Archives for category: Money as goal

Charles Darwin gave us “On the origin of Species”.

We’ve summed it up ‘the survival of the fittest’.
And behaved accordingly. Including some of those who should have known better. “The world of the selfish gene revolves around savage competition, ruthless exploitation, and deceit, and yet, Dawkins argues, acts of apparent altruism do exist in nature.

I reckon all of you know – or at least have heard of, Richard Dawkins.
Compare his celebrity with the relative absence from the public scene ‘enjoyed’ by Ernst Mayr.

And what’s so special about this Mayr guy?
‘Evolution is not as much about the ‘survival of the fittest’ as it is about the ‘demise of the unfit’ ‘

Get it?
In fact, there is no such thing as ‘the fittest’ when we speak about evolution. ‘Fit’ is relative while evolution is a process. Fit is about ‘this moment and this place’ while evolution is about the ability to adapt. To change when needed.

And what has any of these to do with “exploring the consequences of our limited conscience”?

Well, it was us who had interpreted Darwin’s ‘Origin of the Species’ as ‘the survival of the fittest’ individual. It was us who had lionized Dawkins’ ‘Selfish Gene’ and left Mayr’s ‘True’ Evolution in relative darkness…

To sum it up, it is us who are are obsessed with something we call ‘success’.

It is us who keep forgetting that the mighty dinosaurs – maybe the most ‘successful’ animals ever, had been the first to disappear when ‘shit’ had struck. And that is was a meek mammal which had inherited the Earth.

It is our success craving conscience which is highly biased. And I’m not at all sure this is a good thing. In the long run, I mean.

What do we have an economy for?

To make ends meet? To make it easier for our needs to be met?

What do we have a banking/financial system for? To mobilize capital for the economy? To make it possible for our needs to be met easier? More efficiently?

Or just for profit to be made?

“It really is possible to do two good things at once: address the abuse of the working poor by payday-loan and check-cashing outfits while expanding the range of services provided by the USPS. Media outlets have called Warren’s proposal “radical.” That’s ludicrous. She’s simply using her position and prominence to highlight the findings of a new study by the Postal Service’s Office of the Inspector General, which notes that roughly 68 million Americans are underserved by the private banking system. “With post offices and postal workers already on the ground,” says Warren, “USPS could partner with banks to make a critical difference for millions of Americans who don’t have basic banking services because there are almost no banks or bank branches in their neighborhoods.”

This is not a new idea. From 1911 to 1967, the Postal Service maintained its own banking system, allowing citizens to open small savings accounts at local post offices—actually a better approach than “partnering” with banks. The system was so successful that after World War II, it had a balance of $3 billion, roughly $30 billion in today’s dollars. Congress did away with postal banking in the 1960s, but post offices in other countries—including Japan, Germany, China and South Korea—provide banking services. Japan Post Bank is consistently ranked as one of the world’s largest financial institutions based on assets.”

Or, to put it the other way around,
‘what profit is?’

The well deserved ‘consequence’ – considered as such by the vast majority of the stakeholders, of a well-done job?
Or a self serving benchmark to be reached at all costs? Which costs are to be ‘shouldered’ by anybody else but the profiteer himself… till reality slaps us, all of us, over our faces…

About half of our manufactured goods come from China. From half-way around the world. A shipping container needs about a month to arrive to Rotterdam from Shanghai. While ordering the merchandise takes some five minutes over the internet.

Shanghai is in China. A country so far away that hourly wages are a fraction of those in Europe. Or in the US. That being the reason for so many of our manufactured goods coming from there.

China is a country so far away that it took more than a month for the rest of the world to find out that a pandemic was brewing in Wuhan.
China is a country so far away that the CDC expert embedded in China’s Disease Control Agency was deemed useless by the current American Administration.

China is a country close enough for the Chinese tourists to had been a staple for the Italian hospitality industry. “5.3 million overnight stays in 2018
China is a country far enough for an “official opening ceremony” to had been “held at the Auditorium Parco della Musica, a multicultural complex, in the Italian capital on Tuesday, at the presence of Italian Minister of Cultural Heritage, Activities and Tourism Dario Franceschini and Chinese Minister of Culture and Tourism Luo Shugang.”

The ceremony was held because “2020 has been designated the China-Italy year of culture and tourism, as the year marks the 50th anniversary of China-Italy diplomatic ties.
“Tuesday” was the 21st of January 2020.

