The idea of fixing the economy, for most people, means providing a means of making a living (a job) or other opportunities to acquire the things they “need” to survive (shelter, food, water, health care) and some of the basic “wants” for recreation, hobbies, leisure, etc.
With that in mind, let’s examine why a growing number of people in the world are not able to meet their basic needs, let alone their wants. And then take it a step further to suggest solutions for creating an economy that provides for the greatest standard of living for the maximum number of people, while taking care of everyone.
Money / Debt
Money may not be the root of all evil, but it is certainly the root of our current economic issues. The monetary system is based on fiat paper dollars that are created out of thin air by central banks at the direction of corrupt politicians. The problem with fiat money is that it can be printed at will by bankers and politicians that always abuse the system, creating huge levels of debt and inflation, spending beyond their means, while enriching a select few in the process. Those with access to the money first at little or no interest, have a huge advantage over the rest of society. Banks can simply borrow money at 1% and loan it out at 4% or park the cash as excess reserves and earn interest greater than the 1% they are paying to borrow the money. What a great deal!
In exchange for this cheap money, the banks are huge contributors to the campaigns of the politicians that allow this system to perpetuate. Not satisfied with this advantage alone, the banks then use fractional reserve banking to maximize their profits with little concern for the risks. They get to keep the astronomical profits when their bets pay off, but any losses get socialized and dumped on the taxpayers. Another great deal! Can you imagine going into a casino and getting to keep any money that you win playing blackjack, but then have everyone else in the casino pay for any hands that you lose? Sign me up!
They also create elaborate derivative-based investment vehicles in order to further increase their profits by essentially tricking other institutions, hedge funds and pension funds, thus stealing their wealth. It is a system that encourages people to find ways to fleece those that are less knowledgeable, less connected or more naive and trusting. This zero-sum game of manipulation most often ends with the richest getting richer at the expense of the little guy trying to get a decent return on this money. They do this by using insider information, expensive computers that perform high-frequency trading, co-location and various other tools that the average investor does not access.
And guess what? This is the fastest growing sector of the American economy, while manufacturing has all but vanished. Wall Street is having a blast and making record profits as ridiculously low interest rates force disadvantaged investors into the stock market in search of returns greater than 2% annually. That 2% rate offered by banks actually translates into negative returns, as the inflation rate is several times the savings, money market or CD rate being offered. Investors make a return of 2%, but the prices of gasoline, food and most everything else they buy on a regular basis goes up by 5% or more, eliminating any benefit of the pathetic return offered.
The other huge problem with the debt-based monetary system is one that is not often discussed. The fact of the matter is that all of the debt created can NEVER be repaid. And this is by design. For a simple example, consider that when a bank creates $100 and lends it out, they demand to be repaid with interest. Even with an effective APR of just 5%, they must be repaid $105. But where does the extra $5 come from? Only $100 was created, so where is the extra $5 to pay the interest? Or how about a mortgage loan, where the borrower is usually asked to pay back nearly DOUBLE the amount loaned over the term of the loan. If I borrow $200,000 to buy a house and I end up owing back $400,000 to the bank, where is the extra $200,000 supposed to come from?
It has to come from other money in the system. But the problem is that all of the other money floating around is also owed back to a bank somewhere with interest, so that money is not truly available to repay the principal plus interest that the bank is expecting. The economy could grow, more widgets could be produced, asset prices could increase, but it still takes new money (inflation) in order to buy the extra good or more expensive home. That new money was created by a bank somewhere that also wants to be repaid both the principal and some interest. And on and on the game goes until you reach a breaking point, when nations and individuals all over the world are forced with defaulting on their loans. Sound familiar? We are approaching that breaking point right now! With the debt-to-GDP ratio in the U.S. now officially over 100% and likely closer to 500% when including unfunded liabilities, the debt is creating a huge drag on the economy and seriously impeding the potential for growth.
So, we must realize that ALL MONEY IS DEBT. And as the process goes on and on, the total interest owed as a percentage of the available money in circulation only grows. At some point, the interest alone that is owed back to the banks will be more than all of the money in existence! Think about that for a minute.
And since there isn’t enough money to pay back the banks with interest, the banks then get to seize control of a nation’s resources or an individual’s home and other assets, as is occurring at an accelerating pace today. If this continues, one day we will wake up and the banks will not only have all of the money ever printed, but also all of the resources on the planet, in the form of real estate, gold, oil fields and any other form of wealth that was once owned by the people.
How was this system ever allowed to be implemented? It was well-disguised and the masses were dumbed down enough not to understand just how bad they were being screwed. But the great awakening has begun, from Tunisia to Spain to Greece to Wisconsin, the people are waking up and realizing how the bankers and their governments have colluded to accumulate the world’s wealth for themselves.
