	9	negative
Construction	4	7	negative
Transportation and warehousing	3	5	neutral
Other services, except government	2	5	neutral
Utilities	2	1	positive
Agriculture, forestry, fishing, hunting	1	1	neutral
Mining	2	1	neutral
Miscellaneous	1	20
Total	100	151

The middle term development is expected to envolve after the pandemics has diminished. 

The new post pandemic people will adopt probably different behaviours and preferences, compared to the pre pandemic times, and all this will have influence on the economy as well, but i have no professional capacity to explore these fields. The major economic factor in the post pandemic world will be in a new monetary reality, with much more liquid money in the system, concentrated in the hands of certain sectors, and lacking in the hands of others. 

As to the business sector, producing the supply side of the economy, most of the money will be probably under the control of the commercial banking system, deposited as excess reserves in the federal reserve, waiting to be gradually released as loans to new ventures. Other gainers will be businesses that survived the crisis and are ready to act for the revival of the economy. Many of them prepared during the pandemic plans for new business ventures, that may be relevant or not in the new economic realities.

The private households, creating the demand side of the economy will be those, who kept their jobs, and those that have not. Most probably the additional unemployment rate will be about 10% of the workforce. Even if partly, the trillions of US dollars of quantitative easing will be channeled to these people, they represent about 10 to 15 percent of the workforce, to add to them about 45 million pensioners, and those dependent on their income, and it makes probably half of the US population. Those in the lower side of the income level, will probably have significantly less income, than before the pandemics, it means additional increase in the inequality of the income.

The following chart represents the increase in inequality since the seventies. Number 1 represents absolute inequality, while 0 represents absolute equality.

https://fred.stlouisfed.org/series/GINIALLRH

The expectation is that the inequality will further rise due to the policy of quantitative easing. The wealth will be concentrated in the hands of few even more than before the pandemic. 

All these expected developments are pointing towards one direction, less wealth, more inequality, more unemployment. 

Social fabric of economy

If in previous assays i wrote about money and its connection to debt, here i would like to write about the more fundamental issue, that lays under the mechanism of exchange of goods and services, seemingly the substance of everything the economy stands on. This more fundamental issue i would call, the “social fabric”, of every element in the network, teemed together in the economic network, where each individual decision maker and provider, knows his task, his place and his authority in relation to his adjacent co-players and colleagues. The phenomenon of economic networking is based on relation between entrepreneurs, investors, producers, sellers, intermediators, employees and employers and final consumers. The exchange of goods and services needs an intermediary agent, that scales the relative value of the products, and gives it its price. This agent is money. Other emerging property of money is its function as value keeper on  timeline, without propensity to lose it’s value, and as such it brings with it unlimited demand for it. This also means money is an asset, held by people and institutions, in purpose either to generate income in form of interest, or as a value holding asset, that can be easily exchanged against any item or service, without a need to give up the money at discount price. 

The major difference between money compared to other kinds of assets is its relative liquidity, and its value stability. The phenomenon of unlimited demand for money causes accumulation of it, and adds to the  unequal distribution of wealth between people. 

The above described function of money creates a whole monetary system, with agents, who are safekeepers of money deposits, intermediators between borrowers and lenders, trustful payment providers. This whole monetary system is securing smooth flow of exchange between purchaser and seller of goods and services, activities in the real economy.

The real economy is about production and distribution of goods and services. Production itself is about capital invested in production facilities, row material exploited from nature or processed, and labour invested into the production. 

Distribution is about transportation, selling spots, brands, marketing services, etc. 

Above all this stands money, the major tool enabling flow of products in the production process, until finally reaching the customer, who is willing to pay the product its price. 

This simplified description of the economic system leaves one question, what kind of money distribution will secure to most people to get the most value, while limited resources is the axiomatic fact that underlies the whole economic system.

Assuming everyone’s needs are the same, seemingly the solution, to pay to anyone the same amount, seems intuitively right. The problem is, such an approach proved to be very inefficient. The Soviet experiment proved to fail. Someone may claim, this experiment was not handled correctly. It was kidnapped by the most unscrupulous politicians, as Stalin, Khrushchev and Brezhnev. But even more successful experiments, under entirely different circumstances, like Kibutz in Israel, failed to survive beyond the first and second generation of founder fathers. The demand for individual expression and creativity, as fulfillment of desire for freedom, won over the ideology of cooperation and social harmony. 

The economic efficiency of the market-capital economy, based on its capacity to recruit one of the most common human attributes: greed, envy, competitiveness, and infinite whish to stockpile possessions of value holding assets. These seemingly socially negative attributes succeeded to create harmonious social economic cooperation, out of rather chaotic competition between each individual and different parts of social structure. Whereas the alternative system, based on cooperation and mutual guarantee out of altruism and ungrudging acts of readiness to share, seemingly socially positive attributes, failed. 

I thought what experience could be relevant to the expected economic breakdown that will emerge from the Covid-19 pandemic. The only comparable event that came up to my mind was the collapse of the centrally managed communistic economic block. 

About 30 years ago, the communistic economic system collapsed. New leaders of more than half of the world population, introduced revolutionary change in the previous economic system, from bureaucratic, centrally managed-planned economy to capitalist-market oriented economy. The crises following the collapse of the previously centrally managed network was huge. Everything that seemed valuable in the past lost its value. Huge investments in production facilities, and economic infrastructure lost their relevance, and whole cities of industrial sites stood empty, without use. Public transportation, that used to bring workers to these factories became useless. Even worse, lots of the knowledge taught, learned, became irrelevant. The social network, that enabled functioning of the previous system disappeared overnight,  and many major players needed to disconnect their ties with their previous colleagues, denying their identities.

Already before its collapse, significant parts of the leaders in the so called socialistic countries, understood the failure of the socalled “socialist economic system”. But only very few had the freedom to learn about the alternative market economy. The previous leaders, who participated in the leading positions in the communist regime, lost their possessions and position from one day to other. New leaders, relatively young, in their twenties and thirties, with capacity to learn and adopt new ways of action and thinking became relevant. They took the leadership positions, and erased whole level of nomenklatura, mostly opportunists and very few ideologically oriented leaders, were erased from the economic scenery.

The capitalistic-market economies were just happy to fulfill the economic void that had been opened in the post communist countries. They took over the leftovers of collapsed production and distribution facilities, replaced it, remodelled it, rebuilt it. New markets, with hundreds of millions of well educated, very adaptable people, hungry for knowledge, with entrepreneur spirit, opened for risk taking, since they had very little to lose, opened to the unscrupulous, well established, western economic entities. The capitalistic system based on competitiveness, used their advantage in knowledge and available capital, transformed the previously, “socialistic” economy to capital-market economy within less than 20 years. If the GDP per capita with the collapse of the “socialistic system” of the East European countries was about 15% of the major western European economies, at 2019 it was already about 70%. 

But the winners of the bipolar cold war, due to their unscrupulous drive to victory, releasing all the forces of greed and envy, giving up the blush. The had neglected the fact, that there are two sides of the capitalistic-market economy, the financial monetary side and the real economy side.Theyir focusing mostly on the financial side of the economy, leaving the real economy side to the economies, emerging from the socialistic nightmare, mainly China. Most of the industrial production moved to these countries, and most of the western economies focused on services, market developments, global corporate management, and above all financial services. This eventually brought the economic collapse of 2008, when USA needed to recycle debt, accumulated by growing foreign trade deficit, by selling financial assets to the exporting countries, among them, the main exporter to the US, China. 

This policy meant, most developed countries were also the most indebted countries. On the other hand, the developing countries, mainly from the previous communistic block, to secure currency stability, needed to accumulate huge reserves of foreign currency, mainly US dollars, to secure their solvency in international transactions, mostly at times of financial crisis, became the borrowers.

Since 2008 financial crisis, the leading Western economies tried to reload their economies by nationalising the private debt, and continue to increase the volume of government deficit. 

This process continued until 2020, when sudden outbreak of Covid-19 pandemic freezed the economic activity in most of the world, and caused in one hand decrease in the GDP,  that means decrease in debt repayment capacity of economies deeply in depted, while in parallel to it, the governments increased substantially their deficit, that added additional increase in their debts. 

How risky is this debt? The claim is, that Japan has much higher public debt, and it started to accumulate this debt many years before the 2008 financial crisis. But the US debt is very different from the Japanese or European debt, because large parts of it, (about one third), is external to foreign countries, mainly Japan and China, while the Japanese debt is internal debt. This means that the public debt, a financial monetary phenomenon by itself, has deep consequences as to the structure of the real economy. The default of many industries in US, the most famous, the bankruptcy of GM, few decades ago, the biggest company in the world just few dacades before, is direct result of monetary system of overvalued currency, that causes debt to foreigners.

—————-

Modern economy is based on social structure, where each individual, using money is an economically active human being. The very act of using money, is an economic act of participation in creating the fabric of economic network. This can be an entrepreneur, employee or employed, but also an unemployed or a pensioner, whose economic function is to be a consumer using savings, as participant in creating the aggregate demand.

The economy in local or global level includes, decision makers, each of them knows his  unique function, his space to act, his institutive relationships to the other in cooperative network of division of labour. Everyone has his authority as to his adjacent co-players and colleagues, and who has the authority to manage and decide for him his tasks in the social-economic fabric. There are those, who’s knowledge and understanding of realities is limited to their adjacent co-players, then are those with knowledge reaching far related co-players. The final level of decision makers are those, with global picture of the whole social-political-economic structure, and are in the position of global leadership. 

If to try to predict the expected economic recovery from the post Covid-19 world, the closest comparable event will be the post world war, or post revolution world. 

If we compare the post WWII economic recovering from destructed physical infrastructure by war, we find, that while West Germany and Japan miraculously recovered and within 10-15 years newly established a prosperous economy, the East block “socialistic” countries with the same, many cases even better starting point had failed. The major difference between these two competing economic systems was their very different economic networking structure. While in the West the networking was voluntarily based, self organised from the most local to the most corporate level, in the East it was planned and pre-decided by hierarchically organized bureaucratic structure, where networking was strictly imposed on each individual economic unit from the individual to corporate structure. When the so called “socialistic economic system” collapsed, very little useful economic networking remained in function, and all had to be newly build from scratch. 

With the help of western investors and entrepreneurs, the introduction of market economy was relatively fast and successful. Yet, in Czechia as example, even 30 years later, many parts of the economy based on economic networking is in hands of foreign entities. The best example is the food retail distribution, that is all in hands of international food market chains, or small retail grocery shops on local level, entirely in hands of Vietnamese retailers, with their own supply chains, with their own capital investments, with labour force recruited among members of their own community. 

Out of above, the question is, will the standstill of the economy, cause major disruption in the economic networking, or not. The answer to this question is partly in the preconditions that prevailed in global economy before the appearance of pandemics. 

As explained above, the huge indebtedness of the most developed countries, mainly USA and Euro zone, are the basis of the reserve currency, that is fundamental for enabling international commerce and division of labour on global level. Disruptions in this monetary system can endanger the existing global economic networking. 

The US economic policy,  coordinated by president Trump, even before the outbreak of the pandemics, caused several disruptions to the system in the last years. Still the system continued to function without too big upheaval, until the outbreak of Corona virus. To secure the continuous functioning of the system needs international cooperation between the major economic powerhouses, as USA, China and Euro zone. The sustainability of monetary system, based on reserve currency depends on the trust in this monetary system. Trust is a subjective phenomenon and dependent on faith in actions of major political leaders, mainly USA. Major failure of political representatives, or any other disruption in the existing system, as withdraw from international agreements, sudden change of rules of the game, or even verbal expression of to make such a plans, can cause lose of trust among enough people, that panic will take over the system, and then the collapse will follow.

Debts, more debts and even more debts

It’s not obvious what economic impact Coronavirus will have on the global economy and the financial system. What seems already clear, the immediate economic policy will be an additional increase in the national debt as rate from GDP in all the major economies, US, EU, and China.

The global debt had grown in increasing scale in the last 10 years since 2008 and more than doubled itself as percentage of GDP. To make the economy run again, after the 2008 financial crisis, the governments were forced to reduce the interest rates to zero and sometimes even to negative values, while buying out the government bonds and securities. (To this act of central banks was given a nice name, Quantitative easing). This act means transfer of government debts from private entities ownership back to central banks and Federal reserve bank. It also means exchanging government bonds ownership of private entities to cash money, a more liquid form of financial instrument.

The table below represents debt in percentage of GDP as of year 2019 divided between public, households and corporate debts of major economies.

        Government  Households  Corporations

US   107         75             75

Euro     82         58           108

China     50         54           151

Japan   220         59           102

https://rodeneugen.com/2020/04/14/deficit-does-it-really-matter/

While in the Euro area the public debt rate to GDP since 2013 started to decrease, in the USA the public debt increased by 50% since 2008, and continued to grow.

The basic principle of debts is that it includes expectation of repayment. If this principle is invalidated, the lender-borrower relation may be fundamentally disrupted. Lenders who are also the savers, are legal entities, individuals or companies, with faith in preserving the promised future value on their savings,  

The savers can hold financial assets, as cash money, money deposited in financial institutions, (banks  insurance companies, etc.), corporate shares, bonds and other securities, etc.;

or alternatively real assets, as privately owned companies, real estate, rent generating intangible or tangible assets, brands, market shares, etc. The agent representing the value of the assets is cash money, that is financial asset in its most liquid form. Cash money is always the exchange value agent at the act of sale-purchase. The institution keeping the money as its trusty to the act of  transfer, are the commercial banks and other financial institutions. If they fail to fulfill their promise, they will cease to exist. If all these institutions stop to function, the whole system based on trust will collapse. 

The lender-borrower relations have two leads, one moral-political, and two economic. 

The moral concern is about fair relations between borrowers and lenders, that means, the money borrowed to any institution, be it government, financial institution, private company, or private individual, will be used in a way, to support fulfillment of contractual obligation to the lenders. The lenders are savers, many of them employees, their income is wages, whose savings are mostly in pension funds. Against them are standing the businesses, taking loans from banks, or raising money by issuing bonds. Yet, often wrong business decisions, or sudden unexpected change in economic circumstances may cause bankruptcies of borrowers. On the other hand, if the borrower is a big company, the borrower-lender relation, based on assumption, that debts must be repaid or huge personal price is to be paid by the owner of the business for defaulting on debt repayments, is many times violated. The bailout of big corporations issuing bonds that fail to fulfill their obligations, breaks the relationship between a business decision and its consequences. Such a development may break down the relationship between reward in form of money and productive labor, which could lead to collapse of the existing economic system and with it the political system too. It can also cause collapse of the existing socio-economic network. If these moral or economic  principles of lender-borrower relations are substantially disrupted, this may cause the end of the existing monetary system.

Will it happen? If yes, when will it happen? How will it happen? what will the alternative be? No one can predict.

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Increased government debt and commercial banks credit means increased volume of money in the economy. Debt of businesses to commercial banks, and accumulated government debts covered by treasury bonds and securities held by central banks, stand against money, accumulated in the monetary system as bank deposits, or cash money. It also means, when the central bank purchases on open market government bonds, it adds to the monetary system additional cash money.

By contrast, bonds issued by private company, transfer money from bank deposits of bond purchasers, to the bond issuing company, and it does not add new money to the monetary system. If the money borrowed by corporations is used not to increase the corporation’s production capacity and its economic vitality, to secure in the future bonds and loans repayments, but rather to buyback shares of their own company, or to pay bonuses to the executives and/or dividends to the company shareholders, it is transfer of resources at the expense of the savers and may create insolvency in the future. If many corporations are implementing such a policy, the whole system of corporate liabilities as debts or bonds is endangered. 

Private corporate bonds do not add money to the monetary system, they transfer it from one hand to the other, but once the federal reserve starts to buy out corporate bonds, to resque corporations from liquidity problems, it will increase the government deficit, translated to accumulated public debt. This also means additional money in the economy. 

The question is, should we be worried about this additional public debt and cash money in the economy. In the last 10 years, such a policy didn’t increase the prices of consumer basket. (It increased the prices of value holding assets, as shares and real estate.). Will it continue to be so?

If before the pandemic the US government debt was about 23 trillion US dollars, growing at an annual rate of more than 1 trillion US dollars, against US GDP of 21 trillion dollars. At the end of 2020, the GDP will probably drop below 20 trillion US dollars. This also means disappearance of the profit of the businesses. The huge rise of unemployment to levels of close to 20%, means decrease in wages. All this means decrease of national income, and with it decrease of government income from taxes. All this will happen at time of skyrocketing government spending. 

The US government declared an increase in its spending by more than 2 trillion US dollars and it is far from the end. To add to it the expected decrease in tax collection, the deficit for the year 2020 in the US will be probably more than 5 trillion dollars. To add to it the GDP decrease, and the US public debt at the end of 2020, will be well above 100% of the GDP, the limit the congress tried to apply during Obama’s presidency. The same trend, even if more moderate can be expected in Europe. China, where most of the debt before the pandemic was of private businesses and corporations, and since their production capacity will have to compete in shrinking markets in US and Europe, it will need help from the government to save them and with it the Chinese economy. the Chinese businesses’ debt will need to be bailed out by the government. This means swapping the Chinese businesses debts to government debts, as it already happened in the US and Europe, after the financial crisis of 2008. 

This process means, the deficit is accumulating as public debt, mostly in form of treasury bonds and securities. At times of recession to secure enough financial liquidity in economy, and to decrease the interest rates, the central banks are forced to repurchase these treasury bonds and securities in exchang for cash money, newly printed and flooding the monetary system. 

This is Japanisation of the debts in the major economies, meaning by the end of 2020 probably the public debt of the big economies will be well above 100% of the GDP, and closer to 200%. 

In nominal numbers the total GDP of four major economies is close to 60 trillion US dollars, it means their public debt will be close to 100 trillion US dollars and more. These 100 trillion dollars, have the other side of the coin, liquid financial resources in ownership of private households, non corporate or corporate businesses, financial and non financial. This amount will be in some form or other deposited in the commercial banks, or other credit institutions, and will potentially multiply as credit. 

This change in the debt structure and financial variables started after the financial crisis of 2008, when the  Federal Reserve bank and other central banks, to save the economy, overflooded the financial system by excess liquidity. To do so, the central banks used an unconventional policy, called “Quantitative easing”, meaning purchasing government bonds on the open market, and increasing their price, that causes decrease in interest rates on these bonds. This also meant that the central banks printed additional money to purchase these bonds. The commercial banks, where the additional money was accumulated at first, didn’t expand the credit to companies as expected, but they rather took a more cautious stance, piled the liquidity added to the system, and deposited it back in the central banks and Federal Reserve as excess reserves. 

Excess reserves is the most liquid form of money, and as such it is unpredictable. The only way to neutralise this pile of financial liquidity from unexpected fluctuations and high volatility, is to pay interest on these commercial banks deposits in central banks. This policy started to be implemented since 2008. With every new wave of government deficit, and new money printed. The need to be absorbed back from the commercial banks this excess liquidity, the central banks are forced to increase the interest rates on these deposits. 

Since excess reserves are with no risk factor, (the central banks, the depositors can always print new money) the interest rate on this deposits became the bottom interest rate on credit of the system, and one of the major tools to influence the cost of the credit price in the economy. On the other hand for depositors it became the top interest rate, the banks are ready to pay on deposits. As represented in the following chart, the total credit to non financial sector in US, dropped since 2008 from 170% of the GDP to about 150%.

From the side of the savers, low interest rates caused value dilution of savings, among them the pension funds and mutual funds, that are forced to invest in more risk taking assets, among them higher yield corporate bonds. It also caused swap from credit financing to other form of financing. From the side of the borrower, the low interest rate caused waste and misuse of the available credit. The best example are the shares buyback of the public company shares and bonds, that have driven their price to sky, financed by increased debt of the nonfinancial corporations.

https://images.app.goo.gl/thq4nCepfqsxR8A28

In 2008 the central banks and the FR, rescued the economy by purchasing government securities, increasing their price and reducing the interest rates by it. In 2020, because of the limit of negative interest rates, and lack of government treasury bonds on the open market, the Central banks will have to purchase corporate bonds. This will have a significant impact on the real resources allocation, and macroeconomic price will have to be paid for such a policy. Big companies will be supported to issue corporate bonds, as much as possible, without considering the aim of these emissions of bonds, while their price will be secured thru instrument of bailout. It necessarily will change the composition of monetary resources used by investors in the real economy.

A differentiation has to be made between two kinds of investors, the financial investors, that invest in financial assets, as bonds, securities and shares, and real investors, investing in production capacity to supply goods and services to the consumers and their subcontractors. 

———-

Governments, that are afraid of the collapse of the financial system, prefer to inflate the public debt, with every new crisis, to avoid collapse of a major financial institution, that would repeat the situation in 1929, at the time causing unemployment rate of 25% in America, without a social security system, that exists today. 

The metamorphosis of debts from private sectors, be it financial institutions or non financial institutions, to public debt, throughout the process of bailout of these institutions by the government or its affiliate, the central banks, means nationalisation of the debt. This anomaly of public debt and private assets as collaterals makes differentiation between those who have access to loans and those who have not.

The experience shows us, at the times of big debt crisis, only the small debtors must repay their debts, while the big debtors are relieved from their liabilities. The term ” too big to fail”, is reality, that proves to be the rule again and again. It gives advantage to big businesses upon middle and small size businesses, that usually are more flexible, adoptive, innovative and responsive than the big corporations.

As explained above all these processes will cause an unprecedented increase in public debts of all the big economies, that on other side of the coin mean more government treasury securities,  that partially will be purchased by the central banks against cash money injected into the monetary system. As explained above, the expected public debt in the major economies will be very soon about 100 trillion US dollars, or close to 200% of their GDP. This also means liquid financial resources of the same amount, in the form of money deposited in the banks or in form of government treasury securities. 

What does public debt of such level mean? Is it significant? What does such an unprecedented level of sovereign debts in sovereign currencies actually mean? Is it sustainable? 

Since money based on debt depends on the faith of the population, the answer lies in this trust, that is dependent on human behaviour, and as such it is unpredictable. The faith in certain currencies, as the US dollar, Euro, British pound, Swiss franc and Japanese Yen, are independent from any economic reality. The major common factor of these currencies is that the sovereign government with the right to issue them are all democratically elected, and their legal system is supportive for protection of the right for private ownership as one of the most important values. On the other hand, countries that have a tradition of disrupting the ownership right, their currency value is many times unsustainable. A very good example is Russia, and China.

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The main question is, how will the world economy come out from the economic crisis so abruptly blown up because of the coronavirus. 

There are two substantially different approaches, one is through increased competition,  and the strongest will survive.  (Strongest but not necessarily the best). The other way is through mutual solidarity on local and global level.

Several trends can be observe in policies implemented by now, and are expected to get increased momentum;

1. The debts are growing and there is no other way to reduce them, but by hyperinflation that will degredat the savings values, and enrich the borrowers. Yet hyperinflation happens under two conditions:

a. It is always a local phenomenon, in a country with sovereign currency. For example not in Greece (using Euro) and not in Ecuador (using US dollars), whatever economic conditions prevail in these countries without sovereign currency, no inflation occurred since they adopted reserve currency as their own.

https://fred.stlouisfed.org/series/FPCPITOTLZGECU#

b. Hyperinflation occurs only if there is less aggregate production capacity than aggregate demand.

c.  It can’t happen to a country with currency that is accepted as reserve currency, or currency used for international commerce as the US dollar, unless the world production capacity of certain substantial commodity, without alternative is limited. That’s what happened to US dollars and other currencies in the early seventies, when the oil producing countries limited their production and caused huge hike in oil prices.

d. Hyperinflation degrades the value of savings, causes disruption in commerce and causes bankruptcies of otherwise healthy businesses with efficient production capacity, but with not very good financial management. 

2. The Federal Reserve and the Central Banks are in process of nationalising at first government debts, then probably will follow the corporate bonds, and maybe even the private household mortgages, and then other forms of loans, such as student loans, and corporate credits.
3. The nationalisation of debt means adding additional money into the financial system, that reduces the demand for credit, accumulates from the bank perspective unusable deposits in the commercial banks, that are as said above deposited in central banks as excess reserves. 
4. The minimal interest rates on credits are not anymore decided by the market, but administrative decisions of the central banks. This makes the interest regulated and disconnected from the demand and supply of the money. The side effect of this may be unnecessarily high interest rate, in case of recession, while the demand for credit is decreasing and vice versa. The banks eventually may lose their sensitivity to what happens in the economy and in the markets. 
5. The extremely low interest rates set by the Fed are disproportionately benefitting people with appreciable assets. What we’ve got right now is effectively subsidy for corporations and big businesses, with collaterals to secure loans, whereas no income for self employed businesses, their business is based on continuous supply of goods and/or services. 
6. The continued US trade deficit is the result of the low saving rate of the US government and the US households. There were years, when the US net saving rates were close to zero. On the other hand, countries with high surpluses such as China and Japan, have also high saving rates. The result is much higher consumption level in US, if compared to China, and Japan.

 To balance this uneven, and on a way unjust situation, a new kind of cooperation has to be created between the US and these countries.

7. The  increasing income gap between the rich, and the poor, between those who have access to borrow cheap money, and those who have not such access,  while the borrower is becoming rich, the saver who gives loans is getting poorer. The major cause of the increasing inequality between the rich and poor, seen in all the indicators, is caused by the policy of Quantitative easing. Even if the helicopter money goes to the poorest, at the end, it will find its way through the bank loans of commercial banks to the hands of the borrower, who are the collateral owners. 
8. Such imbalances in income are unsustainable politically, and bring at the end political and social disruptions, in form of radicalisation of the masses, who feel to be left out of the party. 
9. Other result of government deficit is too much volatility in the financial markets, that influences the performances of the real economy.

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So what can be expected after the coronavirus pandemics will be gone?

The modern so-called “capitalistic” economy is based on network of commercial relations, enabling transfer of goods and services between every element of this network against easily transferable tool, representing equivalent value to the price of the good and/or service transferred. The participants of this exchange need to have faith in the agent, enabling evaluation of products on the market, the money. Money has to keep its fixed exchange value and the participants of the exchange have to believe it will keep its value. 

The strength the US dollar represents, is not about the money itself and its objective value, but the economic activity, the US dollar can generate. While a local currency can generate only local activity, reserve currency as the US dollar can generate activity world wide. This position of US dollar came to existence after WWII, when no other country could compete the US with its economic strength, to supply all the needs of the world, totally impoverished by the war. At present 75 years later, the US dollar still represents this strength, but decades of mismanagement of US policy, that resulted destruction of the fabric of voluntary cooperation of the US society, intensified since the collapse of USSR, the ultimate enemy, the stratification of US society and politics has deepened, to unprecedented level. The main danger of the Corona virus is not production capacity of commodities or services, that remained untouched since before the pandemic outbreak,  but the breakdown of the social economic network, on which the supplier-purchaser relation is based. This breakdown can be caused by disruptions in the monetary system, too high concentration of financial resources, and bankruptcies of essential chain in the economic networking because of temporary difficulty, creating unsustainable situations for a whole range of entrepreneurs.

Deficit!?! does it really matter?

The word deficit rises with negative connotation among many politicians, economists and even ordinary people. Year 2020 will be all about deficits. The deficits will become enormous even in comparison to the already huge deficits we could observe in countries as US, Japan,  Italy, etc. before the outbreak of Coronavirus. So let’s try to explain the essence of this term.

Investopedia defines deficit as;  an amount by which a resource, especially money, falls short of what is required. A deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets. A deficit is synonymous with shortfall or loss and is the opposite of a surplus.

In a deficit, the outflow of money exceeds the inflow of funds. A deficit can occur when a government, company, or individual spends more than is received in a given period, usually a year. 

Reading the definition above, we have to add and clarify few issues; Deficit has to be covered by loans given by someone who is ready to lend, so the result of persistent deficit is accumulation of debt, but also savings. The debt needs a borrower but also a lender who is in cooperation with him. Someone, who  creates surpluses, and is ready to use it, to cover the debt of the deficit creator. The result is, the borrower accumulates debt, and the lender accumulates savings. 

Money is the most common form of debt expression, but deficit can have other than monetary forms. Dificite happens, when some entity, a person, community, business, company, country, uses, usually on temporary basis, more value than it creates, or exploits more of the disposable resources than can be renewed by natural or man made processes. Accordingly, by definition the use of all natural resources are deficit creating processes, be it raw material mined out of earth, or accumulating ecological imbalances, as  accumulation of greenhouse gasses in the atmosphere or acidification of oceans. 

The deficit accumulation process has some very unique features. Many times deficit becomes an addiction, and then it has tendency to increase and even inflate. The entity may run on ever growing deficit and for an outside observer it may still appear as, “business as usual”. Then one day, one lender refuses to give new additional credit, or refuses to revolve the existing credit, and the borrower is exposed to insolvency. Then the collapse of the entity is inevitable. 

Public debt, created by governments with sovereignty to print money, are very different from all the other debtors, (let’s call them private entities).

Private entities can be businesses, companies, corporations, communities, non sovereign public entities, households, or even ordinary private people. 

If a private entity makes debt, it has to generate in the future enough income, to repay the debt, while sustaining its economic activity and its daily necessities.

Loans of a private entity can have two purposes,  either to finance investments or consumption. The difference between these two is not always obvious. For example; if someone borrows a loan to purchase an apartment, this apartment can be either for self use, or to be rented to others. The rented apartment obviously will create stable income, that will help to repay the loans, while the loan of apartment for self use, has to be paid from other source of income. 

What’s obvious, debts of private entities have to be repaid, and if the entity defaults on repayment, it may end in insolvency, or in other words, no capacity to fulfil its contractual obligations. 

A very different story is the debt of a governments with sovereign authority to issue currency. Here we have to emphasize the difference between countries, with sovereign right to issue unlimited amount of currency, and countries without it, as are the Eurozone countries. The Eurozone countries live in kind of anomaly, that they do have authority to manage independently their own fiscal policies, (tax collection and budget expenses,) or in other words, they can create deficits and accumulate debt, but are dependent on the Eurozone monetary policy to cover this deficit. This discrepancy caused the Greek economic crisis, when Greece accumulated unsustainable budget deficits and debts, financed by private commercial banks loans. While USA is doing the same for decades, and still it can sustain its economic policy, based on deficit without consequences, in case of Greece, it had to default on loans. ⁰But we can observe other countries, like Argentina or Russia, with their own currency, and still had to default on their debts. This needs explanation. 

The following chart shows the ratio of debt to GDP of world major economies. All the major economies clearly increased their ratio of debt to GDP already before the corona virus outbreak.

Even if this process is common to all the countries, there are different kinds of debts. As to 2019, four major economic regions, US, China, Euro Zone, and Japan have very different composition of their debt. The first three economic regions are with debt of about 250% of the GDP, while Japan’s debt is about 380%. While 220% of GDP of the Japanese debt, is government debt, the US government dept is about 107%, Euro zone 85%, and the Chinese government debt is less than 50%. As to nonfinancial corporate and non corporate debts China is an exception with debt of 151% out of GDP, while USA about 75%, Euro zone about 108% and Japan 102%. 

	Government	Households	Corporations	Total
US	107	75	75	257
Euro Zone	82	58	108	258
China	50	54	151	255
Japan	220	59	102	380
Total world				239

These differences are significant and need interpretation. As to Japanese government debt, it is result of the stimulus that started in 1990, after the collapse of the property markets and following stagnation of the economy. The government tried to prevent economic crisis with high unemployment, that would follow collapse of the financial markets. The Chinese anomaly of high non financial corporations debt started after 2008 collapse, when China introduced loose credit policy. These two government policies had deep consequences. Japan did not emerge from stagnation since 1990, and in China the over investment reduced the efficiency of the investments. One of the consequences of the lose credit policy, are the ghost cities. 

Government debt, or national debt: net accumulation of the federal government’s annual budget deficits. This deficit is covered by issuing government securities, or other contractual liabilities of the government to the lender. The bonds are freely traded in bond exchange market. 

The repayment of these securities in the future will be in local currency. It means, a sovereign state, with its own currency can always repurchase this debt by “printing money”. This is the stage, when public debt caused by government’s deficit, changes to cash money or in monetary term liquid assets. 

Printing too much money causes necessarily decrease of currency value, in form of inflation. Inflation can be comprehensive, or specific. If there is enough production capacity potential and opened freely competing markets, there will be no inflation of currently produced ongoing processes. On the other hand, the prices of accumulated value holding assets, (shares, real estate and sometime even cryptocurrencies), will go up.

https://tradingeconomics.com/country-list/government-debt-to-gdp

What government-public debt means in practice? Japanese public debt started in 1990, and since then for 30 years only grew? Does it have impact on the real economy? It didn’t cause inflation, but prevented deep unemployment and decrease in economy. Public debt, big as it can be, not necessarily brings inflation in comprehensive way, but it does create anomalies, as high property prices, or boom and bust in share prices.

Debt of private households: debt of private households is mostly in form of mortgages, leasing, credit cards debts, and overdrafts. Private households have limited capacity to accumulate debt. The main reason for the subprime crisis of 2007-2008 were the mortgage loans given to the households, that exceeded their reimbursement capacity. 

The 2008 crisis started with unsustainable debt of private households in the US, that picked up at 2007 to level of above 100% of the GDP, and since then it dropped to level of 75% of the GDP. At 2019, the other major economies household debts were between 50-60% of the GDP. The US household debts had reducing trend, and seemed to be sustainable. 

https://tradingeconomics.com/country-list/households-debt-to-gdp

Debt of the non financial corporate businesses:  The non financial corporate and non corporate business sector differs from country to country. Chinese corporate debt grew since 2008 to unprecedented 150% of the GDP and has still upward tendency. Yet Chinese public debt is all by local banks, and relatively low government and household debts. At time if crisis caused by defaults on corporate business debts, the government will have the capacity to bail out the banks, and nationalise this debt, as it happened in the other big economies. 

The following table represents Non-Financial corporations debt to surplus ratio of leading OECD countries. The non-financial corporations debt to surplus ratio provides an indication of the capacity of non-financial corporations to meet the cost of interest and debt repayments with the operational profits generated. Debt is calculated as the sum of the following liability categories: currency and deposits, debt securities, loans, insurance, pensions and standardised guarantee schemes, and other accounts payable. Gross operating surplus (GOS) is the value added and generated by production activities after deduction of compensation of employees. The sector non-financial corporations includes all private and public enterprises that produce goods and non-financial services to the markets.

LOCATION	Value
CAN	7.9
USA	7.7
FRA	6.6
GBR	6.5
JPN	6.1
CHE	5.4
KOR	5.1
AUS	5.0
ITA	4.8
ESP	4.4
ISR	3.2
MEX	3.2
DEU	3.0
POL	2.6
TUR	2.3
CZE	2.0

https://data.oecd.org/chart/5UVG

External debt held by foreign countries: this debt is accumulation of trade deficit with foreign countries. The trade deficit has to be balanced by foreign investments in local assets, it can be investment into government or corporate securities, equities or direct investments. If the foreign investments don’t cover the trade deficit, the difference has to be financed by reserves of foreign currency the country holds. But this solution is temporary. Usually, before the reserves of foreign currency dry out, the local currency has to be devalued in relation to other currencies, that enables to balance the deficit. But devaluation may cause in some occasion side effects, very different from solving the problem of trade deficit. The first is, price increase of the imported goods and services. This may cause increase of wages and allowances, that may cause hyperinflation, with annihilating effect on the local currency value. Other side effect may be capital runoff from the country. This may cause in extreme cases default of the country on its debts, that can have devastating long term negative effect on the credibility of the country. 

