[p2p-research] fakeness of recovery

[Ryan Lanham]

On Fri, Dec 25, 2009 at 5:04 AM, Michel Bauwens <michelsub2004 at gmail.com>wrote:

> for an understanding of the depth of the travesty of the current bailout,
>
> see http://theautomaticearth.blogspot.com/
>
> if you're short on time, I suggest starting with this:
> http://theautomaticearth.blogspot.com/2009/12/december-2-2009-its-foolish-to-ask-for.html


Hi Michel,

Very interesting link.  Much of it I disagree with, but much is, I think,
spot on, but it misses the big picture.

I have been following the supply push inflation argument for some time (as
one sees in this article).  So far, there is no sign it is true...or little
sign.  States can quite happily leave interest rates low AND print money.  I
think the reasons for this are two-fold:

1. The world would literally collapse if credit stopped flowing.  Collapse
is something so terrible to comprehend that no one who has any serious power
wants it.  Credit is the life-blood of the present...not capital.  The
fundamental equation of capitalism was...I can find projects by being clever
that merit my borrowing funds with a high likelihood of pay-back of risk
capital.  Sadly, there are few projects during this recession that can
justify debt even at low costs.  Thus, interest rates cannot climb...no
matter how much cash supply flows in the economy.

2. Governments, long the source of Keynesian uptake of surplus credit have
over-extended themselves trying to bribe the public with get goods now pay
later schemes. Thus, no one wants to lend them money and they will not pay
higher prices to borrow...

No one really knows the outcome of this because it has never happened
before.  Anyone who says otherwise, I assure you, is ill-informed.  We are
simply in a new place economically.  It is "peak leverage."  It isn't that
we don't have more money to lend...it is that no one has the capacity to
borrow.  So supply push inflation is not likely...despite what the article
suggests.  I also think collapse is unlikely...because as soon as an
capacity emerges, it will again be leveraged...especially by governments
which cannot exist without bribing voters.  In the old days, monarchs would
simply hammer the poor.  Today, the poor tend to vote.

It is broadly assumed that either the governments or the private sector must
de-lever (reduce their debt loads).  The trouble is, the private sector
de-levers by having jobs and high incomes.  Right now, there are few
projects that merit investment so there are few that can generate cash flows
for high-wage jobs.  Governments cannot de-lever without raising
taxes...which makes the situation even worse on those trying to gain some
traction against their own personal debt loads.

Consequently, the perfect storm exists of governments being deeply in debt,
individuals being deeply in debt and projects being few for creating growth
(that is, there are no ideas so compelling people want them regardless, so
they will take even more risk...)

There is no simple way out of this but that does not imply collapse.  It
probably implies slow down...a general malaise lasting a generation or
more.  That is neither the answer that go-go capitalists or revolutionary
socialists want, but it is the probably reality.  Thus, for those in
relatively OK shape...in short, the wealthy, they are hunkering down,
conserving and trying to last out the storm...which may go on for a
generation or two.  Meanwhile technology advances...even accelerates.

My own personal view is that there is no way out of this problem without
radical improvements in technology that effectively change the game.  In
short, the old system hasn't died, but it is so sick and will be so for so
long, that it cannot be relied upon.  Thus, both the left and right are
contemplating what could serve as the new normal.

In the US the right is trying to gain time...blocking any change at all
until they can come up with a feasible strategy for preserving wealth and
the political status quo.  I am fairly confident no such outcome exists...so
really, they are in a  long death strategy...call it aging gracefully.  The
left lacks the compelling political message to motivate large numbers who
are, frankly, terrified of the abyss they see swallowing more and more of
their friends.  The left is equally in survival mode trying to get basic
services for those who have been destroyed by the slow-down.  Easy money for
the unskilled is gone.  Skills are getting vastly more complex rapidly...a
few at the bottom of the ladder can keep up.  This will fuel growth for the
marginal left, local greens, etc. but it won't matter much in the grand
scheme.  Politically it might matter...especially in Europe...but Europe is
becoming peripheral...not so much economically, but in terms of social power
and influence.  Colonialism is finally dying.

The only (good) answer is technology movements that shift the game.  I
simply see no other feasible answer that arises in less than 20 years.  On
the other hand, I for one believe the probabilities are very very high
(above 0.7) that technology does come up with game shifting advances
relatively soon.   And now that we have the internet, these will be known
almost instantly...

Anyway, that's my way of viewing it...always interested in others...

Ryan
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