[p2p-research] The problems of debt

[Ryan Lanham]

Money is, in simplest terms, a machine.

It isn't like a machine.  It IS a machine.  It is a machine that either
makes something others want (value) or it is a machine that makes things
only a consumer wants (i.e. consumption).

If it makes consumption, it is used up.  If money makes value, like all
machines that can be used more than once, it is a value multiplier.

If someone uses money to create value, then they are productive.
Productivity leads to happier worlds because people have things others
want.  In an eastern-styled anti-desire world, these systems do not
apply...though there is ample evidence, given free choice, nearly everyone
wants something that is scarce.  Wanting fewer things that are scarce is a
sort of advantage in this new world, but it is a choice most would not want
to make freely.  People like cars, tools, luxuries of all sorts...jewelry,
prettier mates, etc.  These things cost machinery...money to produce.  If
they don't create further value...then that is consumption.  Non productive
consumption burns up capital.  It is a fire in the machine shop.  Granted,
it is a necessary fire, but it is a fire none-the-less.

Build a good machine...and value is created.  Build a worthless life or
machine, and value is consumed.


On Sun, Jul 11, 2010 at 10:33 AM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

> I've been asked to explain debt problems as influenced by technology.  I'll
> try.
>
> Here's my "theory".  Many others share or have versions of something
> similar.  I claim no originality.  I've posted several versions on this
> list.
>
> 1. Growth occurs when someone produces something others value.  The sum
> total of value is the economy.
> 2. In the past, it was a matter of work and labour to produce something of
> value...like digging a hole where a hole was wanted.
> 3. People learned to take money that was not in use and to use it by
> borrowing it and then buying value-production which was then placed on sale.
> 4. The process of 3 entails risk.  Risk was rewarded by profit.
> 5. The system of 3-4 really works quite well so long as profit is likely.
> 6. In a world where learning and high productive machinery requiring low
> skill levels is readily available (i.e. post 1990 or so) making profit is
> harder.  7. Item 6 is especially true if innovation is not protected by the
> state (e.g. through intellectual property.)
> 8. Because profit is harder especially in tangible goods and services
> (because of technology and learning distribution) credit is harder.
> 9. When credit became hard, the incentives to cheat increased.  People lent
> money badly and then cleverly sold the bad loans to others who didn't
> understand.
> 10. When 9 happened, the state had to decide whether huge firms fulfilling
> important institutional roles would die, or be saved.
> 11. Nearly all states, especially in Japan and Europe, chose to save old
> institutions (e.g. Royal Bank of Scotland), or in the US, AIG.
> 12. There is now an open question as to whether markets can still create
> value (e.g. the iPod) in such a way that debt is justified.  If not,
> capitialism in the form that creates ready growth through using unused money
> is screwed.
> 13. When money goes unused, it is difficult to create new money and growth
> of value.  There is no/little incentive to innovate.  This can be called
> "deflation."
> 14. Deflation is more dangerous to capitalism by far than inflation.
> Deflation means shrinkage of an economy because unused money becomes more
> valuable by sitting than by being used.  Thus, people become even more risk
> averse.
> 15. When 14 happens for a long time (e.g. Japan) then demographic and
> institutional patterns start to become unsustainable.
> 16. When 15 happens, we do not understand the long term outcomes, but they
> don't seem good.
>
>
> --
> Ryan Lanham
> rlanham1963 at gmail.com
> Facebook: Ryan_Lanham
> P.O. Box 633
> Grand Cayman, KY1-1303
> Cayman Islands
> (345) 916-1712
>
>
>
>


-- 
Ryan Lanham
rlanham1963 at gmail.com
Facebook: Ryan_Lanham
P.O. Box 633
Grand Cayman, KY1-1303
Cayman Islands
(345) 916-1712
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