Since the debt in foreign currency has to be repaid in that currency,  and the local government has no authority to print it, maybe the most sensitive  issue about the debt is, if it is local in local currency or external in foreign currency. Countries with sovereign currencies accumulate enough reserve currency in one of the leading currencies, US dollar, Euro, or the Japanese Yen, to be able to repay the debts in foreign currency. This policy forces all the other economies, that have no reserve currency, to export more goods and services, or needs to attract foreign investments, to have capacity to repay the debt to foreign countries. This gives a big economic advantage to USA, its currency, the US dollar is the main world reserve currency, also used as currency for international financial transactions. 

Gross External Debt Position of major economies

Rank	Country	($ Mil.)	Per capitaUS dollars	% of GDP
1	United States	20,263,768	58,200	94
2	Euro area	16,723,186	37,496	89
3	United Kingdom	8,491,386	127,000	313
4	France	6,470,490	87,200	213
5	Germany	5,800,945	65,600	141
7	Japan	4,243,568	28,200	74
10	Italy	2,471,611	42,300	124
11	Spain	2,390,372	48,700	167
13	China	1,971,657	1,326	15
17	Australia	1,484,182	60,800	126
20	Brazil	697,228	3,200	30
24	India	543,000	383	19
28	Russia	468,849	3,700	28
29	South Korea	462,062	7,500	27
30	Mexico	457,956	3,300	38
31	Turkey	446,860	2,983	34
34	Argentina	283,567	8,280	66
38	Czech Republic	194,146	13,000	70

Source: World Bank’s Quarterly External Debt Statistics SDDS, 10/17/19 update.

United States External Debt

The deficit in their essence are result of excess spending and too low rate of savings. Government and private savings are complementary and integrated in this issue. There are countries like Japan where the private savings are high and public savings with huge deficit, as contrary to it China, that has huge private debt, but very low public debt. And then you have USA, that has relatively high private and public debts. All these economies, in spite of these anomalies, functioned relatively well before the Covid-19 crisis, (full employment, stable currency and low level of inflation).

On the other hand countries, as Turkey, Russia, Argentina, India function very poorly, in spite of their relatively low debt ratio. Why is it so? 

How come, USA, with its huge external deficit to foreign countries, is the provider of the main reserve currency, while Russia, Turkey, Argentina, with low external and internal debt have difficulty to sustain the stability of their financial market? And above all, in spite of relatively high US debt, its currency is stable, and even with tendency of appreciation at times of crisis.

                    U.S. Dollar Index

published by the Federal Reserve

USA is historically highly credited, while Russia, Turkey, Argentina, are not. Is it all about credibility of the country, it’s legal system, its institutions, its political culture, its tolerance to others, or it is some kind of magic that no one can explain?

What can we expect from the day after?

Following the events since the outbreak of the pandemics, we can observe several trends and happenings:

1. The private consumption, that was about 70% of the US GDP, 50% in the EU and 40% in China, dropped dramatically. Certain items like tourism and cultural events, ceased to exist.
2. Certain industries, dependent on component suppliers from China, were forced to close their production. 
3. The governments took over the leadership on the everyday life, leaving no space to the non governmental institutions to intervene into the decision process. Only at war times existed comparable situation. 
4. Aware of the danger of destabilisation of the political system, the governments at first tried to avoid destabilisation of the economy. At the end all the governments gave up, and joined the others, by imposing quarantine on the whole population and closed most of the economy.
5. Learned from the economic crises at 1929 and 2008, the immediate major economic instrument to stabilise the economy are again the central banks. Their policy will be to pour unprecedented amount of money into the financial system. Since central banks are instrument of government for regulation and stabilisation of financial system, with authority limited to monetary operations, most of the financial liquidity will be directed to the commercial banks.
6. The fiscal policy is the prerogative of the governments, dependent on the parliaments or other legislative institutions. An immediate response to this situation could be tax relief and securing minimum income to every family or individual. The second phase of fiscal intervention could be investments into big infrastructure projects, that were postponed because of tight budget and limited resources. But most of these programs need years of preparation and planning,  and cannot be used immediately. 
7. In the longer term, due to expected massive unemployment, the government will have to  invest in social infrastructures, as, education, not only of the young, but also of the adult, health care, sciences. Culture may look as the flavour of the cooking, and it will need special attention from the governments to support creative people in every field of their activities, who will help out the people from the new gloomy mood, the world population will find itself following the Corona virus. 

The major question still remains, how will the societies operate after the pendemics is gone. Few weeks into the pandemics, we can observe total collapse of some economic activities, mostly connected to private consumption. Tourism, public transportation, shopping culture in shopping malls, mass entertainments, cultural events, restaurants, etc. All these activities practically ceased to operate. Most of these activities are provided by small businesses, financially exposed to drop in income. We have to expect, many of them to collapse. Tourist agencies, private hotel businesses,  restaurants and bars, shops with high rents, all these businesses are based on everyday purchases, while their existence in same location, sometimes for years even generations, gives them the exposure to their clients. These businesses are built with patience and persistence. If they will collapse, they will probably never return to operate on the same way as before. The comunistic regime entirely destroyed this kind of business network. Even 30 years after this regime has gone, you can still feel the lack of these locally based small family shops. 

One relatively new phenomena, is wider adaptation of internet, as major tool for commerce and communication between people. Internet shopping became the only option for purchasing. 

Joint decision making processes were transferred from direct meeting to virtual meetings, using different tools available on the web, free of charge or for very low fees. Executives learn to manage their activities, without the need for personal contact. These new ways of communication are implemented in education, social gatherings, cultural and sport performances, etc. What economic consequences will have these changes? Will these changes be permanent or temporary? 

What about unemployment? Will the sudden enormous growth of unemployment be permanent or temporary? What level will unemployment reach? Already before the pandemics the economists predicted big upheaval in employment due to new technologies expected to enter our life. The best example is transportation. Today, costly and inefficient private transportation, that took over the urban spaces, was expected to be changed, due to self driving cars, reducing the need for taxi and truck drivers, but even of privately driven cars. Political opposition to such a change, that needs also new regulations of traffic, was expected from taxi drivers associations. This would have also heavy impact on the demand for cars, a very important part of many industries. 

The stock exchange indexes before the crisis skyrocketed, and were expected to make some corrections already before the crisis. The first wave of correction was a result of this expectation, even if the cause was the appearance of the pandemics. The realisation of enormous permanent economic damage the pandemics made, seems to drive new waves of destruction of values on the stock exchanges. Before the crisis many public companies were involved in buyback operations, purchasing their own shares and bonds due to low interest rates. These companies may find themselves with liquidity problems.

If unemployment will remain on high levels even after the pandemics was gone, unemployment allowances will become major form of social care. Probably the administrative procedures will be liberalized and simplified. Maybe even minimum income payments will be introduced, without the need to prove entitlement. Politically it seems unexceptable, to bail out big corporations and financial institutions, and not to help millions of people, whose businesses or employments were destroyed. 

The question remains, will the change in world economy include solution of major long term problems of the humanity, as the global warming and global pollution, or in contrary the accumulation of these problems will rather intensify, due to attention of decision makers on more acute problems. 

As the scientists predicted with high probability the appearance of certain kind of pandemics with devastating consequences, the same and even worse consequences are predicted due to environmental imbalances caused by overpopulation and over consumerism. Will the politicians give more sincere attention to these warnings after the pandemics, than they have, before the Corona pandemics, or they will continue neglecting these warnings with arrogance,  and vanity as before the outbreak? 

The next big thing is economy

Lets start with a proclamation,  “After the virus will be defeated,  the next big thing will be the economy”. It never happened in the  modern world, that the world economy had suddenly frozen. What does it mean, no one knows. How to restart the world economy, is a real question. 

Does have the government have the instruments to cope with the situation?

As to the question you both arised, (i would put it in a more eccentric form), whom we help to survive, the gravely ill, whose survival is very costly due to need of a very expensive medical intervention, and even then his life expectancy is short, or a pensioner, otherwise healthy, who may die of the Corona virus, because of lack of respiratory equipments. This is rather a moral question than an economic one. These moral questions have to be answered by the society through political institution, that represent the people. This is why politics exists, even if not all the politicians are always aware of it. The economists have to provide the tools, how to create optimal conditions, to implement any policy decision.

What economists are doing on the macro economical level, is to help to create stable prosperous economy, where maximum people will enjoy maximum personal material utility. This means the economy must efficiently use the limited resources,  to produce and distribute maximum value for minimum cost. (Product means merchandise and services). It has to be said, equally distributed production is usually contradictory to efficiency of its production and distribution. Another question of equality of distribution of wealth and income is, should it be on country level or on global level? It seems obscure to follow social movements, fighting for equality in their country, while not be ready to share their relative wealth with the most needy in underdeveloped countries. 

 The macroeconomic models can predict pretty well the level of unemployment and inflation rate, subject to macroeconomic policy be taken. Of course no economist can predict events like Coronavirus. But it can predict expected economic development following certain economic policy. In most of the times economic predictions problem is not a problem of cause and effect, but the effect’s timing. 

But the issue here in this forum is not if economy as profession is a worthy one.  Since many of us are in age of pension, coming from different professions, have accumulated experience, let’s try to predict what world will we wake up into, after the Corona virus will be gone, and what would be our advise, as to the kind of economy and society we expect should be created.

Let me put several questions in front of you:

In few month the Corona virus will be gone, but the most probably the economic reality will be totally disrupted. Unemployment level of 20% in the developed world is far from unthinkable. The political establishment will do its best to return to the pre-pandemic state. Government deficits will be skyrocketing. If before the crisis Quantitative easing in USA and Europe poured about 10 trillion dollars into the monetary system, this figure will double and more. There will be no restrain on this anymore. This necessarily will rise the question:

Will money continue to be accepted as socially excepted instrument of exchange?

Other sort of questions that already appeared here in different forms was, “Do we want to return to the world, where yield demanding capital, pushes the world economy to continuous economic growth up to infinite?”. This idea by itself is self contradictory,  so one day it has to stop. Isn’t it exactly now the time to do something different?

Corona virus doesn’t recognize political borders. It proved again, the main problems are global, and there are no local solutions. 

What to expect from the the day after

I read economic articles in various newspapers and publications and what I miss is a clear idea, where this virus crisis leads.

 Perhaps those who write that the economy should be organized at a lower level than it was before the epidemy, are right, but that cannot happen if part of the people will profit from the situation,  while the other part will be totally forfeited.

 The economy is about connection between each element in it.  Like a cobweb, if a part of it tears, it loses it’s strength, and everything falls apart. Then something new needs to be started.  It happened twice in the 20th century after two world wars.

After the first world war the economy was left to the chaotic power of the market, Europe split to fractions, while some adopted as solution the communism and others Nazism.  After World War II, at least the western part understood the need to try something different. This is how today’s economy we live in, came into being.

The West decided to cooperate, created the European Union, voluntarily decolonized the world, established international cooperation systems, institutions, and thrived. 

On the other hand, the Russian empire, has closed into itself behind sealed borders. Created a rigid bureaucratic hierarchical economic system, led by self nominated lifelong serving politicians.

We do not want the communist economy, and the western economy, based on the need for continuous economic growth, does not seem to be very effective, solving situations of revolutionary collapse of economic activity. Above all this, the threat of environmental collapse is still with us, if we will continue as before the pandemic. Therefore it is necessary to think of some new way out.

In my opinion, everything starts in finance and banks.  Central banks will probably pump an incredible amount of money into the financial system, without thinking about what next.  But how will they do it is a big question. When money goes to banks and financial institutions, everything will be dependent on how banks behave.  And we know what banks are. They are institutions that want to increase profits and reduce risks. This does not seem to me to be the right approach. Another way is to distribute money to everyone.  If this is a one-time event, it probably won’t help much to accelerate the economic activity. If it will be in form of securing a minimum income for everyone, the question will be, whether people will continue their dynamic creation, or they will degenerate into passivity, or addiction to virtual reality?

Let me quote a short article I wrote about a year ago, that ended with:

 If you speak about the bipolar world of the future, I would predict the divisions of people to majority, living in virtual reality, and those who create and manipulate this world.

http://rodeneugen.com/2019/02/10/the-future-is-virtual/

But we’re not there yet, but maybe the virus will accelerate the change to something similar. To a world, where most things happen in the virtual reality.  Do we want such a world? Can we prevent such a world from emerging? We can already see that the whole economy is managed virtually, and at the end there are those who deliver goods directly to customers. So all we need for our existence is production and delivery agents. The rest will be all virtual on the internet.

 We know that most of the production can be done without workers.  Everything can be automated. In the end, even delivering goods can be done without workers. So what’s going to happen?

 Will we still meet for beer?  Or will beer be virtual too? And if governments give alms to citizens, will there be a plumber to maintain our clogged toilet?

Dollar’s exchange rate is important

For several decades, the global economy has built imbalances. On one hand, there are manufacturing countries, with trade surpluses, that are also net exporters, such as China, Japan, Germany, and on the other hand the US, that imports their production directly or indirectly. The net exporting countries, generating trade surpluses are accumulating financial assets as savings, while US creates deficits and has low saving rates.  To keep in balance this process, the exporting countries have to create demand for the currency of the importing country, US dollar, to keep its value high. To do it they invest in importing countries assets, whether in real estate, whether in bonds or corporate shares, through the stock exchange, or in private equity transactions.

 This process is possible, as long as the decision makers in the net exporting countries, as China believe in guaranteed value of their investments in the importing countries, the US. This process simultaneously causes some phenomena in the importing country as US:

 A.  Trade deficit.

 B.  Low domestic saving rates.

C. High asset prices, real estate and stock prices of publicly traded companies.

 D.  Increase of the gap between income from assets versus income from wages, in favor of income from assets. It also means an increase in economic inequality, between employees and rentiers. 

 This process is possible as long, as the demand for assets of importing countries is rising. This demand also creates demand for the currency of the importing country and revaluates its exchange rate against other currencies.  This is a seemingly paradox, that the currency of the importing country is strengthening in relation to the currency of the exporting country. This happens because of the great trust in economics and the political system of the importing country, that will ensure the value of its investments. (The Chinese trust more deposits in US than in China). A small disruption in the flow of capital from net exporting countries to net importing, and everything can collapse. This change of flow of currency can be result of export disruptions caused with the appearance of Corona virus in China, but could happen for any other reason as well.

The expected process will be a dramatic fall in US asset prices, which will be accompanied by the devaluation of the importing country currency, the US dollar.

 https://www.tradingview.com/symbols/TVC-DXY/

Over the past turbulent days, few have noticed since mid-February the dollar had lost more than 5% of its value against the euro, and more than 8% to the Japanese yen.  This is as dramatic a change as the stock market collapses, and indicates a trend. The dollar’s weakening process has moderated due to rising demand for US government bonds, that used to happen in times of volatility in the past. But this time, it did not work. That means capital leaves US. When the foreign holding of US dollar are more than 6 trillion dollars,  about 30% of the HDP, such an outflow is deflationary. 

 The big question is where the finances, that are currently leaving the US stock exchanges will be invested?  The answer could be real estate and government bonds. Continued demand for government bonds may bring interest rates deep to the negative sign, and it is unclear how savers will behave in this situation.  The option of real estate is also not very attractive due to already high prices today and the relatively low yields that real estate investment are generating today. This situation may cause instability in capital flows and high volatility in the markets. 

Economy as social interrelationship

Economic system in it’s essence is a monetary expression of social interrelationships enabling exchange of goods and services between members of society, who are participants in production and exchange of these goods and services. The major instrument used for exchange is money. Money, due its property of being a fixed representative of relative value of goods and services, and its function as universal media of exchange, by its definition, has certain value, as its emerging property.

There are still many places in the world, where repressive regimes still prevail. Most of the population in this countries live in humiliation and poverty. The regimes in these, economically very poor countries, can be called communistic, or capitalistic, but neither of them are successful to create free societies, and well being and welfare for their population. 

The precondition to create wealthy society, with thriving economy, is prevailing social relations, proper for building a socio-political system, which will allow to the creative forces in the country to express and act freely and with harmony with each other.  The modern market economy is built on a voluntary relationship between legal entities, that can be individuals, or businesses, capable to collaborate, while competing among themselves, to create and deliver goods and services to consumers effectively.  Not every country has been blessed with socio-political structures, that allow creation of such a voluntary social-economic relationships, enabling to build a social economic system based on voluntary cooperative action. 

Most of the autocratic political regimes, that are preoccupied with the problem of their lack of political legitimacy, try to prevent formation of voluntary, non institutionalized social relations, that may threaten the despotic regimes ruling political monopolies, but are necessity for existence of thriving economy. 

Other reason for failure of countries to achieve economic wellbeing for the population of their sovereignty, is the lack of critical mass out of  the population, with capacity to achieve education level, enabling transcending from their intuitive understanding, to conceptual understanding of reality. These countries are often characterized by corrupt governments, in which individuals or violent social groups are competing for political power, all for the sake of promoting the people on top of political hierarchy, their families, their klan and the social group associated with them.  Incidentally may happen, that a very well-ordered country, with highly sophisticated social economic relations, under certain historical, economic, political circumstances, may fall into such rule of oligarchy and autocracy too. While failing to build social organization, which facilitates voluntary economic cooperation, and causing by it prevailing poor economic conditions, may develop a tendency to adopt ideologies and faith for radical solutions, such as communism, that in its economic essence lays the centralized political economic management system, as opposed to liberal governments that run in principle a decentralized economic-political system. 

An other possibility is a regime, focused around populistic leader or leadership, that is based on denial of realities, and ignoring long term consequences of policy. The result of these regimes is necessary failure, caused by naturalisation of increasing share of the society, that feel to be marginalised and kept in bay. This necessarily disrupts the the social economic networking, that is necessary for social interrelationships, enabling effective and smooth exchange of goods and services.

j’accuse , אני מאשים

מדינה משמעותה המוסדות שלה, שאמורות לתפקד במסגרת חוקים, אותם קובעים נבחרי הציבור (פוליטיקאים). מוסדות המדינה מחויבים לפעול על פי תפיסת עולם ממלכתית, משמע, פועלים לפי חוקים אוניברסליים, שאינם עושים איפה ואיפה בין אדם לאדם, ולא משנה מה מעמדו. ראש ממשלה או כל פוליטיקאי אחר, שמנסה לפרק את מוסדות המדינה, קריא מערכת המשפט, משטרה, פקידות בכירה וכו’, הוא פוגע במדינה, מחליש את חוסנה ועוצמתה. את זה הבין אחד מגדולי המדינאים בעולם במאה העשרים, בן גוריון, והקים על בסיס חשיבה ממלכתית את מדינת ישראל, שהצליחה מאד במקום, בו הרבה מדינות מבוססות יותר, עם היסטוריה מדינית וחברתית רבת שנים כשלו. מדינות בהם פעלו המנהיגים הפוליטים לפי תפיסה, “המדינה זה אני” כשלו, בעוד מדינת ישראל הצליחה, דווקא בגלל שפעלה על ידי הקמת מוסדות, עוד בטרם הקמת המדינה. דווקא אותם מוסדות טרום המדינה, כמו הסתדרות, חברת עובדים, קופות החולים, הסוכנות היהודית, הגנה ואירגונים צבאים אחרים וכו’, איפשרו את הקמת המדינה על בסיס שלטון דמוקרטי, תוך שיתוף התושבים. אותם מוסדות המושמצים היום לא אחת, אפשרו קליטת המוני מהגרים, שעלו על מספר התושבים היהודים המקוריים כמה וכמה פעמים, תוך מספר שנים מיום הקמת המדינה.
אגב יריבו המר של בן גוריון, מנחם בגין גם היה שותף לתפיסת עולם ממלכתית, ואף דגל בצורך לחזק את שלטון החוק ומוסדות המדינה.

שום מערכת פוליטית נבחרת, לא תוכל לתפקד ללא מוסדות של המדינה. מדינה ללא מוסדותיה, הופכת לרודנות, או, תהפוך להיות אנרכיה, ומלחמת הכל בכל. רודנות בנויה על מערכות ותת מערכות כוחניות, מנוהלות באמצעות שררה, הפחדה ודספוטיזם, ולא תוך כדי שיתוף פעולה ווילונטרי של יחידים, אשר מגיעים לידי הסכמה, מתוך פשרה אשר מאפשרת פעולה משותפת.

דיקטטורה סופה להיכשל, או עם מות הרודן, או בשל התפוררות הפחד של רוב האוכלוסיה, שהוא הדבק היחיד, המאפשר למדינה לפעול כיחידה אורגנית אחת. בעולם המודרני, בו גופים פוליטיים וכלכליים מתחרים זה בזה, אם לא מצליחה המדינה לגייס את היחידים למען מטרה חברתית פוליטית משותפת, מתוך הסכמה וולונטרית, היא תכשל לעמוד בתחרות. זה מה שקרה לברה”מ, כאשר הפחד מהדיקטטור וסטליניזם התפורר, והיחידים, שהיו אמורים לקדם את החברה והכלכלה במדינה, שקעו באדישות. לכך התווספה התופעה, שחלק ניכר מהאליטות, שהיו אמורות להוביל את המדינה אל הישגים, היגרו למקומות אחרים, בעיקר לארה”ב וישראל, מדינות בהם ניתן להם לבטא חופשית את הכשרונות היצירתיים שלהם, ברה”מ נשארה ערומה מכל הצדדים.

עושר כלכלי-מדיני-תרבותי בנוי על יחידים יוצרי עולמות חדשים, אשר מאפשרים שיתוף פעולה בין יחידים אלה, אליהם מצטרפים אחרים באופן וולונטרי, ולא על יחידים כוחניים, מחפשי שררה, אשר מגבשים קבוצות חברתיות-פוליטיות, למען יפעלו לדיכוי כל גילוי של אינדינידואליזם, שאינו תומך, או חס ושלום מנוגד לאינטרסים של המנהיג, בעל השררה.

מדינה וחברה דמוקרטית,יכולה לתפקד רק כאשר מצליחה להקים מוסדות שילטון, אשר מנוהלות אף הן תוך מתן חופש פעולה ליחידים אשר פועלים בה. כאמור מוסדות המדינה בהכרח מנוהלות על ידי מקצוענים, בעלי כישורים אקדמים בתחומי משפט, כלכלה וכו’, ולא פוליטיקאים. כישורים לנהל מדינה נרכשים במוסדות חינוך של השכלה גבוהה, ועל ידי הכשרה ממוסדת, או בעבודה, ולא במסדרונות הכנסת, בהם מתגודדים נציגים נבחרים של הציבור הרחב. בעלי השכלה גבוהה בתחומי חברה, משפטים, כלכלה, וכו’, לרוב מבינים את האמור לעיל, לכן הם אינם תומכים בממשלה שמנסה לפרק את מוסדות המדינה, בין אם באמצעות שחיתות, בין אם למען להימנע מגזירת דין. לכן, לא משנה כמה שנים תהיה מפלגה, אשר פועלת נגד מוסדות המדינה, בשלטון, הפקידות הבכירה, ומוסדות המדינה תמיד יפעלו נגד מפלגה, שמעדיפה אינטרסים של מנהיג על פני אינטרסים של המונהג, (קריא, המדינה). כמובן שילטון מאריך ימים של מפלגה אחת, ויותר גרוע של מנהיג אחד, שפועלים למען האינטרסים של מנהיגות ולא למען אינטרס של הכלל, דינו להיכשל.

כאשר האינטרס של המנהיג באה לידי התנגשות, עם האינטרס של מוסדות המדינה, כמו במקרה של מר נתניהו, מוסדות המדינה קמות נגד נטייתו לערבב אינטרסים אישיים עם אינטרסים של הכלל. נגד זה מנסה מר נתניהו ושליחיו לפרק או לקעקע את היסודות עליהם מושתתת המדינה, קריא מערכת השיפוטית, מערכת אכיפת החוק, צבא, ואפילו עיתונות, אשר אומנם הינו מוסד בבעלות פרטית ולא ציבורית, אולם לעיתים העיתונות עומד בדרכו של המנהיג לקדם אינטרסים אישיים על פני אינטרסים של המדינה.

הבחירות במרץ הן לא על, האם נתניהו או לא נתניהו יהיה ראש ממשלה, אלא על השאלה, האם מדינת ישראל תמשיך לפעול על פי חוקים באמצעות המוסדות שלה, תוך קיום שיתוף פעולה, אשר מושתת על הסכמות וולונטריות של כל מרכיבי החברה, או לאו.

מרכב נוסף שעוזר למדינה לתפקד ביעילות, הוא תחושת זיקה של היחיד אל התת היחידה החברתית בתוך המדינה, שמאפשרת מדיניות של ערבות הדדית, המבטיחה גם לפרטים החלשים ביותר בחברה, קיום מינימלי. כנגד זה עומד המצב, בו מדינת ישראל תהפוך להיות נחלה הפרטית של ראש ממשלה המכהן, ושל קבוצת אוכלוסיה מגזרית זו או אחרת, אשר בקואליציה אופורטוניסטית פוליטית עם מפלגת השלטון, ואשר מדירה את יתר החברה, אשר באופוזיצה למפלגת השלטון, ובמצבים קיצוניים אף מנסה לעשות דאלגיטימזציה של קבוצת אוכלוסיה זאת.

וכעת לגבי המצב הפוליטי היום. השאלה היא לא האם נתניהו או לא נתניהו, אלא השאלה היא “למה דווקא נתניהו”. הרי אפילו ייצא נתניהו זכאי, וצח כמו שלג, היום, כאשר הוא על ספסל הנאשמים, בחירתו לראש ממשלה יהיה בניגוד לכל הגיון, ושכל הישר, אלא אם כן משהו באמת מאמין שקיים אדם, שאין לו תחליף. אבל כידוע בתי הקברות מלאים מנהיגים ואנשים דגולים מנתניהו “שלא היה להם תחליף”. אני כבר לא מדבר על הפן המוסרי, שכפי הנראה לא תקף לגבי כל תומכי נתניהו.

היום נתניהו עומד נגד כל מוסדות השילטון, שהם הם המדינה. אגב רוב נציגי המוסדות האלה מונו על ידי ממשלתו, או ממשלת ליכוד, הרי הליכוד שולט במדינה פחות או יותר בלי הפסקה כבר משנת 1977, כלומר מעל 40 שנה. מלחמתו של נתניהו נגד המערכת השיפוטית, פרקליטות ובתי משפט, משטרה וכו’ היא מלחמה נגד מדינת ישראל עצמה. מבחינה הזאת נתניהו חותר לא נגד הפרקליטות או פרקליט המדינה, אלא נגד מדינת ישראל עצמה, ומחליש אותה. וזה עלול להתבטא גם בהחלטות איסטרטגיות של מלחמה ושלום, שעלולות להביא להחלטות הרות אסון. מדיניות נתניהו היום היא “תמות נפשי עם פלישתים “. או “אחרי המבול”. במצב זה, אפילו אם נתניהו הוא קורבן של המדינה ומוסדותיה, ונאמר שהוא קורבן, וקורה שמדינה ומערכת שיפוטית, שהיא למעשה המדינה עצמה, טועה או מטעה, עדיין אני שואל למה דווקא נתניהו? מה אין אחרים שיכולים לנהל את המדינה? אם זה היה נכון, אז מה יהיה אחרי שהוא ימות בשיבה טובה? זה יהיה הסוף של המדינה? אם הכרעה היא בכל מחיר נתניהו, אולי צריך גם לחשוב, מתי יהיה הזמן להחליפו? הרי זה חייב לקרות מתישהו. ואז אולי המסקנה המתבקשת היא, שזהו הזמן, כאשר תרומתו למדינה ולמפלגת הליכוד, היא שלילית באופן ברור.

לסיכום, אני חוזר ומדגיש, בבחירות הקרובות עומדות זה כנגד זה, נתניהו כנגד מדינת ישראל הריבונית על מוסדותיה. אני בוחר במדינת ישראל, ואין לזה שום קשר להאם מוצאי משרידי יהדות אירופה או ממדינות איסלם. שני חלקי העם היו חייבים בדורות הקודמים לשלם מחיר אישי כבד, כדי שתקום מדינת ישראל של היום, על כל השגיה בתחומי התרבות, כלכלה, מוסדות ממשל, מערכת המשפט, מוסדות השכלה גבוהה, צהל, וכך הלאה.

Makroekonomické selhání české vlády a centrální banky

Makroekonomické selhání české vlády a manažerů centrální banky od roku 2008.

Jako první krok v analýze makroekonomických rozhodnutí České vlády, bych definoval cíl makroekonomické politiky. Dle mého názoru, a dle vyjádření většiny politických reprezentantů, cílem České makroekonomické politiky je vyrovnat nebo přiblížit bohatství českých občanů k bohatství západoevropských států, zejména Německa a Francie. Když se podíváme na vývoj bohatství českého státu dle oficiálního kurzu koruny HDP, zjistíme, že Česká HDP per capita je kolem 22,000 dolarů, proti 46,000 dolarů v Německu a 39,000 dolarů ve Francii. [Porovnaní dle oficiálního kurzu a ne dle PPP (purchase power parity) není náhodné, proto že to vyjadřuje správněji relativní bohatství obyvatelstva*]

Z těchto dat vyplývá, že Český občan po 30 letech po komunismu zaostává svým bohatstvím za občany západní Evropy o cca 50%. Hlavní otázky jsou proč je to tak a či to zůstane tak navěky, nebo se to dá napravit.
Dle mého názoru, tato propast mezi Českou a západní ekonomikou je zčásti způsobena ekonomickými rozhodnutími českých vlád a České národní banky a z části neexistujícího místního kapitálu, který by mohl podporovat místní iniciativy českých podnikatelů.

V Čechách jsou prakticky jedinými zdroji na investice privátního podnikaní vlastní zdroje, nebo banky. Na západě proti tomu jsou finanční instrumenty, jako fungující burza cenných papírů a korporátních dluhopisů. Navíc na západě, i privátní sektor businessu a privátní lidé, jsou podstatně víc zadlužení, něž v Čechách. Z hlediska privátního občana v Čechách neexistují pojmy jako overdraft v bance, což je běžná záležitost v zahraničí, a kreditní karty jsou spíš debetní jenom proto, že půjčka přes kreditní kartu je spíše lichvářství než finanční půjčka.

A teď zpátky k omylům české vlády a České národní banky.

Dle mého názoru, hlavní příčina ekonomické propasti mezi českou a západní ekonomikou není v českých lidech, jejichž úroveň vzdělání je porovnatelná, nebo i vyšší, než lidí na západě. Ani to není nedostatek infrastruktury (kde by šlo jinak ještě hodně doinvestovat, ale nemá to zásadní vliv na ekonomiku, aby to vysvětlilo rozdíly v desítkách procent v HDP per capita mezi Českem a západem). Příčina této ekonomické propasti mezi českou a západní ekonomikou jsou, dle mého názoru, prakticky neexistující místní finanční zdroje a finanční trhy.

Vznik finančních trhů a zdrojů je dlouhodobý proces vytváření důvěry mezi investory a podnikateli, na které asi 30 roků tržní ekonomika nestačila. Další zádrhel je neexistující kapitál, akumulovaný přes generace, který je v rukách pasivních investorů, a který hledá možnost investovat do nových podnikatelů a nových iniciativ. Kapitál v Čechách je většinou v rukách zahraničních firem (zahraniční banky a instituční investoři – jako penzijní fondy atd.), nebo v rukách místních podnikatelů první generace, kteří investují do svých vlastních iniciativ, tak že nové iniciativy jsou závislé buď na bankách v zahraničních rukou, nebo na vlastních zdrojích.

Teď zbývá jenom otázka, či se to dá napravit, a pokud ano, co by vláda mohla udělat pro nápravu této ekonomické skutečnosti a neudělala, nebo možná i udělala opačně. Dle mého názoru si česká vláda a ekonomičtí činitelé musí uvědomit, že v určité fázi ekonomického pokroku, spíš bohatství, privátního sektoru přináší ekonomický pokrok, než ekonomický pokrok přináší privátnímu sektoru bohatství. Ale jak vytvořit bohatství u privátního sektoru z jednoho dne na druhý?

Jsou na to jenom dvě cesty. Buď zvýšit dluh, nebo posilnit místní měnu. A protože zvýšení dluhu může byt za určitých okolnosti inflacionne, a posilněni měny deflacionne, nejlepší by bylo třeba udělat oba kroky najednou. Zvýšení privátního dluhu není možné, pokud místní občané nemají tendenci se zadlužovat, což fakticky v Čechách je. Takže jediná možná náprava této situace, je v rukách vlády a centrální banky.
A teď je čas se podívat na dvě strategické rozhodnutí české vlády a České národní banky od roku 2008 a uvidíme, že jejich rozhodnutí byly pravým opakem.

Dluh: V 2008, když vypukla finanční krize, veřejný dluh v Česku byl cca 30% z HDP, oproti 66% v Německu a 67% ve Francii. Po deseti letech český veřejný dluh se zvýšil na 35% z HDP, když v Německu se skoro nezměnil a je na 63% a Francouzský se dramaticky zvýšil na 97%. Pamatuji si, že když vypukla finanční krize, hlavním problémem české vlády bylo jak snížit veřejný deficit, aby se nezvyšoval veřejný dluh, i když Česko tehdy bylo mezi nejmíň zadluženými zeměmi v Evropě. Toto já vidím, jako vlastni gól.

Ještě se dá zeptat, ale do čeho by se dal investovat veřejní deficit? Přece nové investiční projekty potřebují roky dát je dohromady. Já bych řekl, že česká vláda by mohla bez velké přípravy investovat do zdravotnictví a výchovy tím, že by zvýšila platy těmto vysoce profesionálním pracovníkům. Potom by čeští lékaři, sestřičky nebo učitelé nemuseli odcházet za prací do západních zemí, nejednou pracovat za barem, jenom aby si vydělali na minimální blahobyt. A co udělala česká vláda, snížila v roce 2010 o 10% nominální platy v státní správě.

Měna: V roce 2013 z jednoho dne na druhý, Česká národní banka devalvovala korunu, a začala nakupovat Eura a udržovat korunu slabou, bez jediného smysluplného vysvětleni, proč to udělala. Aby udržela slabou korunu do roku 2017, nashromáždila 150 miliard EUR ve své pokladně, které mu vynáší 0-ovou úrokovou sazbu, nebo spíš minusovou. Z těchto 150 miliard EUR je asi 100 miliard EUR zbytečných z hlediska nutnosti držet zahraniční měnu jako rezervu. Samozřejmě tento krok byl inflační ze všech stran, s tím, že se do české ekonomiky během 4 let nacpalo asi 2,7 trilionů zbytečných českých korun, co odpovídá asi 57 % z HDP. Navíc, když se tato politika zastavila, koruna se posilnila o cca 2 koruny, co vytvořilo v České národní bance ztrátu 300 miliard českých korun, zodpovídající vládnímu deficitu ve výši 6% z HDP. A tato ztráta není z praktického hlediska o nic odlišná od vládního deficitu.
Ještě bych dodal, že devalvace nebo udržování české koruny pod její reálnou hodnotou je zase krok odebrat od českých lidí bohatství co jim právem náleží, a které si slušnou práci v montovnách automobilů vydělali.

