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Aug. 20th, 2003 08:30 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
sophiaserpentiaDoes a Falling Money Stock Cause Economic Depression?
This article gives me pause. It runs counter to what I've been taught about the economic circumstances behind recession and depression... and yet, there is a certain stark simplicity to the argument.
If Federal Reserve Banks know how to steer the economy clear of severe recessions, why has the monetary "toolkit" failed completely in Japan over the last decade? Why is the same pattern repeating itself here in the US?
This article argues that unsecured loans, as they are paid back, have the effect of removing money from circulation (what economists call "M1"). Now, what I'd been taught was that banks turn around and invest. Of course, if the stock market falters, banks either lose that money -- it evaporates -- or they refrain from further investment.
When money stock is pumped into the economy, this has the effect of lowering the value of money across the board. This lowers the investment power of whatever money banks and investors have.
So when you add that all up, the current monetary policy of lowering interest rates and boosting M1 could be feeding the problem rather than fixing it.
I'd say the policymakers had better start paying closer attention to Japan if they want to see what the US economy will look like in ten years if we keep following our current path.
Edit: the article points out that the drop in money stock is more steep than it was during the early '30's. Unsecured consumer credit (in the form of credit cards) is not mentioned in the article -- but it leaps out in my mind as perhaps a primary culprit.
This article gives me pause. It runs counter to what I've been taught about the economic circumstances behind recession and depression... and yet, there is a certain stark simplicity to the argument.
If Federal Reserve Banks know how to steer the economy clear of severe recessions, why has the monetary "toolkit" failed completely in Japan over the last decade? Why is the same pattern repeating itself here in the US?
This article argues that unsecured loans, as they are paid back, have the effect of removing money from circulation (what economists call "M1"). Now, what I'd been taught was that banks turn around and invest. Of course, if the stock market falters, banks either lose that money -- it evaporates -- or they refrain from further investment.
When money stock is pumped into the economy, this has the effect of lowering the value of money across the board. This lowers the investment power of whatever money banks and investors have.
So when you add that all up, the current monetary policy of lowering interest rates and boosting M1 could be feeding the problem rather than fixing it.
I'd say the policymakers had better start paying closer attention to Japan if they want to see what the US economy will look like in ten years if we keep following our current path.
Edit: the article points out that the drop in money stock is more steep than it was during the early '30's. Unsecured consumer credit (in the form of credit cards) is not mentioned in the article -- but it leaps out in my mind as perhaps a primary culprit.
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no subject
Date: 2003-08-20 06:53 am (UTC)It isn't quite a science, becasue although hard numbers are involved, a lot of what happens economically depends on the mood of the consumers and the people running the businesses.
It isn't quite sociology because it also incoporates matters of law.
So I'm pretty clueless. The one thing I clearly remember from economics class (which was taught by a very funny radical/liberal guy) was that over 90% of all people live their life in the same seconomic bracket they were born in to, Horatio Alger myths be damned.
no subject
Date: 2003-08-20 07:07 am (UTC)no subject
Date: 2003-08-20 07:14 am (UTC)no subject
Date: 2003-08-20 07:25 am (UTC)There is plenty of cause to be, though.
no subject
Date: 2003-08-20 07:27 am (UTC)no subject
Date: 2003-08-20 07:41 am (UTC)Don't worry about it. :)
no subject
Date: 2003-08-20 07:46 am (UTC)no subject
Date: 2003-08-20 08:37 am (UTC)Somewhere around here I have a few pictures from when I was 17 that I should post. They're not on this computer any longer, though, so it might take some hunting.
Gnostic Economics
Date: 2003-08-20 07:34 am (UTC)My more general study of economics and society has led me to a quite radical conclusion:
This entire "economy" is mostly false, "virtual" if you will. It's an illusion, perpetrated by (???). False values replacing real ones. We eat terrible manufactured food, watch "television" which tells us how the world is (but it's not like that), we purchase cheaply made manufactured goods of poor quality, etc.
And it all relates to land ownership patterns, banking and monetary policy. This ersatz "economy" is given to us, as a substitution for the real wealth being expropriated by a bunch of schemers. Whomever they may actually be, they are our economic Demiurge.
Even our economic theory is, for the most part, intentionally misrepresenting certain things, like the difference between land (derived from (god?)) and capital (derived from labor and land), etc.
"They" will tell you that "we" live at a higher standard then ever, but what they don't tell you is how they calculate that.
Is a table of the twentieth century really equal in value to a table of the nineteenth? No, but it's cheaper.
Philip K Dick alludes to this in UBIK, and to a lesser extent in other books.
Re: Gnostic Economics
Date: 2003-08-20 07:40 am (UTC)For a long time now I've been worried about the implications of "virtual" money. The concept has been used to fuel capitalism for some 300 or 400 years now -- but only in the last 50 years or so has it taken on the particular character that it has.
I think a lot of us are thinking in similar ways this week... look at this entry in
http://www.livejournal.com/community/privacy_forum/40070.html
Look also at my posts a year ago on the McArchons:
http://www.livejournal.com/users/sophiaserpentia/21453.html
http://www.livejournal.com/users/sophiaserpentia/22206.html
Re: Gnostic Economics
Date: 2003-08-20 07:47 am (UTC)McArchons. I love that term.
If I write a book, I would love to use it. You will receive proper attribution, of course.
Re: Gnostic Economics
Date: 2003-08-20 08:41 am (UTC)Re: Gnostic Economics
Date: 2003-08-20 07:45 am (UTC)Re: Gnostic Economics
Date: 2003-08-20 07:54 am (UTC)Agriculture leads to land "ownership", which starts the whole ball rolling, at some point "currency" is invented (beginning the virtual economy), etc...
One problem with "economics" as usually taught is that it is taught in a kind of vacuum. The class I learned the most in was "History of Economic Theory", because they had to deal with a lot of other factors.
Of course this problem shows up in most disciplines.
There is a spiritual component to all of this, that is at the root.
We fix ourselves, everything else follows.
Re: Gnostic Economics
Date: 2003-08-20 08:03 am (UTC)Turn On, Tune In, Drop Out
Ironically it is not the spread of awareness or information that makes the archons fear. It is the "Drop Out" portion of the message they fear. The idea that people will stop buying into the lie of the easy life en masse keeps them up at night.
I still participate in the Matrix, of course, but barely. It's been years since I had a credit card. I've never had a cell phone, either. I don't like the thought that anyone can intrude on my solitude any time they wish.