[ExI] Energy and Henson's forecast

Lee Corbin lcorbin at rawbw.com
Sun Nov 29 12:06:23 UTC 2009

BillK writes

 > There has been a huge transfer of wealth from the middle classes to a
 > tiny percentage of the super-rich because of the takeover of the
 > financial system.

I used to dismiss such ravings as the work of disgruntled
leftists. But I have converted. Even among the supremely
gruntled this has to be taken very seriously. The entire
banking institution appears to have been designed from
day one to fleece those furthest away from the hot-money

 From the very first gleam in the eye of an Italian banker
ever so long ago in the middle ages, as he saw that he
could simply open an account and say that there was
money in it (knowing full well that the odds of anyone
discovering the cheat before he could recoup interest
were nil), the auto-deflation of what was in everybody
else's pockets has been ongoing. Somebody else borrows
the non-existent money, beats you to the merchant in
the street, and dumb you has no idea why prices keep
going up.

It was hilarious a few days back when the very notion
of Timothy Geitner being a part of the banking/financial
clique/coterie was dismissed out of hand as being "too
obvious" to count as a real conspiracy theory by Robin
Hanson. See that one?

(out of order BillK also said)
 > The money has disappeared already. They are just covering up the
 > problem and hoping things will get better.  The banks are staggering
 > along using lies and false accounting. Either the big problems are
 > 'off-balance-sheet' (Didn't that used to be illegal in the good ol'
 > days?) or their assets are on the books with false valuations. That
 > million dollar mansion with the 950,000 dollar mortgage is still on
 > the books. But under the sheets the mansion could only be sold for
 > around 400,000 dollars and the mortgage is a year in arrears.

Yes, the Japanese spent the whole decade of the '90s unable
to deal with the problem of their false valuations. So
this makes more credible Eliezer's speculation that the
"downturn" we are in could last for a long, long time.

I really don't know, but I hope that the Euro isn't
being as steadily undermined as the dollar, but the
whole house of cards could come down any time. That
$950,000 qua $400,000 you talk of conceivably could
become $000,000 (though as I say, not overnight).
Some people incorrectly think that Washington is
printing money. Nothing could be farther from the truth:

Right now, the production of hot money is kept carefully
controlled. Only so much is put into circulation as
some particular firm volunteers to borrow. (You see, that's
the only thing holding back the creating of infinitely many
dollars.) It's very complicated, this dance over here
between the Treasury and the Fed, which does exactly
what in what order to create the money is very muddled.
But in a nutshell, the Fed and the Treasury copulate
somehow, though it's the rest of us who get screwed.

NOW IF WASHINGTON REALLY began just printing money, (just
saying that such and such account now has X trillion
dollars in it) it would be instant Armageddon. Because
the ChiComs and everyone else propping up the dollar
would panic. Like I said earlier, Obama's real message
to them was that the U.S. must be considered too big
to fail, and that their prudent course is to keep on
buying and buying U.S. bonds and keep on propping up
the system. Or else.

Or else, in practical terms, the end of the world.

> With real unemployment approaching 20% (more in some areas) much of
> the population is surviving on food stamps.  This is an ideal market
> for self-sufficiency. There is a grass roots movement starting up
> already. A small investment by the government would be snapped up by
> the population. (Not the states - they are broke as well due to the
> drop in sales tax, property tax and income tax and they haven't
> reduced their expenditure accordingly yet).

What kinds of "grants"? You are worrying me here. You mean
*just* the solar power, windmills, etc. infrustructure malarky?

> If the government started offering grants to the people for solar
> power, windmills, etc. everyone would take them up. When you have
> nothing left, you take anything you can get.

That reminds me of Mao's big plans for steel. "Now," said Mao to
himself, "let's suppose that every back yard becomes the site
of a family size steel yard. The cadres will force the people
to take anything that has iron in it and melt it down in their
backyard furnaces and, uh, lessee here, 9.8x10^8 people times
oh, say, 10 kilograms, that's uh, something on the order of
10,000,000 metric tons of new steel!! Which'll put us in the
front ranks of the world's industrial states!!"   Of course it
was a total catastrophe, and all those millions of back yards
had these awful little piles of totally useless slag, and no
more metallic farm implements were anywhere to be found. Forward
the great leap.

No. The thing to do to address unemployment is to lower wages.
Those could be called "market clearing wages", as the demand
for labor stoops down to pick up the increased supply. Then as
all the people can find plentiful jobs (though at poor wages)
output goes up and along with it wealth creation. And things
slowly heal properly, the way they should.

But ha! Let supply and demand do their work? Bite the bullet
and put a time limit on the misery?  No. Never. The government
will just keep sending people their unemployment, and keep
on printing up food coupons---hell, who needs to produce
anything when piles of foodstamps and extended unemployment
benefits are to be had for free?

> This is what the government should have done to recover from the
> depression - offering stuff to individuals rather than handing
> trillions over to the already rich groups who just said thanks very
> much and did nothing with it.
> But unfortunately the government is run by and for the benefit of the
> rich, so it will take a big grassroots revolt to get them to pay
> attention to the people.

I would say, BillK, that the government *can't* end the depression.
Only wealth creation---not phony, but real wealth creation---and
real employment (not fake jobs) can do that.



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