Oslabeni české koruny a souběžně obrovské zvýšení korunového finančního toku do ekonomiky dle očekávání přineslo inflaci 3% proti inflaci pod jedno procento v západních zemích. Česká národní banka to chce řešit zvýšením úrokové sazby, co bude mít za následek snížení investic místních firem. Navíc inflace je instrument, který zdaňuje obyvatelstvo velice nevyváženě a chaoticky. Podstatně jednodušší řešení by bylo posilnit korunu třeba na 24 Kč za EURO, jako byl předpoklad České národní banky, že se to stane do roku 2020. Ale zdá se, že realita je jiná. Když nakupovala Česká národní banka EURO od spekulantů, zaplatila jim několik trilionů korun. A teď ti spekulanti, nebo spíš jejich počítače, čekají na posílení koruny a vždy když EURO klesne pod určitou hladinu, začnou prodávat koruny a nakupovat EURA. Proto zvýšení úrokových sazeb na korunu vůbec nezapůsobilo na posílení koruny, jak se to dalo očekávat. Opačně, jak běží čas, spekulanti ztrácejí trpělivost a začínají prodávat nahromaděné koruny, a s tím oslabují korunu ještě víc, pokud Česká národní banka nezačne prodávat část nashromážděných EUR. Výsledek, další zbytečné snižování životní úrovně v Čechách.

Na závěr bych dodal, jak jsem už vysvětlil, po určité ekonomické vyspělosti kapitalisticko-tržní ekonomiky, bohatství privátních lidí přináší ekonomický pokrok, a ne opačně. Vidíme to výrazně v Japonsku, v USA a též ve většině západoevropských zemí, kde veřejné dluhy přesahují i 100% z HDP. Tak kde chceme být, kde je Francie s 97 % veřejným dluhem nebo jako Rumunsko s 37 % veřejným dluhem.

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*)Ekonomové rádi porovnávají HDP per capita podle měřítka PPP, co je relevantní porovnaní relativní kapacity spotřeby občanů spotřebního zboží proti západním zemím, avšak nepoukazuje na relativní bohatství lidí v různých zemích. Jako příklad bych porovnal vlastnění dvou úplně identických bytů, jeden v Čechách a druhý v Německu. Ty byty by byly stejné kvality, ne len fyzicky, ale i polohou, avšak byt v Čechách by byl prodejný jenom za poloviční cenu proti bytu na západě.
Je jasné, že majitel bytu na západě, má nominálně dvakrát hodnotnější majetek, i když z hlediska spotřeby oba občané mají stejnou kvalitu bytů jako spotřebního zboží. Je to důležité? Možná ne když občané jenom berou byt jako spotřební zboží. Ale když se díváme na výhodu, co vyšší majetková hodnota vytváří pro majitele bytu na západě, zjistíme, že kdyby oba majitelé bytů si chtěli půjčit peníze od banky, ten německý má podstatně výhodnější pozici.

תופעת נתניהו

כאשר בוחנים את העמדות האידאולוגיות שמפרידות בין “שמאל לימין” למעשה אין הבדל מעשי ביחסם למדיניות כלפי הפלסטינים. ההבדל העיקרי הוא במהלכים דיפלומטיים, כאשר “הימין” לא ממש מנסה להציג פנים לקראת הסדר עם הערבים, בעוד “השמאל”, לכאורה חותר לשלום והסדר. בפועל לא “השמאל” ולא “הימין” מוכנות לקבל את דרישות המינימום של הפלשתינאים, ויתור על ריבונות על ירושלים, והבטחת זכות השיבה, ופינוי ערים כמו מזרח ירושליים, מעלה אדומים וכו’.

צריך לזכור שמיספר המנדטים לאחר הבחירות האחרונות הוא מצב זמני, נקודתי, (מקסימום 4 שנים) ואני מעדיף להתייחס אל המגמות מאשר מצב שהתהווה אחרי הבחירות. לפחות 6 מנדטים בימין הדתי של בנט ופיגלין הלכו לאיבוד. מה גם שהליכוד מבחינת ההרכב של תומכיו הוא לא ממש חילוני. יוצא מזה שהימין הדתי הוא לפחות 30 מנדטים בפוטנציה, והימין החילוני קרוב לארבעים מנדטים. “השמאל”, שהוא כאמור לא ממש מציע פתרון מעשי לסיכסוך, אלא ברמה של wishful thinking, אלא יותר פרו מערבי ליברליסטי, הוא 45 מנדטים בפוטנציה, אבל אין לו בעלי ברית, בשל עמדותיו החילוניות האקטיביסטיות. בתמיכה מבחוץ היחידה “שהשמאל” נהנה ממנה, היא של המפלגות הערביות, שבמקרה הקיצוני עשויות להגיע לעד 15 מנדטים, שמשמעותן איזון בין הגושים.

אבל כל זה רק העמדת הכלים במשחק שחמט שפחות מעניינת. מה שמעניין אותי זאת המגמה והדינמיקה, ולאן מועדות פנינו. מה שברור הדמוגרפיה עובדת חזק. אם עד שנות השבעים למפלגות הדתיות היו סביב העשרה מנדטים עם פוטנציאל של 15 מנדטים, היום הם 20 מנדטים עם פוטנציאל של קרוב ל 30 מנדטים. הערבים כנ”ל היו עם 5 מנדטים עם פוטנציאל של עשרה מנדטים, היום הם עם עשרה מנדטים עם פוטנציאל של 15 מנדטים. גם צריך להוסיף שאת האוכלוסיה הערבית ייצגה בעבר מפלגה קומוניסטית, ואת הדתיים מפלגה דתית לאומית, כאשר המפלגות החרדיות היו בשוליים. היום גם הערבים וגם הדתיים בוחרים מפלגות שהדת ואורך חיים דתי הוא עיקר עיסוקם. זאת היא מגמה שצומחת מהדמוגרפיה. זהו גם תהליך שאצל החרדים היהודיים מזין את עצמו. אי אפשר לקיים אורך חיים דתי, על כל מוסדות החינוך וסעד, ללא תמיכה מסיבית של המדינה. מכאן, ככל שהמפלגות החרדיות מתחזקות, כך גם מצליחים יותר להרבות בכוחם.

ומה לגבי האוכלוסיה החילונית, ומפלגותיהן החילוניות? כאן עומדות זו נגד זו כ 80 מנדטים, (בגלל אובדן 7 מנדטים של הדתיים זה היום 90 מנדטים), כאשר החלוקה היא בערך חצי חצי, עם יתרון מסויים לשמאל. מה הדבר שמפריד למעשה בין שתי המחנות האלה? לא המצע הפוליטי לאומי. רוב המפלגות היהודיות, פרט אולי למרץ התייאשו מלהגיע להסדר כלשהו עם הפלסטינים. ההבדל האידיאולוגי, הוא ברמת האקטיביזם של פעולות אנטי פלסטיניות, שהמפלגות השונות מוכנות לנקוט בה, ובעיקר לדבר עליה, ומידת ההסתגרות של בוחרי המפלגות בתוך עולם המושגים היהודי הפרטני שלהם. אבל ההבדלים פה הם מזעריים ולא יכולים להסביר את העוינות הנוראה בין שתי האוכלוסיות האלה. לדעתי מקור העוינות הוא ברגשות של השתייכות, כאשר מצביעי ליכוד הם תופסים את עצמם כקורבנות הממסד האשכנזי שייסד את המדינה, שולט במוסדותיה, בעוד נציגיו של הימין לפי דעתם מופלים לרעה.

יש לציין שמנהלי מוסדות כמו אקדמיה, עיתונות ותקשורת, בתי משפט, מנגנון הפקידותי הבכיר, ואפילו מפקדי צה”ל, אינם נבחרים בצורה דמוקרטית פתוחה, אלא על פי כישורים, והשכלה. חלק ניכר מבוחרי הימין רואים אנשים אלה כאשכנזים, או מתאשכנזים, שמאלנים, אנטי ליכוד, אנטי מזרחיים, אנטי מקורות התרבותיים מהם צמחו, ואנטי נגדם אישית. לעומתם עומדים “האשכנזים”, משכילים, בעלי הכנסה גבוהה יותר, שמרגישים עליונות ערכית מעל תומכי הליכוד, הן מבחינה מוסרית, הן מבחינת תפקידם בתחום העשיה הלאומית.

“השמאל”, מאמין, שהבחירה של “הימין” היא בחירה לא רציונלית, הרסנית הן לחברה והן למצב הפוליטי בטחוני של המדינה. בדיוק כמו שהכתבים בניו יורק טימס בטוחים שהם נעלים, לעומת תומכי טראמפ. המדינה עבור השמאל היא מסגרת לשימור התרבות והזהות היהודית, כמו גם קיום מוסדות לאומיים, שפועלים במסגרת אידיאולוגיה של ערבות הדדית.

לעומתם, האוכלוסיה של תומכי “ימין” מחפשת הזדהות והצמדות אל החזק, שיגן עליהם מפני העולם הגדול, הלא מוכר להם, הלא שלהם, ממנו הם מקבלים רק בוז, זילזול, התנשאות ועוינות. מעבר לכך את תומכי “הימין” מזינה שינא יוקדת כלפי הערבים, שכבר אינה מיוצגת על ידי תופעה ביזרית של מפלגה קומוניסטית, אלא בנציגים לאומניים, איסלמיים, שמרימים את הראש “בחוצפתם”, לפי תפיסת “הימין”. למרות ארבעים שנות שילטון “הימין” בארץ, תומכי “הימין” מרגישים הדורים ממנגנוני השילטון. הם לא מתייחסים לעובדה, שהבחירה אל מוסדות אלה היא לרוב לפי כישורים מקצועיים אקדמאים, ולא השתיכות שיבטית. תומכי “הימין” ובעיקר של הליכוד נמצאים בדרגים הנמוכים יותר של השילטון, בעיקר ברמה המוניציפלית, וועדי עובדים, וכו’, אליהם הם נבחרים בבחירות דמוקרטיות. כדאי לזכור, עד שנות השמונים כמעט שלא היו נציגים מזרחיים בכנסת. אני זוכר את דווד לוי, ישראל ישעיהו שרעבי, משה ניסים, שלמה הילל, הם היו תופעה בודדת, כולם שיחקו תפקידים זוטרים, ותפקידם העיקרי היה להציג חלון ראווה של מגזרי אוכלוסיה מזרחית, מתוכה הם צמחו. כל המנהיגים האלה מונו על ידי הפטרון האשכנזי.

כל זה נאלם. היום הפוליטיקאים המזרחיים, פרט אולי לנציגי ש”ס אינם מגזריים עוד. אבל עדיין התרבות הפוליטית שלהם היא של אנטי ממסד, אנטי אליטה, אנטי ליברליות חילונית אירופאית. אחרי ארבעים שנות שלטון הליכוד, רוב האוכלוסיה בארץ כבר לא מכירה שלטון אחר, וכאן נכנס האלמנט של השמרנות שיש לו השפעה לא מבוטלת על הבחירות של האוכלוסייה. רוב בני אדם חרדים משינוי. רק זעזוע ברמה לאומית, כמו הפסד במלחמה, משבר כלכלי עמוק, שחיתות בקנה מידה לאומי, אלה תופעות, שוברות אימון, שעשויות לעורר כמיהה לשינוי שמשנות שלטון.

השאלה הפוליטית האחרונה שנותרה היא, האם החלוקה לאוכלוסיה חילונית וחרדית תגיע לפיצוץ פוליטי או לא. כל עוד החרדיות מכונסת בגטאות שלה, רוב האוכלוסיה החילונית, גם משום זיקתם אל העולם היהודי, וגם משום מצבם הכלכלי והשכלה, לא מוציא אותם אל הרחובות. תנועת האוהלים הייתה אומנם מיני מהפכה של חילונים-שמאלנים, אך היא דעכה ונאלמה כלא הייתה. משבר הדיור אומנם לא נפתר, אבל אנשי מעמד ביניים לא טובים במהפכות, אם לא מצטרפים אליהם המוני העם משכבות המדוכאות, שנוטים יותר לאלימות. פוטנציאל למשבר משנה יסודות עלול לבוא עם יפלו מאות טילים על ריכוזי אוכלוסיה במרכז הארץ. תגובת האוכלוסיה, שמחפשת להישען על נציג אותו מדמה לחזק, עלולה להיות אכזבה, שתביא דווקא להקצנה, ולאו דווקא פניה לאלטרנטיבה. אבל כל עוד המדינה מצליחה להקנות ביטחון וכלכלה סבירה, מעמדו של הליכוד באמצעות גוש ימין הדתי מובטח.

הבעיה של נתניהו היא, שהוא נטע זר בקרב תומכיו. הוא אמנם מוקף כמה אנשים עם פוטנציאל להיות מנהיגים בזכות עצמם, אבל הרבה יותר סולקו מהסביבה שלו, כאשר הוא חש, שהם מאימים על מעמדו הבלעדי. כל נסיכי הליכוד, גדעון סער, כחלון, בוגי יעלון, ועוד. בשל האיום שחש מלפיד על מעמדו הבלעדי, הוא פירק את הממשלה החילונית הקודמת. הוא גם בחר לעמדות מפתח אנשים, המזוהים עם המפלגה דתית לאומית, וכך הוא מבטיח את נאמנותם. אבל בסך הכל הוא חייב לחוש מאד מבודד בפסגה, עם כל האנשים שעיקר כישוריהם להיות נאמנים לו, או שהם דתיים המאמינים בריבון עליון. לכן הדרך היחידה להיות המנהיג שלהם היא להתעלות מעל אלה שבוחרים בו, ולהיות כמלך, מגבש סביב עצמו מספר סעיינים, עליהם הוא צריך לשמור שלא יעשו הפיכת חצר, ויחד עמם הוא ישלוט על נתיניו. שיטה שלטון פאודלית זאת לא מתאימה לאנשי “שמאל”, בעלי ביטחון עצמי, שמגבשים השקפת עולם באופן עצמאי. לכן גם העוינות הקיצונית שלהם כלפי נתניהו.

מתוך ניתוח לעיל נוצרות כמה וודאויות וכמה אי וודאויות. הוודאות היא שאת נתניהו אי אפשר להביס בקלפי, כל עוד הוא תומך בעמדות של הימין הדתי, ומאפשר לחרדים לקיים אורח חיים חרדי על חשבון יתר חלקי האוכלוסיה. קיימת אי וודאות לגבי, לאן מיועדות פניהם של ממשיכיו, כאשר מר נתניהו יפרוש. זה יכול להיות בעוד ארבע שנים, אבל גם בעוד עשרים שנה. החזון של שלטון נתניהו, כאשר הוא מוכר את נשמתו החילונית – רוויזיוניסטית לחרדים, מזעזע את הכל שעליה מושתתת המדינה. החרדיות היא הסתגרות לתוך עולם מושגים ארכאי, לא רלוונטי למודרנה, עוין ופוחד מכל מה שלא חרדי. מכאן גם שהתנועה הדתית הלאומית היא האויב העיקרי שלה, רק אחרי זה באה העולם החילוני. בעוד עולם הגויים כלל לא קיים בתודעתם, אלא כזיכרון עמום של פוגרומים.

היום, השמאל לא מיוצג עוד על ידי תנועה סוציאליסטית, עוינות רוויזיוניזם וממשיכי דרכו של ז’בוטינסקי, שדוגלת במדיניות של ערבות הדדית ועזרה לחלשים. “השמאל” אימץ עמדות ליברליסטיות, אליטיסטיות. נוסף לכך, יש לקוות, שסוף סוף “לשמאל” גם נפל האסימון, שאין לא שום סיכוי לזכות בבחירות נגד נתניהו, שנתפס על ידי רוב העם כמלך, עם כל הקפריזות המלכותיות שלו ושל אשתו. לכן על השמאל לבחור בין נתניהו, שינהיג את הגוש החילוני, ובין נתניהו שמשתית את כוחו הפוליטי על החרדים. על נתניהו לעומת זאת להחליט איזו ירושה היסטורית ישאיר לדורות הבאים. האם יהיה מנהיג שחיבר בין כל חלקי העם, עם דומיננטיות חילונית, או כמו שעשה לפני ארבעה שנים, כאשר פירק קואליציה חילונית והקים תחתיה קואליציה עם החרדים.

? כאן עומדות זו נגד זו כ 80 מנדטים, (בגלל אובדן 7 מנדטים של הדתיים זה היום 90 מנדטים), כאשר החלוקה היא בערך חצי חצי, עם יתרון מסויים לשמאל. מה הדבר שמפריד למעשה בין שתי המחנות האלה? לא המצע הפוליטי לאומי. רוב המפלגות היהודיות, פרט אולי למרץ התייאשו מלהגיע להסדר כלשהו עם הפלסטינים. ההבדל האידיאולוגי, הוא ברמת האקטיביזם של פעולות אנטי פלסטיניות, שהמפלגות השונות מוכנות לנקוט בה, ובעיקר לדבר עליה, ומידת ההסתגרות של בוחרי המפלגות בתוך עולם המושגים היהודי הפרטני שלהם. אבל ההבדלים פה הם מזעריים ולא יכולים להסביר את העוינות הנוראה בין שתי האוכלוסיות האלה. לדעתי מקור העוינות הוא ברגשות של השתייכות, כאשר מצביעי ליכוד הם תופסים את עצמם כקורבנות הממסד האשכנזי שייסד את המדינה, שולט במוסדותיה, בעוד נציגיו של הימין לפי דעתם מופלים לרעה.

יש לציין שמנהלי מוסדות כמו אקדמיה, עיתונות ותקשורת, בתי משפט, מנגנון הפקידותי הבכיר, ואפילו מפקדי צה”ל, אינם נבחרים בצורה דמוקרטית פתוחה, אלא על פי כישורים, והשכלה. חלק ניכר מבוחרי הימין רואים אנשים אלה כאשכנזים, או מתאשכנזים, שמאלנים, אנטי ליכוד, אנטי מזרחיים, אנטי מקורות התרבותיים מהם צמחו, ואנטי נגדם אישית. לעומתם עומדים “האשכנזים”, משכילים, בעלי הכנסה גבוהה יותר, שמרגישים עליונות ערכית מעל תומכי הליכוד, הן מבחינה מוסרית, הן מבחינת תפקידם בתחום העשיה הלאומית.

השמאל”, מאמין, שהבחירה של “הימין” היא בחירה לא רציונלית, הרסנית הן לחברה והן למצב הפוליטי בטחוני של המדינה. בדיוק כמו שהכתבים בניו יורק טימס בטוחים שהם נעלים, לעומת תומכי טראמפ. המדינה עבור השמאל היא מסגרת לשימור התרבות והזהות היהודית, כמו גם קיום מוסדות לאומיים, שפועלים במסגרת אידיאולוגיה של ערבות הדדית.
לעומתם, האוכלוסיה של תומכי “ימין” מחפשת הזדהות והצמדות אל החזק, שיגן עליהם מפני העולם הגדול, הלא מוכר להם, הלא שלהם, ממנו הם מקבלים רק בוז, זילזול, התנשאות ועוינות. מעבר לכך את תומכי “הימין” מזינה שינא יוקדת כלפי הערבים, שכבר אינה מיוצגת על ידי תופעה ביזרית של מפלגה קומוניסטית, אלא בנציגים לאומניים, איסלמיים, שמרימים את הראש “בחוצפתם”, לפי תפיסת “הימין”. למרות ארבעים שנות שילטון “הימין” בארץ, תומכי “הימין” מרגישים הדורים ממנגנוני השילטון. הם לא מתייחסים לעובדה, שהבחירה אל מוסדות אלה היא לרוב לפי כישורים מקצועיים אקדמאים, ולא השתיכות שיבטית. תומכי “הימין” ובעיקר של הליכוד נמצאים בדרגים הנמוכים יותר של השילטון, בעיקר ברמה המוניציפלית, וועדי עובדים, וכו’, אליהם הם נבחרים בבחירות דמוקרטיות. כדאי לזכור, עד שנות השמונים כמעט שלא היו נציגים מזרחיים בכנסת. אני זוכר את דווד לוי, ישראל ישעיהו שרעבי, משה ניסים, שלמה הילל, הם היו תופעה בודדת, כולם שיחקו תפקידים זוטרים, ותפקידם העיקרי היה להציג חלון ראווה של מגזרי אוכלוסיה מזרחית, מתוכה הם צמחו. כל המנהיגים האלה מונו על ידי הפטרון האשכנזי.
כל זה נאלם. היום הפוליטיקאים המזרחיים, פרט אולי לנציגי ש”ס אינם מגזריים עוד. אבל עדיין התרבות הפוליטית שלהם היא של אנטי ממסד, אנטי אליטה, אנטי ליברליות חילונית אירופאית. אחרי ארבעים שנות שלטון הליכוד, רוב האוכלוסיה בארץ כבר לא מכירה שלטון אחר, וכאן נכנס האלמנט של השמרנות שיש לו השפעה לא מבוטלת על הבחירות של האוכלוסייה. רוב בני אדם חרדים משינוי. רק זעזוע ברמה לאומית, כמו הפסד במלחמה, משבר כלכלי עמוק, שחיתות בקנה מידה לאומי, אלה תופעות, שוברות אימון, שעשויות לעורר כמיהה לשינוי שמשנות שלטון.
השאלה הפוליטית האחרונה שנותרה היא, האם החלוקה לאוכלוסיה חילונית וחרדית תגיע לפיצוץ פוליטי או לא. כל עוד החרדיות מכונסת בגטאות שלה, רוב האוכלוסיה החילונית, גם משום זיקתם אל העולם היהודי, וגם משום מצבם הכלכלי והשכלה, לא מוציא אותם אל הרחובות. תנועת האוהלים הייתה אומנם מיני מהפכה של חילונים-שמאלנים, אך היא דעכה ונאלמה כלא הייתה. משבר הדיור אומנם לא נפתר, אבל אנשי מעמד ביניים לא טובים במהפכות, אם לא מצטרפים אליהם המוני העם משכבות המדוכאות, שנוטים יותר לאלימות. פוטנציאל למשבר משנה יסודות עלול לבוא עם יפלו מאות טילים על ריכוזי אוכלוסיה במרכז הארץ. תגובת האוכלוסיה, שמחפשת להישען על נציג אותו מדמה לחזק, עלולה להיות אכזבה, שתביא דווקא להקצנה, ולאו דווקא פניה לאלטרנטיבה. אבל כל עוד המדינה מצליחה להקנות ביטחון וכלכלה סבירה, מעמדו של הליכוד באמצעות גוש ימין הדתי מובטח.
הבעיה של נתניהו היא, שהוא נטע זר בקרב תומכיו. הוא אמנם מוקף כמה אנשים עם פוטנציאל להיות מנהיגים בזכות עצמם, אבל הרבה יותר סולקו מהסביבה שלו, כאשר הוא חש, שהם מאימים על מעמדו הבלעדי. כל נסיכי הליכוד, גדעון סער, כחלון, בוגי יעלון, ועוד. בשל האיום שחש מלפיד על מעמדו הבלעדי, הוא פירק את הממשלה החילונית הקודמת. הוא גם בחר לעמדות מפתח אנשים, המזוהים עם המפלגה דתית לאומית, וכך הוא מבטיח את נאמנותם. אבל בסך הכל הוא חייב לחוש מאד מבודד בפסגה, עם כל האנשים שעיקר כישוריהם להיות נאמנים לו, או שהם דתיים המאמינים בריבון עליון. לכן הדרך היחידה להיות המנהיג שלהם היא להתעלות מעל אלה שבוחרים בו, ולהיות כמלך, מגבש סביב עצמו מספר סעיינים, עליהם הוא צריך לשמור שלא יעשו הפיכת חצר, ויחד עמם הוא ישלוט על נתיניו. שיטה שלטון פאודלית זאת לא מתאימה לאנשי “שמאל”, בעלי ביטחון עצמי, שמגבשים השקפת עולם באופן עצמאי. לכן גם העוינות הקיצונית שלהם כלפי נתניהו.
מתוך ניתוח לעיל נוצרות כמה וודאויות וכמה אי וודאויות. הוודאות היא שאת נתניהו אי אפשר להביס בקלפי, כל עוד הוא תומך בעמדות של הימין הדתי, ומאפשר לחרדים לקיים אורח חיים חרדי על חשבון יתר חלקי האוכלוסיה. קיימת אי וודאות לגבי, לאן מיועדות פניהם של ממשיכיו, כאשר מר נתניהו יפרוש. זה יכול להיות בעוד ארבע שנים, אבל גם בעוד עשרים שנה. החזון של שלטון נתניהו, כאשר הוא מוכר את נשמתו החילונית – רוויזיוניסטית לחרדים, מזעזע את הכל שעליה מושתתת המדינה. החרדיות היא הסתגרות לתוך עולם מושגים ארכאי, לא רלוונטי למודרנה, עוין ופוחד מכל מה שלא חרדי. מכאן גם שהתנועה הדתית הלאומית היא האויב העיקרי שלה, רק אחרי זה באה העולם החילוני. בעוד עולם הגויים כלל לא קיים בתודעתם, אלא כזיכרון עמום של פוגרומים.

היום, השמאל לא מיוצג עוד על ידי תנועה סוציאליסטית, עוינות רוויזיוניזם וממשיכי דרכו של ז’בוטינסקי, שדוגלת במדיניות של ערבות הדדית ועזרה לחלשים. “השמאל” אימץ עמדות ליברליסטיות, אליטיסטיות. נוסף לכך, יש לקוות, שסוף סוף “לשמאל” גם נפל האסימון, שאין לא שום סיכוי לזכות בבחירות נגד נתניהו, שנתפס על ידי רוב העם כמלך, עם כל הקפריזות המלכותיות שלו ושל אשתו. לכן על השמאל לבחור בין נתניהו, שינהיג את הגוש החילוני, ובין נתניהו שמשתית את כוחו הפוליטי על החרדים. על נתניהו לעומת זאת להחליט איזו ירושה היסטורית ישאיר לדורות הבאים. האם יהיה מנהיג שחיבר בין כל חלקי העם, עם דומיננטיות חילונית, או כמו שעשה לפני ארבעה שנים, כאשר פירק קואליציה חילונית והקים תחתיה קואליציה עם החרדים.

יהודים, ישראלים

יהודים, ישראלים

סקירה קצרה על מצב הלאומי-פוליטי של ישראל, מתוך נקודת מבט היסטורית.

ראשית קצת סטטיסטיקה:

Country Pre-War Estimated killed

Poland 3,400,00 3,000,000

Russia 3,000,000 1,000,000

Romania 757,000 287,000

Hungary 445,000 270,000

Czechoslovakia 357,000 260,000

Germany 500,000 165,000

Lithuania 150,000 145,000

Netherlands 140,000 102,000

France 300,000 76,000

Latvia 93,500 70,000

Austria 206,000 65,000

Yugoslavia 68,500 60,000

Greece 70,000 58,800

Belgium 90,000 25,000

Italy 46,000 7,500

Bulgaria 48,400 ..142

Total 9,689,500 5,594,623

באירופה לפני השואה חיו כ 10 מיליום יהודים. אוכלוסיה הזאת יש לחלק בגלל שינוי גבולות שחלו עם הסכמי מינכן ופרוץ מלחמת עולם השניה לשלושה גושים. רוסיה, ליטה, לטביה ואסטוניה ופולין עם כ 6.7 מיליון יהודים. הונגריה, רומניה, וצ’כוסלובקיה, עם כ- 1.5 מיליון יהודים, גרמניה, אוסטריה, והולנד עם 850,000 יהודים. ביתר מדינות בעיקר צרפת ואנגליה חיו כ- מיליון יהודים .

אחרי השואה שרדו בעיקר יהודי ברה”מ 2.2 מיליון כ- חצי מיליון מיהודי פולין ורומניה כל אחד, ועוד כ 300,000 יהודי הונגריה וצ’כוסלובקיה. כלומר מתוך 9 מיליו יהודים שרדו 3.5 מיליון יהודים. כדאי עוד להוסיף שמתוך יהדות גרמניה ואוסטריה, יותר ממחציתם היגרה עד מלחמת עולם השניה, כמאה אלף לארץ, והיתר לארה”ב. כמו כן כחצי מיליון יהודים, רובם מיהודי פולין ורוסיה היגרו לפלסטינה .

צריך לציין שבאזורים המזרחיים מגרמניה, היהודים חיו בקהילות שהתקבצו סביב מוסדות הדת ועזרה הדדית יהודיים. אומנם לאחר המלחמה לכאורה שרדו איים של קהילות יהודיות מזרחה מגרמניה, במקומות כמו בודפשט, רומניה, בולגריה ובברה”מ, אבל הם כולם חיו אחרי המלחמה תחת משטר קומוניסטי, שלא ממש טיפחו את המוסדות היהודיים בלשון מועטה. להוסיף לכך את ההגירה של רוב רובם של שרידי יהדות פולין, צ’כוסלובקיה, הונגריה ורומניה לישראל אחרי הקמת המדינה, ויהודי ברה”מ החל משנות השבעים של מאה העשרים, שהגיע לשיאו בתחילת שנות התשעים, קיום יהודי המקורי, כפי שהתקיים במשך כאלף שנה באירופה, מזרחה לנהר ריין, למעשה נאלם.

אם היום הולכות ומוקמות קהילות יהודיות בכמה מרכזיות בגרמניה ומזרחה לה בעיקר על ידי חב”ד, אלה קהילות שהקשר התרבותי אתני שלהם אל הקהילות המקוריות לא קיים. באותו אופן מדינת ישראל, רק במקרים נדירים הצליחה להעתיק קהילה יהודית מקורית, בלי לאבד לחלוטין את ערכיה וצביונה.

אם לשרטט בקווים מאד גסים את האוכלוסייה האשכנזית בישראל, היום חיים בארץ מעל 3 מיליון יהודים שמוצאם מיהודי אירופה. כשליש עד מחצית מהאוכלוסיה הם מנישואי תערובת בין אשכנזים ומזרחים, מבחינה סטטיסטית מחציתם יש לכלול בין אלה שאמצו את השקפת עולם האירופאית של אחרי מלחמת עולם השניה. פחות ממיליון מהם הם יהודים דתיים ומסורתיים והיתר חילוניים. בחלוקה גסה מאד, מתוך אוכלוסיה של שלוש מיליון, כמיליון הם יוצאי ברה”מ, כמיליון צאצאי החלוצים מקימי המדינה, והיתר צאצאים של שרידי השואה.

ניתוח האוכלוסיה הזאת הייתה חשובה לי כדי לנתח את הבסיס האלקטורלי של השקפת עולם, שנקראת שמאל, ולמעשה מדובר בהשקפת עולם חילונית אירופאית, שמנסה לבנות בישראל קיום תרבותי דמוי אירופאי, פוסט מלחמת עולם השניה. מדובר בגרעין של כ 2 מיליון יהודי אירופה, שהם כרבע מהאוכלוסיה הכללית של ישראל, כולל הלא יהודים. אם נספור את אחוז מצביעי שמאלה מליכוד, בלי הערבים, מדובר בכ 30-35% מהמצביעים.

השקפת עולמם של המצביעים האלה ניתן להגדיר בערך כך, “סולדים מהנרטיב התרבותי של ערבים מוסלמים”. הנרטיב התרבותי הזה עדיין ניכר בקרב יהודים מעדות המזרח, בעיקר מצביעי ש”ס ודומיהם, חלקם מצביעים ליכוד או מפלגה דתית אחרת. מסיבות מובנות, אף אחד לא יודה בכך בקול רם, לא יוצאי ארצות איסלאם ולא יהודים אשכנזים, אבל זה מה שהם חשים בליבם, אחד הסממנים של התרבות היהודית הזאת הוא מתבטא בכמיהה של האוכלוסיה הזאת למוזיקה מזרחית, שחשיפתה עד שנות השבעים הייתה שולית, והיום הפכה להיות main stream, וחלק מהישראליות. יש להבין שהמעבר מלחן אירופאי למוזיקה מזרחית, עם טונאליות שונה לחלוטין מהטונליאות האירופאית, היא לחלוטין לא טריוויאלית.

עולם המושגים של יוצאי ארצות ערב נבנה מתוך זיקה אל התרבות של ארצות מוצא הוריהם, בעיקר מרוקו, תימן עיראק, ופרס. תרבות זאת היא תרבות יהודית מסורתית, עם עויינות חזקה כלפי ערבים מוסלמים, למרות שזהות התרבותית של יהודים מארצות איסלם דומה מאד לתרבות ארץ מוצאם. לא ברור לי מה מקור עוינות הקיצונית הזאת של האוכלוסייה המזרחית כלפי העולם המוסלמי-ערבי, שאינו קיים דומה לו למשל בקרב יהודי אשכנז כלפי אוכלוסיית אירופה. זאת למרות שלכאורה, במהלך ההיסטוריה, יהודי אירופה נפגעו ללא פרופורציה יותר מהנוצרים, מאשר יהדות מארצות איסלם, מהאוכלוסיה המוסלמית. סיבה שאני יכול להעלות על הדעת היא רצונם להתנתק מהמורשת וזיקה מהעולם הערבי-מוסלמי, שמבחינה פוליטית מייצג את האויב, אותו יש לשנוא ולעשות לו דה-הומניזציה. הסבר אחר הוא הזלזול הרב למוסלמים בקרב קהילות יהודיות יוצאי ארצות איסלם, שכל קשר אליהם מנסים למחוק.

אותו שליש מבין מצביעי “שמאל”, “אשכנזים” איורופאים, מתחלקים בשוני בביטויי הסלידה שלהם לתרבות הערבית, והזהות הערבית. רובם לא בוכלים לומר זאת בריש גלי, שהתרבות הערבית היא נחותה, ואין לערבב אותה עם התרבות היהודית החילונית המודרנית. עובדה, אין כמעט נישואי תערובת בין ערבים ויהודים, אפילו אם הם מהשמאל. לכן גם השמאל תמך מהתחלה במפעל ההתיישבות מעבר לקו הירוק. חלק “מהשמאל”, בעיקר מצביעי מר”ץ, מתוך גישה אפולוגטית כלפי הערבים, מנסים לאפשר לפלסטינים להקים ריבונות משלהם באזורים בהם הם מתגוררים, העיקר שלא יהיו חלק מישראל, ושלא נצטרך להיות במגע יומיומי איתם. הם מאמינים שערבוב אוכלוסיה ערבית ויהודית מסכנת את הדמוקרטיה הישראלית. לכן הם תומכים בגדר ההפרדה, כמה שיותר גבוהה שתפריד בינינו לבינם. הם גם מתנגדים לישיבת יהודים בקירבם, כדי לא לערבב יהודים עם הערבים, ולא להפריע בניסיונות השמאל להתעלם מקיום האוכלוסיה הערבית במרחב. הבעיה של “השמאל “, היא לא בעיה מוסרית של מעשי הכיבוש של המתנחלים, אלא הצורך להתמודד עם מצב, בו השכנים של מדינת ישראל הם ערבים בזויים, מהם רוב אנשי “השמאל” סולדים. לכן לומר על שמאלני, שהוא אוהב ערבים, זה מגוחך. דווקא הימין, בעיקר זה המתנחלי לא פעם מתגאה ביחסים “הטובים”, שלהם עם שכניהם הערבים. האמת היא, שמדובר ביחסי אדון-עבד, אך זה בסדר מבחינתם, בגלל שהם בהחלט לא רואים בהם בני אדם שווים, ובמיוחד לא שווים ליהודים.