The same day

  • United States confirms its first case in Washington state, a man who traveled to the Wuhan area.
  • China confirms two additional deaths, a sixty-six-year-old man and a forty-eight-year-old woman
  • New cases are announced in China, including in Beijing, Shenzhen, and Shanghai.
  • Chinese state media raises number of confirmed cases to 291 and confirms 15 medical workers in Wuhan have been diagnosed with pneumonia.
  • Hong Kong confirms its first case, a person in their thirties.
  • Taiwan confirms its first case, a woman in her fifties.

The above timeline was ‘borrowed’ – through the Internet, of course, yet another example for how close we are of eachother, from https://www.thinkglobalhealth.org/article/updated-timeline-coronavirus on 3/28/2020, 12:30 GMT
Which Internet pulls us together by pooling information/data while simultaneously rips us apart by feeding us a constant stream of fake news.

We are so close together that you can send/receive almost everything (from) almost everywhere.
We are so close together that everybody who has a smart phone can see their similarly equipped buddies halfway across the world.

We’re so far apart that we still have to make up our collective mind about which comes first. The Economy or the People.
We’re so far apart that we haven’t figured out yet that there’s no such thing as a running economy without enough able bodied and mentally sane people. To produce, transport, distribute and buy the things we need.
We’re so far apart that we haven’t yet figured out that the present number of people cannot survive – let alone maintain a decent living standard, without a running economy.

Let me make something clear.
Crystal clear!

Money, and its ‘derivatives’ – from ‘capital’ to ‘financial market’ and ‘stock exchange’, are the tools we used to get where we are now.
Without them we would be still foraging in the woods.

Only something rather insidious has started to eat the whole scaffolding from inside.
Same process has been happening with weapons. We invented them for hunting. Then used them for self protection. Against large beasts and fellow humans.
Finally, after using them to conquer and defend our liberty, we used them to subjugate others. To impose our will upon some other people.

In other words, we used guns to shoot ourselves in the foot.
Unwittingly.
Both as hapless individuals and as a cultural species.

Money – and its derivatives, have suffered the same degradation.
We used it, at first, to coordinate our efforts.
The Stock Exchange had been an excellent way to coordinate otherwise disparate means. Very few of the corporations who have changed the world into what it is now – for good and for bad, wouldn’t have come to life without the money which fuel them.
Nowadays, too many of those who trade on the Stock Market do it in a ‘barren’ manner.

They do not contribute anything but extract value.
The inside traders being only the visible part of the iceberg.
Which iceberg might tank the whole contemporary ‘arrangement’.

If we keep sleeping during our watch.
And there’s no one else on deck…

Why is it so hard to predict anything?
So hard that some people believe that ‘no prediction will ever be accurate’?

Which is simultaneously true and false!
First of all, it is a prediction.
Hence, it is supposed to be false.
But it’s true!

Then, if all predictions are going to be false, why bother?

Because sometimes it works.
Or, at least, it works good enough to be useful.

Hence this query.

Will economists ever be as good at forecasting as meteorologists?
I must thank Tim Harford for this excellent question.

No. For a very simple reason.

Meteorology has to do with physics. Something which doesn’t change as you learn more about it. Only the researcher’s understanding of what is going on goes deeper and deeper into the matter.

Economy has to do with both hard facts – how much coal/arable land is available at one moment, and psychological unknowns.
What people will do if/when….
The hard facts might change – just as meteorological data does. But in a rather foreseeable manner.
What people will do… is a lot harder to predict. Simply because people change their understanding of facts, based on what they learn.

Just as the meteorologists do.
And while it is relatively easy to predict that meteorology will become more and more accurate – for the foreseeable future, at least, it is a lot harder to predict what the meteorologists will do as a consequence of their increased abilities.

Specially when a lot of money is involved.

We’re in the middle of a crises.
Some people believe the crises has been only triggered by the virus. And that it has been mainly caused by ‘globalization’.

I beg to differ. In part.

The crises was indeed triggered by the virus.
But the fact that we are so fragile isn’t the consequence of globalization.
Only by what we have done in the given circumstances.

It wasn’t globalization itself which had made us fragile.
Globalization only extended the opportunity field we had at our disposal.
It was our way of developing those opportunities which had made us fragile.
We had chosen ‘financial efficiency’ over ‘resilience’.
We had chosen to increase profit instead of making it ‘more and more sure’ that we’ll be able to survive.
In a sense, we have been acting as if we’d lost touch with reality.
With the hard reality….

There is nothing to suggest that we knew what we were doing. Then.
But we won’t have any excuses left once that we will have reached the other side.

My previous post was about the parallel fate endured by those who had experienced nazism/fascism and/or communism.

My point being that nazism/fascism had been powered by the feelings of those attempting to regain their previous, higher, status while communism had been powered by the feelings of those not allowed to ‘move forward’ by the social constraints paralyzing their societies.

