Is The Economy A Hoax?

[Guest UK Debt Slave]

What has actually physically changed? The people are still here, no one has died (yet) and the earth is still intact and in orbit.

Is the "economy" just an illusion?

YES! Totally!

I think this little blog page explains it quite well

http://fskrealityguide.blogspot.com/2009/04/discharging-debt-vs-paying-debt.html

The upshot is you can discharge debts with paper money but you can never repay a debt with paper. The debt just moves around and forces more and more people to the bottom of the pile. For every winner in this commerce game, someone else is a loser.

It's a thouroughly wicked system

[scepticus]

Actually it's realism. We have some oil and gas but nowhere near enough to sustain our current consumption.

I agreed that we need to moderate our consumption of oil gas and food to approach a more self sustaining economy.

Given the oil gas and farming output we have, I think it is doable.

Dream on, we could not do it in WW2 with a far more cohesive society than now. At this point we have no chance of reaching self sufficiency any time fast enough to avoid serious economic crisis and deep social 'unrest'.

That's because our oil consumption was very high at the time due to the war, and we were blockaded by u-boats, and many of the farmers were fighting in the war. Since then agriculture has become a lot more efficient.

Crisis is coming a little fast for that to make any difference.

Firstly you can't know how fast any crisis will come. Secondly, if it is coming we should act against it regardless of the likelihood of success. The nuke plants which are now shceduled are part of that reaction. Currency deval will force people to moderate consumption of external goods. Therefore currency deval is also part of the reaction/solution.

I have to ask, just how long do you think QE and other such nonsense can actually hold reality at bay for? You are in for a nasty shock in the not too distant future.

I would say for 5 years ot so. However it does need to be replaced by some more sustainable policies asap.

I don't consider that 'hell, lets collapse everything' is a sustainable policy unless you have a very clear view of what is to be done immediately post the collapse.

[PopGun]

I've worked in plenty of offices where I've started to wonder if it all is a hoax. I've never worked anywhere where 95% of the people working there were doing anything of any actual use in the production of something of actual value.

Sounds like my career to date.

[ken_ichikawa]

The problem is about UK agriculture is that even if it is self sufficient (it isn't) wouldnt there be a general pressure or temptation to export to grab foreign hard currency?. Which would create even more starvation in the UK?.

A similar thing happened to China in the USSR / China split, in that the USSR had given China a ton of loans, when they split the USSR the most powerful military force at the time demanded the loans back, so the collectivism took the falsely reported amounts of grain from the farmers and exported it for hard currency to repay the loans, this caused mass starvation which resulted in many cases of cannibalism.

[ImA20SomethingGetMeOutOfHere]

Quite true.

But after a bit of "social unrest" people will soon realise that their survival depends upon cohesion (and has done since the dawn of time) and get on with it.

Day 1 of no food you complain

Day 2 of no food you steal

Day 3 of no food you get together with your mates and think "we need a long term plan here"

In modern Britian I expect that the rest goes like this:

Day 4 of no food - Government decides that food urgently needs to be redistributed to the needy and disadvanged and set up the food redistribution agency which employs 500,000 civil servants to go around confiscating tins of baked beans. Fortunately this is easy due to a previously overlooked clause in the prevention of terrorism/criminal justice/the state can do whatever it bloody well likes act.

Day 5 of no food - Articles start appearing in the Daily Mail about how canny investors are making a killing buying up farmland and renting it back to farmers. Overnight banks start lending money at low interest rates to canny would be investors.

Day 6 of no food - Wheat futures go through the roof. Hedge funds and banks use the profit gained to pay record bonuses to their staff.

Day 7 of no food - A man from Nottingham is sent to prison because he refused to give his food to an Ethiopian lesbian asylum seaker collective across the street.

Day 8 of no food - A group of starving protestors is surrounded by police outside the houses of parliament and not allowed to leave until they hand over a DNA sample and at least 8 forms of ID. Eventually the situation is resolved when the protestors starve to death.

Day 9 of no food - The government announces that it will start printing money immediately to help people get on the food ladder and moots the possibility of shared ownership of loaves of bread.