בקיצור יהודי אשכנז, אירופאים החילונים, סוציאליסטים או רוויזיוניסטים, נגררו ונשטלו על ידי כמיהות לאומיות אנכרוניסטיות, מושרשות במקורות האמוניים של התרבות היהודית, ללב העולם הערבי מוסלמי. זיקה וכמיהה הזאת, שהייתה אחת מעמודי התווך של האמונה והזהות היהודית, היא גם שאיפשרה בסופו של דבר, ללכד את העם היהודי לכדי עם, למרות שדור הראשון של מהגרים, נתקבץ מעשרות ארצות, עם תרבות ושפה שונים, וזהויות תרבותיות מאוד רחוקות זו מזו. ואני אפילו לא מדבר על השוני בין יהודי אירופה ויהודי עדות המזרח, אלא בין יהודי פולין לדוגמא, דוברי יידיש, ויהודי הונגריה, דוברי גרמנית או הונגרית. תופעת חסידות, לא הייתה כמעט קיימת בקרב יהודי הונגריה. גם הפער בין יהודים חילוניים לעומת דתיים, ציונים ולא ציונים, היה גדול אז, מאשר בימינו. אבל כולם ידעו להתלכד על הרעיון של עצמאות יהודית בארץ ישראל, בין אם דתיים מכל הזרמים, או חילוניים. כך הצליחו בסופו של דבר הציונים, שהיו זרם חילוני לחלוטין, לנצל את כמיהתם רבת השנים של כל היהודים מכול המקומות וכל הזרמים לריבונות יהודית בארץ ישראל, ולהקים את המפעל הציוני. הם גם הצליחו בגלל גישתם המודרניסטית, בין של הוסציאליסטים, ובין של הרוויזיוניסטים, לשחרר את הפוטנציאל היצירתי של היהודים, שהתקבצו במיליונים כאמור בארץ ישראל, וליבנות מדינה יהודית חד לשונית, אפילו תרבותית מפוצלת לזרמים חילוניים או דתיים.

סיפור הצלחה של מדינת ישראל היא יחידה בהיסטוריה האנושית, וראויה להתפעלות. עמים עתיקים נכשלו במשימה לבנות מדינה מודרנית למופת, עם צבא חזק, כלכלה משגשגת, ותרבות פורחת. מעט מאד עמים יכולים להתגאות בהישגים, דומים לאלה שהשיגה מדינת היהודים. מעל הכל אבל מדינה היהודית הצליחה לגשר בין יהודים מתרבויות, שפות וסביבה שונים מאד, כלל בין יהודי אירופה האשכנזים ליוצאי עדות המזרח. אגב אני מתקשה להשתמש במושג עדות המזרח, בגלל שהשאלה היא מזרחה ממה? מרוקו גאוגרפית יותר מערבית מפולין, וכו’. הכינוי הנכון הוא יהודים מזרחה מארץ ישראל, שכולל יהודי פרס ועיראק, יהודי מגרב, שכולל את כל הצפון אפריקאים, ויהודי תימן. לעומתם יהודי פולין, רומניה ורוסיה דוברי יידיש, וכך הלאה. ערבוב של ערב רב זה של אנשים מתרבויות שונות, תוך אימוץ הסיפור המכונן של היהודים, מהווה בסיס לתופעה היחודית, מדינת ישראל. בין אם דתיים או חילוניים, שמאלנים או ימניים, אשכנזים או ספרדיים, וכך הלאה, כולם אימצו את המיתוס היהודי הציוני של שיבת ציון.

The future is virtual

Responses to essay, Capitalism Isn’t Going to Survive the 21st Century. Will We?
It’s not enough to predict the end of liberal-capitalistic political economic system, ( i fully agree with), but there is a need to point out a different outcome, that will be very different from anything we can learn from the past. So let me try one such a prediction.

In most of the twenty century, the world was divided to bipolar political entities. On one hand the liberal, democratic-capitalistic political-economic system based entities, on the other hand personal freedom repressive-socialist political-economic system based entities. This division was not based on differences of opinion as to the goals of any political entity, but to the way how to create more efficient economic system, to secure wealth and well being to most of the people in the society. At the end of the century, the capitalist system won the battle, and the repressive-socialistic system became irrelevant.

At the very beginning of twenty first century, new division of political entities appeared. On one hand societies with demographically stagnant societies, with critical scientific conceptual institutions, against societies with population growth and institutionalized dogmatic thinking, mostly nourished by organised religion, enforced or voluntarily accepted by the majority of the population.

Accordingly, we can put political entities as EU and China and other East Asian countries, like Japan and South Korea to societies with scientific approach, while most of the Muslim countries and Africa to societies with dogmatic approach. As to the US and with it most of subordinated South American states, is does have leading institutions with scientific approach, but their political representative, act as representatives of financial magnates, that are disconnected from critical-scientific approaches. Russia is in similar situation, even if with a very different political system, for very different reason.

But this bipolar division of political entities, doesn’t apply only to division between countries,  but also to social-economic layers of the societies within the political entity. Since the major force bringing change to the contemporary human society is science and technology, they are those who participate in developing economic advance, and are those who don’t. This leaves minority of people, necessary to advance modern scientific-technological societies, and majority of those who are useless for this process. Since the new scientific-technological approaches will create eventually enough resources, to satisfy the needs of all the world population, if as predicted, the world population will stop to grow, most probably the small minority of leading creative people in sciences, technology, arts, politics, entrepreneurship, etc. will create systems, to satisfy the needs of majority of useless people, while manipulating their needs, to virtual entertainments, that are causing relatively limited damage to the environment.

We can see already the first signs of development to this kind of world. Many young people are already spending hours in computer games, simulating virtual reality, much more attractive than the real world. I can imagine future, as the games and technology develops, hordes of people in zombie state, living in virtual reality. It demands a strong self aware individual, to be disconnect from these games.

If to speak about bipolar world of the future, i would predict divisions to the majority, living in virtual reality, and those who create and manipulate this world.

Pray

Pray is an introverted psychological act, done to pacify stress and excitement of the mind, by turning to abstract, non existing, never present, imaginary force, exogenous to the praying individual. Even if praying is done mostly within the group, it is act of submission of the individual to the authority, imaginary, or the one, who claims to represent the imaginary non existing, omnipotent, ever and everywhere present entity.

What really means Gross domestic product (GDP)

What really means Gross domestic product (GDP)

According to Investopedia, Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within borders of politically sovereign entity, in a specific time period.

But before to continue with our analysis, we need to differentiate between two different measures of the GDP change, the Nominal GDP and the Real GDP measure.

Nominal Gross Domestic Product represents economic output produced during a particular time period, usually a financial year, in aggregate monetary terms, at prevailing current market prices. Monetary value of economic output, means GDP accounted as the total value of commercialized production of goods and services, changing ownership in particular time period, (usually a year) expressed by monetary means, (money), plus changes in aggregate inventory.

Real Gross Domestic Product is GDP measure at prices prevalent at certain particular time period in the past, known as base year prices. Real GDP accounting measures the economic output change in a particular time period in relation to the economic output of the base year, at constant prices, while cancelling the price changes between the two time periods. When economic data speak about GDP change between base year and current year, it is usually percentage change, expressing change in economic output in real terms.

Price increase, (in economic terminology inflation), brings increase in nominal GDP, that by itself enables nominal increased yield on investments, that doesn’t have to be satisfactory for investors, who eventually expect yield increase in real terms. More than that, the invested capital loses its value in real terms and this may have additional negative effect on the propensity to invest in production capacity. But the disposable capital will not be left for too long time deposited in current bank accounts. It will look for speculative investments, meaning value holding assets, without any influence on the production capacity of real GDP. The result will be souring price increase of these assets, as for example gold, real estate, art items, corporate share prices and lately even cryptocurrencies.

The radical technological changes, brought unprecedented reduction in production costs, by more efficient production and distribution processes, introduction of new materials, redesign of the products themselves, and increased competition of new producers, adopting these new technologies and production processes. The new technologies also decreased dramatically the entry bar for new competitors in the economy. Consequently, due to fierce competition, it caused price decrease of many final products, and introduction of new products to the market. From the point of view of the consumers, this process increases their purchase capacity of goods and services, (assuming their income doesn’t change). The result is relative price increase in service sectors, where the technological changes didn’t change the production capacity, as personal services, where the service is provided from individual to individual.

If to assume that the GDP in real terms does not change, the price decreases will decrease the nominal GDP. What effect, if at all, it will have on the macroeconomy, except of the obvious positive impact on the consumers, whose relative disposable income will increase?

To try to cope with this question, we will have to check the influence of the nominal GDP decrease separately on Government sector (defined by having authority to collect taxes), private households sector (defined as consumers) and the business sector (include all the suppliers of goods and services). Other sectorization of the economy is between employees whose income is out of wages and investors, whose income is from capital, as interest, dividends, rents, royalties, etc.

Capital based economy, must satisfy continuous expectation of investors to increasing capital gain, as interest and dividends payments on their investments. To secure these increasing yield expectation on capital investments, the businesses must generate profit, that is a monetized expression of increasing additional economic value creation. This demand for ever growing yield, can be satisfied either from reduced costs, namely wage decrease on the macroeconomic level, or by increasing GDP in its monetary form, or in other words Nominal GDP growth.

Economic crisis is eventually other verbal expression for stagnant or decreasing GDP in real terms, while the nominal GDP is increasing (inflation) or decreasing (deflation). Deflation can be defined as GDP decrease in nominal and real terms. Inflation as nominal GDP growth higher than GDP growth in real terms, and stagflation is nominal GDP growth with stagnant or decreasing GDP in real terms.

While economic models speak about sustainable, balanced economy, meaning smooth flow of commerce, expressed on one side as goods and services circulation, on the other side continuous increase of money circulation, the models speak in the same breath about sustainable economy growth, if not in real GDP terms, at least in nominal GDP terms.

But what happens if there is process of price reduction, that brings lower nominal change in GDP than real term GDP change? The nominal GDP decrease, caused by price decreases, if not offset by GDP growth in real terms, causes destabilization of economy, by causing relative changes in income level between the three sectors of the economy, the government, private households and the business, as well as between capital income and the wages. On one hand the nominal GDP decrease due to price decrease, increases the disposable income of the private households, on the other hand reduces the government’s capacity of tax collection and the business profits out of their business activities, translated later to reduced capital gains.

Other effect of nominal price decrease is
wage stagnation, that can deepen the deflation in nominal GDP, and necessarily causes decrease in nominal aggregate demand in the economy. The result is less tax collection and lower profitability of the businesses, and difficulty of economic entities to pay the expected yield on capital, namely interest payments. This may cause bankruptcies and stagnation of investments. These two phenomena usually come together, with positive feedback on each other, and deepening deflationary effect on the real economy.

How come, that nominal decrease in GDP, caused by price decrease, that should eventually increase the economic activity, has deflationary effect? The answer lays in the different effect of price decrease on different kinds of income in the economy.

If nominal price decrease reduces the businesses profits and potential tax income, the interest payments, anchored in long term contracts between financial institutions and the borrowers remain constant in the short term. As to the nominal wages, they are also irreducible in the short term because of the unionization of the labour and wage level agreements achieved between representatives of the employees and the employers. The only way to balance this discrepancy caused by nominal GDP decrease, that has different outcome for different kind of income in the economy, is layoff of employees and increased tax rates, compensating for the lost income. These events, with additional negative effect on the propensity of the capital to invest in the production capacity, can have strong destabilising effect on the social political environment, and can wake up the most dangerous demons, buried deep in the social-political subconsciousness.

מה קרה למדינת היהודים

לכאורה הפוליטיקה מונעת על ידי מניעים אידיאולוגיים, שהם למעשה תירגום עמדות מוסריות לגבי החברה למהלכים מעשיים ברמת מדינה או חברה. כך המושג צדק, הופך להיות או צדק לכולם, או צדק רק לקבוצה נבחרת של בני אדם. למשל עד תקופת ההשכלה באירופה, כלומר עד מאה השמונה עשרי הצדק המקובל היה לשמר מבנה חברתי שנקבע לפני דורות רבים על ידי אבות אבותיהם של האצילים והאיכרים. (אבות האצילים היו בעיקר רוצחים מוצלחים שהצליחו לכפות את רצונם על הרוב הפסיבי האיכרים, באמצעות אלימות).

היום בישראל שורר צדק דומה. צדק הוא מיועד קודם כל ליהודים, בעוד האחרים חייבים להכפיף את עצמם מול העוצמה הצבאית והשיטורית של היהודים. באירופה לפני מלחמת עולם שניה היהודים הכפיפו את עצמם מול השליטים הגויים, כמו גם רוב האוכלוסיה הלא יהודית נטולת זכויות ונכסים. ואז השליט השתגע יום אחד והחליט לרצוח את היהודים. למה? ככה!!!. בגלל שהוא יכל. מי מבטיח שאנו לא נגיע לפתרונות דומים אם נוכל?

האם אני רוצה להיות חלק ממדינה כזאת? אם אשאל את עצמי איפה אני פה, אני לא יודע. אני לא ממש הומניסט, אני יותר מיחס ערך לתרבות אנושית מאשר לאנשים עצמם. אני בעיקר נגד תרבות שמנסה בכל האמצעים להשליט את עצמה על הכל. כך היה הקומוניזם, או עולם הצרכנות הקפיטליסטי, כך הוא האיסלם, אבל גם היהודים המתנחלים. כל אלה אידיאולוגיות משיחיות מיסיונריות, שמאמינות בכך, שכדי להושיע את העולם צריך להנחיל על הכל את הערכים שלהם שהיא ורק הם מושתתים על האמת. כל התנועות האידיאולוגיות האלה טוענות על מונופול על האמת. זה יסוד הטוטליטריות שלהם.

הימין המתנחלי מדבר על זכויות לעם נבחר, בעוד האחרים הם נטולי זכויות, בין אם תאורטיות כמו עם סגולה, זכות היסטורית, קשר היסטורי תאולוגי אל ההארץ שהיא של היהודים מתוך מצוות אלוהים וכו’. גם בארץ הימין האידיאולוגי כמו כל יתר האידיאולוגיות הטוטליטריות, הצליח לגייס את המוני העם, בעלי חשיבה פשטנית תחת הדגל של אמירות כמו: “אתם מיוחדים”, “אתם טובים וחזקים מכולם”, “אלהים בחר בכם ולא באחרים”. אלה ססמאות נבובות, אך עובדות היטב על המונים, שבשורש חשיבתם תמצא סיסמה כזאת או אחרת, בלי הבנה יותר מעמיקה של מה היא מייצגת. כך לדוגמא המושג “ארץ ישראל”, כבר טעון, בגלל שיש בו את האלמנט שהיא חלקת ארץ עלי כדור הארץ, שניתנה לאברהם, אבי היהודים בברית שאברהם קרת עם האלוהים. זה שכל זה סיפורי אגדות, בגלל שלא אברהם ולא אלוהים היה במציאות, וכל אלה הן רעיונות מומצאים מתוך הקונטקסט המיטולוגי ששלט בלבנט לפני כשלושת אלפים שנה, זה בכלל לא משנה. כל זה אגב נכון גם לגבי המוסלמים שגם טוענים שאברהם היה אבי הערבים.

הבעיה של ישראל היא שהיא אבדה את הזיקה שלה לפילוסופיה, שעמדה בשורשי הקמתה. ציונות הייתה מלחתחילה תנוע מודרנית, שאימצה את הרעיון של מדינה לאומית, כמסגרת פוליטית שמטרתה לקיים את התרבות היהודית שבעלת ערך לאנושות כולה. כך חשב הרצל, וכל המיסדים, כולל כל הסוציאליסטים כמו גם ז’בוטינסקי ובגין, אפילו שהם נתנו דגש גדול יותר למדינה שמטרתה לשמר ערכי תרבות יהודיים, כולל דת היהודית ומסגרות הקהילתיות של היהודים, בעוד הציונים הסוציאליסטים שבפועל הקימו את המדינה התמקדו יותר ברעיון הערבות ההדדית, שהייתה תמיד במרכזו של הקיום היהודי. מה גם שהציונים הסוציאליסטים הצטיינו ביכולת אירגונית טובה יותר מהרוויזיוניסטים, בגלל מוסדות הרבים שהקימו על בסיס הרעיון של ערבות הדדית, קריא מושבים, קיבוצים ואגודות יצור, שהפכו בסופו של דבר לחברת עובדים. עם עלית הליכוד לשילטון כל זה נהרס, ובמקום זאת קמה חברה אוליגרכית, עליה ניתן לקרוא בעיתונים של היום יום יום.

אבל הבעיה היא לא אני. אני כבר החלטתי שמדינה בה מירי רגב היא שרת התרבות, היא לא יכולה להיות המדינה שלי. מירי רגב היא חלק מהתופעה, בה כל אחד יש לו זכות להשמיע כל דבר ברבים, לא משנה איזה דברי הבל הוא משמיע. התרבות הנבובה והרדודה, אותה מירי רגב מייצגת, היא הופכת להיות אט אט המאין סטרים התרבותי, בגלל שזה תרבות הרוב, תרבות העמך. מכאן מהר מאד יבוא גם שיש להשתיק את כל אלה שחשיבתם עמוקה יותר, חקרנית יותר, שמנסה להגיע לשורש האמת, ולא מסתפקת בתפיסת עולם של “אמת וקדש”, בגלל שרב זה או אחר, או פוליטיקאי משלנו זה או אחר אמר זאת. תוסיף לכך שחלקים הולכים וגדלים של המנהיגות הפוליטית, צבאית, כלכלית עושים רק לביתם, ומצידם, שיתר העם יחיו את חייהם העלובים. שיתמודדו כל החיים עם עול הפרנסה, ומשכנתאות עתק למיניהם. העיקר שאנחנו שולטים על השלטר. בין אם השלטר הוא כסף ציבורי, בין אם בזכות החזקה ונחלה שהשגנו לנו בכוח הזרועה. וזה נכון מפועלי נמל וחברת חשמל, דרך פעילים פוליטיים כאלה או אחרים, ושלא נדבר על אותם עשרה טיקונים שקיבלו ביד נדיבה מהמדינה שליטה על נכסים וזכויות, כדי שאלה שהעניקו להם את הזכויות האלה, ביום מין הימים יזכו בחזרה בתמורה על הטובה שעשו לגבירים אלה. אגב מצב דומה שורר בכל מקום בעולם “הנאור”, אבל לנו ישראלים זה כואב יותר.

לנו זה כואב יותר כאשר אנו זוכרים, שהמדינה קמה בזכות שש מיליון הקורבנות התמימים שנרצחו בדם קר, לנו זה כואב בגלל עשרות אלפי החיילים הצעירים שהקריבו את חייהם על הקמת המדינה, לנו זה כואב יותר בגלל שאנו זוכרים איך החלוצים עזבו בתים בורגנים עשירים באירופה, רוסיה פולין וכו’, כדי להלחם במחלות, רעב, ורוצחים, והכל למען לממש עבור הדורות הבאים חלום של מדינה יהודית למופת, שתממש את חזון הנביאים, שהיו סוציאליסטים של התקופה, ופילוסופים מאירופה מאז דקארט ועד מרקס.

ומה יש לנו היום? מדינה בה האירוע התרבותי המככב הוא תוכנית של שפים, ושרת האנטי תרבות שמנסה להחניק כל יצירה עצמאית שיש לה מסר מוסרי אוניברסלי, ולא מתאים לתפיסת עולם הפרימיטיבית והמוגבלת שלה על העולם, שמתחיל ומסתיים בהנפת דגלים בכל פורום אפשרי. היא מתפארת בבורותה ובחוסר תרבות שלה, ולכן היא נבחרת ציבור מועדפת על חלק גדול של העם. איפה הימים שפילוסופים היו המנהיגים, שהסתפקו לחיות בצריף בשדה בוקר, ולא נזקקו לנועמי שילטון של מלכים, כדי להוכיח לגיטימיות של שילטונם.

נתניהו, חרדים, שמאל, ימין

כאשר בוחנים את העמדות האידאולוגיות שמפרידות בין “שמאל לימין” למעשה אין הבדל מעשי ביחסם למדיניות כלפי הפלסטינים. ההבדל העיקרי הוא במהלכים דיפלומטיים, כאשר “הימין” לא ממש מנסה להציג פנים לקראת הסדר עם הערבים, בעוד “השמאל”, לכאורה חותר לשלום והסדר. בפועל לא “השמאל” ולא “הימין” מוכנות לקבל את דרישות המינימום של הפלשתינאים, ויתור על ריבונות על ירושלים, והבטחת זכות השיבה, ופינוי ערים כמו מזרח ירושליים, מעלה אדומים וכו’.
צריך לזכור שמיספר המנדטים לאחר הבחירות האחרונות הוא מצב זמני, נקודתי, (מקסימום 4 שנים) ואני מעדיף להתייחס אל המגמות מאשר מצב שהתהווה אחרי הבחירות. לפחות 6 מנדטים בימין הדתי של בנט ופיגלין הלכו לאיבוד. מה גם שהליכוד מבחינת ההרכב של תומכיו הוא לא ממש חילוני. יוצא מזה שהימין הדתי הוא לפחות 30 מנדטים בפוטנציה, והימין החילוני קרוב לארבעים מנדטים. “השמאל”, שהוא כאמור לא ממש מציע פתרון מעשי לסיכסוך, אלא ברמה של wishful thinking, אלא יותר פרו מערבי ליברליסטי, הוא 45 מנדטים בפוטנציה, אבל אין לו בעלי ברית, בשל עמדותיו החילוניות האקטיביסטיות. בתמיכה מבחוץ היחידה “שהשמאל” נהנה ממנה, היא של המפלגות הערביות, שבמקרה הקיצוני עשויות להגיע לעד 15 מנדטים, שמשמעותן איזון בין הגושים.
אבל כל זה רק העמדת הכלים במשחק שחמט שפחות מעניינת. מה שמעניין אותי זאת המגמה והדינמיקה, ולאן מועדות פנינו. מה שברור הדמוגרפיה עובדת חזק. אם עד שנות השבעים למפלגות הדתיות היו סביב העשרה מנדטים עם פוטנציאל של 15 מנדטים, היום הם 20 מנדטים עם פוטנציאל של קרוב ל 30 מנדטים. הערבים כנ”ל היו עם 5 מנדטים עם פוטנציאל של עשרה מנדטים, היום הם עם עשרה מנדטים עם פוטנציאל של 15 מנדטים. גם צריך להוסיף שאת האוכלוסיה הערבית ייצגה בעבר מפלגה קומוניסטית, ואת הדתיים מפלגה דתית לאומית, כאשר המפלגות החרדיות היו בשוליים. היום גם הערבים וגם הדתיים בוחרים מפלגות שהדת ואורך חיים דתי הוא עיקר עיסוקם. זאת היא מגמה שצומחת מהדמוגרפיה. זהו גם תהליך שאצל החרדים היהודיים מזין את עצמו. אי אפשר לקיים אורך חיים דתי, על כל מוסדות החינוך וסעד, ללא תמיכה מסיבית של המדינה. מכאן, ככל שהמפלגות החרדיות מתחזקות, כך גם מצליחים יותר להרבות בכוחם.
ומה לגבי האוכלוסיה החילונית, ומפלגותיהן החילוניות? כאן עומדות זו נגד זו כ 80 מנדטים, (בגלל אובדן 7 מנדטים של הדתיים זה היום 90 מנדטים), כאשר החלוקה היא בערך חצי חצי, עם יתרון מסויים לשמאל. מה הדבר שמפריד למעשה בין שתי המחנות האלה? לא המצע הפוליטי לאומי. רוב המפלגות היהודיות, פרט אולי למרץ התייאשו מלהגיע להסדר כלשהו עם הפלסטינים. ההבדל האידיאולוגי, הוא ברמת האקטיביזם של פעולות אנטי פלסטיניות, שהמפלגות השונות מוכנות לנקוט בה, ובעיקר לדבר עליה, ומידת ההסתגרות של בוחרי המפלגות בתוך עולם המושגים היחודי הפרטני שלהם. אבל ההבדלים פה הם מזעריים ולא יכולים להסביר את העוינות הנוראה בין שתי האוכלוסיות האלה. לדעתי מקור העוינות הוא ברגשות של השתייכות, כאשר מצביעי ליכוד הם תופסים את עצמם כקורבנות הממסד האשכנזי שייסד את המדינה, שולט במוסדותיה, בעוד נציגיו של הימין לפי דעתם מופלים לרעה.
יש לציין שמנהלי מוסדות כמו אקדמיה, עיתונות ותקשורת, בתי משפט, מנגנון הפקידותי הבכיר, ואפילו מפקדי צה”ל, אינם נבחרים בצורה דמוקרטית פתוחה, אלא על פי כישורים, והשכלה. חלק ניכר מבוחרי הימין רואים אנשים אלה כאשכנזים, או מתאשכנזים, שמאלנים, אנטי ליכוד, אנטי מזרחיים, אנטי מקורות התרבותיים מהם צמחו, ואנטי נגדם אישית. לעומתם עומדים “האשכנזים”, משכילים, בעלי הכנסה גבוהה יותר, שמרגישים עליונות ערכית מעל תומכי הליכוד, הן מבחינה מוסרית, הן מבחינת תפקידם בתחום העשיה הלאומית.
“השמאל”, מאמין, שהבחירה של “הימין” היא בחירה לא רציונלית, הרסנית הן לחברה והן למצב הפוליטי בטחוני של המדינה. בדיוק כמו שהכתבים בניו יורק טימס בטוחים שהם נעלים, לעומת תומכי טראמפ. המדינה עבור השמאל היא מסגרת לשימור התרבות והזהות היהודית, כמו גם קיום מוסדות לאומיים, שפועלים במסגרת אידיאולוגיה של ערבות הדדית.
לעומתם, האוכלוסיה של תומכי “ימין” מחפשת הזדהות והצמדות אל החזק, שיגן עליהם מפני העולם הגדול, הלא מוכר להם, הלא שלהם, ממנו הם מקבלים רק בוז, זילזול, התנשאות ועוינות. מעבר לכך את תומכי “הימין” מזינה שינא יוקדת כלפי הערבים, שכבר אינה מיוצגת על ידי תופעה ביזרית של מפלגה קומוניסטית, אלא בנציגים לאומניים, איסלמיים, שמרימים את הראש “בחוצפתם”, לפי תפיסת “הימין”. למרות ארבעים שנות שילטון “הימין” בארץ, תומכי “הימין” מרגישים הדורים ממנגנוני השילטון. הם לא מתייחסים לעובדה, שהבחירה אל מוסדות אלה היא לרוב לפי כישורים מקצועיים אקדמאים, ולא השתיכות שיבטית. תומכי “הימין” ובעיקר של הליכוד נמצאים בדרגים הנמוכים יותר של השילטון, בעיקר ברמה המוניציפלית, וועדי עובדים, וכו’, אליהם הם נבחרים בבחירות דמוקרטיות. כדאי לזכור, עד שנות השמונים כמעט שלא היו נציגים מזרחיים בכנסת. אני זוכר את דווד לוי, ישראל ישעיהו שרעבי, משה ניסים, שלמה הילל, הם היו תופעה בודדת, כולם שיחקו תפקידים זוטרים, ותפקידם העיקרי היה להציג חלון ראווה של מגזרי אוכלוסיה מזרחית, מתוכה הם צמחו. כל המנהיגים האלה מונו על ידי הפטרון האשכנזי.
כל זה נאלם. היום הפוליטיקאים המזרחיים, פרט אולי לנציגי ש”ס אינם מגזריים עוד. אבל עדיין התרבות הפוליטית שלהם היא של אנטי ממסד, אנטי אליטה, אנטי ליברליות חילונית אירופאית. אחרי ארבעים שנות שלטון הליכוד, רוב האוכלוסיה בארץ כבר לא מכירה שלטון אחר, וכאן נכנס האלמנט של השמרנות שיש לו השפעה לא מבוטלת על הבחירות של האוכלוסייה. רוב בני אדם חרדים משינוי. רק זעזוע ברמה לאומית, כמו הפסד במלחמה, משבר כלכלי עמוק, שחיתות בקנה מידה לאומי, אלה תופעות, שוברות אימון, שעשויות לעורר כמיהה לשינוי שמשנות שלטון.
השאלה הפוליטית האחרונה שנותרה היא, האם החלוקה לאוכלוסיה חילונית וחרדית תגיע לפיצוץ פוליטי או לא. כל עוד החרדיות מכונסת בגטאות שלה, רוב האוכלוסיה החילונית, גם משום זיקתם אל העולם היהודי, וגם משום מצבם הכלכלי והשכלה, לא מוציא אותם אל הרחובות. תנועת האוהלים הייתה אומנם מיני מהפכה של חילונים-שמאלנים, אך היא דעכה ונאלמה כלא הייתה. משבר הדיור אומנם לא נפתר, אבל אנשי מעמד ביניים לא טובים במהפכות, אם לא מצטרפים אליהם המוני העם משכבות המדוכאות, שנוטים יותר לאלימות. פוטנציאל למשבר משנה יסודות עלול לבוא עם יפלו מאות טילים על ריכוזי אוכלוסיה במרכז הארץ. תגובת האוכלוסיה, שמחפשת להישען על נציג אותו מדמה לחזק, עלולה להיות אכזבה, שתביא דווקא להקצנה, ולאו דווקא פניה לאלטרנטיבה. אבל כל עוד המדינה מצליחה להקנות ביטחון וכלכלה סבירה, מעמדו של הליכוד באמצעות גוש ימין הדתי מובטח.
הבעיה של נתניהו היא, שהוא נטע זר בקרב תומכיו. הוא אמנם מוקף כמה אנשים עם פוטנציאל להיות מנהיגים בזכות עצמם, אבל הרבה יותר סולקו מהסביבה שלו, כאשר הוא חש, שהם מאימים על מעמדו הבלעדי. כל נסיכי הליכוד, גדעון סער, כחלון, בוגי יעלון, ועוד. בשל האיום שחש מלפיד על מעמדו הבלעדי, הוא פירק את הממשלה החילונית הקודמת. הוא גם בחר לעמדות מפתח אנשים, המזוהים עם המפלגה דתית לאומית, וכך הוא מבטיח את נאמנותם. אבל בסך הכל הוא חייב לחוש מאד מבודד בפסגה, עם כל האנשים שעיקר כישוריהם להיות נאמנים לו, או שהם דתיים המאמינים בריבון עליון. לכן הדרך היחידה להיות המנהיג שלהם היא להתעלות מעל אלה שבוחרים בו, ולהיות כמלך, מגבש סביב עצמו מספר סעיינים, עליהם הוא צריך לשמור שלא יעשו הפיכת חצר, ויחד עמם הוא ישלוט על נתיניו. שיטה שלטון פאודלית זאת לא מתאימה לאנשי “שמאל”, בעלי ביטחון עצמי, שמגבשים השקפת עולם באופן עצמאי. לכן גם העוינות הקיצונית שלהם כלפי נתניהו.
מתוך ניתוח לעיל נוצרות כמה וודאויות וכמה אי וודאויות. הוודאות היא שאת נתניהו אי אפשר להביס בקלפי, כל עוד הוא תומך בעמדות של הימין הדתי, ומאפשר לחרדים לקיים אורח חיים חרדי על חשבון יתר חלקי האוכלוסיה. קיימת אי וודאות לגבי, לאן מיועדות פניהם של ממשיכיו, כאשר מר נתניהו יפרוש. זה יכול להיות בעוד ארבע שנים, אבל גם בעוד עשרים שנה. החזון של שלטון נתניהו, כאשר הוא מוכר את נשמתו החילונית – רוויזיוניסטית לחרדים, מזעזע את הכל שעליה מושתתת המדינה. החרדיות היא הסתגרות לתוך עולם מושגים ארכאי, לא רלוונטי למודרנה, עוין ופוחד מכל מה שלא חרדי. מכאן גם שהתנועה הדתית הלאומית היא האויב העיקרי שלה, רק אחרי זה באה העולם החילוני. בעוד עולם הגויים כלל לא קיים בתודעתם, אלא כזיכרון עמום של פוגרומים.
היום, השמאל לא מיוצג עוד על ידי תנועה סוציאליסטית, עוינות רוויזיוניזם וממשיכי דרכו של ז’בוטינסקי, שדוגלת במדיניות של ערבות הדדית ועזרה לחלשים. “השמאל” אימץ עמדות ליברליסטיות, אליטיסטיות. נוסף לכך, יש לקוות, שסוף סוף “לשמאל” גם נפל האסימון, שאין לא שום סיכוי לזכות בבחירות נגד נתניהו, שנתפס על ידי רוב העם כמלך, עם כל הקפריזות המלכותיות שלו ושל אשתו. לכן על השמאל לבחור בין נתניהו, שינהיג את הגוש החילוני, ובין נתניהו שמשתית את כוחו הפוליטי על החרדים. על נתניהו לעומת זאת להחליט איזו ירושה היסטורית ישאיר לדורות הבאים. האם יהיה מנהיג שחיבר בין כל חלקי העם, עם דומיננטיות חילונית, או כמו שעשה לפני ארבעה שנים, כאשר פירק קואליציה חילונית והקים תחתיה קואליציה עם החרדים.

Debt, a curse or necessity

What’s so bad about debt? After all debt of one sector of the economy is savings of other sector. Yet too big debt causes several problems on the macroeconomic level. But to start with, we have to separate in our analysis, the sovereign debts of the governments with the right to issue independently currency and debts of all the other sectors of the economy, namely the private households, and corporate, non-corporate private businesses.

1. To answer to the question, at first it has to be explained shortly how debts became the basis of money creation and the foundation of the monetary system, then, it is necessary to categorise the different debts, modern monetary system is based on, and to understand the major developments of these debts since the 2008 crisis.

A. The following short essay explains in understandable way for every reader, what does it means that money is debt?

How can money be a debt?

B. Since the 2007, when the economic crisis started, several dramatic developments evolved in the US and EU economies, the sovereign emitters of the most important world currencies, the US dollars and the Euro, that can be characterised by dramatic public debt increase since 2007, as seen in the next chart.

B1. The US economy a major shift occurred from private non financial debts to public debt. Since 2008-2017, the private debt declined from 170% to about 150% of GDP. Out of it the private households debt dropped from about 100% of the GDP to about 80%. The private non-financial corporate businesses total debt is about 70% of the GDP, similar to the 2008 data.

In parallel with it the public debt increased in the same time between 2008-2017 from about 68% to more than 100% of the GDP.

B2. In Euro zone a less dramatic shift occurred from private non financial debts to public debt. Since 2008 the private debt declined from 165% to about 160% of GDP. Out of it the private households debt dropped from about 64% of the GDP to about 58%. And the private non-financial corporate businesses total credit stabilized at 80% of the GDP since 2008.

In parallel with it the public debt increased from about 69% to more than 87% of the GDP peaking at 92% in year 2014.

B3. In China the private debts, most of it of non financial businesses, increased to unprecedented level of above 240% of the GDP, from just about 100% of the GDP in 2008.

Chinese public debt even if grew from 35% in 2008 to 48% in 2017, it still remains very low compared to the US and Eurozone debts. Most probably, in the future, if and when the private businesses will have difficulty with their debt, that is by large the highest among the big economies, to save the financial system and the Chinese economy from collapse, the private debt will be nationalised, just as it happened after 2008 in the US.

C. Since debt is Money, and money is an agent, that represents one to one the aggregate value of the products exchange, volume of money in circulation influences the volume of economy. So we have to ask, how money influences the real economy’s circulation.

We can recognise two states of money, state of potential circulation or actual circulation. In the modern times the act of transfer of money, in most of the cases is done by stroke on a keyboard. Since it usually takes a blink of time to transfer money from one account to an another one, the money mostly is accumulated as stock in the financial institutions, in state of potential circulation, and only small parts of it is in circulation every moment. This fact is not only a technical issue, but also influences the volume of money in the financial system.

D. As contrary to every other sector in the economy, by definition a sovereign government, with sovereign right to emit its own currency, can never default on it’s debts, if they are in local currency to the local entities. (Default means loss of capacity to repay contractual obligations.) This uniqueness is enabled by sovereign governments capacity to emitte currency without limits. Yet unlimited emission of currency by governments, may cause devaluation of the currency against other economic items of local suppliers, that will increase their products prices, and cause by it inflation. The value devaluation can be against currencies of other countries, tangible or intangible assets, or consumer goods and services. The volume of currency is not the only way, the debt translated to money influences the economy through money circulation. Every additional currency volume added to the economic circulation, if not accompanied by equivalent increase in production capacity, will have to couse general increase in prices, (inflation).

