Tag Archives: economy

The Problem of Profit: Circulatory metaphor stated

As a small disclaimer, I’ve received one response to this idea already and would like to dismiss it out of hand: I am at base a capitalist. I believe in the free market with some important exceptions, and my base struggle here is to balance that belief with an underlying assumption in the equality of men, which is a democratic–not a communist–viewpoint. I sympathize with Marx in that our current capitalism seems to be bleeding itself dry, but I do not believe the rhetoric that a perfect society will one day inevitably replace what we have: no generation supercedes the last in those matters truly human, and inequal power distributions and massive ignorance are among those truly human matters. What I do mean to say here is that our system is broken, has been for a long time, and I offer this metaphor to propose at least one solution.

**

Capillaries are so small as not to be seen by the unaided eye. Therefore, the best European science use to believe, as ridiculous as it seems today, that blood did not circulate through our bodies but was constantly generated and discarded. It wasn’t until William Harvey came along and in his book On the Motion of the Heart and Blood in Animals offered several obvious but previously unseen arguments about how difficult it would be for a body to maintain a non-circulatory blood supply including food intake and waste based on the amount of blood pumped by the heart per pump. Harvey may not have know what capillaries were, but he proved that blood must circulate, which lead to their discovery. This book singlehandedly initiated the controversy about looking at the human body as a machine instead of as a mystery, from which comes all of modern biology (most true to this tradition neuro-psychology). Regardless of the metaphysical implications of such a view, the outcome of modern medicine itself encourages the pragmatism of such a system.

A few hundred years later and in the same spirit, Adam Smith’s The Wealth of Nations served a similar role by replacing general mysticism about what wealth is and from whence it comes. Like blood cells, every dollar has an orgination point and follows a measurable path to a knowable destination. Adam Smith may not have known what I refer to as the problem of profit, but he did know that some abuse would occur once a system of the circulation of wealth was known, and so he listed some duties to which the people should hold their sovereign. Sovereigns’ general failure to maintain these guidelines because of power’s loyalty to laissez faire has in general lead to the Marxist theory of capitalism–that capitalism holds within itself the seeds of its destruction–and the peoples’ desire to maintain Smith’s duties of the sovereign has in some places inspired socialist movements.

Despite the dollar’s basic adherence to the law of conservation and the hundreds of years since the establishment of a system of economy, Americans continue to treat wealth as if it were a part of impregnable Fortune, and this is more true the lower the monetary class of the individual in question. But I liken the American economy and Smith’s wealth-circulation application therein to describing a patients’ bleeding to death in terms of Harvey’s system of blood-circulation. Harvey describes a closed and efficient system, and modern science makes up for this error by explaining why some blood is lost and where new blood comes from such that it remains essentially a closed system. But the circulatory system becomes open when wounded, sometimes losing blood at a rate faster than it can replace the loss. These situations can prove fatal, and this is exactly the situation of the American economy.

Profit is one means by which the closed system of the American economy is compromised. Importation and out-sourcing are other wounds, but these are mostly managable by law and extremely small compared to the problem of profit. The American economy exists within a system of world economies, and importation and out-sourcing are means by which these economies interact with each other. Profit, however, is the means by which wealth is removed from circulation within a system. Therefore, importation and out-sourcing can be seen as blood donations, basically useful and on occasion beneficial to both parties, whereas profit is a bruise, a self-inflicted wound in which all material is lost and from which no benefit can be derived.

**

Follow-up posts will include why profit-money can be considered as having left the system and a rebuttal to the argument of incentive.

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What we talk about when we talk about the economy

Recession, the end of fun

Recession, the end of fun

We talk about numbers. Hundreds of banks per month, hundreds of thousands of layoffs, unemployment and unwillingly idle statistics. I theorize that in allowing the corporations to set the tone of journalism, we’ve lost site of the fact that stories should both give us facts and highlight the humanity behind the story. In an attempt to provide this illumination, here’s a story.