Currently, people are ‘confused’.
Some say communism had been better than nazism – for various reasons.
Others find various excuses for the way both regimes had treated the general population and, mainly, the ‘dissidents’. Or, specially for the nazi, the ‘differents’.
There is, though, a convergence point. Nominally, at least. All sides declaratively abhor the violence employed by both regimes.

To add to the confusion, after the 2007 financial meltdown, more and more ‘concerned individuals’ have fingered capitalism as the main culprit for all the tragedies experienced by humankind in the last century and a half.

For me, this is the straw which will break the camel’s back.

So.
Nazism/fascism – which is nothing but a ‘condensed’ form of corporatism, is bad.
Communism – a similarly centralized manner of social decision making, only differently sold to differently feeling masses, is also bad.
Capitalism – a decentralized manner of resource allocation, is considered to be more or less equivalent to both nazism/fascism and communism. All three of them have been declared equally criminal…

Then what?
What are we to do next? Hang ourselves in despair?
Reheat either fascism or communism?

Or look forward than our own noses?

Both those who had followed Hitler and Lenin/Stalin were feeling desperate. Desperation drives you to do stupid things. And there are plenty of unscrupulous people willing to profit from this kind of situations.

Do we really want to prevent ‘unpleasant’ experiences?
Then we need to go beyond blaming the likes of Hitler and Lenin/Stalin.
They should be dealt what’s rightfully theirs, no doubt about that.
But we also need to make sure that the ‘run of the mill’, the ordinary people who make things work in this world, no longer feel desperate.

How to do that?
Taking into account that contemporary capitalism seems to be faltering?

What was the common thing between nazism/fascism and communism?
The fact that decision making was concentrated in a very small number of hands? Which had led to both regimes ending up in abysmal failure?

What is the apparently unstoppable trend in our contemporary societies?
The apparently unstoppable wealth polarization?

Then let’s tax ourselves out … America worked fine during the ’50s and ’60, when the highest marginal tax was 91%…
Yeah, only those years had been followed by stagflation.
And let me remind you that communism can also be interpreted as ‘100% tax followed by a comprehensive redistribution’. And it also failed.

Then how about ‘libertarianism’? No taxes, no government…

But how about less extremism? Of any kind?

How about remembering that liberal capitalism has made possible all that we have today? Liberal as in free-market capitalism, of course.

Free market as in competition working both ways.
Entrepreneurs competing among themselves for clients AND resources. The workforce being, of course, a resource.
The ‘compensated’ workforce representing the bulk of the clients…

What we seem to have forgotten today is that the circle must be round. If we want the ‘show to go on’, of course.

If some of us concentrate too much control over the rest of us – either way, the circle becomes lopsided. And everybody has everything to loose.

No matter whether this happens as a consequence of nazism/fascism, communism or even capitalism.

At least, capitalism has proved to be manageable.
Let’s make it work, again.

Until we discover something better, of course.

For a (free) market to function, at all, it needs active economic agents.
Which economic agents need, in their turn, certain amounts of concentrated resources at their disposal. A certain amount of ‘capital’. Regardless of who owns it. Or disposes of it.

In this sense, no matter where each of them finds itself on the individual to socialist spectrum, all societies are ‘capitalist’.

On the other hand, individual capitalists – economic agents, do not need a free market to thrive. The do indeed need a market to sell their products/services, only that market does not have to be free. On the contrary, even.

OK, no monopolistic market has survived for long. And all monopolies have eventually failed. Even those who had grown ‘too big to fail’!

But go and tell this to any of those who happen to be at the helm of a monopoly… be it of economic or political nature …

“Do you know why I hate capitalists?

1. All they care about is money

2. They have all the money”

This is a bi-partisan joke. Some of the haves use it to demonstrate that money is the essence of modern life while the ‘lefties’ use it to demonstrate the ‘malign’ nature of capitalism.

Both sides are wrong.

According to Adam Smith, the market consists of many specialized economic actors who sell their wares/services. Thus helping each-other lead a better/simpler life than if each of them had to ‘do everything’. Furthermore, a free market is better than a ‘cornered’ one, simply because competition keeps everybody on their toes.
In this sense, a capitalist is a guy who organizes a group of synergically skilled operators in such a manner as to increase their aggregated efficiency.
In order for the market to remain free, a.k.a. efficient, there must continue to exist a certain degree of competition between the said capitalists. And for the whole thing to remain a market, each of the capitalists must remain but an actor, not become a dictator. A.k.a a monopolist.
Differently put, for the market to remain functionally free, capitalists should remain/must be kept level with the other ‘merchant-men’. The bakers sell their bread-making skills, the brewers their beer-making skills, the butchers their ability to carve carcasses while capitalists sell their ability to organize people. Their entrepreneurial skills.
OK, there is difference. But only in our heads. While each of the others use specialized tools – ovens, vats, knives, etc., capitalists use money. Yet another tool but one which seems familiar to all of us. But very few of us see money as a tool and even fewer accept that using money, a lot of it, implies a huge responsibility.  Hence the enormous misunderstanding. No reasonable human being – except for a carpenter, of course, would dream to amass a huge number of, say, hammers, but a majority of people are convinced that having a lot of money would make them happy.