E. The volume of currency is not the only way, the debt translated to money influences the economy through money circulation. Except of money volume issued by the government, the other factor is the velocity of money circulation. Money circulation velocity can be influenced by different variables.

-The most obvious variable to influence money circulation velocity, and highly manipulated by the central banks is the interest rate. Higher interest rate, lower velocity of money circulation, vice versus.

-Other important factor influencing the level of velocity of money circulation is the level of inequality of income in the economy. Higher equality in income increases the money circulation velocity, vice versus.

-Level of indebtedness of private households and corporations also influences negatively the velocity of the money circulation.

-Since income tax is on annual basis, level of income taxation also influences negatively the money velocity.

-If the money still would be in form of physical items, like paper bills or coins, and to pay with it, it would have to be brought physically to the supplier, the time period that the money would be out of financial system would be much longer. This would influence the available money in the banks for overnight deposits, as minimum reserve required by the bank. This means, the potential level of available funds for credit would be more limited, and this has also negative influence on money velocity.

– the velocity of money circulation can be influenced even by technical issues, like the frequency of wage payments. Change from one week paycheck to one month paycheck will influence money velocity, since one week paycheck enables to reduce the value of necessary buffer stock money held in bank accounts.

– The demographic developments of the society, as for example the age structure of the population has to have influence on population propensity to savings in form of money. Expected rational would be: as individual ages, his life expectancy decreases, so he should rather reduce his propensity for savings. In reality it’s not clear, what saving behavior is to be expected from aging population.

The two charts above obviously show the decline of velocity of money circulation in the most advanced currency regions. Interestingly even the 2008 crisis and the almost zero interest rates that followed, didnt change substantially the general trend of reduced velocity, as contrary to what would be expected.

F. But the financial world is more than money emitted by the government. Additional money creation by central banks, happens too in commercial banking system, that multiplies through credits several times the original money emitted by the government. The relation between credit and the currency issued by the government can be regulated by the government, or rather the central bank itself. The government has several tools how to influence the volume of money in circulation, while regulating the banking system.

F1. Minimum Reserve Ratio Requirements, defined as percentage of the value of deposits in commercial banks, that are their liabilities to its depositors – savers, that have to be stored physically in the bank vault in form of cash, or as balance of the commercial banks account in the central bank. This percentage is defined as obligatory by the central banks, that are part of the sovereign governments operation. In most of the countries this ratio is about 10%, what means, that theoretically the bank credit can be up to 9 times more than the deposits in the central bank.

F2. Other requirement the banks have to fulfil is the minimum capital adequacy ratio, or equity requirement ratio to the total credit, the commercial banks lent to creditors.

These two instruments were created to secure financial stability of the banks, and as such, the whole financial system. But the result is, that when the government creates new debts, and finances it by emitting additional currencies to the economy, it always can control the amount of money in circulation, unless all the deposits of savers in the banks will be covered by equivalent currency bills in the bank vaults, and all the credits given by the banks will be out of banks equities. Banks equities by their nature are limited, since their source is either from emitting shares to investors, or from accumulated profits, that were not paid as dividends to the owners. The credit on the other hand is out of deposits, what is the usual state of liquid money, unless it is currency bills, saved in mattresses. When a bank gives a credit, it will be again deposited in a bank account of the borrower, or if money is used as payment, that is also deposited in a bank account of the supplier. So in modern banking system money never actually leaves the banking system, but for a blink of second.

A financial system based on banks equities would be financially very stable, but it also means, that the capacity of the commercial banks to lend money would be limited, and the government would have to be the major source of the money supply to the economy. This would have to be by creating excess expenditures, and this also means nationalisation of most of the economic activities and suppression of the private sector. Since government cannot act in competitive environment, it’s activities are usually out of monopolistic power. It means also relative inefficiency of activities in government fields.

G. The debt of the private househo lds as contrary to public debt has limited capacity to grow. Private households if indebted above their capacity to repay debts, are forced either to sell their assets, usually private dwellings, that were mortgaged to banks, or reduce their level of consumption. If the private indebtedness is a large-scale, whole country phenomenon, it causes collapse of the aggregate demand, and the economic activity is depressed. The result may be an economic crisis of reduced level of economic activity, unemployment, etc.

H. The corporate and non corporate businesses have several debt types. Equity, bank loans, and corporate bonds. Each of this liabilities behave differently. As in the case of private households, the private businesses cannot create debts exceeding their repayment capacity, but as a temporary state.

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2. After analysing the state of debt following the 2008 economic crisis, and explaining the connection between debt and money we can try to answer the question why debt is bad after all.

Historically economic activities could be without exchange of money. In the agrarian societies, the peasantry was self sufficient in supplying most of the needs of the family or the community. The exchange of products was necessary because of seasonal overproduction and high storage costs. Many produced agricultural items were also unsuitable for storage and had to be sold. On the other hand the peasantry needed some products, that was unable to produce by itself. Such a product could be salt or seasoning, necessary for food storing, or products produced by specialist craftsmen, who processed iron, wood, leather or textiles, like blacksmith, cobblers, tailors, etc. But most of the needs of the population, who lived in the rural regions were based on self-supply, without need for exchange of goods and services, so also without need for money. Such an economy was pre monetarised.

Even today most of the housewifes activities are economic activities of production, without commercialization and monetization, meaning without money exchange. Such an economic activity is not counted as part of the income on individual as well as on the national level. This activity doesn’t participate on the GDP creation, can’t be taxed, and hardly can be financed by debt.

Since the industrialisation, more and more economic activities were about transfer of ownership of products produced by human activity between two legal entities, the supplier and the purchasers. On one side, the supplier brings to the deal product, on the other side, the purchaser brings money. Because of it, availability of money is crucial for any economic transaction. Collapse of money supply, because of money’s abundance or scarcity, will necessarily cause disruption in products production and commercialisation, even in extreme cases to its total collapse. Economic crisis in form of inflation or deflation is all about collapse of commerce, because of discrepancies between the value of money or product circulation.

Such a discrepancy is almost necessary because of very different timeline of money elasticity to grow or to shrink, as compared to the product’s production capacity change, that on the short term is very inelastic. To put it metaphorically, to create money all you need is keyboard connected to a right computer program, while to create production capacity, you need an additional, well planned production facility, its building an introduction to operation may take years.

Yet not everything is lost.

The financial system has its stock buffers too, using money’s value holding property in form of financial savings and deposits, that are influenced by many factors, among them the most important probably is the interest rate. High interest rate causes increased savings, vice versa.

Yet, any economic item or commodity if to abundant its value decreases, and if too scarce increases. The same with money, if too much of it, it causes inflation, or lose of money value and too little of it deflation., that is price decrease.

As described previously, the 2008 economic crisis resulted an unprecedented increase of public debt in US and EU, and big increase of private debt in China. If private debt can endanger the financial stability of the whole financial system, as it was proved since 2008, the government can always rescue the economy on the macroeconomic level. By doing it, it takes over the private debts, while this process creates cash money.

Does this unprecedented increase in public debt, translated to additional cash money in the financial system causes the expected inflation? Yes and no. As to consumers basket price index, that influences on short term the standard of living, it’s not translated to inflation, because of globalisation of the economy, and the excess production capacity worldwide for these products. But at the same time money loses its purchase power against other value holding assets, like real estate properties, publicly traded company shares, even cryptocurrencies, etc.

An another question is, because of tendency of existing economic monetary system to continue to increase debts, does the described system have capacity to repeat itself, and eliminate again the danger of total collapse of the monetary system as it happened after 2008? It seems, until most of the debt and so the money in circulation originates from the commercial banks and not from the government, the government has still big space to squeeze the credit volume in the economy, or manipulate the money circulation velocity, if it is needed. Also the government always can issue new currency and introduce it to the financial markets.

As i see it, the major threat to the existing economic-monetary system is in shaking the trust, the people have in money, as value holding and value representing item, what is the foundations of the existing economic system. More and more voices are heard about the absurdity of the most universal faith the humanity has, the fath in the universal value of money, and mainly of the reserve currency money, the US dollar. Viz:

http://rodeneugen.com/2018/07/19/money-debt-promissory-notes-reserve-currency/

The faith in money, mainly the US dollar or Euro is universal, and stable, even crossing borders of countries and nations with animosity towards the sovereign government, that emitted the currency. This faith has irrational foundations and is not consequence of any external preconditions, just as any other religion, like believing in almighty God, or faith in humorous Spaghetti Monster. Yet, as any other religion, with increased human awareness to the fact, that money doesn’t represent any real value, except the very faith that it has value, secularization of faith in money can appear out of nowhere or out of deep economic crisis.

Scarcity versus abundance.

The question of scarcity and limited resources touches a much more substantial question of nature, the second law of thermodynamics, entropy. Entropy means processes in the nature, from potential energy, its existence is caused by disbalances of state of particularity, to state of absolute equilibrium or uniformity, irreversible without additional energy input.

Out of the second law of thermodynamics emerges the following questions: “Is entropy enforced on biological phenomenon or not?”, and if the answer is not, still there is the question, “Can the phenomenon of human consciousness free itself from entropy?”.

As to biological cycle, it seems on the local level, as a temporary phenomenon, until the conditions on earth and in the solar system are suitable, the life itself doesn’t behave according to law of entropy. Still there remains the question, “Is human consciousness ruled by entropy?”.

The answer is not obvious. If we investigate human existence since the dawn of the humanity’s impact on the nature was governed by entropy. The very first humanoid acts of regulating fire, that goes back hundred of thousand of years, even long before appearance of homo sapiens, created irreversible processes of diminishing certain forms of flora and animal life, that existed on the earth for millions of years. This process was intensified with introduction of agriculture, urbanisation, and even more since the industrial revolution.

Does it mean these processes initiated by humans are irreversible and non cyclical, what would mean, the human phenomena is necessarily doomed? Not necessarily. It seems, the human intellect, does have the capacity to create tools to reverse these irreversible processes. But on the other hand the same technological tools have the capacity to destroy the human life or even the life all together on the earth. The question is, how humanity will use these tools. If to look in the past, the recorded history of humanity doesn’t give big hope. The most advanced technologies, the humans developed, were used for self destructive acts. As those tools get the capacity of global destruction, their usage became more selective and careful. That’s how we still have this discussion. As the technology develops, and it becomes more and more available for wide range of private people, and not only states, can anybody secure, that there will not be misused for destruction?

Even more, at present the technology is developed by scientists and technology developers, who usually act out of long term systematic vision, while those in authority to implement these technologies, act out of short term non systematic view of the reality.

Still, even if the experience of human history, and the political – economic scenery at present, doesn’t give to much hope for only positive usage of the newly developed technologies, there is chance, that the technology, as a conscious being, will save the humanity from destructing itself. Then the question is, what kind of human existence we can expect in the world, sustained and protected by non human, non biological life forms? Do we want to live in such a world?

As to economy, the basic assumption of every economic model, be it Marxistic or capitalistic is, that resources are limited. Economy is a profession about efficient and “just” allocation of scarce resources. If no scarcity, there is no need for economy as a profession.

In the seventies of twenty century, the energy seemed to be scarce resource, since then, most of the people while speaking about scarcity, they have in mind energy resources.Maybe in our times, with the new technologies, there is no scarcity of energy any more. But scarcity doesn’t have to be only about basic raw materials, energy resource, or cereals and corn. Scarcity is also about sustainable ecological system, that enables sustainability of human social and political framework, securing decent human life for every individual. If over exploitation of global resources, and its impact on the environment causes collapse of social political systems, even if in certain parts of the globe, it is also an expression of limited global resources. And in our global world, it hardly can remain a local event. The recent happenings in Syria and some other countries in the globe are result of political-economic mismanagement of despotic regimes, without long term aims and management for sustainability of environmental resources, as water and agrarian land. This kind of political-economic mismanagement, can be observed as today in many other countries. The expected collapse of these countries will have global consequences on a scale, unknown until today.

Is Marxism a solution for the problems of capitalism?

A dialog between a young student emerging from the occupy wall street movement and an old school economist (E), who became sceptical about the capacity of capitalistic economic system to create a sustainable economic system, that can successfully cope with the major global economic problems of the humanity.

W. I want to approach from the outside and analyze economic analysis from its core: what are the assumptions that underpin economic analysis, and are they valid? (i.e. humans are rational, act to maximize utility, etc.) Are basic economic theories proveable? Are the basic axioms correct? As a quick example, demand curves are supposed to represent consumer utility. Utility is supposed to be reflected in the prices of commodities. Yet utility is not measurable. Utility is supposed to give a product the price at which a consumer would purchase it. Yet we only know a commodity’s utility if we know its price. This circular logic poses the question: is utility theory able to be empirically proved? Utility theory came about through the “Marginal Revolution” in the late nineteenth century in opposition to the classical economics’ labor theory of value. Yet the same question could be asked of the labor theory of value: if price is a reflection of the abstract human labor (labor-time required to produce any commodity under the conditions of production normal for a given society and with the average degree of skill and intensity of labor prevalent in that society), is this measurable? Is it able to be empirically proved?

Economics is a very unusual field. Unlike the hard sciences, economists cannot set up a laboratory and empirically test their theories. Only historical data can be used, and it is often even hard to verify how accurate the data is. Furthermore, many economists are vehemently opposed to each other, and often none of them can make accurate predictions. I am interested in understanding why all of this is.
E. You wrote;

Are basic economic theories proveable? Are the basic axioms correct? Utility is supposed to be reflected in the prices of commodities. Yet utility is not measurable.

I would put the question in a more simple way, “Is utility definable”. Probably on the individual level. After all it is changing with aggregation. This is the second important understanding of the demand curve, the reduced marginal utility as it aggregates in the increased possession of the item by the consumer. But this you have to understand, since it is just a simple derivation. From practical point of you, even the second ice cream doesn’t taste so good as the first one. To speak about utility, it has to be in relative terms to situation in time of purchase of the potential consumer and not in absolute terms of fixed and unchangeable utility measured to product. Let’s take as example utility from the ice cream compared to utility from chicken wings, while the price of both products represented by universal media, called money express their relative value derived from their relative utility. I’m sure if you are hungry, the chicken wings gives you more utility than the ice cream, but if you are full it is in opposite way. Since an average person enters the restaurant hungry, he is ready to pay a lot for chicken wings, and very little for ice cream. But then, when his hunger is satisfied, he still is ready to pay for the ice cream, not because he is hungry, but because he looks for some additional pleasure, this price have to be below the chicken wings price, even if its production cost in terms of labor time input is higher. And this is why the demand curve of menu in restaurant derived from it has downward tendency. The price itself represents the meeting point or equilibrium between marginal utility curve and marginal production cost.
The model starts to be problematic, when the marginal production cost is zero, like in cases of free music, movie, or any other item, already created and exists free for usage on the web? This is the black hole of the market economy, where all the economic laws, as we know them start to collapse.
As to empirical prove of utility theory, don’t expect prove, as proof at level of certainty as of Einstein’s theory of General Relativity. (But even in physics not always you get such a clear verification) . Economics is about human behaviour, and as such, your scientific method approach has to be accordingly. I can make easily an experiment of checking marginal utility of any consumption product. But you will have always exceptions, and on those work the marketing agencies, to persuade the consumers to buy products without or with negative utility.

As to the labour theory of value, it is totally wrong, and never was right, except maybe it seemed to look right in the very first years of the newly emerging capitalistic economy in England in mid 19 century, when Marx lived. Marx didn’t give any value to factors as risk, entrepreneurship, brand value, know how, the differences of character among individual workers and of leaders of the new economy and technology emerging in front of him. He spoke about technology and its impact on the economy, but never admitted, that its development is unpredictable. I remember science fiction movies from sixties and seventies, where people having video phone calls in public phones. No one imagined the existence of mobile phone with the same possibility, and the revolution it will bring to human life.

Today the labour theory of value is even less relevant. I just heard, that Adidas is building a new factory for snickers close to Munich, where 400 employees will produce half million shoes annually. They are also closing a shoe factory in Bangladesh, with thousands of workers, who used to put millions of work hours in those snickers. Buy the way none of these 400 employees works in production line. How much value in your snickers is labour, and how much the abstract issue, that the shoe is called Adidas?

Also if you have politically socialist tendencies, to have intellectual decency, you have to ask yourself, where are the limits of your social responsibilities. Are there within the borders of US, or beyond. Do they include the workers of Bangladesh, Africa or China, who may starve if their work will be transferred back to the US or Germany, where the markets of their products are? Then also there is the question, do you have to buy new snickers, even if the old ones are still ok, just became out of fashion, and justifying it by claim that it gives work to the poorest in this world, while in other hand this over consumption is one of the reasons for global warming.

W. Even though I lean towards a Marxist perspective, I am not fully convinced of anything.

I understand that with utility theory, utility decreases with each marginal unit of consumption, which is why demand curves are downward sloping, and that price comes from the intersection between marginal utility and marginal cost. But price is supposed to be derived from utility. Can you predict price from utility? Utility is a defined concept, but it is not a physical, measurable quantity. An analogy I can think of is: “I posit that there is a feature within all physical objects that causes objects to be black. I’ll call this feature ‘B’. The more ‘B’ within an object, the darker it is. How do we know how much ‘B’ is in an object? We measure how dark it is! And we will base all of our theories on color based on this concept.

If utility theory is correct, a different analogy could be gravity. We know gravity exists but we can’t see it. It can only be measured by measuring things like the acceleration an object experiences because of it. However, the difference is that this theory can then empirically make predictions with very precise accuracy. For example, in the equation for gravity, force = G x mass1 x mass2 / distance^2, where G is the gravitational constant, a constant that is the same everywhere in the universe. This G was not measured directly, but derived. However, we have a value for G, and this value is then used to make very accurate predictions. Are there accurate predictions that are made with the concept of utility? Or, when we make predictions and they are not accurate, do we simply say, “well, the situation is complicated, there were other factors which caused the prediction to be inaccurate”? If predictions are consistently inaccurate, at what point would we start to question the fact that, even if utility theory seems logical, maybe it’s incorrect? Maybe price is not based on a subjective factor (utility, or satisfaction), but comes from some physical observable reality (an objective factor)?

As to labour theory of value, I think an important question is: what do we mean by “value”? You say Marx didn’t ascribe value to these things. But what do you mean by that? He didn’t incorporate these things into price? In what way does utility theory incorporate these factors into price that Marx does not?

Also, Marx did not deny the function of factors such as risk and speculation that go into the fluctuations of prices. Marx was concerned with price in the long-run.
Marx devoted hundreds of pages discussing technology and automation and the role it plays in the development of capitalism. He wrote of the necessity for constant improvements in productivity in order for capitalists to produce more efficiently to extract short-term profits by outperforming competitors, of how capitalism necessitates the need for revolutions in transportation, communication, etc. In fact, when reading Marx, it was pretty incredible to me the level with which he predicted technological innovation. I could come up with an abundance of quotes, but I won’t do this at the moment.
Amongst other reasons, a major reason why profit rates are constant throughout industries is that capital is free to flow across industries, so if one is more profitable, more capital will be attracted to this industry, and the rate of profit will decrease in that industry. Furthermore, it is not simply the number of hours worked that matters. What’s more important is relative amount of value produced by a worker, i.e. how much value a worker produces vs. how much the worker gets paid. With increased technology, a business can extract more labor out of an individual worker, thus leads to greater short-term profits.

Also if you have politically socialistic tendencies, to have intellectual decency……

I disagree with the framing of your last sentence regarding sneakers. Overconsumption is not the reason for global warming. Overproduction is the reason. An economy that depends on infinite growth is the reason. In fact, I read an article of yours from a few weeks or months ago, and you mentioned.
“The price to be paid in terms of global environment, to achieve this continuous economic growth, ignated an unsustainable processes of global ecological disbalance, endangering the very existence of bio-systems. It seems, already we are in the stage, that these processes cannot be stopped, unless a system change will happen.”
I agree with this. “Ethical consumption” (i.e. choosing to consume “environmentally sustainable” products) is not the solution to the ecological crisis. System change is.
E.
1. As to utility theory, gravity is not a good analogy. You have the G constant and it is exact and always the same, even if it came from measurement, or experiment, or what is called induction, and not prove deducted from theory of everything. When you speak about utility, you shouldn’t confuse between individual utility and aggregate utilities. The marginal utility is always a result of all the participants in the market, while all of them have a different utility curve, but all of them together have one aggregate curve. Those with too low utility from the product, will never purchase it, if the very first product price as to him is below the equilibrium price. Also the utility is always in relation too. Utility from beer, is in relation to the money I’m ready to pay for it. It could be in relation to chicken wings, but it is to complicated. The price of the beer in relation to money is not absolute value of the beer but a measure, ruler to express its relative value as to chicken. This is why utility argument is not circulare as you claim. Also the demand and supply curve is always in certain time and specific conditions. So if conditions change, the utility changes too.
I hope my argument is clear enough.

2. In market economy, as the technology is distributed to all the producers, on the long term all the producers products price will be the same, and their profit will be minimized to zero. The only way to be profitable in the market economy is by creating monopolistic advantage and scarcity, even if very temporary one, usually technological, or being the first on the market with product, like iphone. This is why Adidas, that has to compete Nike, Power, etc., but also car producers in spite of their brand, make very little profit, while Apple or Samsung made a lot, until the Chinese will take over the lead. GMs bankruptcy happened because it had to compete with Japanese and Korean car producers. In late sixties no one ever heard that they have any car production. Because every producer tries to adopt the cheapest way to produce, in the long term price in market economy leaves no profit, and in a way it flattens the production cost curve, meaning the first product produced have the same cost as the last one, theoretically to the infinity, and reduces marginal cost close to zero. In modern technology products like IT programs or art production, marginal cost of product is zero, and if distribution costs are zero, the product price has to be zero or close to it. Like the cost of this letter that will be eventually transferred to you.

3. Major problem of Marx are his political, sociological, historical analysis. If we accept the Hegelian dialectics, history is driven by conflicts. Yet, most of the conflicts are about clash of civilisations. Different mythologies, different human values, or lust for subduing and ruling others and not by materialistic class struggle for redistribution of resources. Definitely not in our times. Since Europeans adopted Monotheism, most of the wars were religious wars. The very first was Constantine. Before that the Greek-Persian, the Punic wars of Rome against the Phoenicians, the Romans blamed the Phoenicians of cannibalism (probably truth), the peloponnesian war was also about cultural differences between Sparta and Athens. Then you had medieval wars among the kings, what was struggle for territory in the sense of ownership, but not for economic reasons, but for glory and greatness of the Royal family. With the rise of capitalism colonial wars became about economy, but they were initiated by corporations, like East Indian company. But this is an exception. WWI was about frustration of German elites with the new urban population tending to support socialist parties, and not the conservative traditional elites, who, by the way, have done well for the working class, including first national security system in the world. Of course it was also about stupidity of absolutistic Russian Tzar, who was a retarded dictator, with a crazy wife. And then you had an 80 year old king of Austria. Intermarriage between the European kings made them dumb. Only exception that fits into Marx’s historicism is the French revolution, but it lasted few years, and was followed by Napoleon, the warmonger.
The classes struggle is non sense, and always was, even at times of great victories of this ideology in Russia and China, that was not result of power struggle of classes, but rather successful exploitation of opportunity, caused by political chaos after war, and annihilation of elits. In Russia they were successful in Germany not, even if tried. Why the German socialists were not successful with their revolution after WWI? After all they had much larger popular support than the Russian communists? Because they were less unscrupulous in their drive to political power, than their Russian camarads.

The Russian communist leadership was very effective in propaganda, and very goal minded. The goal was to grab the political power for any price. They fully implemented the slogan, The aim justifies all the means. They succeeded, but the price was huge and was paid by ordinary people. They murdered before the WWII millions of ordinary citizens in pretext of being capitalists, kulaks and bourgeoisie. You will say it is not Marxism. But yes, it is. Marx clearly speaks about the necessary annihilation of the bourgeoisie. And he says clearly, you can’t change them, they always will fight for their class interest. Conclusion, you have to murder them. The idea of proletariat dictatorship is also a very violent idea. Not to speak about the falsity of claim that there is proletariat and class struggle. Is such a claim a scientific claim? When did you meet last time a proletariat, are they the rednecks, who voted for Trump?

4. You wrote: …….. profit rates are constant throughout industries? It is empirically not truth. Maybe you mean interest rate? But even that is not constant. Interest rate is risk related. But above all, interest rate is not a free market price, but directly fixed by Federal Reserve bank.

5. We have agreement, the yield hungry capital driven economic system, combined with democratically elected populist politicians, monitored by specific interests of corporations is not very promising. Obama, who claimed to understand the global problems, had done nothing. He was puppet of big money. The disappointment from him brought Trump, who maybe will be more successful, by destroying the whole American political system. God knows if we will survive him.

Politics is about recruiting the ignorant masses to follow leadership case. Leadership is always elites by definition. The question is what purpose these elites follow. Are they for general utility of people, or fulfilling some hidden psychotic need to control and rule others. Communism under pretext of policy of general utility for all, created system of absolute power and absolute control of all. The Russian communists got all the legitimacy for all the cruelty and abuse of power they made from Marxist ideology.

6. As to labour theory of value, you wrote:
….more important is relative amount of value produced by a worker, i.e. how much value a worker produces vs. how much the worker gets paid….

First, if price is fixed according to labour time input in product, can’t be differentiation between labour value of scientist compared to manual worker. Also the wages according to Marx are according to needs. Kind of consumers basket. What it is i don’t know. Does it include sexy high heel shoes? And if not what about small hight girls that want to compete for male attention the higher ones?

7. Brand is about creating scarcity. When Apple launched one of his new products, he created a scenery of scarcity. Fronts of purchasers in front of its shops. Also the Apple shop chain is about trying to create a feeling of scarcity and ceremony, when you purchase iphone. Apple is fetish, as money, gold, diamond, or collection of art or old car is fetish. Marx spoke about fetish in negative terms. But it is still here. The profit is created out of scarcity, and not from exploitation of workers labour. Land in tiny city centres is scarce, so expensive. Land in vast uninhabited periphery is cheap. And it has nothing to do with labour.

8. I agree that capitalistic economic system has to change and will change. Either by collapse or by evolution. Collapse can be due to mass migration, I’m not speaking about millions but a hundred of millions of people leaving in places uninhabitable in the near future, like Bangladesh, Pakistan, Egypt, etc. due to ecological or political collapse or both, like in Syria. And it was not a result of US Middle East policy, but lack of water due to overpopulation, political corruption, and Turkish dams on the Euphrates. Parts of the world with huge population are becoming uninhabitable.
If to make evolutionary change, definitely materialistic Marxism can’t be the solution. Some new ideas have to be created, that may work, out off classical understanding of what humanity is all about.
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E. Your paper touches many subjects, and i will try to pick up some and comment on them

W. Consider the housing market before rent control. In economic terms, there was no shortage of housing. Yet people were being forced out of their homes because they could no longer afford rising rents – the conditions that fomented the urgency for action regarding rents in the first place. Economics would not consider this market failure, which is a situation in which a market left on its own fails to allocate resources efficiently.

E.

You speak about homelessness. Price control on the rents, may be for some individuals salvation, but still many more others will stay out in the streets, since, what causes the homelessness is insufficient absolute number of apartments available for rent looking for tenants, and it will decrease with the price control.
Here i have to give a general remark, you have to decide what are you into, telling a story of an individual, for example homeless, or trying to analyse the system, its advantages and disadvantages, and try to find solutions. To speak about a general problem, and relating it to a particular problem, as an analogy is the basis of populist demagogue.

W. Nevermind the fact that the drive for profits has pushed governments to pass free trade agreements where capital is free to flow over borders but workers are not, which allows international capital to explicitly exploit the differences in wages in different nations and pit worker against worker. Definitely nevermind the fact that the profit-motive is largely what drove the expansion of slavery to provide the mass production of cotton for English factories. The 5 free market will solve all.

E. A very strong argument. I fully agree, that internationally free flow of capital without free flow of workforce causes discrepancy. But not too many in the unions or the left will accept to open the labor market for foreign workforce, and even less will accept the social class, you probably will call the proletariat opened immigration policy.

W. …..This explains why centrally planned economies never work very well?……

Thats quite an extraordinary claim. For example, in analyzing a country like Cuba, one would have to control for the obvious fact that it has faced a disastrous economic embargo and threats of invasion and infiltration from the most powerful country on Earth since its inception, and still managed to survive and build a better healthcare system than the US, eradicate illiteracy, and maintain a higher average annual growth rate since 1970 than the US , (even including the dismal years after the fall of the USSR where Cuba saw growth rates of up to -15%). This explanation provided by Mankiw is not an academic or scientific explanation. It is an ideological one.

E. Cuban experiment is an excellent example. Central planning economy can work well, if the needs are very basic, with very clear aim. It worked for USSR during second World War, when all the economy was recruited for war effort, or in Cuba, while the aim was to solve very basic problems, like illiteracy. But when the economy has many diversified tasks, trying to satisfy many different kinds of products, to satisfy maximum of the demand, it had to fail.

W. Still, its hard not to hear the promises the Bush Administration made when presenting their case for enormous tax cuts on the wealthy and corporations in lines like the following from Mankiw: Taxes are costly to market participants not only because taxes transfer resources from those participants to the government but also 13 because they alter incentives and distort market outcomes.

E. Here i would have a more profound argument against the claim that tax causes distortion to the market, and as such it reduces always the general utility. If to divide the economy to two sectors the public and the private. Each sector has different activity (for example: the government produces education and health, while private sector consumer goods and services). Both sectors have to have very different marginal utility curve in certain time. The marginal utility of both activities has downward tendency, it means, if too much private activity is done, its marginal utility has to be less than of the public activity and vice versa. This is happening in US, where investments in private activities bring very little additional comfort, like new brand cars, while the public investments are neglected, and there are not enough roads, trains, etc.

W. These subtleties provide the illusion that the free market provides natural outcomes, and interference with the market is essentially unnatural.

E. Totally agree. And what if natural outcome without intervention results mass murdering of people or ecological disaster, like in case of global warming or water reserve exploitation? Market always allocates activities in certain time and location dimension, and neglects the impact of the economic activity in different dimension. For example, all the ecological problems are on global scale and long term, while market decisions are mostly short term and local.

W. Could it be that an economic mode of production that provides a tiny portion of the population ownership and control over the means of production (i.e. the factories, machinery, and raw materials that are necessary for the production of commodities) naturally produces a class of people (i.e. the capitalist class) that inherently have conflicting interests with the mass of people (i.e. the working class) that must sell their labor in order to survive? Could it be that since business owners necessarily must drive down costs in order to maximize profits to stay afloat in competitive markets, their interests are to keep wages as low as possible and to squeeze as much labor out of workers as they can, and that these antagonistic relations naturally lead to conflicts between workers and capitalists, where workers organize collectively to form unions and fight for higher wages?

E. Yes this sounds very Marxist and i see it very differently. There are no classes in the society, in anthropologic sense of word. It is just a marxistic fiction. All you have is political organisations called communist party, where people with lust for political power, try to exploit frustration of certain sector of the society, less educated and less successful, to recruit them to create community of political supporters. Not all the workers are the same and the humanity is not divided to capitalists and workers. There are no social classes, there is no class of proletariat that identify themselves to other working people. No worker in Detroit has any positive feelings, towards a worker in Korean car factory. In contrary, they hate them and want to close for them the US car market. People are by their nature very competitive. Even the losers are failed winners. The workers who are employed and have pension fund investments are capitalists, on the other hand the CEOs can be just employees. You have also educated employees, and non educated ones. You have entrepreneurs and passive workers, asking only to submit themselves to some authority. Etc.

W.The theories stemmed from Marxs and others critiques of capitalism, and the idea that the means of production should not be owned privately by a small group of individuals, but instead should be owned collectively by workers. It is true that communists generally think that the market should not be the force that allocates societys resources, but that does not mean that the pervasive thought was that they should instead be allocated by a select group of government officials. The thought was that societys resources should be owned and distributed collectively and democratically, instead of leaving the distribution up to market forces that fluctuate wildly,….

E. This is a very popular argument of Marxists to defend Marxism, by saying it was not correctly implemented in USSR that’s why it failed. This is false claim. Collective ownership of resources distributed collectively and democratically, means economy is managed rather by political processes than by entrepreneurs competing each other fiercely. The necessary result of political processes is monopolisation of resources and decision processes in the hands of the politically most powerful, who are at the end most powerful because they are the best to manipulate other people and the truth and not because they have the best capacity to create wealth and utility for the society or have higher morality. In 20 century i recognise only 3 successful politicians with high morality, Gandhi, Mandela and Havel. No one else. Collective ownership and management resulted everywhere, even in the kibbutz in Israel the same result. After second third generation, when the founding fathers died, all was left is political struggle, who will be on the top. Remember in any political systems the most evil rule because they are the most evil.
W. …… Yet, today, in the wealthiest country the Earth has ever seen, there are around 550,000 homeless people……

E. You bring up US statistics, that is the result of very bad political processes, implemented in US, that brought to power very stupid and corrupt politicians. Donald Trump is just the top of the iceberg of the stupid political representatives, representing only particular interests, and have nothing to do with capitalistic economy. By the way Hillary Clinton wouldn’t be better than Donald Trump. Proper capitalistic system includes in itself very efficient tools how to cope with problems of inequality, social aid, public services, etc. The question is if these tools are used by the government. But if the political representatives are in payroll of corporations and banks, they don’t represent any universal economic goal, and not even the capitalistic system.

W. Nearly every major policy that has impacted the lives of workers for the better, from the eight hour working day, to social security, to job safety regulations, to medicare and medicaid, have been won off the backs of tremendous struggles of organized labor………

E. It’s not truth historically. The first welfare state was established by Bismarck before WWI, an ultra conservative German nationalist, to strengthen the German nation. Then after WWII it was introduced in GB by the Labour government. The Soviet threat, helped to restrain the criminal tendencies of politicians and their corporate management collaborators. But it has nothing to do with capitalistic or socialistic system of economy. Corporation tend to create monopolies through lobing, that are anti market anti capitalistic economy, that is based on competition.

The weakening of the concept of welfare state is result of increased economically inactive population due to aging, globalisation that by itself brought the distribution of welfare worldwide, and not only to the workers in the most developed nations, and lately the automatisation technology in production and management, that reduces the jobs in growing range of professions.

W. The demise of the Soviet Bloc was an incredibly complex issue. The facile explanation of why communism collapsed seems to suggest that communism is always doomed to fail; eventually the economy will stagnate and the situation will be forced to change. Hubbard explicitly states It is clear that a centrally planned economy could not, over the long run, grow faster than a market economy, leading to the collapse of the Soviet Union. But Mankiw and Hubbard never examine the opposite situation: that capitalism keeps seeming to run into this problem where workers revolt against the economic system and agitate for revolution. Couldnt one make the argument that capitalism, if left to itself, is always doomed to fail? After all, if it wasnt, why would the US have had to spend trillions of dollars over the past century , criminalizing and suppressing socialist and communist movements domestically and brutally crushing movements around the world ? Why would the US have had to overthrow countless democracies and install ruthless dictatorships , invade nations and slaughter millions , fund and arm right wing insurgents and military juntas , and spread anti-communist hysteria all over the world?