As desired entry-level positions are replaced with internships and other “opportunities” slaves wouldn’t consider worthwhile, the number of young people deciding to attend graduate school rather than settle for mind-numbing internet-addicting laze jobs is rising. Well, a lot of that is my theory: the quality of entry-level positions is dropping such that people won’t choose to maintain the position for long, and rather than take another job just like it, they move back into the academy, hoping to bypass the schlock with a graduate degree. Whether the schlock ever goes away or simply becomes more refined I have yet to see.

As the unemployment percentage moves to break 10% and underemployment moves to break 5%, people like my parents fear for their jobs. Articles such as this one, which makes it sound as though the layoffs were lagging behind and have finally caught their stride again, make me worry for my parents. My father is in mainframe software sales support and my mother in middle-management quality assurance, both software related fields. And my mother’s company is military-based, so as we argue over the Lockheed Martin F22s, look to see other military-funding decisions like it that will directly impact my mother’s security. My father has already been laid off four times in ten years and has no fantasies about the security in his current position, though he loves the flexibility of his current job.

Idle grandparents watch the news and don’t know which fearmongering to listen to and which to let roll on by. They fear for their banks, for their children, for their grandchildren. They fear for their savings and for their children’s social security, which they’ll be able to collect on within the next ten years. They watch the news, and a faceless fear that is the abuse of our current media oversaturation takes hold, an ignorance that’s both attacked and perpetuated by the media status quo. In their houses alone, they wait for phonecalls from the people they love that will turn their whole world upside down, that will interrupt the forced peace of their retirement.

Broaching the subject

Broaching the subject

**

“How are you, man?”

The question took me off-guard. So busily did I contemplate how I would make everything work, I didn’t give my status second thought.

I paced the dark, broken street. Construction barrels blocked my natural path, and I dodged them unconsciously.

“I’m fine, Steve. Fine. I got to see Ashley and I side by side with my parents this weekend. That was creepy.”

“Yeah?” His voiced buzzed through the phone, old and tired and needing replacement.

“Yeah. I never realized how similar she was to my mother. I couldn’t deny it, though, not side by side.”

He laughed but didn’t reply.

The broken down Boston neighborhood hovered like a menace. People didn’t linger in the street but to smoke; no sounds of life or celebration. Those were reserved for the bars. How could Ashley do well in this broken down West End neighborhood, lively only when BankNorth Garden held an event? But it was packed tonight, Trivia Tuesday.

I saw her bounce out the door, smiling after all. “She’s coming, I’ve got to go. Thanks for the chat.”

“No problem, man. Anytime, you know that.”

I closed the cell.

“I made a hundred and fifty tonight! Oh, it was so hectic! I ran that whole room myself!” She was all beams and glee, and my world shifted up a notch in brightness.

On the way home, we discussed for the first time not how to make ends meet but what to do with the extra money. We splurged on sandwiches at The Federalist, an expense we could finally afford. Our relationship was filled with expenses we couldn’t afford; clothes at the Goodwill to keep her in good spirits, a brownie for me with lunch, a personal-sized French press for her to use at work, a Virgil’s rootbeer to make my nights a little sweeter. A trip to New York when she just couldn’t stand Boston’s rain anymore, and a trip to the North End when both of us just wanted out of town. We couldn’t afford a dime of it, and yet somehow all our money came together. That night, we discussed Harry Potter; we should buy tickets before they sell out. We didn’t; they sold out.

She, feet and, I would imagine, cheeks, fell asleep. I checked my email, my blog stats, facebook, and then played Bejeweled Blitz while waiting for my mind to surrender consciousness. In between games, I received the following email:

I am afraid I won’t be sending any more bonds for a while, maybe not till next year.  I have just read in the paper that my bank is losing money and is trying to get some of the “bank stimulus money” from the govt.  I really feel nervous about it and I am not sure how it will affect my checking and savings accounts, so I am going to hang on to the bonds in case I need them for emergency funds, etc.  I am not sure if they will be able to get a loan from the govt. and how it will play as far as getting cash, etc.  I hope it won’t put you in too much of a bind.  The bank is Guaranty and it is not a local bank, I believe the main office is in Austin.  I may have to open a checking account with the local Community bank.  We will see.  I will hang on to the bonds and hope that I won’t have to use them to tide me over.  Love always, Nana

