So when the economy can’t generate growing earnings the banks multiply its debt instead, creating\u00a0“a debt\u00a0bubble” <\/strong>and promises that won’t be fulfilled. \u00a0 The promises that won’t be fulfilled grow without limit until there’s a collapse of confidence (‘pricking the bubble’<\/strong>),\u00a0unless 1) the economy finds totally new ways to expand ever more rapidly, 2) a “Jubilee” is declared to write down the debt, or 3) investors start spending their profits to create earnings rather than lending them to create debt (‘bleeding the bubble’<\/strong>) to relieve the pressure so the economy can return to health.<\/p>\n The Jubilee idea, to write down all the debt (something like a global bankruptcy) is much more disruptive than needed, and is just a temporary fix.\u00a0 How natural economies solve the same problem, so they can smoothly pause their growth when needed, will also cure the problem for all time and give us a healthy free market economy in the end.<\/p>\n ……<\/p>\n I responded to Joachim Sturmberg<\/strong> on the NECSI Linkedin Forum regarding \u00a0The Eurozone as a complex network: New analysis shows connectivity as a problem and a solution<\/a><\/span>.<\/span><\/em><\/p>\n JS<\/strong><\/em> 11\/20\/11\u00a0– All of this is really interesting. \u00a0However, isn’t there another fundamental point being lost, the core attractor of the whole system? It is all well and true to understand the interconnectedness, if the core aim of the game is all about making ever more money by whatever means, the system network will exactly do that. It may be dumb to have an exponential growth attractor, but if you have one a necessary outcome of the workings of systems is unsustainable exponential growth with all its consequences.\u00a011\/20\/1<\/p>\n The solution is a change of attractor, and “common sense” would suggest that sustainable economic development would be a better attractor than greed – thinks a non-economist.<\/p>\n PH<\/strong> 11\/20\/11\u00a0–\u00a0Well, yes of course.\u00a0 That’s why I termed my first paper on the subject “The Infinite Society, growth induced collapse”.\u00a0\u00a0 I don’t think that’s an “attractor” you’re talking about though, but a “procedure”.\u00a0 Procedures can be changed.<\/strong> Keynes and Boulding also came to the same conclusion, that at the limits of productive investment it was necessary to have investors stop adding as much of their earnings to their savings, to spend more of them instead.<\/p>\n What that does economically is a little like the so called “Tobin tax” proposed recently to tax financial trades to constrain speculation.\u00a0 The “bubble tax”<\/strong> would be scaled to restrain investment growth to not exceed economic growth, to keep the bubble from growing till it burst.\u00a0 Traders could return most of the proceeds from their trading to the creditor they were trading for every day, to be spent in a non-profit way.<\/p>\n Those funds would become spending going directly toward the earnings of working people, is another part of why the possibility hasn’t dawned on people yet, not go to the government.\u00a0\u00a0 So it would relieve the struggling economies from both sides, restraining ballooning debt while creating earnings the natural way.\u00a0 The main problem seems to be it’s anti-social thinking for business people and investors alike.\u00a0 You could even call it the “Scrooge tax”<\/strong> because the turnabout is to convert the act of hoarding of money, squeezing your world for ever more, into gifts to revive it… \u00a0But the Scrooges won’t like it, even the ones whose environments are about to crash.<\/p>\n <\/p>\n PH<\/strong> – I guess we’d have to talk, as I’m thinking that if you take your foot off the accelerator the vechical slows down, and you’re thinking it would speed up, it seems.<\/p>\n SS<\/strong> – I am seeing the Wall Street function as a way to accelerate, and create (phony) wealth, without having any effect on the material world.<\/p>\n PH <\/strong>– Perhaps the present social value of finance has become that, but as part of the physical economy its main role has and still is to allocate the economy\u2019s surplus to its future paths of development.\u00a0\u00a0 That\u2019s the physical steering process of the growth system, making choices for how it\u2019s products will be used to build its future process.\u00a0\u00a0 Money managers select investments to receive funds from the savings and profits of investors to, usually intending to maximize investor profits.