[p2p-research] fakeness of recovery

Fri Dec 25 16:42:11 CET 2009

Hi Ryan,

I agree with you on most counts,

- inflation is unlikely because despite the money creation, it can't keep up
with the credit and wealth destruction that has taken place

- a long slow malaise, like Japan, is likely,

and this for the same reason: the U.S. government has chosen the same zombie
bank strategy, which keeps the patient on life support, but doesn't heal any
of the underlying causes .. over-indebted households, corporations, and
governments are in such need to be deleveraged that artificial credit
creation only compounds the problem ...

However, I would not be confident that crisis moments would remain abstent
(which doesn't mean total and immediate collapse)

But all of this seriously hampers a reconfiguration needed for Kondratieff
5,

Michel

On Fri, Dec 25, 2009 at 9:40 PM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

>  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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