E. You put here on the paper a whole range of very weak arguments and i have to cope with it one by one.

1. The solution can’t come in Marxist kind of revolution by non existing proletariat, that by definition has to be employed and not unemployed, but by some system of welfare and employment, disconnected from the production process. I personally would suggest introduction of mandatory whole life education, training, or cultural activities, for the unemployed, while paying them wages, to secure decent living. The habits of waste and overconsumption, propagated by marketing agencies i would put under strict regulations.
2. I do agree that capitalism by itself is destructive and will be doomed, or will bring to the end the human civilisation, but not because of its failure to achieve its goal, the ever increasing yield on capital, but because of being successful in its drive to its goal. Capitalism’s aim predisposition is unlimited global resources, but the globe is with limits, and so the human capacity to comprehend the reality. So such a system eventually must collapse.
3. US post WWII policy of military intervention has nothing to do with capitalistic economy. It’s a result of majority of stupid political representatives, who represent only particular and not universal interests of the capitalism. Wars are too costly to be justified by economic means. Usually they are result of all powerful crazy or stupid leadership. Iraq war was result of very bad misconception of G.Bush junior and his arrogant advisers. Banana fruit company wars in Banana republics happened, but they were rather the exception than the rule. Most of the wars since WWII were result of fierce competition between despotic USSR, and democratic US. They managed to fight these wars in peripheral regions from European-US point of view.

As to your description of Marxist theory of value, if you reread with critical eye what you wrote, you have to come to conclusion that it is an anachronism, that probably never existed. The capitalists were not evil beasts, but real people, most of them run local based enterprises, in communities they were part of. The huge Ford like production line factories, like in Charley Chaplins movie existed only very partially in twenty century until the seventies. Since the eighties the automatisation of production, diminished the phenomenon of throngs of workers leaving by foot their shift. It also reduced the political power of unions.

To base whole economic theory on one temporary phenomenon is mistake. If you speak about scientific methodology, you have to define exactly who is proletariat and who a capitalist. Does such a definition exists? And if yes, do they exist as separate class?

W. Marx’s model was anything but deterministic. Marx’s entire theories were grounded in the philosophy of dialectical materialism, where history is a flow of interactions between ideas and material reality, and nothing is deterministic. Marx’s theories suggest that with a declining labor force, capitalism will be set into a series of crises as the rate of profit falls, and if he was right about many things, his analysis is more relevant than ever. We have yet to see empirically whether this was a correct prediction.
Marx did not deny the role that scarcity plays into short-term prices. He was concerned with prices in the long-term. Here I quote from this excellent source on Marxian economics:
Some people have the mistaken impression that the labor theory of value is some sort of substitute for the laws of supply and demand. This is not the case. All of the classical economists from Adam Smith, to David Ricardo to Karl Marx where aware of the forces of supply and demand. Yet they didnt think supply and demand were sufficient for a theory of value. Instead supply and demand were seen as the mechanism through which value operates.

For Marx, the theory of value is more than just a theory of prices. Price theory might help us make business decisions, but value theory is concerned with deeper social questions like Why do the products of labor take the form of commodities with prices? and What sort of social relations between producers are necessary in order for this to happen? In the process of answering such questions we can build a theory of the social relations of a capitalist society in all of its antagonism and dynamism.

You say most “conflicts” were about clashes of civilization, but your only notion of conflict in this statement is war. Nobody ever said that every single war was about the distribution of resources. In fact probably the overwhelming majority of wars were not simply about the distribution of resources. But this does not mean that many of the same wars you mention arise out of systems of societal organization that function to maintain the balance of classes. Was the Catholic Church’s dominance not necessary to justify and maintain the feudal order and the relations between serfs and lords? And religious wars fought between Protestants and Catholics, where Protestantism arose as a rebellion against the Church’s dominance and coincided with the rising of capitalism and the industrial class that conflicted with the traditional landed aristocracy? You are not mentioning innumerable international conflicts initiated by corporations (quick examples are the US overthrow of Guatemalan Democracy at the urging of the United Fruit Company, overthrow of Iranian democracy at the urging of the Anglo-Iranian Oil Company, etc.), but even those are not important compared to the majority of wars that are not directly attributable to corporations, but to the functioning of nation-states and their goals of preserving political and economic dominance.

Why did nation states arise with the advent of capitalism? Very briefly, the rise of private property and competitive commodity production based on wage-labor necessitates strict juridical frameworks to regulate production, contracts, etc. State force develops to maintain these legal frameworks. The need to regulate relations between capital and labor, and between capital and capital, further develops the functioning of the state. The producing classes, with wealth and power, dominate capitalist nation-states and wield the state to create favorable conditions for production, so states like Britain and the US intervene in foreign countries to ensure access to markets to sell surplus goods and access cheap labor and resources. I would argue that nearly every single war in the past few hundred years ultimately stem from these kinds of dynamics.

About the French Revolution being the only one that fits into Marx’s historical materialism, there are just so many examples I don’t even know where to begin. The Paris Commune in 1872, the Russian Revolution, failed revolutions in Germany, the Spanish Civil War, the Cuban Revolution, China, Vietnam, Chile 1970’s, not to mention countless other examples of mass movements that were not explicitly Communist but still the same light… in all of these places there were enormous worker uprisings. Your claim that the Russian Revolution was not a result of class struggle is completely unfounded. Have you read the testimonies of millions of revolutionaries who fought for revolution? It is books like “Ten Days that Shook the World” by John Reed and “October” by China Mieville that I think make pretty convincing cases that this classic line of “the Russian Revolution was not a mass uprising but an exploitation by the Bolsheviks of the masses” is completely without merit.
I think in your other email you said that the War in Iraq was simply stupid policy by one politician. This is an example of our disagreement. To me, the War in Iraq is not just a result of stupidity. It is part of a global project that has taken place in the past four decades, that we call “neoliberalism”. The War in Iraq was an attempt to dismantle a government that was at times resistant to US hegemony, and to build Iraq as an exemplar of a free-market, neoliberal success story, and it massively failed.

E.

You wrote: Marx’s entire theories were grounded in the philosophy of dialectical materialism, where history is a flow of interactions between ideas and material reality, and nothing is deterministic. Marx’s theories suggest that with a declining labor force, capitalism will be set into a series of crises as the rate of profit falls, and if he was right about many things.

To my understanding his materialistic dialectic historicism and his theory of stages is deterministic. Let me cite Wikipedia:
Marx predicted the breakdown of capitalism, and the establishment in time of a communist society in which class-based human conflict would be overcome.

How could you understand such a theory, predicting the next stages of the socio-economic structure if not as a deterministic one? You yourself wrote, it is surprising that Marx got it right in so many of his predictions. But then, how can you predict anything without to be deterministic? All the hard sciences are deterministic, because they try to predict. Just try to imagine, what would happen if you couldn’t predict the results of the simplest experiment. What if while boiling water on the fire the water would from while to while freeze instead of evaporate. You should check your claim that Marx’s historicism is not deterministic. Even in quantum physics, with its uncertainty principle you are predicting. And dialectics, materialistic or of the spirit is system of cause and effect. Thesis, antithesis – the cause, synthesis -the effect. What it is if not deterministic?

To me the expression, You can’t not to know, what you know”, is the basis of deterministic evolution of the spirit.
Also demographic trends, are deterministic within the existing cultural framework.

The first question is,… is human act out of free will or not, …
The second question
Can human individual act and have influence out if his social political background?
And the last one ……is dialectical materialism deterministic or not…..

To my understanding Marx saw historical processes as result of economic development in form of capital and knowledge accumulation and its ownership and the inter-relations between individuals in the society and individuals and the society, while the division of labour placed each individual to it’s class according to his economic task in the society.

I may be wrong about Marx, but still i believe i have the capacity to summarize the essence of differences between your and mine points of view. After all it’s not important who said what, but what are the ideas we believe in and if they are right or wrong.

To my opinion, the only way to change these deterministic processes is war, mass murdering, social-political upheaval through complete annihilation. If the Bolshevik revolution wouldn’t be successful, the world would be a very different place. Their victory was far from necessity. After all in 1917s election the Bolsheviks got only 24% of the votes, far behind the social democrats.

To my opinion, the major issue in political system is the legitimacy of the government authority. Historically, rulers political legitimacy in the pre industrial revolution era was from their family stories about heroism, nobleman status of aristocratic families, etc., meaning fairy tales. If you visited palaces of European nobleman 250 years ago, you would see paintings of all their predecessors on the walls and their great deeds. Also their names included the roots of their families, etc. All this gave to them huge respect among the mostly illiterate rural population, living in the villages in the neighbourhood of their castles, who and their families were part of these stories, and as such could identified with them. Also there were no big concentration of population, that the rulers couldn’t manage. With the beginning of industrial revolution, growth of urban population, literate and concentrated in the cities and the new factories, this tie between master and vassal was broken. Add to it the new growing, well educated middle-class, and the old political power structure was broken. But no ruler, be it aristocrat, capitalist, or communist, gives up his grip on political power voluntarily, just because it lost its relevance. The revolution is the only way to change it. It started in France, the most important country in Europe, where the aristocratic grip to the power was the strongest, and most obscure. Germany, still divided among hundreds of city states the demand came later. To relate these events to clash of different economic classes with different economic interests is oversimplification. Class consciousness doesn’t exists, unless it is arisen by some ideologically motivated, semi-intellectual leadership with lust for political power.

———————
As to utility theory, i accept that the methodology used for the theory is very different from the methodology used by hard sciences. It is the same with all social sciences, psychology etc.

The question of determinism goes to the very core of the philosophical question, if there is free will or there is not. In physics and definitively in classical physics there is no free will, but mechanical obedience to laws of nature.
In sciences of human behaviour all what the scientists try to do is to build a model, that can be quantified, and partially explain certain aspects of human behaviour in certain situations. From this point of view Marx or Marshal are the same. Marx theory failed, not because his scientific method is worse than the alternative theory, but because he wrongly predicted human behaviour, in certain situations. He didn’t give enough importance to individuality, so important today, and on the social level to tribalism and all connected to it like, ceremonies, myths, feelings of belonging to community, fath, religion, casts, and thought it as a temporary phenomena, unless it is based on social class, divided by economic function of the class. He felt contempt to religion, to phenomena of casts in India, etc. and saw it as a temporary phenomena. He didn’t give enough importance to major force that drives the human individual to act, the urge to compete, to posses and to have profit from any opportunity it encounters.

To my opinion humans are result of evolution of hunters gatherers, who had to be opportunistic, trying to create advantage from every situation. This urge had to be restrained by the first agricultural statements about 10,000 years ago, when ownership on land became crucial to the success. With it started also to crystallize the social political structure of the society, all based on ownership. By diminishing the right to private ownership, the whole social-political-economic structure has to change. It is not a technical question. It has deep psychological impact.

Marxism is about materialistic mechanistic social-political processes. Essence of all is labour and capital. For example the spirit of creativity and entrepreneurship, he didn’t emphasise and counted enough, since it is uncountable. And to my opinion it is the most important factor that drives the economy. And now, my opinion on the major questions we have to discuss:

1. I personally believe that accumulated knowledge or in other words human capacity to comprehend reality, is the major force driving the human experience on the social or individual level.

2. Class struggle; i don’t believe there is class struggle between different socio-economic levels of society. As to my understanding, all the conflicts in human history, including civil wars as French or Russian revolution, were opportunistic exploitation of frustrated masses, who expressed their frustration by filling the streets ad hoc, without concrete plan what to do next day, after the masses go home. The very best expressed it Zizek, while participating in student gathering in Greece, during the demonstrations at the break down of Greek economy. He said, I’m with you, I’m left, Marxist, let’s do revolution, but you have to ask yourself, what will happen tomorrow, or the day after the revolution, who will clean up the mess after you?……
And this is the main point. It may seem, as if short term euphoric mood of masses can organise themselves to a political movement and act, within the classes. But the experience shows us, that rather some opportunistic charismatic unscrupulous leader, someone like Lenin, Stalin or Khomeini, takes over the political power after the revolution, and the result is more catastrophic in humanitarian terms than the previous regime. Experience and history shows me, collective leadership doesn’t work, but on the very short term and its results are unpredictable. Sometimes revolution may have positive outcome, when out of the revolution comes a leadership with very humanistic, pro community ideology, with deep philosophical and ethical commitment and understanding. That’s what happened to US with its founding fathers, all of them philosophers. But usually this is not what is happening. Usually out of revolution the most unscrupulous despots, with the biggest lust for power comes out as the leader. It will be Lenin and Stalin, Robespierre or Khomeini, and not someone more hesitant, more ethical, who will try to form some system of balances of power between different interest groups, and not just annihilate everybody who is not supporter of the case. This is why Kerensky failed, where Lenin was successful
2. Good government comes always out of evolutionary processes and not from revolution. The American independent war was a very unique exception, and this happened because of the personality of George Washington. Washington as a military leader, supported by the other founding fathers, all of them intellectuals, was an exception. He didn’t grab the political power, even if he had the opportunity to do so, but instead established a democratic system, with president elected by all, and for limited term. This was a precedent. It never happened before in human history. The only working democratic example were the Athenian Greeks and the Romans. Athens was a city state, with 100,000 citizens, and the Romans became dictatorship, very soon after the Punic wars, when it became an imperial power.

But very soon the American experiment became a great success, and England, then France tried to follow. And do not forget, US never became a colonial power, even if it could be. It took to France and England another 100 years to create a democratic system based on universal suffrage. Unfortunately in Germany the leaders of 1848 revolution were too hesitant to overturn the Prussian King, so it took 100 more years and two world wars, US occupation to bring stable democracy to Germany. Today you live in a democratic world, where despotism and dictatorship, as a political system is rather an exception. Of course, you still have most of the Muslim world, China, Africa. Are their dictatorships so successful? Or dictatorship is a result of failure to create a better political system?
3. I believe that history of humans is many times result of accidents and acts of few individuals and not of the acts of social communities, like socioeconomic classes, or nations.
Sometimes there are unstoppable, deterministic trends in the history. Like at present the technological development, that is unstoppable, and unpredictable. The same is with the population growth in third world countries with no or very poor education and social system, that causes mass emigration, that is expected to grow. Other deterministic phenomenon is the global warming. No-one seems to be able to change these trends, even if everyone understands the expected catastrophic consequences of these processes to the humanity and the biological processes in the nature.
4. As to Marxism as an economic model, i don’t think i have much to say about it above what was already said by others. Maybe i would add just, that the Marxistic social-economic model is not for humans as they are, but for the humans as they should be according to the Marxistic ethics. Meaning socially cooperative and responsible and not competitive individuals. This discrepancy between how people should be and how they in reality are, has to be overcomed by continuous revolution, not to overturn the government, but to change the people according the Marxist model. For this purpose all the tools are legitimate. As to Russian experience it included mass murdering and despotic repression by any means. And what is the result, creeping economy that fell apart after 80 years of central planning and despotism of worst kind. After 80 years or 3 generations out of the fragments of collapsed Soviet Empire, emerged the Soviet people, who are the most competitive and egoistic in the world. Why do you think, you will be more successful than all those clever people like, Lenin a professional philosopher, Mao Ze Tung poet, Pol Pot an engineer who studied in France, or Chauchesku a shoe maker.
5. You wrote:
Marx did not deny the role that scarcity plays into short-term prices. He was concerned with prices in the long-term.

Here surprisingly we can agree out of disagreement. It seems, if in modern market economy the competition is not restrained, (not as in reality,) due to technology, the marginal costs tends to become zero or close to zero. The only element of cost is the capital cost for investments. But this too tends to become close to zero. Of course it leaves very little for the labour, when everything is done by machines, but so happens to capital gain too? So who gets the reward? The scarce asset holders, like valuable located premises, the entrepreneurs, technological innovators, highly evaluated artists, etc.

6. Your interpretation of history, is with huge biases, putting events out of context and relevance, and i my even claim, smells from conspiracy theories. Truth is, as i wrote to you already, during the cold war, when the West felt threatened by the Soviet regime, and exaggerated this threat, (i believe, mostly out of intelectual misinterpretation of the power of the Soviet state, that had no legitimacy whatsoever of Russian intellectual elites), acted many times with exaggerated power to any threat from the communists, like in case of Muzadek in Iran. And in fifties it still could happen, that they gave overthrown a democratic regime, for economic interests of a corporation. It was an illegal act even then, as in case of Guatemala. But so since the seventies, since the end of Vietnam war all this changed. The US presidents Jimmy Carter, R. Regen, and above all Bush Junior, don’t show too much expertise in international policy. Clinton and Obama probably knew more, but the political system based on corporate money just flattened them. But at least they didn’t start a war.

Wars initiated by politicians happen mostly out of miscalculation, except if it is caused due to conflict between nations, and not by some president ignorant in international relations.

To my opinion, the reason for revolution is always loss of legitimacy of the regime. Thats what happened in French Revolution, then at 1848 it happened for the same reason. New urban middle class, the bourgeoisie, growing in numbers and in economic importance demanded participation in the political scenery. The French 1872 revolution was result of military debacle of Napoleon III against the Prussians. Lost war always shakes the legitimacy of the government. Very recent and similar cases of loss of legitimacy and power happened in Greece and Argentina, after the military debacle in Cyprus, respectively in Falkland war, or in the case of German and Austrian Kaisers, who lost their power after they lost the WWI. The 1905 revolution in Russia was result of debacle with Japan.

These changes of regime always happen in dictatorships, because loss of war causes weakening of deterrent force of the oppressive regimes, and the people are just not afraid to rise up. The same happened in the Arab spring. By the way, the Soviet Empire collapsed without Revolution. It was enough, that the Russian army was not ready to shoot on civilians, and the retarded alcoholic politburo give up the power without capacity to fight back. Only Ceausescu tried to fight back, with his securitate, recruits of his private army, about 10% of the population. The desperation of the population was so deep, that even murdering thousands innocent people didn’t stop them to turn over his government, and execute him. After this, the remaining communist leaders, whose only concern was not to be executed as Ceausescu, gave up voluntarily power. In Czechoslovakia they tried to fight back, but the army refused to shoot into the crowds, so frightened they stepped down, after 3 days of gathering of the Central committee of the party. Few hundred representatives of the proletariat asked one question, are they going to hang us for our crimes or not. Even if they spoke about different issues as reform etc. the only thing that really bothered them was the rope.

Democratic regimes from this point of view are more resilient, because in the democratic system is incorporated tool for change of government.

As to Russian revolution, the social political situation was too complicated to make it a revolt of proletariat. First of all was revolt of the soldiers who refused to fight on the fronts and Lenin, a German spy, promised them to end the war. Then 87% of Russian population were rural, at 1918. Even according to Marx it was not a proletariat. As i said, the Bolsheviks, who were only 24% of the newly elected duma at November 1917, exploited the naivety and hesitancy of Kerensky, who wanted to create a democratic republic. The Bolsheviks, were unscrupulous unrestrainedly cruel, and it have done, what they couldn’t achieve in the polls. Under the slogan, “who is not with us is against us”, they murdered in few years until 1922 hundreds of thousands of people. No one knows exactly how many. Their faith in Marxism, and belief that the history is on their side, enabled them to destroy opposition. They were just as ISIS today, just more successful. Fanatic in their faith, cruel, unrestrained, ready to destroy anything that stood on their way to power. It is not accident, that out of their lines came so many mass murderers. You are right, among the working class, who were told that they will rull through the Soviets, the revolution had to be a very enthusiastic time. But for how long. As Zizek said, i am for revolution. But what will happen a month after the revolution? He is too clever to support revolution with an aim different than western democracy. By the way, i was in Athens in 1 May the same year the Greek economy collapsed. I spoke to young communist students, and asked them what they want. All they wanted is subsidies from German working class. They said it in different words, but that’s what they wanted. But the German proletariat didn’t want it. This is all as to solidarity of world proletariat.

7. I agree that market-capitalistic democratic system can’t cope with the most urgent problems of the humanity. But definitely communism, in any form is not the solution. Whenever you leave out from political or economic processes competition, it will be disastrous. And today, with technologies that can be used by any individual, i would say, before to act, humanity need to think.

Future Economics

The major problem of understanding the economy is that while people are good in perceiving situations, they are not so good understanding processes. Process is flow of events following each other, chained to each other by causal relationship sequence. Process is happening in time, while situation is an immediate state. How much this causality relationship is hard to comprehend can be seen in all those popular theories throughout the human history, taking form of mythologies, religions, conspiracy theories, that are all about, as if revealing these causal relationships between sequencing events. Yet, since throughout the history people created all those mythologies, obviously the need for causal explanation is a necessity for human perception.
Science is all about causal explanation between sequencing events, while economics as a science, is also trying to expose these causal relations in economic processes. Economic processes have to be analyzed in their timeline. The timeline can be short term, medium term and long term.
-The short term timeline is defined as an economic event from the beginning to the end. Such event in the private sector can be in between financial reports of a company, or a process of planning-production-commercialization of a product. In the public sector it can be an annual budget, or a term between elections.
-The medium term economic processes is defined as several economic events, connected to outside events, like market development, change of taste, fashions, but also political cycles like change of government, structure, etc.
-The long run processes analysis timeline is within human life span, and sometimes even exceeds it. Such a planning needs to be related comprehensible to the whole global economic system, including all its elements. For example retirement planning is such an economic activity, even if not taken as such, this is why there are so many defaults in it. For example the pension systems have difficulty to cope with increasing human lifespan, since no one can predict its development. Other such a problem is global environment monitoring and planning.
The classical economics, starting with the emerging capitalistic economy in end of 18 century, was all about reciprocal flow of money and goods and services (production) out of which emerges the value of every element of commercialized production. In the process of commercialization emerges the price of the product, using money as an universal scale. Price is result of continuous process of tender in form of invisible offers and bids, in each case when a process of sell&buy happens. If a consumer picks up a product in supermarket and puts it in his basket, this tender process happens, even if many times unconsciously. More conscious act of offers and bids is when the consumer chooses between two or more similar products offered by two different suppliers, standing next to each other, but with different prices. The price is the most important among many attributes the consumer is considering before the act of purchase. Out of the agreed price emerges the currency value itself, representing the universal value of all the products, but also every separate product, that can be commercialized. Even more than that, the currency value relatively to other currencies is also strongly influenced from the product prices in the local currency.
Smooth flow of the economic processes requires trust in money value of every participant of this act of commercialization. The trust is secured by government enforcing acceptance of its legally tendered promissory note, (Money), as representing the price value of production by every resident of the territory, the government is sovereign in.
The major tool to enforce the money value on the commercial activities is tax collection in form of money, issued once by the same government. Why does the government need to collect taxes, when it can easily just issue the same money? Because it needs from one side to enable this whole carousel circle of commercial activities, from production processes to commercialization of the products, and on the other side between issuing the money by the treasury of the government and taking it back to the same treasury.
This economic process worked pretty well in the last 250 years, spreading this system of money circulation all over the world, going through evolution and increasing sophistication, as the professional economists analyzed and comprehended the whole economic process, improving their understanding from one economic crisis to an another. Every economic crisis can be seen as result of intellectual misconception of economic profession, until new discovery makes a paradigm change in understanding the economic process and with it comes the economic system change.
Several such economic concept changes happened in the late nineteenth and twentieth century, when gold-silver coins money monetary system was changed to paper many, at first based on golden standard, meaning exchangeable to gold one to one. Even in this time mainly after WWI, several major currencies, like the dollar and the British pound were used partly as reserve currency that had backing of gold reserves. This connection between the dollar and gold was disconnected in early seventies of twenties century and fiat money became the leading form of money in the world.
Economic crisis of 1929, escalated to catastrophic dimensions because of misconceptions of economic leaders of the time. One of the major reasons of this crisis was insistence of the economic leaders of the time to stick to gold basis of the money. This caused monetary squeeze at the time, when monetary enlargement was needed. The crisis of 2008 didn’t come to same dimensions, exactly because the economic leaders in Federal Reserve and the US Treasury, possessed better knowledge about economic system, and reacted according to upgraded economic concepts. It doesn’t mean there is no opposition to this policy, and the problems of deep economic crisis is solved. In contrary. The policy of Quantitative Easing implemented by Federal Reserve bank brought the world to unknown enchanted territories.
To this short term developments in macroeconomics on the global scale, that is fueled by increasing debt of either private or public sector or both, are accompanied several other medium and long term developments. If to follow the most significant macroeconomic processes in the developed economies, we can find the following phenomena:
A.One distinct long term development is relative decrease in employees wages as percentage of the GDP.

B. Since employees are the majority of the population, their share in GDP is still about 40%, it means this development has a major impact on all aspects of the economy. Naturally the propensity of the employees to savings is lower than of other sectors of the society. This seems to have major influence on the economic cycle. In the next chart can be observed the declining trend of the velocity of money. This two parameters of the economy seem to be closely connected.

1. Continues recycling of the money and the production, economy needs consumers demand of the wide population, including the employees. The solution to decreasing wages of the existing economic system is consumers credits, in form of mortgages for real estate ownership, mostly not of newly built houses, but newly evaluated ones, leasing contracts against private cars or other tangible consumers products, or just credit cards debts. Unrestrained consumers credit adds uncertainty to the economy, since the private households, as one hord, may anytime panic and try to repay or reduce their debts. If it becomes a major event, it brings collapse of the economy, and the government has to intervene, by buying up the debts of the private households from the private commercial banks.
2. The public debt is growing to unsustainable level due to government budget deficits and due to nationalisation of the private debt created by the banks, whenever these debts are endangering the existing economic monetary system. To save the financial system that created these debts, from collapse, the government initiates government treasury securities purchase or mortgage backed securities, by exchanging these securities to cash money Quantitative Easing (Q.E).
3. Due to the Q.E. policy the commercial banks are overflowed by cash money available for immediate use, yet with no operational capacity to increase the entrepreneurs loans for new business ventures, that judging their business plan needs expertees the banks don’t have. On the other hand the banks act more cautiously with consumers credit, due to learning curve of the banks and due to new regulations that restrain their risk taking policy. The result is increase in their reserves in the central banks vault, above the level demanded according to the minimum reserve rate requirements of the central banks. This cancels the need for interbank loans between commercial banks and last resort loans from the central banks to commercial banks.
4. The excess liquidity of cash money in the system reduces the treasury security interest rates to zero.
5. The central banks, in purpose to create a new instrument to regulate the interest rate started to pay interest on excess overnight reserve deposits of the commercial banks. This interest competes with government treasury securities, its interest rate must be higher than the reserve deposits interest rate, because of higher risk on treasury securities, their price has volatility compared to the deposits in central banks. This results, that the interest rates are administratively fixed by the central banks, and are officially accepted as the bottom interest. It means interest is not anymore, result of open market operation of the central bank with government treasury securities, but fixed directly by the central bank.
6. The disconnection of interest rate fixation from any marketplace operation eliminates the connection to business moods, emerging from the private sector of entrepreneurs and households.
7. The central bank’s policy is to secure full employment and price stability. If the banks rise their risk taking policy, and increase the credit to more risky projects or increase the consumers credit, the central banks will have to increase the demands on banks on minimum equity requirement, even above the Basel III accord, or minimum reserve rate requirement and these tools may become in the future the prime monetary instruments to regulate the interest rate.

But all these processes described above are valid for the classical capitalistic market economies. If to do prediction about the economy of the future, we have to try to uncover the major trends and their dynamics at present, that will create the new economic circumstances in next decades. The most dynamic and most substantial issues are all result of technology development and social-political reaction to them. There are many fields that as result of previous scientific discoveries are developing new profound technologies. More than that these technologies start to get interconnected, as new peradigma changing technologies. Let me mention few of them.

1. Computer power, the quantum computer is to be launched and operational within few years, and many very complex computing problems will be solved.
2. In energy, within 15-20 years from now, most probably the first fusion electricity reactors will be launched, and within a decade they will become the major source of energy.
3. The 2 means unlimited energy for almost zero marginal price, after the initial investment costs. One of the major technological problem of fusion reactor is in creating efficient superconducting materials. Research in this field will probably get strong push with the new computing power capacity of quantum computers.
4. New materials, the new nano technologies of manipulating molecules on most elementary level enable to create new materials with unprecedented, and many times unexpected attributes. Nanotechnology will probably get strong push with the new computing power capacity of quantum computers.
5. New biological forms created by genetic engineering. The already existing crispr gene editing technology opens the possibility to create new living tissues, with new attributes. This will change completely the agricultural production, if political and cultural limits will be removed. This technology will probably get strong push with the new computing power capacity of quantum computers.
6. Artificial Intelligence, is getting to a stage, when more and more human activities are done better and cheaper by machines, and computers than by humans. Not to mention the new computing power capacity of quantum computers will have major impact on AI.
7. They are many other applications, like robotics, swarm technologies, virtual reality worlds, that are all result of all the above mentioned technologies.

Any economic system, that will not include these expected developments in its curriculum, will fail. So what effect will have those expected developments on the economy? General price decrease of products, due to new marketing models, distribution forms and production efficiency, that we can see already evolving today, demand to consider new economic model. Price decrease, even if increases the utility value of production through more products sold for the same cost, does not increase the commercialized monetized value of the GDP. This trend is in opposite to the trend that ruled quite recently, that more and more products were monetized. For example food and clothes production were allocated to shops and restaurants from housewife kitchens and salons. All these activities, if before excluded, became part of the GDP or National Income, out of which were paid taxes, wages, capital gains, etc. But when the prices decrease, or many times product is transferred free of charge, as in case of many economic items distributed on the internet, the classical economy stagnates, and so the GDP. But all the economic financial system is based on assumption of increasing GDP, and if it is not happening, the capital can’t get its expected yield and the government can’t collect taxes. High production and distribution efficiency, mechanised and computerised will also create large scale unemployment.
Major questionnaire hangs above the function of money and the whole monetary system. In the classical economy money fulfilled two functions, intermediary agent between buyer and seller, and value holding asset. The technological development didn’t jump over the monetary system. The money became more and more virtual, financial transactions became or immediate or overnight. Also new financial instruments appeared on the system, as platforms for direct investments, like Kickstarter and above all the cryptocurrencies. Even if price reduction of consumers product diminished the inflation pressures, it didn’t happen to value holding assets. The souring value of cryptocurrencies, stock prices, and above all worldwide real estate increase, are all different form of inflation, not measured in average consumer basket, and not influencing directly the population, unless the individual has no accumulated assets tries to jump the bar, and tries to become an asset holder.

Popular misconceptions about economy

The major popular misconceptions about economy.

In the public view there are several misconceptions about how economy works.

Taxes are collected to cover government spending.
Public debt and printing money, necessarily cause inflation.
Government’s deficit has always negative influence on the economy.
Private sector is always more efficient than the public sector.
Inflation is result of increase in the demand due to increased wages.
Increased wages reduce competitiveness in the economy.
Trade deficit is devastating for the economy of the country, while trade surplus is healthy always for the economy.
Money has to be backed by economically valuable precious item. (Rare metal like gold).
Money has fixed value, unless there is inflation in the sovereign country that issued the money.

A. Taxes are collected to cover government spending.

The reality is, taxation is aimed to fulfil several very different goals except to cover government expenses.

a. Increased equality in distribution of income, by progressive income tax, property tax or tax on heritage.
b. To protect local production from foreign competition by costume tarifs.
c. To regulate economic activity by fiscal economic policy, without to change the government spending. Tax release can spur economic activity of the private sector, while increased tax burden has opposite effect.
d. To regulate consumption, (Value Added tax, tax on alcohol or tobacco, fuel, private cars, etc.)
e. Return on government investments on national level investment projects, (federal road tolls, payments for national railways, electric grind, etc.)
f. Social security taxation. This taxation is special purpose taxation, aiming to transfer income from part of the society with higher income, to parts of the population with non or limited income.

The government activity can be divided between spending, that doesn’t increase the economic production capacity in the future and government investments, that do have positive impact on economic growth. The obvious government spending item is military spending, that usually has rather negative impact on economic growth, even if it increases directly the government spending and by doing that increases the aggregate demand. Other such item is social security system, that is a special kind of taxation, its purpose is to allocate income from economically active segment of population, to the less active segment, either because of their age, limited employment capacity, unemployment, etc. This kind of taxation doesn’t influence directly the government spending, but indirectly, by allocating financial resources from population with high income, their spending rate out of income is relatively low, to population with low income, with relatively high rate of spending out of income. The impact of social taxation is positive to increase in aggregate demand. On the other hand it reduces the income of the most productive segment of the society. Some economist believe, it negatively influences the economic growth.

Conclusion: Only one of many aims of taxation is to cover government expenses.

B. Public debt necessarily causes inflation.

Public or sovereign government debt by definition means government expenses exceeding tax income and government revenues from its activities. This debt is covered by government promissory notes in form of cash money or government securities and bonds. Since Government tends to increase its spending, and not so much reciprocally tends to increase taxes, it creates debts. These debts are translated to promissory notes, that become the basis for financial liquidity in the economy, the Monetary Base, without which economy couldn’t operate. These promissory notes circulate, and have reciprocal twin, the economic production, that circulates in opposite direction, and its value is represented by the value of these promissory notes exchanged against them. The rate of circulation of money, or the Velocity of the money, together with the volume of money in circulation is monetary expression of economic activity, and is called the Gross Domestic Product, or GDP. Change in value of promissory notes circulation changes reciprocally the value of production circulation, that is measured as GDP (including change in inventories). The equal opposite to GDP is GDI, that is the Gross Domestic Income, representing the Money value circulating in the economy. Only part of this circulation creates new economic wealth in form of savings its other side are investments accumulated as wealth. The rest is consumed or waisted.

Since the level of liquidity strongly influences the monetary circulation level, it influences the aggregate demand in the economy, and so the GDP. This is the state, until the economy reaches its objective potential, limited by certain resource, that has no substitute for similar price. If such a limit is reached, the result is price increase of a particular item, or many items, their supply is dependent on this limited resource. Such a basic limited resource can be a raw material or energy source, cereal grains, or available workforce, specialised or not specialised, etc.

Conclusion: Government deficit is inflationary only, if it creates additional aggregate demand in economy without enough production capacity. Otherwise it increases the volume of money in the economy, depending on money circulation velocity, it may or may not,
increase the total volume of money in circulation.

Comment: Due to development of the technology, usually such a limited resource on the short run causes price increase, that itself causes in market economy concentrated effort to develop technological solution for the shortage in resources, that on long run according to experience in the past solved this shortage. So it happened after oil price jump in seventies and eighties of last century, that caused development of photovoltaic technology, as substitute to carbohydrate fuels.

C. Government’s deficit has always negative influence on the economy.

Government deficit, if created in times of available production capacity, causes increase in aggregate demand, and usage of this unused capacity, meaning GDP growth, or increase in wealth. In time periods of limited resources, the government should run public surplus in its budget, that can be achieved by government budget cuts, or increased taxes. When government increases taxes to reduce deficit, the aggregate demand decrease will come from the private sector, while if the budget cut will be the major tool of the government to fight inflation, the aggregate demand decrease will be of the government.

Since decrease in private sector activity also decreases the taxable income basis, budget cut is more efficient way to reduce the deficit and to fight the inflation than the tax increase, that decreases rather the tax obliged private sector activity. Government economic activity is either providing services for the population, as social services, education, health, or legal, personal and national security. Other government activity is investments to low yield, long term projects in national level. At times of unemployed production capacity, the government’s budget increase is usually focussed to governments investment activities. This means increased government activity is a more efficient tool to activate unemployed production capacity than tax reduction. Tax reduction may increase the aggregate demand too, but not necessarily by direct investments, it means it’s impact on economic growth will be rather short term and limited.

D. Private sector is always more efficient than the public sector.

In modern market economy, in principle, public sector should not be in competition with private sector activities. On the other hand exists necessary high risk economic activities on the whole national level, or very long term investment activities without obvious immediate reward. This is why governments many times invest in very visible white elephant projects, like unused airports highways, etc. with no direct profitability. Still government investments bringing indirect profits to the society on long run. As example of such activity is education for the whole population, minimum income security programs for all, but also wars preventing dangers of crumbling of the society, due to external or internal aggression. If these services and activities are neglected relatively to private sector activities, it’s more effective to the economy to increase public sector activity than private sector activity.