So, this leaves the 99% of society that does not run a bank or have access to money at 1% interest left to scramble and compete for a shrinking pool of cash available to pay back loans. As this process continues, more and more cash gets concentrated in the hands of those 1% and the desperate suckers (the rest of us) often resort to really abhorrent behavior to try to get whatever crumbs are left over and pay down debts. We fight amongst ourselves, pick a party to support like a football game, yell, scream, fight and toil with each other while the elite sit back and watch their pockets grow fatter. This is the essence of “divide and conquer” and it has worked up until present. Infuriated yet? Unless you are a bankster, you should be.
Jobs are always at the top of the list as they provide the income everyone needs to survive and prosper. It is always the issue of highest priority for politicians developing talking points, as they know the people are desperately looking for answers. However, with a bunch of corporations concerned first and foremost with their own profitability, what is the incentive to create jobs in the United States, where wages are considerably higher than other parts of the world? If I run a corporation and my primary objective is to maximize profits, I am not looking to hire expensive workers, compensate them well, treat them fairly and create job growth. I am looking for ways to reduce my overhead, automate my systems, hire as few people as possible and pay them the least amount possible. I then go about creating the cheapest product possible and seek to sell it for the highest price that I can, all while wasting valuable resources trying to convince people that they need my product to fill some emotional void.
Another huge factor driving the lack of jobs is technological unemployment. Robotics and computer-driven machines are now able to perform many of the jobs that used to be available to citizens and they can do it cheaper, better and faster than a human could. This phenomenon is not going away, but will only accelerate as technology advances. So, the good old days of being able to find a job if you just work hard, are loyal and get an education are long gone. Jobs will only become increasingly scarce and none of our leaders are addressing the issue honestly. Unless Americans are prepared to work for $5 or less per hour, they will continue having a hard time finding jobs. And even if they would work for that amount, the minimum wage requirements make it all but impossible for companies to pay this rate legally.
Part of the reason for the unemployment also goes back to the flawed monetary system. With a greater percentage of the world’s wealth getting concentrated in the hands of a few very wealthy individuals, what is their incentive to create jobs? They are already financially set for life. And the more the wealth gets concentrated, the worse the economy and unemployment will get. If you give a poor or middle-income person a tax cut or extra $20,000 a year, they will spend that money into the economy. A tax cut or extra $20,000 for a millionaire just gets hoarded or invested in the casino called Wall Street, which provides little value to society. Yes, they *might* invest in a company that *might* use those funds to hire new workers and this *might* be in an honest and sustainable business that translates into true economic growth that helps everyone. But the $20,000 going to a lower-income family is going to translate into instant economic activity that is much more likely to have positive effects that trickle through the economy and society.
So, where will the jobs come from under the current system? I can tell you where they have been coming from… the government. The public sector is leading the anemic amount of job creation we have seen recently, as the government simply borrows and prints money to create jobs, placate the masses and give the impression that things aren’t as bad as they seem. This of course is not sustainable and not a good strategy for job creation. Governments have proven to be inefficient and this type of job creation only increases the debt and accelerates the decline of the dollar, which hurts just about everyone.
Printing cash to stimulate the economy or create jobs also has a rapidly diminishing return as every new dollar directed towards this end will have less and less of an impact. The reality is that the population is growing faster than the economy and job creation can not and will not keep up. High unemployment numbers are here to stay, so we have to think about intelligent ways to re-design the system to account for this reality. We may even be able to create a system that requires less manual labor, yet yields more goods and services, decreasing the number of hours we all need to work and increasing the free time necessary to pursue non-monetary passions, interests and creative pursuits.
Concentration of Wealth
Let’s get down to one basic truism that you should have gleaned by now: the concentration of wealth is bad for the economy, bad for job creation and horrific for poor people that are no longer able to afford food or healthcare because the world’s wealth is sitting in the hands of a few. The richest 1% of people control 40% of the world’s wealth. This growing income gap also leads to increased levels of crime and violence, as people become desperate and do whatever it takes to acquire the money needed to survive. As this money becomes more and more scarce, the deterioration of society becomes more evident. Furthermore, the monetary system itself creates artificial scarcity by providing an easy means for wealth concentration. So, we must endeavor to re-design the monetary system in the short term and ideally, eliminate money altogether. It takes an open mind and is hard to imagine, but I invite you to consider this possibility by visiting the following links (Link 1, Link 2, Link 3, Link 4).
