SUBHEAD: Finance is a taxing agent. It's relationship to commerce has changed to being purely parasitic.
Image above: Etching by John Martin (1732) of Lot leaving the "The Destruction of Sodem and Gomorrah". From (http://www.williamweston.co.uk/pages/previous/single/822/276/1.html).
By Steve Ludlum on 6 October 2010 in Economic Undertow -
(http://economic-undertow.blogspot.com/2010/10/lurching-tiward-gomorrah.html)
The world is under a lot of stress. Things aren't working. Everyone I know is having problems. Some are losing their jobs, their houses or have lost retirement savings. People looking to sell their houses cannot. Business activities are frozen. Banks aren't lending ... because there are few borrowers and those looking for loans cannot qualify.
A time- tested approach to dealing with systemic issues is to unleash the creativity and wit of individuals. A lot of talk by the establishment indicates it wants individual entrepreneurs to 'innovate' the country out of its malaise. Sounds good except the greatest obstacle to innovation is ... the government itself. It's hard to make progress when the government and its 'agencies' are actively pushing back! How can those nearing retirement save when 'safe' returns - interest on savings - are near zero? How can anyone buy or sell a house when the industry is rife with fraud from top to bottom, promoted and abetted by government? How can a young person enjoy a secure future when such a future requires passage though institutional gateways that saddle that person with unserviceable, unsupportable debts?
How can the country adjust away from energy waste when waste is a structural component? When destinations are spread across the countryside, when replacing them cannot be contemplated due to sunk costs, resistance to the creation of alternatives and a decline in capital? How can change be accomplished when those most able to take the required steps - the young, bright and ambitious - are frozen into stasis by establishment prejudices, institutional favoritism toward a few central industries and a culture that has lost curiosity?
If work, skill, labor and sensible capital investment is deprecated, what's left? If workers cannot get good jobs - the platform by which workers- as actors exhibit their skills and accumulated experience, what can Companies accomplish? Workers are companies' customers. If companies cannot find customers, what allows them to earn profits? If companies cannot profit, who hires the unemployed, who allows both workers and companies to accumulate capital? How can capital be accumulated when there are no returns/yields on savings? Without employment, customers, profits and capital accumulation, how does anyone/anything complete the virtuous cycle?
The decline in 'real commerce' leaves only speculation in various pseudo- 'Markets', which is what the various nations' central banks are offering as a substitute for hard work, innovation and risk taking. Welcome to the casino, where there is only the risk. In these markets the first and only question is, "What position in this market is the government taking?"
Says Charles Hugh-Smith:
Says Ilargi at Automatic Earth:
And talking about "would you buy stocks in the face of this data", for a preview of next time: we're fast on our way back to what "we" were 60-70 years ago, when there were 90%+ less "investors" relative to the total population than there are today. Talk about a dying breed. Banks are not the only zombies in our economies. We're all zombies. All our wealth has evaporated, and we're just not clueing in. Pension fund? Gimme a break. Value of your home? Get real. Indispensable at your job? Let's not go there. Look at the graphs for a while, and see you next time.
Graph, you ask?
This is from the Consumer Metrics Institute. A 'contraction watch'. How apt! We have two recessions at once, there could in reality be more, many more. We are a Planet Bernanke blunder away from a fuel price spike that gains a life of its own, rampaging across the economic landscape like a golem. If $88 oil isn't enough to pull the plug on 'recovery', imagine what $140 oil will do.
Says Matt Savinar:
In October 2005, the normally conservative London Times acknowledged that the world's wealth may soon evaporate as we enter a technological and economic "Dark Age." In an article entitled "Waiting for the Lights to Go Out" Times columnist Bryan Appleyard reported: Oil is running out; the climate is changing at a potentially catastrophic rate; wars over scarce resources are brewing; finally, most shocking of all, we don't seem to be having enough ideas about how to fix any of these things.
Almost daily, new evidence is emerging that progress can no longer be taken for granted, that a new Dark Age is lying in wait for ourselves and our children . . . growth may be coming to an end. Since our entire financial order from interest rates, pension funds, insurance, to stock markets is predicated on growth, the social and economic consequences may be cataclysmic.
Since cataclysms seem to be a faltering 'Key Man' away, why do people who should know better insist that Peak Oil is somewhere 'off in the future'? How bad does it have to get, anyway?
Even though finance itself does not require energy the same way the trucking or airline industry does, it needs the business activity that takes place in the physical economy. Finance is a taxing agent. It's relationship to commerce - once essential for allocating capital - has changed to being purely parasitic.
Finance has both co-opted and out-competed the government as the taxing agent. Government responds by offering money at near-zero cost and lending to the government, itself. Finance is the gatekeeper, hoarding the low-cost money. By doing so the value of commerce declines, that of money increases and the problems increase.
A contest for relevance is taking place. This contest is between central banks and governments on one hand with finance on the other. The citizens are frozen out of the contest and can only lose.
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