E. Inflation is result of increase in the demand due to increased wages.

Wages are only one of the elements in the production costs. Other production costs are capital income expectations as interest rates or yields on capital investments, franchise right costs, royalties right costs, rents on land and premises, raw material resources exploitation rights, etc.

While Labour and wages are always exchangeable for technological solutions, or increase in production efficiency, capital income expectations are hardly changeable, so less flexible.

F. Increased wages reduce competitiveness of the economy.

Wages increase may happen for two different reasons. Increase in productivity of production, or limited supply of labour. In case of increased productivity, the price of labour decreases relatively to produced value, and it causes tendency to wage increase, without to influence competitiveness. Increased wage means relatively less capital gains out of economy. Improved competitivity in economy is caused by new investments and initiations done by private sector. Does decrease in wages bring less initiations and investments. There is no necessary connection.

If wage increase is caused by limited supply of labour, it may causes general price increase. This means, the profitability will not be influenced by such wage increase on whole country scale, but in the particular case.

G. Trade deficit is devastating for the economy of the country, while trade surplus is healthy always for the economy.

Trade deficit is one of the components of the current account. It represents the total export minus the total import of goods of a specific sovereign country. If the number is positive it means trade surplus and if negative it means deficit. Trade surplus or deficit can be balanced by service account of current account. Services account includes all the international economic activities, excluding the items in trade deficit. As example, deficit or surplus from foreign tourism. Other example can be the difference on capital gains on foreign investments, compared to capital gains paid to foreign investors by local economic entities or the government.

If the current account has deficit, by definition it has to be balanced by capital account. Capital account includes all the foreign investments, foreign bank loans or non bank loans, etc. If current account has deficit, its balance by capital account creates indebtedness, either in form of loans and credits to foreign banks, or in form of equity liabilities created by foreign investments, causing foreign ownership rights on economic assets, like real estate, or company shares. If the current account deficit is created partly by government, this is balanced by government debts in form of treasury securities, that will be held by foreign investors, or governments. An unusual phenomenon is when the currency of a sovereign country like US is held by foreign governments as currency buffer stock reserve. In this case, the nation with the currency desirable as reserve currency has to have current account deficit, that is balanced by investments in US government promissory notes, usually in form of US treasury securities. Viz:

Money, debt, promissory notes, reserve currency

Too much debt to foreign investors my cause dependency on foreign entities, be it private foreign investors or foreign governments. In the past, while the dominant global economic system was based on national economies, competing each other fiercely, this was important, but in today’s global economy, of international corporations, the differentiation of debt as foreign or local, lost its importance. More important is the level of investment attractiveness of certain country. This attractiveness depends not only on yield of this investments, but the trust in the stability of the country’s political and economic system.

Another reason why the differentiation between local and foreign investors is not relevant, can be understood from the silicon valley high tech corporations, that their management and research development are usually in US, while most of them are incorporated abroad and their production facilities are also abroad. Since the know how development costs and the corporation profits are significant part of their revenues, are at first accumulated in their foreign entities, then reinvesting back to US. In official statistics, these investments are registered as foreign investments. In reality this funds never left practically US.

H. Money is backed or should be backed by economically valuable item, with fixed high price. (The best, precious rare metal like gold).

This urban mythology still prevails, even if the connection between gold and money was disconnected officially in early seventies of last century, and in fact such a connection never existed. Even in times, when instrument of payment was precious metal coins, the relative price of the coin to products changed. If too much coin was minted, because new gold deposits were found, the product prices went up and vice versa. To understand how inefficient is gold as a fixed measure of value for product price, it’s enough to see the gold price in last years since 2008, jumping ten folds, then collapsing back again.

I. Money has fixed value, unless there is inflation in the country that issued the money.

Inflation means average price level increase, of either an average consumption basket, or of any other basket, defined by the economist. Such a basket can be energy items basket or house price basket, etc. Usually even if the average consumption basket is fixed and stable, there is always big price change diversity of specific consumption or investment item baskets. Usually housing and energy prices are characterised by big velocity, high tech products with downtrend tendency, and the classical food and basic consumption items with relative long term stability.

New way to finance dividends

Global or local politics

The right of any nation for any piece of land is derived from the capacity of a group of people to identify themselves as belonging to unique mythology that defines them and their connection to certain piece of land. If the connection of these people to this particular piece of land is strong enough, to make them to be ready to sacrifice their life, in sake of saving this particular piece of land for people, who belong to the same myth, then these people have the full right to own this land. But then what happens when more than one group of people have claim for the same land? They will try to delegitimize the other group by different claims like, who was first, or trying to claim of falsehood of the others identity. They will use ancient texts, believes, fables, fairy tales, myths they believe as if it was a massage from the All Mighty directly to their brains. They will adore the ancient texts, and try to uncover mystery in those texts, interpret them with strong bias to prove their myth being right, and the other’s being a lie. But this conflict cannot be solved by proving the rightness of one claim and denying the other. It only brings claims against claim, not standing by any standard of objective measurement. It can take hundreds or thousand of years and still the same claim will be there. After almost one thousand years the Arabs still accuse the Europeans being crusaders. After more than half century the Africans accuse the White people of being colonialists.

Only complete change of collective mind state can resolve the conflicts of this kind, where truth of one social group collides with the truth of other social group. But does anyone want to change his own state of mind? Does the humanity capacity to such a change. Is modernity with its ideology of hedonism answer to this question? And what is the final aim of humanity? It seems as if segregation and interreflection of the different  cultures is more relevant today than global perspective, comprehending all the cultural, scientific and economic values the humanity successfully accumulated within thousands of years of human civilization.

 

The new political leadership, emphasizing rather local particular issues, while neglecting whole globe, universal problems, as:

1. Global environment, global warming, and global resources exploitation.
2. Nuclear war.
3. New forms of political extremism.
4. New technologies under development, that eventually will marginalize the task of humanity from the goal to a tool.  

All these problems, that are all at global universal level, don’t get any attention of the political garniture concentrated in local particular interests, even if they are challenging the very basics of human existence.

GDP growth obsession-1

The economists obsession about GDP growth is not a misconception or ideological prejudice. The whole capitalistic system, to satisfy the demand for positive yield on capital, needs continuous economic growth. In a stagnant economy, will be no new additional add value, that is necessary to pay return on the loans in form of interest, or on invested equities in form of dividends, (or CEO wages). The whole capitalistic system cannot continue to exist on the long run, if no positive return is on the capital. This is why the existing capitalistic system must continue with economic growth, even if doing so, it will destroy the world’s ecological balance, and at the end cause the annihilation of human specie on planet Earth.

The world economy long time ago stopped to add new value to the standard of living in the developed countries. It rather productises more and more of the human activities, and releases the individuals from knowhow and capacity to create its own products and enjoyment. If few generations ago, kitchens at homes were facilities to produce food and social gathering spot, today they became design show off, while the food is processed and bought from the restaurants. By doing so the family dinner became part of the GDP. This social-economic change happened, without decision of any authority. An another example i would bring, is the more and more sophisticated private cars, that add very little comfort to the driver, while he has to drive for hours in traffic jams. The same can be said about most of the consumption items that gradually overtake our life. Sometime the takeover of the new technology comes like a storm with a new paradigm products, that appear from while to while on the market, like plastic materials, personal computers or smartphones. Are those deep changes in human acts and behaviour, unconsciously adapted by the people living in modern developed economies for the wellness and happiness of the people, or for achieving higher profits to the suppliers of these products, so they can satisfy the unrestrained urge of the capital co generate ever increasing yield?

The price to be paid in terms of global environment, to achieve this continuous economic growth, ignated an unsustainable processes of global ecological dis-balance, endangering the very existence of bio-systems. It seems, already we are in the stage, that these processes cannot be stopped, unless a system change will happen.

Observation brought me to categorize human beings to social cultural groups, that differ from each other according to their conscious awareness to the realities, they encounter in their daily life, or come to their awareness through the information media. I can in rough terms divide the people to three different groups with different personal methodologies they use to comprehend their worldview:

A. Those with concept of consciousness based on belief in fairy tales, originated in ancient texts like, the Bible, the Quran, etc.
B. Those whose consciousness is built on modern fairy tales, created by sophisticated tools of modern marketing, distributing rather disinformation than information, useful for a potential customer of a product. Those tools include not only the official marketing tools of advertisements, but every random information and communication object a normal human being encounters in every step in his life in modern society. It includes cultural products, like movies, tv serials, newspapers, books, shops, street signs, showcases, etc. Then falsified consumers evaluations, that always tend to be too much positive to be valid. But also our language penetrated with false icons, brands and other kind of junk information.
C. At the end are those, who make consciously special effort to avoid random information enforced on them, and rather are exposed to intentionally chosen information with definite purpose. Then they rationally, with self aware critical approach, judge, categorize and filter such an information, based on evidence and previous experiences.

There is no need to make intense surveys to know what kind of information, out of those three mentioned above, are most of the people exposed too. It is enough to compare the number of followers on the web and especially on YouTube kind of media, of the disinformation kind of information, compared to the followers of the third kind of information. While millions of people are following the first two kinds of disinformation, only very few follow the third kind of informative publications. This is the reason, why no data, evidence or any kind of rational argumentation is accepted by the masses, within the existing economic and political system.

Then it becomes relatively easy for people, who run the existing economic system, based as explained above, on the need for ever growing return on capital, to sustain this deception of most of the people, whom they draw to over consumption and illusive satisfaction of immediate desires and lust. On the other hand, the economic leaders, who market such a deceptive economic system, have to be well aware to the fact, that this system cannot continue forever, exactly as they knew before 2008, that this system of theft, that created systematic debts creation, without real economic foundation, cannot go on forever. Still they continued to play their game, personally very profitable for them, believing, that somehow-someone, will clean for them and after them the economic mess they create.

The contemporary capital driven economy, in its foundation, with the need of continuous blind economic growth, because of its cumulative tendency to accumulate waist, has to bring to collapse of global environment, and eventually of the human civilization as we know it.

It appears, the most important macroeconomic question on the global scale should be, to develop an economic model, that will be based on sustainable processes, securing balancing feedbacks to the whole global system. Even if the awareness to these problems and to their solutions exist, and sometimes even implemented, these solutions are always very partial, sporadic and particular, while the problems are at global scale, and its accumulation continuous. The tools used to solve these problems are always political, and within the existing capitalistic economic system. The latest example is European decision to abandon the usage of plastic bags. It is again a sporadic and particular solution to global system problem. (An exception of world wide cooperation on solving a global problem was the acceptance of restrictions on usage of ozone layer damaging gases as chlorofluorocarbons. Even here it seems there are leakages in the restrictions).

Why such an inaction of economic-political leadership on the global scale, when every reasonable minded person can easily understand, that any continuous process, if not disturbed by contra-act, has to create an unbalance, that at the end will create a bubble that has to blow up.

The answers lies in the existing political-economic system, that has no management tools to cope with those long term global problems. It seems a Global Environment Economic Management System (GEEMS), has to be created, to cope with the issue. To create such a system, first we have to ask the question, what are the core problems in the existing political-economic system, that seem to be in the root of the impotence of the existing authorities to act. There are several systemwise problems, that can’t be overcome in the existing global political system:

A. Fragmented sovereignty problem.

While the GEEM problems are global, its management is local, by sovereign nation or state focused. Political system based on competing nations, has no capacity to solve global problems that need global cooperation of all.

B. Term problem.

The GEEM problems are long term, while the existing democratic political decision making processes are short term, limited to time schedule of the next election.

C. Social change problem.

GEEM problems solution demands changes in socio-economic behaviour of every individual, be it in economically developed or developing nations. While in the economically developing nations, consumers based economy and society has to be abandoned, in developing societies birth control policies has to be adopted.

D. The hungry capital problem.

The economic system based on interest or other form of yield income, forces a need of continuous economic growth of the economy.

E. The monetary system problem.

The monetary system imposed by sovereign governments of the states, that is based on mixture of two. Money as byproduct of government deficit, and government securities, issued to cover government deficit, with byproduct of being a major tool to influence interest rates, with intention to secure economic stability, but also economic growth, that is the basis of economic stability. (Economic stability means full employment without inflation.)

F. Equality in income distribution problem.

Can’t be expected a policy of self- restrained economic growth, while in parts of the world, still big parts of the population struggle to satisfy their basic needs, as food, shelter, education and healthcare.

The existing economic model is based on faith, that market, an imaginary place, where competitive demanders and suppliers meet and negotiate the price, that will become the equilibrium price, that equalizes the production and consumption motivations and utilities. Yet this economic model does not takes in consideration, the global scale price to be paid, to let these individuals involved in exchange of products at agreed price. The individual utility from the usage of the product, expressed in form of product price, doesn’t take in account the price the global community pays, as byproduct of the act of production and exchange. This phenomenon is an obvious failure of the market price system. The solution has to come with communal intervention into the free market processes. But who have the power to enforce such an intervention in global scale? Obviously not the national governments, that suffers from all the defects mentioned above.

The economist suggested policy is eventually government intervention into market prices of energy through taxation. Yet even this policy is not globally implemented. In contrary, many countries subsidize the energy usage, that not only increases global ecological imbalances and resource depletion, but also creates unfair competition advantages of these countries, while the ecological price is paid evenly by those countries, that subsidize energy and those that don’t.

Jewish national home

Israel is the prove, that humans, whatever culture, faith, nation they come from, when acting as one politically organised society, eventually will behave and act very similarly. Jews while in diaspora, even if segregated for centuries in ghettos, or following the enlightenment integrated in the surrounding societies,  according to their cultural ethical code were the most pacifist, cosmopolitan non locally oriented people. Jewsin spite of living in diaspora dispersed in all corners of the world, sustained their tribal identity. With the opening of the surrounding societies in nineteenth century, and gradual secularization of European societies, many Jews also went through secularization, at least in the more developed parts of Europe, namely, England, France, Germany and Austro-Hungary, certain parts of Russian empire, and tried to integrate into the surrounding societies. Many of them abandoned their religious identity and officially became christians, even if they had become rather secular than believers. (viz, Mendelson, Marx, Heinrich Heine, Mahler, etc. who became officially Christians, but still were considered Jews, by thenon Jewish neighbours.)

While before the beginning of nineteenth century the European society for centuries was divided clearly to peasants subjected to their landlords, urban population belonging to their professional guild, and the leading political, military and spiritual elits, with the industrial revolution, and urbanisation this social identity, old loyalties, and social belonging was disrupted, and new political ideological faith appeared in form of nationalistic or socialistic politically active parties, that recruited to their lines most of the new urban population. Add to it, the secularization of the European societies, and all these new emigrants in the growing cities, originated form peasantry and agricultural communities, who lost their original identity based in their homes on loyalty towards their lords, became confused and disoriented by losing their identity, while trying to solve their identity crisis, were radicalised. The easy exit from their  confusion, while joining the urban communities, was to join group of people politically active in societies, that later were identified with the left or the right political ideologies. 

While the religious Jews, continue living their segregated life, believing, it doesn’t concern them, the secular Jews, understanding that there is no place for them among the right wing nationalist activists, turned to the more cosmopolitan, more universal ideology of the left. This is the reason behind so many Jews names among the left spectrum of the political scenery, and so few in the right spectrum.

The Zionist movement, represented ideology of emerging Jewish national identity, claiming right for self determination in the ancient Jewish land, where the Jewish cultural, religious and national identity came to existence. This political movement was a political reflection of the secular part of the Jewish society, and in its essence was a socialist lefty secular movement, with Jewish national emphasize. Still small chunk of the Zionist movement was nationalistic, with more tolerance to the religion than the totally secular socialist Zionist left. Both parts of the Zionist political spectrum made their agenda the need to normalize the Jewish nation, or as metaphorically they put it, turn around the inverted pyramid, (Borochov) meaning to make the Jewish nation more normal as any other nation, (European nation). That meant at the time more peasantry  manual working class and less spiritual, religious, intellectual based population. 

Following WWII and the Holocaust, the lefty socialist Zionist movement, as contrary to the right wing Zionist representatives, opportunistically  exploited the window of opportunity given to Jews by the community of the war winning world leading nations, who couldn’t comprehend the level of evil, the most advanced European nation made to the Jews, out of confusion of a moment supported the establishment of the Jewish state of Israel. This historical success kept the left in power for 30 years, but then demographic changes increased the more religiously and more traditional propensity part of the society. This resulted a failure in the ballots of 1977 elections. 

Since 1977, most of the time the government of Israel is based on representatives of national conservative parties, that created a more natural coalition with the religious parties, without them never could be established a majority in the parliament, not even in times of lefty governments.
Today, the left includes 10% of political several represent the Arab population, and about 35% secular, liberal or socialistic parties. They  try to create after each election a majority block,  or at least situation,  where there is technically no possibility to create a right-religious coalition government.  Since the religious political parties represent about 15-20% of the political representation, the right wing coalition can’t exist without them. The left, on the other hand tries to create coalition based on Jewish majority,  while the arab parties are supportive out of the government.

But what kind of ideology the religious parties represent? Mostly ideology of segregation and inner reflection, that was so typical for the religious Jews, while living in diaspora in ghettos. But then the Jews were powerless,  and this became faithful to them, when the murderous Nazis came to power in Germany. 

The lesson was learned and Israel became militarily a very powerful nation. To add to it the reality of continuous wars with the neighbouring arab states and the Palestinians, who even after 70 years of continuous wars, almost always provoked by the Arab countries or the Palestinians. All these wars militarily ended with Israeli victory, The Muslim Arab politicians and population didn’t come with term with the reality,  that in this small piece of land, came to existence a non Muslim state, that in spite off all the wars, delegitimizations, boycotts, hate speeches, threats, and collaboration with the western naive intelectual left, Israel continued to thrive, culturally,  economically, and socially. On the other side, the Muslim-Arab world, ruled by military or religious despotism fall into disintegration and loss of cleare identity and focus. 

Since the creation of Israel, the Jewish nation, successfully accomplished the task of normalization of the Jewish people, and successfully turned around the inverted pyramid. Meaning, not anymore pacifists or cosmopolitans, but rather nationalistic introverted nation, as many other nations. To add to it the religious traditional element of segregation tendencies,  and you have here a absolutely normal nation,  that under continuous threats of war and annihilation, act’s more and more aggressively and with less and less restrain towards the neighbouring states and people who continue with their policy of trial of delegitimization and annihilation of the non Muslim,  Jewish state. 

Out of all this reality came the new legislation changing the character of Israel, from multicultural universal country of all its citizens,  to a Jewish state. Even if this rather declarative than practical legislation, has no real practical meaning,  still this is an important issue, that no Israeli or Jew can be indifferent to it.

Introduction to wealth, liabilities, assets, debt

Introduction to wealth, liabilities, assets, debt

Wealth is financial savings, represented also as liabilities of entities accumulating assets of the same value expressed by universal scalar, MONEY, equivalent to the financial assets of the savers. So savings are equivalent to investments. If an incorporated business invested in tangible asset and if financed it by equity (Capital), lent by the entity owner, and/or by bank as a loan, by definition all this has to be balance between debt translated to liabilities and asset. If the asset price will go up, it will be a profit translated to additional equity, registered as a liability, that in future will be paid as dividend to the equity holder, vice versus. The difference between equity finance and loan is that the first doesn’t pays interest but dividends, and in case of liquidation of the entity for whatever reason, the lender gets paid first. Also equity financier holds the ownership share and managing power of the entity it finances, while the bank loan or different kind of securities financiers (bonds, debentures) have no ownership rights.

By definition liabilities of borrowers are assets of the lender. The economic world is divided between the lenders and borrowers, while in between stands the financial institutions, mainly the commercial banks.

1. Liabilities are either of public institutions empowered to collect taxes (federal government, states, and municipalities) or private. The private entities are either, foreigners (foreign governments or foreign private entities), private households or corporate and non corporate businesses.
2. According to the above mentioned definition, assets = liabilities are either public or private. Private assets and liabilities can be either of private households or of incorporated business entities, that have different level of ownership distribution.
3. Assets can be tangible or claims against others, that are debts of others than the assets holders. The debts of the public institutions, are in form of cash money or securities issued by public entities. Then loans to private entities, or from other borrowers in form of future receivables.
4. If government increases its debt by deficit, it will become debtor to either foreign country,  private households, or businesses, but to the lender it will be part of their assets.
5. Quantitative easing is a process of transferring liability of government from government bonds and securities, obliged to pay interest, to cash money, usually deposited in commercial bank accounts, free of interest payments from the government or other public entity. These deposits are either lent to borrowers by commercial banks, or deposited as reserves in Federal Reserve bank, that according to new policy introduced after the 2008 crisis, pays interests on this deposits.
6. If the foreign debtor wants to reduce the level of loans it gave in the past, it has to sell the debts on the free market. By selling the debts, that will be usually either government or corporate securities, it will reduce the market price of the debt, it means the debt value will be reduced. Lower government bond prices means also increase of interest rate in the borrowing country, that can cause economic depression. To prevent interest rate increase the government (central bank) or the corporation has to buy back its debts, (Quantitative Easement). Government bonds buyback would mean changing public debt from liability paying interests to promissory notes without interest charges and without expire date, (Money). But if a private corporation buys back its bonds they will become assets in its balance sheet, in exchange against bank deposits of cash money. Against it will stand the debt itself in liabilities. If offsetted against each other the liabilities and assets will be decreased accordingly.  

While government purchases its debts, the financial liquidity in the economy increases, while when business corporation is doing so, its financial liquidity decreases.

Does such an increase in financial liquidity in economy and consequent increase of money circulation have limits? Most probably yes, when more value of money will circulate in the economy than real production capacity. Is US economy close to it? It is hard to estimate,  because limits of production capacity are not all the production items used to produce, (usually what is watched is level of employment), but any substantial item,that has no supplementary alternative, can become that limiting item of the production capacity, and its essentiality is discovered usually when it is out of shelf. Still, most of the money in economy is supplied by the banks and not by the government. But to much Quantitative easing, generates cash money in businesses and other private entities, that are alternative to the bank loans, and reduces demand for bank loans. Since the 2008 economic breakdown, the volume of commercial banks credit is limited by the volume of business opportunities the banks can enter to. Other limited factors of the banking system as minimum reserve requirement and/or minimum equity requirements are becoming less and less limiting, with increased cash in the economic system.

Too much cash in the monetary system, means too much money in bank deposits. Public deficit financed by new government securities, increases demand for money deposited in financial savings, meaning causes increased interest rate, repurchase of these securities by the central banks or Federal Reserve, increases the security price and so decreases the interest rate.

Too much cash will cause less debt in private sector and will make the economy financially more stable. At first, the publicly traded corporations, if no better investment opportunities appear, will repay their debts. Then they will purchase from the public their own shares, and increase share prices.

As to the public sector, its repurchased debts will be changed to form of promissory notes, without interest charges and without expire date, (Money).

If quantitative easing policy of central banks, results reduced debt levels of public and private sector, what’s the problem? Why not to use it more often,  or even always?

1. The lenders, mainly those who hold most of their assets in money, be it cash, deposits or savings, will lose their asset value compared to those, who hold their assets in non financial form, due to low interest rates and increasing non financial asset prices caused by increased liquidity. This means, pensioners, wage employees, low income part of the society will be the one to pay the price.
2. The banking sector has its own problem? On one hand it will have also more deposits in form of cash in their balance sheet, much above the reserves demanded by the Federal Reserve, that makes them much more stable. On the other hand, less demand from potential credit worth borrowers, will shrink the share of bank credit in the economy. Because of enormous political influence of the banks, such a policy is opposed by political system. This situation may cause more loose risk taking approaches of the banks.
3. The central banks and F.R. have to be very careful not to become too addicted to Quantitative easing, and not to purchase other than government public debts. Otherwise while not democratically elected, the central banks will be involved in resource allocation policy of the democratically elected government, from one sector to other sector, creating unwillingly price distortion between the sectors. The central banks has to have, as much as possible, a neutral policy as to resource allocation between the different sectors of the economy. 

Does Quantitative easing causes limitations on economic intervention in the future, in cases inflation or deflation overtakes the economy?

In case of deflation, if there are no more public sector securities on the market, it may be a problem, unless the government will increase its deficit, and create new debts. It may do it by tax reduction, that can be fast, or/and increasing public sector investments and consumption. The problem is political opposition to such a policy, and investments in public infrastructure may take time, until it will have effect on the economy.

In case of inflation, assuming the government can’t reduce its deficit, it will have to squeeze the bank credit to balance the deficit. The bank regulator has enough tools to do it. Again the banking sector will have to be squeezed as result of such a policy. The share of the private sector compared to public sector in the economy will decrease as a result of deficit financing of public activities. But the public sector is financing it’s activities by tax collected from the private sector. Squeezed private sector means less taxes and even more deficit. This scissor effect has its limitation too.

Still it looks the Quantitative easing has huge positive impact on the economy, why such an opposition to it, and why it was never implemented before 2008?

If we neglect the consumers society phenomenon of consumers credit, the loans are supplementary to equity capital needed to invest in new business venture, or existing enterprises. The lenders are those with excess financial capital deposited in the banks, while they don’t have the capacity it fully utilise efficiently themselves. The borrowers are usually the entrepreneurs, with need for supplementary loans, to invest into the new or existing enterprises. Policy of Quantitative easing has to degrade the relative value of the financial capital, unless it is actively invested. Active investment is about higher risk taking, compared to investments in bank deposits.

Conclusion:

As said above, from economic point of view the society is divided to lenders and borrowers of financial capital, while the banks are the usual go between. Since money value is imaginary,  and is based on faith, this process of lending – borrowing is filled with emotions, mythologies, misunderstanding.

Quantitative easing means increasing the money in the economic system on account of the loans. With more cash money in the system, more money is to lend, and less money is needed by the entrepreneurs for investments. The demand for money is infinite, yet its price is negatively sensitive to level of cash money abundance. Who will lose from abundance of money? The lenders and the financial system, as the go between. The actual gainer of this process will be the borrower, who is culturally seen as the sinner, the bad guy of the game, while the lenders are traditionally seen as the noble ones, who need to be protected.

Money, debt, promissory notes, reserve currency

After the conclusion that most of the people don’t understand what actuality money is, how it is created, and how currency like US dollar becomes a reserve currency, i will try to explain the connection between reserve currency, deficit and debt.

Let’s assume there is only one country, and its government doesn’t collects taxes, (a very imaginative scenario). Yet, the sovereign government has to pay for wages or products it purchases. The only way it can pay is by printing money in form of promissory note, (check) that is an obligatory paper, its repayment is guaranteed by its issuer. The definition of promissory note is: “a signed document containing a written promise to pay a stated sum to a bearer at demand”. Usually such  a promissory note has specific issuer, who promises to pay a determinate sum of money to the payee a fixed sum in a specific defined future time or on demand.

But sovereign government, with the power to print money, is a special kind of issuer of promissory note.  

1. The repayment of its promissory note is to be in form of money, issued by the same government. And what is money? It is a promissory note,  without interest, without specific payee, and without determined time of reimbursement.
2. When the government issues and transfers this promissory note to employee or supplier, it also guarantees that it is transferable between everyone on demand.
3. It uses all its sovereign authority, that everyone will respect the face value of this promissory note.

(Since currency exchange is different act than product purchase, let’s assume that this promissory note is not convertible to other currency).

In other words, to create trust in face value of otherwise invaluable piece of paper, the government guarantees, that the face value printed on the bill will correspond the price of any product in the country of its sovereignty. How it is doing it? When anyone attends with money in hand to shop, and asks to purchase anything, the government, with all its enforcement strength, including its army and police, stands behind the promissory note face value. Since so, the one who holds the money, is holding a government promise, that it will be exchangeable against equivalent value of product in the future.

When the money was received by payee at the beginning, it was given him by the government against products or work given and accomplished in the past, while the government still didn’t give against it any exchange value, but a promissory note on governments debt (bill, money). So the promissory note, if taking form of money as defined above, is form of loan, that from personal point of view will be repaid, or rather the liability transferred to third party, when the money will be used to purchase anything, and not necessarily from the government, but from some private entity. What confuses the picture even more is, that while the government, when purchasing some product from you, payed to you with a promissory note, or form of debt of government to you, represented in the face value printed on the bill. The payee, when using this promissory note (money, representing government debt) is going to transfer it against a real product, its supplier is another private entity. This debt of the government is very theoretical, since it will be repaid not by supplying to you products by government, but when you pay taxes, that is the actual repayment time of governments debts, even if it is paid by you and not by the government, that actually is the borrower.  So at first the government paid you by debt, and second time you are forced to pay to government taxes with promissory note you received against this government debts, that will be used to pay next time by the government to pay for wages and products. But you can also say, that the government doesn’t supply to you directly the product, like any other supplier, against your taxes, that are form of payment you pay to the government, but indirectly, by giving you services, like education, health, security, etc, for what the payment is in form of collective taxes. So taxes are payments done in collective way for collective public services, and again not repayment of debts.

But this whole circle can happen only, after the government issued at the first time the first tranche of promissory note, that later will put in circulation thru taxes, then payments to government employees and subcontractors the whole system.

Are you confused? I wonder why.

Still i have to explain how a match between the face value of the promissory note and the product price is created. It will be achieved in act of tender between purchasers and suppliers. The act of tender is a continuous process, that decides the price of the product in relation to the face value of the money. So the currencies face value represents exactly the price of everything sold in exact moment, when it changes hands against the products. Any kind of purchase-sell is a form of act, when one side gives a loan, and the other side repays it immediately. It can be that you give money first and the product will be handed to you few seconds later or in opposite way, and in those few seconds there is a debit credit relationship between the two sides of the deal. To make it happen, there has to be trust between the purchaser and supplier that this debt will be repaid and/or the product will be supplied. The other problem is, that there can be someone else with money in his hands, who is ready to buy the same product, and if there is no other piece of the product you want to purchase, the one who will pay more will get it. In these few seconds when the purchase-supplier deal is taking place, the seller believes that there is no one else who would pay more for the same product, and the buyer believes that there is no one else on the same spot, who would sell for less the same product. This is the essence of a tender.

Now someone from other country, who likes your promissory note bill, because of the picture on it or any other obscure reason, is ready to give to you the same product, for the same price or lower price, you would pay to the local supplier. After this foreigner sells his product and becomes an owner of the bill of country with foreign sovereignty, he doesn’t uses it to purchase product in the country that issued the bill, but rather puts it in a vault. Still the government guarantees, that in the country of its sovereignty, all product suppliers are liable to sell to the promissory note holder anytime in the future any product available in this country, for price decided in tender, equivalent to the face value of the money. So this money, that is in foreign country vault, becomes a reserve currency, meaning a every resident of the country of sovereignty becomes a guarantor of liability towards the foreign holder of this money – bill – promissory note.

As a side effects of this process, because people in foreign country like to hold the bill in their  vault, its value will grow, unless your government will decide to print more to satisfy the demand for its bills – promissory note -money. Then if no new money is printed and part of it goes to foreign countries, it will become rare, and its price will grow against prices of products. It means deflation, or price decrease in the country of the reserve currency. Fortunately the government, because it always purchases more than it can collect taxes, it prints enough promissory note bills to satisfy the demand from the foreign country, that will supply the local market with products. It can happen, because there are enough foreign suppliers of products, who want to use the promissory note of your government as reserves, because they have trust, that the liability behind this promissory note will be fulfilled.

The next big economic breakdown

In the essence of any macroeconomic considerations stand three major economic questions.

1. The time period the economic actors plan to achieve their economic goals, that can be short term, medium term and long term.
2. What drives the economy, aggregate demand or supply.
3. What comes first,  money or the product?

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While economy was rather agrarian activity an economic time period for consideration was one season. The economic cycles were caused by weather conditions, that either enabled plenty or lack. Since the beginning of the industrial revolution,  but mainly since the second half of the twentieth century, the economic and political leaders had to relate their policies to much longer term considerations than one agrarian season. Industrial revolution needed adaptation of the technologies, capital accumulation, workforce training, etc. All these needed more time than one season. Since the late sixties of the last century, consumers society was introduced at first in post war Europe and Japan, then in most of Asia, and South America, and since the collapse of Soviet Union also in this part of the world. Together with population growth from about 2 billion people at end of WWII, to 8 billion today, the human impact on the environment created accumulation of dis-balances, their solutions need time schedule if dozens of years. This sudden increase in pressure on global resources needs change in political decision making processes, from short term to long term considerations, that were not adopted yet.

The short-term period i would define as 1-4 years period. In short term the planning is annual, when national budgets are discussed and approved by the political representatives of the people, or with annual financial reports, when represented on the shareholders meetings by the executive management. When a new political leader is elected, at the beginning of his term in office, his expected time period rule is usually four years, that shortens with every day. Since economic achievement are represented to the electorate before end of his political term, the economic-political considerations of the decision makers are influenced by rather short term problems. The time period of presidents or corporate managers planning is decided by arbitrary political or accounting habits, like annual reports of corporations, national budget approvals, or election day date. So decisions about implementing activities, solving long term problems, mainly if the solutions demand investments in infrastructures, their effect will be felt by the electorates beyond the term relevant for evaluation of the decision making institutions success, are usually neglected or postponed. This is truth unless a sudden unexpected crisis brakes out, like war, global economic collapse, public uprising, etc.  Then the short-term considerations are neglected, and crisis management system is implemented, neglecting the previous concepts and ideological considerations. The very best example of such a sudden change in policy is the budget deficit of the governments.

When the crisis becomes manageable, new long term or medium term considerations become leading. These are also situations,  when old school ideas are replaced by new ideas, and new thoughts are allowed to be exposed, while the old ones are reconsidered and criticized.

The medium term economic period is between 5-15 years, where the market forces have enough time to react to crisis situation, caused by resource limitation, as it happened after oil price jump between 1973-1985. This crisis was followed by trying to develop alternative energy sources.

The private debt crisis of 2008-2016, that endangering the global monetary system, was treated by monetary instrument, called Quantitative Easing, unthinkable before the crisis. It was used not only because the possibility of its fast implementation, but also because the authority who operates monetary policy is federal reserve governor, who by profession is a professional economist and not a politically elected legislative representant, with conservative rigidity and no capacity to adopt abstract macroeconomic concepts, needed to comprehend money as a monetary tool for macroeconomic policy making, and not a fetish.

The modern economists have pretty good tools to predict the future developments in medium term considerations, and have tools to cope with these medium term crises. These tools didn’t existed or rather were not used at 1929, when the world economic crisis broke out, that could have been coped with modern economic tools relatively easily, but because of colossal mistakes of the economic policy decision makers, the crisis turned to a long term global crisis, that ended only at 1945, with the end of WWII, in the Western world. The major political conclusion of the elites governing economy in the “West”, from the 1929-1945 years crisis was, to adopt economic policy, of responsibility to provide full employment, that will give chance to every household head reasonable chance to  provide his family with decent income, and to live productive life, when being part of social community, he can positively identify with. The other need recognised by economic policy makers is monetary stability, that meant keeping price levels fixed. But these two goals, full employment and stable prices, contradict themselves, and certain level of inflation is needed to secure full employment. The problem is that inflation disturbs the level of equality of income in the population. It delluts the accumulated wealth of the savers and enriches the borrowers. It also disrupts the price system, giving opportunities to short-term investments, upon long term investment.

From time to time, usually because of crucial mistakes of economic policy makers, inflation tend to break out from manageable level to unmanageable levels.