I know that I might be called an evil communist for espousing such views, but it does not make it any less true. The concentration of wealth and resources in the hands of fewer and fewer individuals is absolutely disastrous for society. The more the wealth of the world is spread around, the better off we all are. The ultra-rich and their puppets in Washington D.C. have done an amazing job at convincing people otherwise and even getting citizens to vote against their own economic interest. It is time to wake up. Making the rich richer does not create a wondrous trickle-down effect that helps everyone. Reagan’s supply-side economists inadvertently proved this point beyond a shadow of a doubt. Voodoo economics indeed!
Marx raised another serious issue with the capitalist system that I have never seen adequately addressed. A capitalist economy must constantly grow in order to survive. While globalization has helped to this end, the markets can not grow indefinitely, at least not in the organic sense. They have been growing recently as a result of simply inflating the money supply, but this is not the true growth in value or volume that the system requires. So, the growth curve will eventually flatten due to declining aggregate demand, revealing what might be a fatal flaw in the economic system. We may be witnessing the first major signs of this flaw, as economic growth is becoming more and more elusive in the face of mounting sovereign debt throughout most of the industrialized world.
While I acknowledge some of the efficiencies and value that the capitalist system has brought us, it still seems eerily reminiscent of a Ponzi or pyramid scheme that requires a constant flow of new suckers (markets) in order to be sustained. This system, along with the ability to print the world reserve currency at will, has created an artificially high standard of living that can not be sustained. Just like Madoff and his clients were on top of the world for a while and eventually had to face a bitter reality, so too will Western nations have to realize a significant decline in living standards before this system crumbles and a new one emerges.
Taxes, Free Markets and the Profit Motive
I hate high taxes as much as anyone else. I would like to keep more of my hard-earned income, rather than giving it away to an inefficient, wasteful and corrupt government. So, I am in favor of significantly reducing the size and budget of the Federal government. This in turn will create the conditions necessary to lower everyone’s tax rate. But simply lowering taxes without proportionately reducing the size of government will not have a positive impact on the economy, as some politicians would like you to believe.
In fact, some of the most prosperous times in U.S. history occured when the tax rates were very high and very progressive. So, ignore anyone that tells you that simply lowering taxes will improve the economy and create jobs and economic growth. It must be accompanied by spending cuts from the government and the larger the portion of those cuts that goes to the poor and middle class, the greater the impact to the economy will be. Lowering taxes for the ultra-rich, just helps them get a little richer, further concentrating wealth and stagnating any potential economic growth. There is some small amount of job creation as a side effect, but it is not the panacea they claim it to be because most of the benefit goes directly to the saving/investment of the rich, not into the economy.
Corporations, business leaders and their puppets on Capitol Hill argue for low taxation and no regulation behind the shield of free market capitalism. It is taboo to discuss alternative systems or level criticism against the free market system anywhere in mainstream politics or media. Of course corporations want lower taxes and no regulations… it helps them to acquire and concentrate more wealth.
But I’ll call their bluff when they also claim that free market capitalism is the reason for America’s success and prosperity. Access to cheap energy (oil), technological innovation, owning the world reserve currency and unparalleled military might are the elements which have created our prosperity. We have used our military to steal valuable resources and demand below-market fuel prices from other countries, while forcing nations around the world to accept our debt and fund our extravagant spending habits. Most, if not all, of our wars have been about stealing resources and ensuring the dollar continues its monopoly as world reserve currency.
There is also the hypocrisy of free-market economists and politicians calling for massive taxpayer bailouts for the banks, rather than allowing these institutions to fail. What happened? I thought the invisible hand of the markets settled everything properly and there ought not be any interference. I guess that doesn’t apply when it is their top political donors that need the help.
More than the capitalist system, these are the elements that brought America its prosperity in the past century. Yes, there has been hard work, brilliant minds and a relatively high level of personal freedom that has also contributed, but the free market system, if we ever truly had one, deserves little credit for our prosperity. The argument has only been useful in helping the richest in society get richer at the expense of everyone else.
The last element to discuss is the profit motive. Those that profit most off this system would have you believe that society would break down and cease to function properly without the profit motive. But this is simply not true. Most of history’s greatest thinkers and innovators were motivated not by profit, but by problem-solving, recognition and their love of science. Nikola Tesla, Albert Einestein, Thomas Edison, Buckminster Fuller and most of the greatest minds in recorded history worked because of their passion for the sciences, learning, solving equations that nobody else could, and the recognition that comes with it. While everyone wants to live comfortably, materialism and monetary reward were not the key drivers of their innovation.