And why did I say “both sides are wrong”?

Because real capitalists are focused on the needs of their business partners – a.k.a. ‘consumers’, not on their pockets/paychecks. Because real capitalists understand that sellers would go hungry if there was no money to buy their wares.
Because free market capitalists are focused on making money go round – and getting handsomely paid for this, instead of constantly attempting to hoard all the money in their grasp.

It’s not me who says so.
Jamie Dimon, Alex Gorsky, Tim Cook, Ray Dalio….

 

This rule of thumb is also known as ‘Gresham’s Law’

At the core of Gresham’s law is the concept of good money versus bad money. The law holds that bad money drives out good money in circulation. Bad money is then the currency that is considered to have equal or less value compared to its face value. Meanwhile, good money is currency that is believed to have greater value or more potential for greater value than its face value. One basic assumption for the concept is that both currencies are equally liquid and available for use simultaneously. Logically, consumers will choose to use bad money over good money because good money has the potential to be worth more than its face value.”

‘Concept’, ‘the law holds’, ‘is considered’, ‘value’, ‘compared’, ‘is believed’, ‘assumption’, ‘logically’…
So. The way I see it, ‘Gresham’s Law’ is about people interacting according to their own ‘impressions’, ‘drives’ and ‘internal logic’.

But wait. Things are far more interesting than ‘commoners’ hoarding the potentially more valuable coins, when having the ‘opportunity’ to choose between good and bad money.

“The minting of coins provides the most basic example of Gresham’s law applied. In fact, Gresham’s law itself was built around the minting of coins and Gresham’s service to Queen Elizabeth I of England. Sir Thomas Gresham lived from 1519 to 1579, working as a financier serving the Queen and later founding the Royal Exchange of the City of London. Henry VIII had changed the composition of the English shilling, replacing a substantial portion of the silver with base metals. Gresham’s consultations with the Queen explained that consumers were aware of the change and began separating the English shilling coins based on their production dates to hoard the coins with more silver which, when melted down, were worth more than their face value.”

In fact, Gresham’s Law is about ‘commoners’ reacting in a logical manner whenever the powerful had tried to ‘trick’ the less powerful into accepting less valuable coinage.

Let’s examine the situation from another angle.

Gold and silver had been used to make coins for a number of reasons.
Both were rare enough to maintain their perceived value no matter how much of them might have been ‘suddenly’ discovered. For example, the Spaniards had brought shiploads of precious metals into Europe from South America without creating much ‘inflation’.
They, individually and or alloyed, were soft enough to be minted using primitive technology. The oldest coins made of precious metals go back almost 3000 years
Both gold and silver are impervious to the passage of time. That being the motive for those coins having survived for so long.

For these three reasons gold and silver had been the obvious choices when people had realized they needed a ‘technology’ for making payments and for preserving and transporting value.

In reality, this is the intrinsic logic for which gold and silver had been valuable for us. They had represented the most convenient manner of making payments and for transporting/preserving value. As metals, gold was basically useless until the advent of microelectronics while silver had become really useful only after Daguerre started using it to make primitive photographs.

So. Ancient people had discovered that by using gold and silver coins they could vastly accelerate their economies. The most interested being, of course, the powerful of the day.
The rulers. Those who had the means and the authority to mint.
Some of whom also had the gumption to mess with the whole process. For their own profit, of course. Why do you think Hieron, the King of Syracuse, had hired Archimedes to determine whether a piece of metal – a crown, but the shape had no real meaning, was made of pure gold – as the goldsmiths pretended, or not?

Instead of a conclusion.
Since the start of time, some people have tried to swindle the others. No matter how high their position on the social ladder. And the rest have tried to protect themselves. Or, sometimes, even to emulate the ‘bad’ behavior.

This being the beauty of the free market.
Whenever a market is truly free, the reasonable people naturally weed out the swindlers.
Whenever the swindlers happen to have the upper hand, the rest have no other option but to follow suit. To hoard the ‘good’ money.
The consequence being the slowing down of the economic cycle. To the ultimate ‘bad’ of everybody. The swindlers included. And their children/suitors!

 

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