Take our rags, sponsored by Guaranty

Take our rags, sponsored by Guaranty

I turned away from the computer, ashamed. But it wasn’t our fault that we couldn’t make ends meet; we were relying on so many things, banks staying open, savings holding out, social security. I looked at Ray, my husband, and I knew that we were making the right decision, and yet shame permeated my heart, and I could see a similar sadness in his eyes.

My grandson is in graduate school. He went away to Boston, alone to chase his dreams, and we’re all so proud of him. I’m so proud of him. I bought a five-thousand dollar savings bond for him in 1987, when he was four. I had planned on giving it to him when we passed away, Ray and I, and while he’s been in school I’ve sent him five-hundred dollar sections of it every other month so that he doesn’t blow it all at once; youth has its irresponsibilities. He sends me emails every now and again to tell me how appreciated the money is, that it makes the difference between making ends meet and living a comfortable life. I know he appreciates them, and that he loves us, and we love him.

But with my bank on the verge of closing, depending on whether it gets this federal loan or not, how am I supposed to send away the money? We may need it; Guaranty has all of our savings! How could things get this bad again? They tell us about mortgages and stimulus packages on the news, but I know we’re not getting the whole story. I know that something insidious is happening right now to bring all of this back to us again. America the brave, the true. Sure. I’m still scared, and so is my husband.

At least my daughters are alright. Donna and Curt are alright. No matter what happens to us, even if we need the bonds, Donna and Curt can look out for Greg.

**

“It doesn’t make any sense,” my father said, “but there’s no reason to tell her that. It’s all FDIC insured, so she won’t lose a dime.”

“I know that, but I don’t want to confuse her. It does make me wonder how I’m going to make rent in August, but we can talk about it later.”

I heard the conference call he had muted drone on in the background; a symptom of our economic failure is lodged deep in that unrecorded conversation and its hardly conscious participants and all calls like it. I remember something my mother had said earlier in the week, that she wasn’t a trust-fund kid but a work-until-they-kick-you-out kid. My father had laughed, had said that he hoped he could work another four years without being laid off again.

“Yeah,” he said, “let’s talk about it later. 10 o’clock on Friday might be too early, but I think I can work it out.”

“Don’t worry, I can wait at the station. I’ll bring a book or something.”

“Alright, I’ll talk to you later.”

And we hung up.

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Author: Greg Freed

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Everybody Panic! Six reasons to read "The Economy Is Even Worse Than You Think"

This post is a response to the WSJ article of the same name (minus Everybody Panic!, of course), found here.

First, a “thank you” is in order: Thank you, Mr. Zuckerman, for levelling with the American populace and calling an end to the bullshit about how everything is fluffy and peachy keen. It’s about time someone with some clout said so.

Second, a “fuck you” is in order. Your closing paragraph destroys the majority of the respect that I built for your voice in this article:

“No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It’s a shame Washington didn’t get it right the first time.”

A steady erosion of confidence in the stimulus bill is occurring because the happy-happy joy-joy news is vastly at odds with what is occurring in the United States, and it’s only a matter of time before people will see that. I wouldn’t put it past you political types to have foreseen that the charade was wearing thin, making your aggressive coming-clean with the American people a political ploy so that the WSJ could be the first mainstream media to report of monkeys throwing feces. Well, congratulations, I guess.

Also, look at your last three sentences. Obama playing politics. Infrastructure now. Shame on Washington. Well where the fuck were you, Mr. Zuckerman, when the first stimulus bill was going through? Where’s the link back to previous articles where you’re talking about how we need to spend money on infrastructure? Oh yeah, you were on FOX news lobbying for a second stimulus package and sitting on FOXBusiness sitting in some snazzy bar talking about greed. Come to think of it, where’s your infrastructure plan suggestion now? Alright, we need infrastructure investment; so what’s your big idea? What notion do you support? Oh, you’ve never mentioned it before? Don’t have an idea just yet? Well thanks for the tip, you old windbag. Go back to the drawing board until you can stop being political and come up with an opinion that matters.