<\/p>\n It\u2019s an accelerator because the scale of investments then grows exponentially if the profits are added to the investments.\u00a0\u00a0 It\u2019s that choice to add profits to investments that determines whether finance multiplies finance. \u00a0So if you interrupt that feedback loop, growth of investment from that source would stop.\u00a0 \u00a0You could either take the profits out of circulation or have their owners divest them, as one or another kind of spending, and so returning them to the cash economy.<\/p>\n If divested rather than invested, most of the money would be exchanged for goods and services to become earnings, by the people doing work. \u00a0They would then be better able to save for their own security moving some of it back to finance.\u00a0\u00a0 At present people are not able to save much, though.\u00a0 They have too much debt and the economy as a whole is becoming unprofitable, and its surpluses are shrinking.\u00a0\u00a0 People are spending less and there are large increases in overhead costs.\u00a0 Some are voluntary like population and the desire for progress.\u00a0 Others are involuntary, caused by the growing natural costs, conflicts and complications of colliding with limits.<\/p>\n SS<\/strong> – If the speed-up were to be connected to the material world via projects (like dams and mining) and jobs, then we would destroy the natural world even faster than we do.<\/p>\n PH<\/strong> -That would happen if the physical systems were actually profitable, but they\u2019re increasingly not.\u00a0\u00a0 We already depleted those opportunities, as the profitable valley\u2019s to dam and profitable minerals to mine were depleted.\u00a0 So, as net-energy systems, the economy is producing less and less net energy, due to ballooning overhead costs.\u00a0 So there\u2019s physically less surplus energy available and less reason to grow the system.\u00a0 \u00a0Those are all symptoms of the economy being \u201cover-invested\u201d.\u00a0 Like anything you\u2019ve already taken all the easy profit from, there\u2019s both less to invest in and less to invest with.<\/p>\n SS<\/strong> – So, I see the financial sector as a damper on material development, [not an accelerator] <\/em>allowing the greed emotion to spend itself in paper promises.<\/p>\n PH<\/strong> – Again, it may seem so at the moment from a social value perspective.\u00a0\u00a0 From a physical system view its present role is conflicted.\u00a0\u00a0\u00a0 It continues to put money into the cash economy, but only to create growing obligations for getting more back.\u00a0 It becomes an exponential driver of ever growing obligations for the cash economy.\u00a0\u00a0 The money taken out of the cash economy is added to the pool of funds accumulating in the finance economy.<\/p>\n In the cash economy people just pass money around. In the finance economy they put money into things only to get more back.\u00a0 So the cash economy grows as the earth allows and the finance economy grows till the cash economy exhausts its ability to pay its growing debts to the finance economy, and goes bankrupt as we now see happening.<\/p>\n Why the circular motion of finance, putting money into the cash economy only to take more out, has not been recognized as a \u201cperpetual\u201d one way exponential drain on the cash economy till it runs out of cash, is a bit curious. \u00a0It seems to be because economists have not been thinking about the economy as a physical system, but just as a source of financial profit.<\/p>\n","protected":false},"excerpt":{"rendered":" The problem is not exactly with the banks. It has to do with society asking the banks to permanently stabilize a system for multiplying financial returns. So when the economy can’t generate growing earnings the banks multiply its debt instead, creating\u00a0“a debt\u00a0bubble” and promises that won’t be fulfilled. \u00a0 The promises that won’t be fulfilled … Continue reading Prick or Bleed, drain the bubble or burst?<\/span> ![\"\"](\"https:\/\/synapse9.com\/issues\/images\/PrickOrBleed.jpg\" "\\"Prick")
Will it just shift the bubble to the physical economy??<\/h3>\n<\/address>\nI forwarded the comment to Stan Salthe<\/strong> who copied friends on “thegreatchange” @yahoogroups.com, saying he thought finance would be slowing down the economy already, so\u00a0transferring\u00a0funds from the finance economy to the cash economy would speed up the physical depletion of the earth (at first)… <\/span><\/address>\n