If we lived in a world void of the profit motive, innovative minds would still want to innovate, create, solve, evolve, invent and discover new and better ways of doing things. Those screaming of the necessity of the profit motive are the very ones enjoying the power and luxuries that the system has provided.
And let’s not forget the negative consequences of the profit motive. This system encourages mankind to do whatever is necessary to acquire more money and power, regardless of how it impacts others or society as a whole. The profit motive encourages weapons manufacturers to agitate for more wars, encourages chemical companies to dump pollutants in our rivers and oceans, encourages sweat shops, poor work conditions, insane laws that create more and more “customers” for the privatized prison system, the suppression of new technology (when it might hurt older/slower businesses) and most of the action on Wall Street that has led to our crippled economy and widening income gap. Vast amounts of resources are also wasted in advertising campaigns and discrediting competition.
Repealing Obama’s healthcare plan will have little impact to the economy. I don’t like the plan, particularly forcing people to buy healthcare under threat of fines or jail time. That portion is highly unconstitutional and riddled with philosophical and moral contradictions. I also don’t think the GOP plan to completely privatize health care is a good idea either. History has shown that prices rise faster when private enterprise controls the health care system, energy grid, water distribution or just about any other essential systems. Any efficiency that might be gained from it being private rather than public is squandered by the necessity of the private system to generate increasingly large amounts of profit off the sick and dying. This middle man actually increases the cost of health care to the astronomical levels that we are currently experiencing in the United States.
While I can agree with conservatives and libertarians about the government overreach and efficiencies of the private sector, their version of privatization is not the solution to all aspects of society and health care is a prime example. There are certain areas of life that simply should not be utilized for profit and when it comes to sickness and matters of life or death, I think there are better ways.
Health care should take place directly between the doctor and the patient, without a middle man. If we eliminate the insurance agencies profiting as middle men, doctors should then be able to lower rates, making health care more affordable to everyone. If health insurance is desired, it should be an opt-in system run on a non-profit basis. People have a tendency not to save for catastrophic events and will often not be able to afford health care when major things go wrong. This was the driving argument for insurance and I think there is some merit in this idea. But it would serve the public interest much better as a non-profit.
You would still pay a monthly amount for insurance and the non-profit would pool this money together to be able to pay out claims when needed. But your payments would be significantly lower, as the middleman is now a non-profit. It would likely slash monthly premiums by 50% or more. The non-profit can still pay its employees well and attract talented people to manage the system, but it would not have a mission or need to generate millions in profit every year. That money would be returned to the people in the form of lower insurance premiums, doctors could lower rates as they would no longer need to pay the health care companies exorbitant fees and most importantly, sick and dying people could now afford the health care they so desperately need. Couple this with preventative programs and a focus on healthy eating and exercise and we could quickly solve the health care crisis that is destroying lives and draining the nation’s wealth.
It is often said that war is the health of the nation. Some have taken this to mean that war makes an economy healthy and prosperous, thus advocating for war. The theory is that war necessitates production of military goods, tanks, aircraft and weaponry, thus putting Americans to work in factories. Some also argue it keeps oil prices low and opens new markets for our corporations, thus generating growth and creating more jobs.
What a twisted and wicked way to view the world, not to mention based entirely on false premises and leaving out key points. First is the obvious immorality of killing innocent people and stealing resources as a method of economic growth. If we treat others this way, we will get the same in return. I personally don’t want to live in a world where everyone is killing each other and stealing from each other in order to create economic growth.
The other important point to make is that the labor and resources used by the military-industrial complex to create all of those products is wasted. There is little in the way of long-term value or return on investment, as their “product” is either used to destroy or gets destroyed during use. Plus, there is a huge opportunity cost as the vast amount of resources wasted on military pursuits could be used in other sectors that generate positive short and long-term returns, while not creating enemies worldwide that we need to constantly defend ourselves against. Imagine what could have been if we used the resources of the Manhattan Project instead to generate a new, clear, renewable energy source. How about investing the Trillions spent in Iraq and Afghanistan on education, so that we are turning out scientists, engineers and designers that fuel economic growth for decades to come?
And while oil prices might seem lower on the surface, the true cost of oil when factoring in the cost of gasoline is closer to $10 per gallon. We just don’t notice it immediately, but the debt created from the wars weakens the dollar and makes prices go up for everything that we buy. And in terms of the new markets opened up for U.S. companies, they are hiring foreign workers and moving their operations offshore to avoid taxes and high labor costs. So, the taxpayer dollars spent on the war go to enrich a small group, while costing the rest of us considerably, in terms of a weaker dollar, higher debt levels, and growing worldwide resentment for our ability to murder in the name of economic progress. The wars are immoral, unconstitutional and extremely damaging to our relations with the rest of the world. War is the death of the state, as history has proven to the Romans, British, Russians and now the United States of America.