Now that I’ve made friends, let’s talk about the good things in this article and why I think my modest readership needs to see it.

One, there’s a ten-point list of why things are fucked and will continue to be fucked. As far as I see, it’s on point, so read it and pay attention.

Two, despite a lack of definition, there’s a call for infrastructure spending. Fucking duh, but why aren’t we talking about it yet? The best idea I’ve seen so far is a redux of freight train lines. Got a better idea? Post it in a comment or, better yet, SEND IT TO YOUR SENATOR. We can, after all, hope that senators are still representatives of the people and worth their governmental paycheck, an idea I’ve always doubted but is sure time to put to the test!

Three, this article gives you real and adequate reasons why you should be concerned about the unemployment rate. Yes, in general the unemployment numbers are a lagging indicator of the economy. BUT IN THIS CASE, we have wiped out all industry growth from the previous economic expansion: 9 years of growth gone in 6 months.

Four, it gives you a more realistic breakdown of the statistics than can be seen by the raw numbers, including the adding of unemployment and underemployment, which puts our nation at a total of 15-20% sum. One in five Americans is either unemployed or underemployed, and those are the ones who are currently seeking employment. In the meantime, why not get a job on a cruise, since they’re hiring? Dear Business Week: Nobody else may tell you this, but you’re a bunch of fucking assholes for posting that article/blog post.

Five, it shows that people are doing the wrong reflex in this time by saving money. It often happens in the course of a human life the one does exactly the wrong thing when simply reacting; you see someone running a red light and you slam on the brakes instead of the gas, guaranteeing that they’ll hit you. You see an accident coming and you tense your body, which will cause you more pain than if you have relaxed instead. During economic slumps, interest rates for savings accounts go down while inflation goes up, making any money saved worth less over time instead of worth more. The proper time to save is in economic expansion; recessions call for spending. It’s important to note, even though it’s obvious and natural, that people are reacting the wrong way because the situation won’t change until people react the right way en masse.

Six, there’s a realistic discussion our country needs to have about why giving money to the managers and bankers is not a good idea. In capitalism, MONEY DOES NOT TRICKLE DOWN. The basic theory states it, for god’s sake: The circulation of wealth gives rize to the centralization of wealth. The stated incentive to own a business is to centralize wealth (called profit when a business is working correctly), and while I suppose that one might give it back once one has it, one often doesn’t. The great benefit that infrastructure projects have over any other type of stimulus is that they put money back in the hands of workers, who spend it such that it eventually ends up in the hands of business owners and once again needs to be given back to the people where it once again rises to the hands of the business owners ad infinitum. We’ve corrected this psuedo-Marxist critique time and time again in American history with the highway project and the development of national parks and with massive wars; anything that puts money back in the hands of the people allows the economy to thrive a little bit longer. Think of it as a gravity clock: sand falls from the producers to the centralizers, and eventually the sand runs out. Or think of it as a convection cell: the material at the producers’ level gets spent and rises to the businessman’s level where it cools and falls back to the producers, except our capitalist system artificially cuts out the part where the material falls back into the hands of the producers. Well, guess what? That’s the primary problem that we’re seeing; too much money is centralized with the business owners such that it’s not circulating anymore, and the first symptom (probably not really the first, I guess) showed up when producers couldn’t pay their mortgages anymore. NOBODY IS AT FAULT HERE, not the bourgeois or the proles, not the banks who aggressively gave out mortgages to people who probably couldn’t afford them or the people who took out mortgages they probably couldn’t afford. There’s a system in place that has yet to be understood, but the reason infrastructure programs work to reignite slagging economies is because it puts money back into the peoples’ hands, in this case allowing them to pay their mortgages, which makes money rise to the businessmen who own the bank. So do it!

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