Is Our System Beyond Repair?

[alexw]

The way i look at what has happened is that to afford all the goods and services produced individuals have had to go into debt. The historical way this has been avoided, was to have the economy grow at such a rate that there was enough to enable salaries to be high enough to afford all goods/services produced without debt, with the growth portion being large enough to satisfy capitals profit motive. However when the growth portion is not high enough to satisfy the profit motive, it eats into wages and workers must take on debt to purchase all goods and services produced. If they dont then more goods will be produced than can be afforded, thus companies reduce their labour force to reduce output, forcing further reductions, etc, etc.

A simple analogy (to help get my point across) is if only one company existed which made everything in a non-growth world. If the companies owner wanted to make a profit it would have to pay less than the goods sold for. But if their workers were paid less than the goods sold for, how do the workers (who are the only ones existing in this 1 company world) buy all the goods debt free?? You might argue that the company owners would spend all their profit to buy the excess, but that just would not happen. At the very minimum some of it would be stashed away. Thus the reason/need for growth in our current system.

I also dont see those who own capital willing to settle for only the growth portion (or a portion of this portion) of our economies as their profit. I hesitate to guess but it would likely mean returns much much less than they are used to (1-2% per annum or possibly less??).

This means that if we cant have growth high enough, then the system nolonger works, and has no chance of working again, ever.

Now this is my take on things, i might be wrong, but i dont think i am, and it seems to ring true with what we have seen in the world over the past 2-3 decades. To bring in the desired profits wages were held down, and thus to consume all that was produced the consumers had to resort to debt. Now that debt fueled consumption is over we are in the downward spiral i mentioned in the first paragraph.

Am i wrong in all this, and if not, where do we go from here?

[Guest Steve Cook]

The way i look at what has happened is that to afford all the goods and services produced individuals have had to go into debt. The historical way this has been avoided, was to have the economy grow at such a rate that there was enough to enable salaries to be high enough to afford all goods/services produced without debt, with the growth portion being large enough to satisfy capitals profit motive. However when the growth portion is not high enough to satisfy the profit motive, it eats into wages and workers must take on debt to purchase all goods and services produced. If they dont then more goods will be produced than can be afforded, thus companies reduce their labour force to reduce output, forcing further reductions, etc, etc.

A simple analogy (to help get my point across) is if only one company existed which made everything in a non-growth world. If the companies owner wanted to make a profit it would have to pay less than the goods sold for. But if their workers were paid less than the goods sold for, how do the workers (who are the only ones existing in this 1 company world) buy all the goods debt free?? You might argue that the company owners would spend all their profit to buy the excess, but that just would not happen. At the very minimum some of it would be stashed away. Thus the reason/need for growth in our current system.

I also dont see those who own capital willing to settle for only the growth portion (or a portion of this portion) of our economies as their profit. I hesitate to guess but it would likely mean returns much much less than they are used to (1-2% per annum or possibly less??).

This means that if we cant have growth high enough, then the system nolonger works, and has no chance of working again, ever.

Now this is my take on things, i might be wrong, but i dont think i am, and it seems to ring true with what we have seen in the world over the past 2-3 decades. To bring in the desired profits wages were held down, and thus to consume all that was produced the consumers had to resort to debt. Now that debt fueled consumption is over we are in the downward spiral i mentioned in the first paragraph.

Am i wrong in all this, and if not, where do we go from here?

You are not wrong.

Where we go from here is down.

By down I mean, at best, a slow grinding deflationary decline until we reach an equilibrium point where what is made has to be made. Even then, there will be no room for growth. Only a static-state economy as a whole. For every individual/group/nation that makes a profit and does manage to grow their economies, someone else will have to make a loss. There will be no more growth for all.

At worst, the big players will not settle for the above and, instead, will engage in a bloody end-game as they fight over the remaining scraps left on the table.

Frankly, I see this latter scenario as being the most probable.

Edited June 13, 2009 by Steve Cook

[cashinmattress]

It was doomed from the get go, I'm sorry to say.

http://en.wikipedia.org/wiki/Exponential_growth

[50%deposit]

The way i look at what has happened is that to afford all the goods and services produced individuals have had to go into debt. The historical way this has been avoided, was to have the economy grow at such a rate that there was enough to enable salaries to be high enough to afford all goods/services produced without debt, with the growth portion being large enough to satisfy capitals profit motive. However when the growth portion is not high enough to satisfy the profit motive, it eats into wages and workers must take on debt to purchase all goods and services produced. If they dont then more goods will be produced than can be afforded, thus companies reduce their labour force to reduce output, forcing further reductions, etc, etc.

