If we take the 40000km view (a quarter of the way to the moon, more or less) we may wonder why there is a recession. The factories are still standing, the houses are still standing, the roads are still there. All the wars have been arranged to bring stability to the global economic system rather than bring instability in the areas they are fought (compared to WWII).
Obviously(*), the problem, then, is a credit problem or in other words, too large a fraction of the people began to control assets that they had not deserved. In other words, the “I want it now, I’ll pay later”-philosophy got the upper hand. Hence, now there are too many people, who “own” more than they deserve. It is easy to make the cut: Anyone with a negative net worth has consumed more than they have produced. The credit crisis was simply “reality” showing up at the door and making this obvious(**).
(*) As of lately, I’m developing a nasty habit of starting my every sentence with the word “obviously”, but things should really be getting just that obvious, shouldn’t they?!
(**) There it was again, damnit!
Now, those in power, that would be the Federal reserve banking system, are trying to make the problem with the “I want it now, I’ll pay later”-philosophy less obvious. This could be done by traditional means which is some way of rolling over current (things that come due within a year) into the next year. In calm circumstances, this is called treasury notes. In emergencies like this, such money gets all sorts of funny names like TARP, say. Another way is to “raise the tide”, so that those that have been grounded float again. This is done by inflating the currency making those that use more than they deserve better off. Strangely, this is considered a desired state of the economy. Why? (The reason has to do with the way reserve banking works. I can tell you about this, if you want. It’s a long story.)
Now, because of our attitude, which I can tell is several widespread when testimonials like this are still considered outliers(****), of buying now and paying later and because we have made this available to people that did not know any better to skim a profit, these people went ahead and bought oil and burned it up up the way to the mall to buy doodads for their castles while trying to make an economy out of administrating each others paperwork.
(****) In a responsible world, they would be considered outliers because of the short durations they have been using cash.
So to summarize, the current problem has been to seriously misadministrate/misappropriate real goods towards unproductive and wasteful purposes, in particular it has been done by people who have not yet deserved to do so by putting in the proper amount of production work. I am talking very generally here.
I am, however, confident that this “credit” problem can be solved by paperwork and legislation. Afterall, the factories and office spaces are still standing.
Now, a much more seriously “debt”-problem is our debt to “mother nature”. When we cut down a tree or shave off a mountain top, we put in a number of the asset side of the ledger, but we do not put in an additional number of the debt side. (In fact this is very similar to debt-money which represents a claim from the bank but actually does not represent any kind of productive asset. If you do not understand this, read up on reserve banking.) As a consequence, we praise ourselves on our economic growth while ignoring the fact that we have been building up a massive debt to mother nature. This is really unfortunate, because if we bankrupt mother nature in the same way as people try to bankrupt each other by living it up and walking out of the debt… well, where are you going to walk this time? Off the planet? Second, how are you going to fix the problem when you can not legislate your way out of it by moving money around?
I can give you a long answer or I can give you a short answer, and since this post is growing very long, I am just going to give you a short answer.
- Never carry debt.
- Never ever use something you can not afford. For instance, do not live in a place that costs $300/month unless you have $90000 in the bank. Yeah, that’s right. It sounds outrageous, because it is so far from the “buy now pay later” philosophy and even far from the “pay as you go” philosophy.
- Do something that is productive. Stop being destructive. There are many industries that are engaged in destructive behaviors and merely act to cancel out constructive efforts so that both sides may make more money.
- Restore nature. Do what you can. Plant a tree,Generate top soil,, grow a garden, use your laundry water and dish water for the garden. At the very least, avoid products that are destructive. The easiest way to do this is to buy used, whereas any destruction has already been fully depreciated and where by buying you keep the thing out of the landfills.
Originally posted 2009-12-09 10:15:02.