Day 10 of no food - A reporter manages to smuggle out pictures of the MPs canteen showing the MPs gorging themselves on free food.

Day 11 of no food - Vanessa Feltz collapses from hunger exhaustion. The nation morns.

And so on...

[Guest UK Debt Slave]

In modern Britian I expect that the rest goes like this:

Day 4 of no food - Government decides that food urgently needs to be redistributed to the needy and disadvanged and set up the food redistribution agency which employs 500,000 civil servants to go around confiscating tins of baked beans. Fortunately this is easy due to a previously overlooked clause in the prevention of terrorism/criminal justice/the state can do whatever it bloody well likes act.

Day 5 of no food - Articles start appearing in the Daily Mail about how canny investors are making a killing buying up farmland and renting it back to farmers. Overnight banks start lending money at low interest rates to canny would be investors.

Day 6 of no food - Wheat futures go through the roof. Hedge funds and banks use the profit gained to pay record bonuses to their staff.

Day 7 of no food - A man from Nottingham is sent to prison because he refused to give his food to an Ethiopian lesbian asylum seaker collective across the street.

Day 8 of no food - A group of starving protestors is surrounded by police outside the houses of parliament and not allowed to leave until they hand over a DNA sample and at least 8 forms of ID. Eventually the situation is resolved when the protestors starve to death.

Day 9 of no food - The government announces that it will start printing money immediately to help people get on the food ladder and moots the possibility of shared ownership of loaves of bread.

Day 10 of no food - A reporter manages to smuggle out pictures of the MPs canteen showing the MPs gorging themselves on free food.

Day 11 of no food - Vanessa Feltz collapses from hunger exhaustion. The nation morns.

And so on...

Great post

Sadly, probably rather accurate

[Caveat Mortgagor]

Hoax is one word you could use for our economy. Or you could say it mirrors recent trends in social attitudes.

1. Plastic surgery

2. Fake tan

3. copied 'designer' goods

4. Lick of Magnolia, call it a revamp and stick it on for £30k more

5.

6.

I'll let you fill in some of the blanks.

Some time ago, Gordon created the fake economy where growth was dependant on increasing personal and corporate debt.

Now they have failed to achieve fake growth as a veneer for massive increases in public debt.

And of course, lets not forget the fake housing market. The lengths Gordon has gone to in order to achieve such fakery really is a thing worthy of a few moments to marvel at its scale & complexity.

In a recent interview, when asked what he would have done if he hadnt gone into politics, Gordon Brown said plastic surgeon (1). Well he has given a number of false veneers to our economy for quite some time. Looks like you achieved your dream Gordon.

(1) This statement is entirely made up. Why not????? Gordon has been doing it for years!!!!!!

Edited November 18, 2009 by Nick Dastardly

[kzb]

I'm becoming more and more convinced it is a hoax. However, that's the wrong word really. What it is is a system of political control, whereby populations can be controlled by the global elite.

There is no way there is enough productive work being done in the UK or most other EU countries to justify the average standard of living, compared to poorer countries. i think it comes down to something very simple: as long as the money markets can be fooled into thinking a currency has value, and that value is higher than the average currency value, the corresponding nation is OK.

[Guest UK Debt Slave]

I'm becoming more and more convinced it is a hoax. However, that's the wrong word really. What it is is a system of political control, whereby populations can be controlled by the global elite.

There is no way there is enough productive work being done in the UK or most other EU countries to justify the average standard of living, compared to poorer countries. i think it comes down to something very simple: as long as the money markets can be fooled into thinking a currency has value, and that value is higher than the average currency value, the corresponding nation is OK.

Absolutely correct and this is what is so terrifying should the system collapse

And it looks to me like it will be collapsed deliberately. There is method in their madness.

The people who moan about foolish central bank and monetary policy seem to have ignored the possibility that they are deliberately destroying global capitalism.

[ImA20SomethingGetMeOutOfHere]

I'm becoming more and more convinced it is a hoax. However, that's the wrong word really. What it is is a system of political control, whereby populations can be controlled by the global elite.