A simple analogy (to help get my point across) is if only one company existed which made everything in a non-growth world. If the companies owner wanted to make a profit it would have to pay less than the goods sold for. But if their workers were paid less than the goods sold for, how do the workers (who are the only ones existing in this 1 company world) buy all the goods debt free?? You might argue that the company owners would spend all their profit to buy the excess, but that just would not happen. At the very minimum some of it would be stashed away. Thus the reason/need for growth in our current system.

I also dont see those who own capital willing to settle for only the growth portion (or a portion of this portion) of our economies as their profit. I hesitate to guess but it would likely mean returns much much less than they are used to (1-2% per annum or possibly less??).

This means that if we cant have growth high enough, then the system nolonger works, and has no chance of working again, ever.

Now this is my take on things, i might be wrong, but i dont think i am, and it seems to ring true with what we have seen in the world over the past 2-3 decades. To bring in the desired profits wages were held down, and thus to consume all that was produced the consumers had to resort to debt. Now that debt fueled consumption is over we are in the downward spiral i mentioned in the first paragraph.

Am i wrong in all this, and if not, where do we go from here?

dont understand what your saying. i dont follow this everyones in debt rationale. are you just reffering to govt debt?

with regards to personal debt most people dont have any.

but i think either way, markets respond, if people really dont have any money, prices will go down, you cant sell iron ore to a smelter that cannot sell steel, prices will go down down down until the market coughs and recovers. then through affluence people will spend more and prices will go up.

[erranta]

You are not wrong.

Where we go from here is down.

By down I mean, at best, a slow grinding deflationary decline until we reach an equilibrium point where what is made has to be made. Even then, there will be no room for growth. Only a static-state economy as a whole. For every individual/group/nation that makes a profit and does manage to grow their economies, someone else will have to make a loss. There will be no more growth for all.

At worst, the big players will not settle for the above and, instead, will engage in a bloody end-game as they fight over the remaining scraps left on the table.

Frankly, I see this latter scenario as being the most probable.

They already started this!

It's called buy-outs/conglomeration / Globalisation - Gordon Gekko stylie! ie Fook the workers!

[Guest Steve Cook]

They already started this!

It's called buy-outs/conglomeration / Globalisation - Gordon Gekko stylie! ie Fook the workers!

Agreed.

Except, it's about to leave the boardroom and begin on the battlefield.

Actually, they've already started that as well.....

[Harry Monk]

Nah, in five years time the HPI stupidity will be going on again, with nothing having been learned from the current stupidity.

That's capitalism for you. Two steps forward, one step back. Repeat ad nauseum.

[godless]

Yes, pretty good analysis.

The system will have to change, it HAS collapsed and we cannot grow out of it, only inflate one last time before it gets destroyed in a hyperdeflationary death spiral. The government are attempting to nationalise the entire economy now, this will lead to inefficiency on a grand scale which will make the last 50 years of fiscal mismanagement look like a 5min search for a 10p.

[grumpy-old-man-returns]

Am i wrong in all this, and if not, where do we go from here?

ask Alex Jones, he will show you.

edited for obligatory 'be very afraid' smilies.

Edited June 13, 2009 by grumpy-old-man-returns

[oracle]

ask Alex Jones, he will show you.

edited for obligatory 'be very afraid' smilies.

what we have witnessed it most certainly an "economic pearl harbour"

and we are by no means done yet.

the system,in essence,is perfectly sound....however we have had a couple of assailants try to exploit what we have.

be careful not to fall into the "reverse psychology" trap.

I know we are taking a legislative beating at the mo,and there's lots of chaotic stuff going on....but it is worth trying to hang on to what we have.

the PTB would like a happy-clappy world enforced by their pretorian guard,somehow i do not envision this to be the case

all those downtrodden do-ers are about to be given thhe mantle of officialdom.

having an A* in GCSE government+politics just won't cut it when you have to supply your tribe with adeqate food+water