Long-term considerations used to be of lifespan of productive person. This stands behind all kinds of pension savings, that can be in form of investing in pension funds, savings, but also giving birth and educating the next generation of children is form of saving used in traditional societies. People on every country and almost every society and culture start these savings from early adulthood, until retirement. Only the very rich individuals or very rich societies will have long term economic considerations that exceed their individual lifespan.

In modern economics, long term period changes, are processes, i would define as more than decades time-period, where existing market conditions go through paradigma change, due to radical technology changes, or social and political changes due to collapse of political or economic system. It happened between 1929-1945, period during which new political order was created world wide. Other paradigma change due to technology happened in years 1980-2000, or alternatively can be defined the period between 1950-2000, during which at first appeared the computers, that later evolved to smartphones, and with it created the connection of general public to world web network. This change wasn’t just about adopting new products and technology, but a complete change in way of life, production technologies, management systems, new marketplaces, leisure time, etc. None of these developments could be predicted and prevented or regulated by economists or political activists, before they were invented, and when introduced to the market, no-one, not even the inventors and initiators themselves could predict exactly economic impact,  these technologies will have.

Since the late sixties, the public started to understand, that processes with cumulative tendencies, cause human impact on global environment, that demand consideration beyond human lifespan. The understanding that if not taken in consideration the very long term trends, the globe can flip over a no return point, from where a new uninhabitable environment will be dominant in most of the globe, just as it already happened for natural spices of animals and vegetations. The existing political-economic system, still driven by yield hungry capital, has no tools to cope with the mounting problem of global ecological disbalance accumulations. The result is local ecological disasters, and threat to the global ecological system.

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Other basic question economists are divided upon is, if the demand – or the supply is the major steering force behind the economic processes.

Those who see in the demand the main engine that runs the economic change, believe that every additional aggregate demand will be satisfied by additional supply or/and price change, that will adopt the demand quantities to available supply. It means that the supply side of the economy can be neglected in macroeconomic considerations, and left to the market forces to cope with.

These economist does neglect in their models the limits of disponible resources. Their assumption is, that the market with flexible price system, competing suppliers and consumers, will always balance itself at certain price level. If there will be a price jump, due to limited resources occurring in the short-term, on the medium-term, the economy will adopt itself on new absolute and relative price levels, and also new employment levels of production capacity.

On the other hand, economists, who see the supply as the major motor of economic change, believe in finality of economic resources, that no technology can overcome them. Such resource limitation obviously exists because of limited size of the earth. The supply side economists understand, that resources can be supplemented by new technological developments. (For example, energy crisis of seventies, brought to the world new energy generating technologies.) But there are still limitations, that cannot be overcomed, because of long term one line trending processes, that accumulate disbalances on global scale, their correction is beyond the capacity of human spices.

The best example of economic policy driven by supply side of the economy was the Soviet economic system. Their emphasize of production and absolute neglection of demand, brought disastrous economic consequences, including famine, lack of basic products etc. On the other hand, one sided emphasize of demand, without considering the cumulative entropic tendencies of continuous economic growth, brings from while to while the economy to its limits, when it collides with resource limitations. The 2008 economic crisis can be considered as such a phenomenon, when the commodity prices included in CRB index https://www.investopedia.com/terms/c/crb.asp jumped before the crisis by almost 50%, and collapsed immediately with the outbreak of the crisis by more than 100%. Even if the financial breakdown is the direct reason for the 2008 crisis, the sharp increase in commodity prices before the crisis, indicates bottleneck situation of production capacity at existing prices, that wasn’t translated to consumer prices inflation, but a economic breakdown. The hypothesis of such a connection, not so obvious, exists, since the financial manipulation implemented before 2008 crisis, created economy based on deep debt in private households, supporting consumerism, in parallel with real wage decline. The debts, that supplemented increase in wages, were either against real estate value increase, or against consumers credit, conducted by the financial system.

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The last central issue, economists are divided upon is the question, what drives the economy, money or products. While money is an agent without practical value by itself, because of habits, norms, faith, traditions, and sovereign right of governments to issue this money, and authority with threatening power to impose taxes, to be paid in the same money, gives to this agent, without value by itself, an exchange value, universally recognized and accepted. While money without production has no value by itself, value of product without money cannot be measured and exchanged, or it would be difficult if not impossible to measure it’s relative value. But because money’s generally recognized and accepted fixed exchange value, money has also capacity to keep under certain circumstances its value stable, or even appreciate through time. This makes money to own two attributes, exchange value measure tool, and fixed value keeper capacity tool. While money acts as value holder, it is deposited in savings where its value is either stable or even appreciated, with the interests paid on the  savings.

Since economy exists only with exchange of goods, and such an exchange can’t be even imagined without universal exchange value media (money), it can be said, economy came to existence with money. Also aggregate money value in exchange circle represents the same product value in circle. (currency exchange is a special case, not included), it means by increasing money exchange value circulation we necessarily will increase products value circulation. But here comes in the scenery the question of limited versus unlimited resources. If the global resources are final, and be it the capacity of the earth to absorb the effect of cumulative processes, without balancing feedback, the whole economic model based on continuous increase in aggregate money and product value circulation have to break down.

Weakening the all mighty US dollar

1. Continued trade deficit degrades the US merchandise production capacity, and what’s most important, its population will become instead of matterial merchandise product producers to service suppliers. Even if most of the employees in both, merchandise and service industries are rather low wage, low educated workers, the mentality difference between these two is immense. While the merchandise producers at the low level occupation are usually part of the production process, that needs cooperation, and are unionised, the service employee, usually acts individually, be it a shopper, banker or even post office clerk. While the merchandise producer’s attention is concentrated on the product, the service provider on the final consumer. These differences are psychologically deep. Service provider has to be always positively oriented to clients, even if in bad mood, merchandise producer, doesn’t. It makes a good service supplier a natural faker, while the merchandise producers can hold his integrity and pride of belonging to the producers community.

2. As to US trade deficit, it is result of US global position as world power, giving to the world after WWII, Pax Americana, with which came also the all mighty US dollar, leaning on US military dominance, and US democratic political system, unchanged since its independence, protecting free competitive market economy and unchallenged right for private property and wealth. But this caused trade deficit as explained in triffin dilemma.

https://www.investopedia.com/financial-edge/1011/how-the-triffin-dilemma-affects-currencies.aspx

3. All mighty dollar is not result of US merchandise industries producers competitivness and contribution of merchandise products to foreign countries, but attractiveness of US as world power, with stable political system, protecting individual property rights.

After WWII, the West European countries, devastated by war, still threatened by despotic Soviet, millitarily aggressive regime, had very little choice, but accepting the US dictate for new post war economic order, based on free trade, (dismantling the mercantilism in colonies) and US dollar as reserve currency for International trade and anchor of currency exchange. These brought too strong dollar, that until early seventies was also supported by US merchandise production capacity, that had no competitors.

Since the seventies, Germany and Japan, recovered from WWII, took over the position of world industrial producers. From the late eighties China and other East Assian countries joined them and became the major merchandise producing economies, while the US provided for the system huge market to absorb all the overproduction capacity, and also an economic platform for reinvestment of US dollars accumulated in the merchandise exporting countries.

4. Also US, due to it’s open emigration policy, attractive universities, and world dominance of English language, succeeded to become almost a sole leader country, introducing new technologies, new popular culture, and global service consumption chains and brands. It drew not only many skilled young people to US, but also capital investments. Yet, the leading US corporation, acting on the global scale, are incorporated mostly in tax shelter countries, and it reduces the tax basis for US government spending, that creates public deficit in US budget, causing US debt to Asian merchandise exporting countries.

5. The US global corporations, even if incorporated in tax shelter countries, they reinvest their profits mainly back in US. So eventually enable the whole global economic system to continue to exist. But these “foreign ” investments of US based global companies causes also huge inequality in income, when concentrating on one hand the wealth in global corporation managers and owners, and on other hand causing degradation of the local merchandise production capacities.

6. Even if economically this system is sustainable, probably politically not, mainly if there is political opposition to foreign trade deficit and political need for millitarily adventurous US foreign policy. The result is elections, that brought to power politicians with short term populist agenda. Such a policy can’t be sustainable on the long run. Even if the popular masses many times find short term solutions attractive, when the pay day comes, they tend to be revolutionised and are looking for the scapegoat to sacrifice it. We are still in the process of disastrous choices of the majority in the USA and in G.B. The masses still didn’t get it, that the consequences of drastic change in economic policy to wrong direction, (that still didn’t happen in acts, just in proclamations), will appear not less than in two years from the policy shift, unless the business community will panic and bring to collapse the whole system, that may happen in any moment. Such a collapse is unpredictable, and its cure is not always obvious, since it is in the fields of knowledge of psychology and sociology, and not economy, and these fields of science are even less equipped to bring solution than economics.

7. Still it is understandable that politically majority of the people in the US and GB want to bring back the merchandise production capacity, and with it this industry occupation. So how to do it? Definitely not by economic policy of segregation and anti global trade policy. This can only bring to reduction of global wealth, with all its consequences. The solution has to come in new world wide currency order, where the anchor currency will not be a national currency, not of US, not of EU or China, but some global currency solving the Triffen dilemma problem.

But any such solution needs an US President of very different skills and vision than the last Presidents of US. Last time US had president with such skills was R. Nixon, who had the courage to disconnect the US dollar from the gold standard and prevented by this act the world monetary system from potential collapse, that existed at the time.

Let me try one prediction in this blog, if the world economic powers, with strong reserve potential currency and China will not create such a currency, the cryptocurrency community will create it.

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Why necessarily reserve currency creates trade deficit?

Reserve currency means, that the currency is saved in other countries, than country of its origin. It can be done by private or public entities, or even private people, who prefer to hold the reserve currency, as media of savings, because of the trust in it, compared to the local currency. By doing so, they create demand for the money itself, as if it would be commodity or item of value by itself. And the truth is the reserve currency is an item of value, because of the trust people all over the world put in it. This trust is result of long history of reserve currency origin country’s military dominance, democratic political system, free competitive market economy and unchallenged right for private property and wealth. China, even with its size of economy, (bigger economy than that of US, in terms of potential production capacity) doesn’t have a reserve currency, because it couldn’t create the trust in its sincerity in most of the above mentioned issues. Europe succeeded only partly in making the Euro a reserve currency, because of its history of world wars it initiated, and their economic consequences on Europe. Even 70 years of peace was not enough to create enough trust in Europe, to make from its currency a reserve currency comparable to US dolla. Ythe history of Europe and its composition of competing semi-sovereign states, continuous to witch-hunt its image.

The need for reserve currency exists, to create trust in local currencies, based on these reserves. Just as in the past precious metal reserves, like gold or silver, made the currencies trustworthy, today holding of US dollars makes local currencies trustworthy.

But then if there is demand for reserve currency, not as media of exchange, but as value holding item, its price, or exchange value will be influenced by this demand, without the question if exists enough additional production capacity to satisfy the value of potential demand that reserve currency promises. Then the relative prices in the country of origin of reserve currency, have to be higher than in countries who accumulate the reserve currency, that has to create surplus in trade with reserve currency origin country, to be capable to accumulate these reserves. Such a surplus can be created only if the local currency value is undervalued compared to the reserve currency. Then the other side of this surplus has to be the deficit of the reserve currency origin country.

And here comes my warning, such a trust can be easily destroyed by irresponsible acts of politicians, who make big mistakes like, a. making wars destructive to economy, b. budget deficits creating debts, that are not invested into the increase of potential of production capacity, c. Not fulfilling the obligation given to the holder of the reserve currency, to supply against the reserve currency the promised value in form of products, whenever demand to its fulfilment will come, d. many more issues, known and unknown, that the reserve currency promise represents in the eyes of the reserve currency holder state.

Irresponsible president, who acts out of urge of the moment, without understanding or without caring of the possible consequences of his acts, and proving that after all, and if the legal -political system of reserve currency origin country has no instruments to stop such a policy of one man, it can be a very good reason to undermine the trust in the reserve currency.

How can money be a debt?

The economists claim, that in the essence of the money stands debt. Such a claim has to sound like esoteric claim to an ear of non professional. How can debt, that has negative value become money, that has positive value? It sounds like the story of alchemists, who tried to transform droppings to gold. So i would try in short assay to explain in understandable way for every ear, why is it so and what does it means, when an economist claims that money is debt?

To start with, it has to be understood, that when the economist speak about debt, they mean debt caused by government deficit, the credit given by commercial banks, that  is an other form of debt of non financial businesses or private households with capacity to create money.

At first let’s start with government deficit, and with assumption, that we have a modern economy in its starting point, with potential complexity as we know it today, with all its capacity to produce and allocate the products to its final stage, when it reaches its final destination, the consumer. To achieve this, we need some instrument of exchange, that will be acceptable to the seller and the purchaser, during the whole process of production, from it’s  form of raw material, to the final product, including investment to production and infrastructure facility needed to produce and allocate the product to its final destination. Let’s call this instrument Money. To make it happen, the money, will have to have universally accepted exchange value.

By definition, economic act is about exchange of economically valuable items in terms, that give the same level of satisfaction to purchaser and seller. It doesn’t have to happen every time and in every deal, but in long run in average it has to be so, otherwise the unsatisfied side will look for better deal, and by doibg so, it will cause change of the price of the economic item. The engine behind this price system is, that no one likes to be sucker, and we also assume, that no the long run everyone is looking for a fair price deal. If the purchaser, who bought an item A for price a, finds out, that his friend bought the same item for less, he will demand next time the reduced price. and vice versa. If this short description of price theory seems acceptable, the conclusion is: the price of any deal, will always represent a balance between buyer and supplier, or in economic terms equilibrium (except in case of suckers and cheaters, who’s act is short term).

Now it’s time to start to ask the question, “how government creates money out of debt?”. Let’s assume the government wants to give service to the citizens of a country, and it doesn’t want to make the citizens angry by rising taxes. So the government instead instead of increasing taxation prints money, that is form of security paper, with which the government guaranties, its face value against any economic item, soled within the borders of its sovereignty, in any time without delay. To give to money this universal exchange value, this security paper (money) has to be transferable between third parties without governments intervention. The government uses all it’s authority and enforcement power, to secure the exchangeability of the money at present, or anytime in the future, within the borders of its sovereignty, against any kind of economic item.

The government in principle should secure also, that the money will represent in the future the same exchange value as today. To do so it promises, that it will limit itself in its policy of money printing, or debt obligations creation, to level, that the dept it creates, and is monetized by currency it emites, will not exceed the capacity of debts repayment in form of economically valuable exchangeable items. Unfortunately there are many precedence in economic history, that governments didn’t keep this promise, usually under pretend of necessary war, and they then created inflation, that in other word is degradation of money value purchase power. It has to be emphasized, that money not necessarily is used as instrument of economic exchange between government and private entity. In contrary, most of the exchange is between two private entities, who both believe in government’s capacity to fulfill its obligation to supply or enforce non governmental entity to supply the demanded economic item, against transfer of money for freely agreed price.

When a commercial bank is involved in the act of exchange, and it is giving credit to over-bridge the time delay between the product production from its start until transfered to the consumer, and the money needed to support this process, this loan of the bank will create new money. This statement has to be explained and we have to explain the banks function in this process.

When the money holder has more money than it needs right now, and he has no plans to purchase right now anything, but rather in the future. So he collects money and probably he wants to keep it safe. The best way to keep money safe is to deposit it to vault keeper, who keeps it for him, and even pays interest on these deposits. The promise is, that the money will stay in the vault until the right time comes for the money owner to use it. Let’s call the vault keeper Bank. The bank within time, collects not only money of depositors, but also statistical information about them, out of which it understands, that not all the deposit holders will come to take out their money from the vault in one moment, but rather one by one in different time period. In the meanwhile, some new depositor will come to deposit their money, and repeatingly so. Most probably the one who received payment from the previous depositor will immediately deposit back the money recieved as payment for its product to the bank vault. In the modern banking, where no real cash is involved in the process, the money actually never leaves the bank, but rather is transferred from one account to another account. So in practice, the banks can give infinite volume of loans, unless the government interferes in the process, by creating limits to the commercial banks.
So in practical terms, the private banks create money, whenever they give a new loan, and when the loan is repaid, they reduce the amount of money available in the economy. This money is either in circulation or in potential circulation.

So the bank loans, that are debts of non financial sector to the bank are becoming new money in the economy. In this system, the privately owned commercial banks became major money creators. If so, why not to print unlimited amount of money to make unlimited profit, that is the only goal of any economic entity. First the banks are limited as to the level of credit they can give by the government, or its monetary tool, the central bank. But more importantly, the banks need to be careful to whom and to what activity they give the loans, not to create bad debts, that will be never repaid and reduce the banks profits. It is assumed, that from that perspective, the privately owned commercial banks are better guardians of money than the government, with different goals than profitability. This is the reason, why the government doesn’t nationalise the banks and provides by itself credit to the economy. To operate in such a way bank, the major asset of the banks is their trustworthiness in eyes of borrowers, that have positive credit history. Maybe this is one of the reasons, why the bank keep information about their clients so close to their chest.

The last question is, who and how in this system knows and decides, how much money a certain economic enclave needs, to secure smooth exchange of goods and services in the economy from the producers to the users, and without to degrade the money’s purchase power. To secure such a monetary system from breaking down, the government created a department, called Central Bank, that is the lenders of newly printed money to the government, to cover government debts, to provide additional services to citizens. Since the government dicided to do it without to rise taxes, the government creates deficit. To cover the deficit,  the government issues to central bank obligatory papers in form of bonds. By doing so, the central bank influxes not only newly printed money into the economy, but also government backed interest carrying securities, that are freely marketed to private investors, on the government security paper markets. One of the major traders on the government securities market is the central bank itself, that was originally issued to cover government deficite, or debt. By doing so, it can regulate the price of the securities, and this influences the level of interest, achievable on these securities according to market prices. Since central bank has unlimited capacity to print money, it can in principle purchase unlimited amount of government securities. By doing so, it will increase the price of the securities, and with it decrease the interest rate achievable on securities. But also influences the interest paid on any other kind of debt of non government entities. The central bank’s goal is to keep the money value fixed, as much as possible, while securing, that most of the economic production capacity, mainly the labour force, of the economic enclave, is fully activated.

Since the government has capacity to print infinite volume of money, its securities are without risk, while all other forms of debts do carry risk. So the height of the interest on government securities pays the lowest interest rate paid in economy, compared to any other kind of debt, available in the financial market.

Conclusion:
A. Government debt in form of government securities-bonds, created to finance deficit, creates newly printed money as opposite value to the deficit the government creates and finances by freely transferable security papers, Money.
B. Banks, that circulate repeatedly the original deposit, its source originates from the once newly printed money against government debts, multiplies this money as many times as it is lending it again and again. So on one hand banks create debts of non financial entities to the them in form of credit, on the other hand this credit is translated to additional money in the monetary system.

 

Yield driven capital

Capitalism is capital driven system, where yield hunger capital is the central pillar of the system. Average positive yield on capital demands positive economic growth on aggregate level. Capitalistic economy, in its foundation has a necessity for continued aggregate economic growth, and as such needs continues increase in demand for goods and services, that will pull with it a parallel increase of supply. To secure continues economic growth, the capitalistic economy developed tools to increase demand. Such tools include modern marketing as branding, advertisement, but also continues search for new products, some of them human life paradigm changing.

If in the past the major driving force for technological development was the need for advanced military equipment, or fierce competition between world leading superpowers, not anymore. Since the collapse of the Soviet Empire, the major engine of the technical advance became introduction of new paradigm changing products to the consumers markets. Technologies like space technology, GPS, internet, used in the recent past purely for military purposes, or initiated by governments within global competition between two superpowers for political superiority, are introduced to civil markets as new consumers products, to drive the need for growing aggregate demand, that will bring increased supply levels, what in other terms is translated as economic growth.

While satisfying the need for growing supply, additional new products introduced globally on markets, brought high level of employment and increase in productivity. Introduction of new technologies in production processes increased efficiency of capital and labor usage. Global brands are enabling worldwide distribution of the same products, using global financial institutions and capital in global consumers markets, and the demand and supply for the same products is satisfied. This consumerism driven culture changed the way of life worldwide from local to global.The same food chains, drinks, clothing, music, movies, etc. are produced and distributed in every corner of the world.

Consumerism became the major social and political ideology in all the societies worldwide, including in those countries and cultures, that are trying to oppose it, and are trying to introduce ideologies opposing the focus of the individuals on consumerism. But these societies can oppose successful only temporarily this trend, while using repressive political institutions, and when this system changes to more democratic and liberal, the local culture inevitable transforms itself into culture of consumerism. This is what happened in the post communist countries. In some religious or ideology based countries, where still exists opposition to culture of consumerism, will eventually follow this trend too, or fall into huge identity crisis, when the leading elites will be disconnected from the masses, demanding to adopt consumerism, promising illusion of happiness through comfort and leisure.

While local way of life can exist without adaptation of modern economic tools, and some human activities can be self produced and self used, without to be exchanged by mean of exchange, money, not so in global exchange markets economy, where every product is monetised, and has its price. The process of monetisation itself brings economic growth measured and expressed as monetary income. This economic growth, even if not accompanied by growth of physical side of economy, but just a process of giving price lebel to already created product, is important, because it increases the economic basis for tax collection and return on capital investment. Other form of monetisation is the process of privatisation, that is not only change of ownership and management of economic activity from public ownership to private ownership, but also monetisation of services, before distributed freely for all and financed through taxes to distribution through private monetised system

All these components of capitalistic economic system created an unprecedented drive for global economic growth, that in last decades reached annually 3 – 4%, (except in years of economic crisis, like in 2008). Such a growth is unsustainable, because of it’s devastating impact on global environment. Since without economic growth, existing capitalistic system will necessarily fall into economic crisis, if no organized system change will happen, it will necessarily bring global environmental collapse. Until now no democratically elected government tried to cope with the problem of creating economic system with long term ecologically sustainable economy, and rather acted out of short term populistic policy. When the need for sustainable economic system will penetrate the understanding of the masses and their democratically elected representatives, the capitalistic yield driven economic system will have to change fundamentally, and with it the unrestrained consumerism of each individual in the capitalistic society.

If it will not happen in organized way, it will happen as a new global economic break down, that can come in form of economic crisis, or complete system break down of countries. (As it is happening in some Arab and African countries). It will also trigger mass migration of people from economically and ecologically collapsing countries to neighbouring rich and relatively stable countries.
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Money as sole product value measure agent, representing relative value relationship between different products in the market, in form of price of the product, or exchange value measurement, also represents future exchange value, and as such it has capacity to accumulate wealth. No commerce can be even imagined without such a tool as money. Since all economic activity is about exchange of products, money is fundamental to any economic system. But this value holding asset property of money needs faith in its sustainable value. Faith is a human concept, totally unpredictable. So money value is unpredictable too.

All the economic models have underlying presupposition, that interest rate influences the human evaluation of money as value holding asset. This is why higher interest rate should cause increase in wish to hold money, meaning increases its relative value as asset value guard. But there are other, not less important factors influencing money’s asset value holding properties, like it’s scarcity or abundance, and also the trust in vault depository institutions, like banks, insurance companies and other financial institutions. Distrust in any of these my cause failure of the whole economic system based on money, like the modern exchange based economy.

It can be observed that since 2008 crisis money is changing its position and status.
Quantitative easement is not only about transfer of cash money from central banks to commercial banks, as against overpriced securities and other financial assets, but also causing abundance of cash money in the economy. The 2008 year collapse of economy, was followed by collapse of trust in financial institutions. The restored trust in the monetary system and its institutions happened because there are no real alternatives to existing system. Bitcoin and other cryptocurrencies as alternative, because of their high value volatility, are still marginal as tool of economic value exchange mean. So the official money, issued by the central banks is the only real mean for commercial exchange. But money is losing its position as value preserving asset. The worldwide increase in real estate, company shares and even cryptocurrencies prices is rather decrease in value of money, than increase in value of non monetary assets. Since the fixed value of money is absolutely necessary to sustain faith in its validity, this processes need tight follow up.

Science versus anthropocentric faith

The humans life span is less than 100 years, his height up to 2.2 meters, health weight of a healthy adult individual is between 50 to 150 kg, while the realities of universe are in completely different dimensions. The universe, but also planet earth exists billions of years. Its size is in billions of light years. Even the Earth Radius is 6,371 km, Mass: 5.972 × 10^24 kg, Area: 510.1 million km². So the geological or universe dimensions are at entirely different time and space extent than those of humans. Still the anthropocentric belief systems, remained the focus of cultural value systems, even when it became clear to most of the humans on the earth, that not the human beings, and not even the Earth, have any kind of central meaning on the global, whole universe scale of existence.

Culture refers to all human knowledge in all areas of human consciousness that have ever been created and is preserved and will be created in the future. Human consciousness can be individual but also of a social group, acting, feeling and expressing together within their cultural heritage. Culture is common cognitive expression of each individual belonging to certain social group. This expression is perceived differently within the group than out of it. Even if every individual has the capacity of his own cultural expression, it’s cultural expression is in relation to the culture of the social group, to whom he belongs to. Any individual cultural expression can be positive, negative or neutral in relation to the cultural framework norms, in which it was created, and the cultural framework will always be in the background of it.

There are societies, where individual cultural expression of non conformism is accepted and even positively encouraged, and they are social groups with no tolerance to non-conformity, and individual expressions, alien to the norms of the group, and they are unacceptable and repressed, either by political-physical abuse, or by psychological-ideological indoctrination.

Religions, faith in supernatural phenomena, belief systems, at first came to existence, to explain the everyday phenomena, that needed explanation within the human capacity of perception. The stories of creation are all anthropocentric and within framework of human dimension. So the universe was created in six days, stars and planets are within human reach and influencing the personal human destinies (astrology), etc. As the modern sciences, started a process of unwalling one by one events, that appeared to pre-scientific worldview supernatural, as perfectly natural understandable phenomena, it became hard if not impossible to keep this kind of belief system relevant. Still the human need for purposefulness, that can’t be fulfilled by material explanation of reality, continue to give legitimacy to belief in supernatural phenomena a substantial role. So the religion or any other belief systems based on faith in unexplainable phenomena, continue to exist even in the modern age, among those ignorant to the natural reality explained and based on evidence achieved within scientific method. Even more, the faith in supernatural phenomena and transcendental occurrences continue to play central role for human individuals, even if they are aware of scientifically verifiable or refutable findings about natural reality. This denial of scientific explanation of natural reality, is explained by limiting the science to material side of reality, while the spiritual, non-material side of the reality, by its definition is beyond the reach and comprehension within the scientific method. The faith in spiritual phenomena didn’t disappeared, due to the human need for cultural and social belonging and purposefulness. The social framework grouping the individual humans, fulfills a genuine need for identity, that gets satisfaction with all the unique cultural phenomena like symbols, colors, flags, clothes, hair cut, slogans, quotations, tales, stories, theories, conspiracy theories, myths, etc., special and unique for the various social groups. These groups as they come to existence or continue to exist through the ages, create or emerge within the framework of their social group political structures, with defined system of authorities and hierarchies.

This is how national leaders can still continue to speak about uniqueness of their nation or faith, that has meaning far beyond the real time and space reality of the existence of the specific nation, social group, community or even the human species as whole. This is how, in age of sciences, within the cultural context of social community, still is acceptable to nourish ideologies, using terms like eternal time or geographically boundless purposes and uniqueness of the culture of specific community, Our community.

Any argumentation based on scientific rational reasoning or evidence is useless against these ideologies, because scientific rational reasoning always claims to be an universally verifiable phenomenon, and if refuted then it will be always universally refuted, with hope that it will bring new scientific findings, while the refuting evidences will be the starting point of the new scientific theory. Since any faith or belief system is in the center of social-cultural belonging to certain social group, any evidence or argumentation against the Truths that are substantial to the faith, will irritate the members of the social group, and they will react with animosity.

Yet faith in national, above national or subnational cultural group anthropocentric believes, are not the only cultural phenomenon on the social group level. The social grouping with faith in preserving the need to preserve nature, or animal kingdom, or even unique cultural grouping is non anthropocentric ideology.One of such cultural systems is the faith, that the ultimate goal of any socio-economic political system is to preserve human culture with all its diversity and uniqueness. The social group following this faith believe, that the precondition to secure preservation of human culture in all its existing forms and manner similar to what is familiar to us, is to preserve the diverse biologic metabolic systems of life existing on Earth at the most varied level. In the essence of this standpoint stands the understanding, that human culture includes human interaction with nature. If the nature will be diminished or disconnected from the human existence, it will change the cultural approach, leading and fulfilling the purpose of human existence. Such a change, together with the advance of new technologies may create an undesirable world, where humans will lose their position as messengers of higher purpose, than existence of humanity by itself.

Currency, Deficit and global economy

The ideas about trade deficit and currency value importance are left overs of times of national and marcentile economies, where commerce and capital flow was limited and restrained. (historically the last marcantilism was the British colonial empire). This times are long time over, even if prevails certain nostalgia in GB for those times. (viz. Brexit). The global markets and global capital took over the lead, (unless some crazy president will be successful turning back the time). In global economy the capital flows to places, where primarily it promises highest political and legal security and stability, and secondarily it promises the highest yields. This is why US can maintain its huge trade deficit already three decades, and China has outflow of capital. This may change if the position of US dollar will change. There are several threats on the horizon, that may endanger the US dollar position. The most important is Trumpamania. But there are others:

A. The first and imediate threat is making the Chinese RMB a freely convertible currency. On one hand China measured in merchandise production performance, has become the biggest economy in the world, yet it always will be an underdog to US or Euro based economies, until its currency will not be freely exchangable and its exchange value will not float freely. What gives strength to US and the European economies is not their production capacity, (that is still there even if not fully used), but their financial system, supporting their markets.

B. The cryptocurrencies. Even if still marginal, and all the governments and financial institutions try to keep it marginalized, the idea of blockchain and smart contract technology can become a leading intermediation tool as value of exchange. I can imagine an economy, based on idea of barter commerce, where no intermediating money is involved, and products are exchanged against other products, for contracted exchange value, without money as intermediator. I heard about a platform, where plumbers, electricians, any other kind of technicians, dentists, cleaning ladies, etc. exchanging their services as mutual help. Instead of price, the exchange value will be agreed in blockchain-smart contract system, eventually the exchange value of different products will be normalized, exactly like the exchange value of currencies, and there is no need for price. But this is just one idea among many others, that can appear in the new crypto-backchain-smart contract economy. 

Of course it would have catastrophic consequences to the banks, but also to the governments, who will have difficulty to collect taxes, and their (banks and governments) monopoly on money creation will be endangered. In Davos we could see the carefully formulated reservation of major representatives of the existing financial system, to what is happening. But it seems, since 2008, the fraud foundation of the existing monetary system was exposed to the public, that felt to be deceived, and reacted with refusing to continue to accept the legitimacy of the existing political and social system, based on tight collaboration between the governments and the financial barons and big publicly traded corporations management. It resulted Brexit and Trump, but also the new phenomena of cryptocurrencies, and investment platforms of crowd financing, that became certain alternative to the existing financial institutions. It seems no power can push back the Genie to the bottle.

Top-bottom, bottom-up resources allocation

From the very down of human history, social communities, characterized by their political-economic management systems were created, to cope with problems of security and material prosperity, as main problems of human existence.

The economic-political management systems major point of interest is how, to what segment of the society, and from whom to allocate the limited resources, the concrete social grouping, with decision authority will do. The management-decision making tools used in these political-economic grouping can be differentiated between two kinds of systems, the top-bottom or bottom-top systems. These two economic-political management system were implemented intermittently in different communities and at different times. At the top-bottom economic-political systems, the authority to allocate resources, is centralized, while in the bottom-top economic-political systems, many individuals are involved in decision process, about resources allocation.

The hunter-gatherer societies the tribal system implemented most probably in its simplicity, used rather bottom-top management system. Then with growing population and its concentration adjacent to rivers, used for transportation, communication and irrigation in arid places, a centrally managed government, started to implement rather top-bottom management system. The top-bottom management systems, used in new kind of agricultural settlements, cities, was not based anymore on the need to communicate with every significant part of the society, considering their particular interests and opinions, when concluding a joint agreements with every part of the society but on representative social political system, where the top management was supposed to represent the bottom masses. The more complicatedly structured societies, that couldn’t be based any more on individuals acquainted to each other, needed universal laws issued by central authority. So were created the empires, like the Egyptian empire, and later the Roman empire, indirect descendant of the Egyptian empire, or the Summer culture, that was subsequently followed by the Parthian empire. In between the early Summer culture, emerged other empires, that eventually collapsed and were many times temporarily replaced by culturally less developed societies, mostly managed in bottom-top system. So it happened, when the Roman empire, that was very much centralized, and managed as top-bottom management political-economic system, was destroyed, and small barbarian kingdoms, managed rather as bottom top systems replaced them.

The same question of these two management systems on the scale of whole social grouping, modern states, is present also now in the modern economic systems. Until quite recently, a highly orthodox top-bottom political system was implemented in USSR and its satellite states, the so called “Socialist Countries”, while in the so called “”Western  Countries”, namely Western Europe, USA and other American continent countries, Japan and some Asian countries implemented the so called “Market Economy”, or alternatively some may call it “Capitalistic Economy”, management strategies. While “Socialist Countries”, tried to implement their top-bottom management economic system, in all levels of economic activity, with growing orthodoxy, the “Western Countries” implemented their bottom-top economic system with less rigidity, while according to the temporary public mood, fashion or political opportunism, they shifted from more orthodox bottom-top management economic system to the partial top-bottom system. The Socialist countries used the centrally managed top-bottom management system to concentrate political power in hands of the political leadership of few, while the more flexible market economic systems created a partnership between the political leaders and the economic leaders. Since the early nineties of twenty century the top-bottom economic system collapsed with the collapse of the “Socialist” economic system, and whole block of countries, with about five hundred million people joined the market economy. Adding to it China with the more gradual but with same aming process of decentralization of resources allocation management, and practically most of the world economy, in very short time period joined the market economy. It is not surprising that the capital based market economy thrived for almost twenty years since then.  

The market economic system adopted with warm welcome hug the newcomers in the global economic system, with all their huge resource allocation, these underdeveloped new markets needed. New opportunities for more efficient resource allocation gave new opportunities for capital to generate higher yield. This gave new opportunities for the capital, accumulated in the pre-collapse capital driven market economic entities to use their accumulated capital from the past,  management know-how, and consumers oriented technology to allocate production capacities to the new participants in the global market economy. The famished consumers in these new markets at beginning absorbed more and more from the production capacity of the Western economic entities. Together with it new production facilities were built in these new economic regions, utilizing the relatively low production costs, with technologically and intellectually relatively well educated population.

The huge global corporations, used skillfully their accumulated capital and know-how, to increase their wealth and with it their political influence, on the local, but mainly on the global scale. This partnership caused evergrowing concentration of capital and as well political power, process that stand in contradiction to one of the pillars of the market economic system, widely distributed entities with capital and resource allocation capacity, fiercely competing among each other. This process concentration of capital and political power, caused growing concentration of decision making processes about allocation of resources. Again a process heading toward  top-bottom management economic system seems as taking over the economic decision process.

To all the above, joined with ever growing economic influence, the new technologies, based on accumulated scientific findings generated and accumulated at accelerated rate. These technologies brought revolutionary communication systems like, personal computers, internet web communication, mobile phones. Soon new consumers markets were established on the internet, with major influence on the economy.

New technologies introduced to production processes, make the production cheap, almost with zero marginal costs in certain segments of the economy, while the major cost is connected to investments. The result is transfer from labor costs to capital costs.

As a byproduct of these process, in democratically elected political representation political entities, inequality in distribution of income and wealth grew to levels unprecedented in modern times.