We need an entire reboot of our economic and political system. Minor changes and half-gestures are not going to do the trick or bring the desired effect. We have to completely flush out this old, corrupt, unfair system and replace it with a system that does not encourage the corruption that we see today. Those enjoying the wealth and power that the current system has given them will surely go down swinging, but go down they must. While a violent revolution seems unlikely and comes with all types of ill consequences, we are more likely to watch the system collapse under the weight of its own corruption. Although the transition is likely to be long and painful, the key is to be organized and ready to implement a better system when the dust clears. Here is what I would like to see:
1) Immediate forgiving of all debts worldwide. The agreements were not entered into with good faith and the system has been engineered specifically so that the debts can never be repaid. Instead, the World Bank and smaller regional banks are robbing the world’s resources as repayment for the money they created our of thin air. As of midnight tonight, all debts owed by all countries, both public and private, are hereby canceled. Individuals should honor their obligations and negotiate amongst themselves for ways to settle their debts, but there shall be no repayment of debt to any banks, governments or financial institutions.
2) The elimination of all fiat currencies. Any new money must be 100% backed by a basket of tangible assets, such as gold, silver, food or other commodities. Competing currencies will be encouraged and individuals are free to choose which they use to settle transactions. The next step would be transitioning to a moneyless society, using technology, automation/robotics and cooperation in order to create abundance for everyone. This is not some far off pipe dream, but possible even today with the resources and technology available, thus freeing mankind from monotonous, unrewarding jobs and maximizing free time, creativity and leisure. There simply will not be enough traditional jobs in the future to keep everyone employed under the paradigm of the old economic system. The new model will drastically reduce waste and obsolescence, creating efficiencies that allow society to function with a fraction of the workforce employed today. For more on this concept, visit www.thezeitgeistmovement.com or www.thevenusproject.com.
3) Immediate dismantling of all government agencies except the absolute minimum required for domestic defense and a justice system to settle disputes. This will in turn reduce the size of government by 80% or more and allow for the elimination of all income taxes in favor of a tiny consumption tax that is only applicable to spending in excess of $30,000 per year. Consumption taxes like value-added taxes tend to be more growth-friendly that income taxes. This would also allow for the elimination of the IRS and the huge amount of resources wasted on the overly-complicated tax system.
The few government agencies that remain would be prohibited from accepting any form of political contribution and would be periodically reviewed for performance that is aligned with the interests of the people. We must also eliminate too-big-to fail, which would address much of the lopsided lobbying influence in Congress. True campaign finance reform.
4) An opt-in non-profit health care system or direct settlement between doctors and patients for services rendered. Several administrations have tried and failed at meaningful health care reform. The fact of the matter is that the health insurance and pharmaceutical industries have too much to lose and have dedicated vast amounts of resources to defeating any type of reform. Premiums have more than doubled in the past decade and the insurance companies have continued to find ways to deny coverage as often as possible. They have entire teams dedicated to this, which is a clear conflict of interest if anyone is expecting a health care system that is concerned primarily with the health and well-being of its patients.
5) Slash military spending by 80% or more, leaving only the necessary defenses to protect the homeland. Deterrence worked during the Cold war and will continue to work in the future. Any aggressive military action instigated by a country outside of its own borders will be met with worldwide cooperation to end the aggression. This will lead to complete deterrence of any other nation attempting such actions in the future and leave the world in relative peace.
6) Prohibition of corporations as we currently know them. Instead, everyone would be personally responsible for their actions, rather than hiding behind the veil of corporate secrecy and legal protection.
While I am somewhat pessimistic about the short-term, I am absolutely optimistic about the potential for the future. It may seem idealistic, but I believe we can design a system vastly superior to what we have today. I am convinced that we can be prosperous, comfortable and healthy as a society, while taking care of our environment and each other. This new system will encourage a whole new set of behaviors for humanity, such as cooperation, compassion, respect and kindness, all while maximizing our freedoms to levels never seen before. We are entering a new era and will have the opportunity to make this vision a reality. I don’t view this evolution as optional. We either change our ways or perish. I hope you will stand with me, not only for yourself, but for future generations and the species as a whole.
If you have constructive criticism of my ideas and can present it in a respectable, intelligent manner, please feel free to email me at firstname.lastname@example.org. I may include the feedback in future articles and ongoing discussion. All abusive emails from those trapped in the right/left paradigm will be deleted immediately. If you would like to receive my monthly contrarian newsletter, click here.
Peace & Prosperity,