There is no way there is enough productive work being done in the UK or most other EU countries to justify the average standard of living, compared to poorer countries. i think it comes down to something very simple: as long as the money markets can be fooled into thinking a currency has value, and that value is higher than the average currency value, the corresponding nation is OK.

It works a bit like this.

We do little of anything of any real value in this country and import far more than we export. In the past this would have meant that a nation's gold reserves and hence money supply would have rapidly disappeared and we would have had to resort to something like selling addictive drugs at gunpoint to maintatin a balance of trade (google the opium wars). In this magical age of printy printy though we can just magic some more money out of thin air and use it to pay for as much stuff as we could possibly need.

Now in any sane world this would quite quickly result in the collapse of the currency but as long as the new money can be balanced by the creation of some kind of asset then the international money markets can still be persuaded to accept that the pound has some kind of value. Thus, if money is created as debt, international investors can be convinced to buy some pounds and use them to buy up privatised utility companies, government bonds, mortgage-backed securities, rail companies and so on. As long as stuff denominated in pounds continues to go up in value, money markets are prepared to turn a blind eye to the printy-printy type activities. A good example of this is the recent gains in the stock market.

The problem comes though when the nation cannot become ay more indebted and there is nothing left to sell. At some point, bubbles burst and the whole giant ponzi scheme comes crashing down.

[right_freds_dead]

I'm becoming more and more convinced it is a hoax. However, that's the wrong word really. What it is is a system of political control, whereby populations can be controlled by the global elite.

There is no way there is enough productive work being done in the UK or most other EU countries to justify the average standard of living, compared to poorer countries. i think it comes down to something very simple: as long as the money markets can be fooled into thinking a currency has value, and that value is higher than the average currency value, the corresponding nation is OK.

our standard of living is in fact incredibly poor.

thats one thing.

but to make such a poor standard of living so costly was a huge mistake.

there was never any need to ramp property by 300% in 2001

now here comes the price...

[Timm]

It works a bit like this.

We do little of anything of any real value in this country and import far more than we export. In the past this would have meant that a nation's gold reserves and hence money supply would have rapidly disappeared and we would have had to resort to something like selling addictive drugs at gunpoint to maintatin a balance of trade (google the opium wars). In this magical age of printy printy though we can just magic some more money out of thin air and use it to pay for as much stuff as we could possibly need.

Now in any sane world this would quite quickly result in the collapse of the currency but as long as the new money can be balanced by the creation of some kind of asset then the international money markets can still be persuaded to accept that the pound has some kind of value. Thus, if money is created as debt, international investors can be convinced to buy some pounds and use them to buy up privatised utility companies, government bonds, mortgage-backed securities, rail companies and so on. As long as stuff denominated in pounds continues to go up in value, money markets are prepared to turn a blind eye to the printy-printy type activities. A good example of this is the recent gains in the stock market.

The problem comes though when the nation cannot become ay more indebted and there is nothing left to sell. At some point, bubbles burst and the whole giant ponzi scheme comes crashing down.

As I think you have spotted, both highlighted passages amount to flogging off assets to finance consumption.

The differecnce is that the second means that the buyer has a claim on the country, rather than some useless yellow metal.

[ImA20SomethingGetMeOutOfHere]

As I think you have spotted, both highlighted passages amount to flogging off assets to finance consumption.

The differecnce is that the second means that the buyer has a claim on the country, rather than some useless yellow metal.

In a sense I agree. Where I perhaps disagree is with the idea that consumption for the sake of it is the goal - it isn't IMO.

One reason why this country has been able to sustain the illusion of wealth for so long is that it has truely excelled in creating bubbles and debt for other countries and institutions to invest in. This has made a few fabulously wealthy but has near bankrupted the rest.

It's all about the banksters not the consumers.

[kzb]

"IAmA20SomethigGetMeOutOfHere" wrote:

As long as stuff denominated in pounds continues to go up in value, money markets are prepared to turn a blind eye to the printy-printy type activities.

Exactly. I feel we have hit the nail on the head. Especially as I suspect the main "stuff" is not the assets you mention, but property-price related assets. As long as we can fool the world that UK property only goes up in value, it means we've fooled the markets into thinking the pound has value.

Hence the truly desperate measures to keep up house prices.

[DabHand]

You now understand what the austrians don't. Our consumption wasn't over the top, those cars and houses were real(the only unreal part was the trade deficit which was less than 5% of the total). All that has changed is the abstraction, the monetary system. The system for getting money into the hands of consumers has broken down. And now we have perfectly good car factories going idle and construction equipment sitting idle, while people still want new cars and new houses.

The MEW-train was how consumers were getting money from about 2001-2007.

Good lord what rot. What is this 5% figure? Private debt has ACCUMULATED to approx £1.4Tr.

To make your fairy tale abstraction work you have had to entirely ignore the basis of the issue. By assuming we just need to magic up some more fiat beans (l know what a QEasy lad you are) you are also assuming that the providers of the resources fuelling the cycle are happy to get NOTHING but empty promises in return for their tangibly PRODUCTIVE output.

A country that operated as the UK did over the 01-07 period, did so because the ultimate creditors believed that they would be able to exchange these MEW promises to pay for something of ultimately tangible value. As this is clearly not going to happen (a quart of real production expected out of a pint sized UK pot), someone is going to eat a real loss to equal the real consumption we didn't really pay for. We collectively stole those cars and other goods you mention from productive (mostly foreign) sources. Your entire logical stance is only valid if we presume that another party is happy to continue to lose in real terms whilst we consume their production for 'free'/printy printy.

If you wish to continue this charade, please come over and do some garden chores for me and l'll pay you with some leaves from the tree. I am leaf rich at the mo' what with it being autumn.

p.s. l have been looking into community credit which can help fill some of the shock credit vacuum, but you'll notice these also do not expect or cope with members running permanent and exponentially neg balance positions. Allowing it to do so would break the system immediately. It perfectly OK to run a fiat exchange medium, but you must understand the basis of the exchange is FAITH, or TRUST, in that medium.

[HumanAction]

I agreed that we need to moderate our consumption of oil gas and food to approach a more self sustaining economy.

Given the oil gas and farming output we have, I think it is doable.

Indeed I have little doubt you think it's doable. But you ought to be clear and say outright that what you are saying is that the living conditions of the majority of the UK need to plummet even further than otherwise to save your rich friends.

That's because our oil consumption was very high at the time due to the war, and we were blockaded by u-boats, and many of the farmers were fighting in the war. Since then agriculture has become a lot more efficient.

Our oil consumption is way higher now, the blockades didnt actually stop food getting in either. Many farmers fought in the war for sure but others were moved to work on the farms in their place, they didnt go fallow. Agriculture will need to be way more efficient given our increased population and that many farmers have gone to the wall over the last 30 years or so.

Firstly you can't know how fast any crisis will come. Secondly, if it is coming we should act against it regardless of the likelihood of success. The nuke plants which are now shceduled are part of that reaction. Currency deval will force people to moderate consumption of external goods. Therefore currency deval is also part of the reaction/solution.

Anyone can see crisis is coming sooner rather than later, all the printing and excess borrowing of recent months hasnt even got us out of technical recession, at this point even Brown knows taxes are going up and spending will inevitably have to be cut if we are to avoid full on currency collapse. Once taxes go up and spending cuts start coming in we will start to see the stark reality of just how bad things actually are.

I would say for 5 years ot so. However it does need to be replaced by some more sustainable policies asap.

Then you are a delusional nutjob, these policies haven't even managed to give the illusion of growth and as our abilirt to borrow further declines they will be less, not more, effective. We have nowhere near 5 years, it's probably closer to 5 months than 5 years.

I don't consider that 'hell, lets collapse everything' is a sustainable policy unless you have a very clear view of what is to be done immediately post the collapse.

Unfortunately it's not a choice we get to avoid without consequences. Propping failed enterprises up at the expense of those that might otherwise generate some actual wealth is the opposite of sustainability itself yet on this board you are the champion of such madness.

As Dabhand has observed, ultimately our consumption was borrowed, the lenders now know we cant even pay for what we took already, the idea we can just keep borrowing insults both our and our creditors intelligences.

Edited November 20, 2009 by HumanAction