Timothy Wilken, MD writes: Making money is not the same as creating life support. Elsewhere, I have defined mutual life support to be synergic wealth. Money was defined as neutral wealth. We humans are an interdependent species. We meet our needs by making exchanges in the marketplace. Supply and demand often determines the value of things that we need. High demand raises the value of a particular good, as does low supply. It is scarcity that gives everything its maximum value.

The laws of supply and demand were originally formulated by Adam Smith before the invention of advertising. Advertising is a powerful tool designed to create demand. This tool is a constant and insideous companion to modern life. It is enormously effective at creating demand. You can’t watch television, listen to radio, read a magazine, or even drive on the public highways without being bombarded with advertising. This prolific advertising creates a strong demand for products and services that have little or no benefit to humankind.

Most of this advertising created demand is for our wants not for our needs. Wants and needs are not the same.

I want a Mercedes, but I need transportation.

I want a gold Rolex, but I need to know the time.

I want Gucci loafers, but I only need shoes.

I want a million dollar architectually designed home, but I only need safe, comfortable housing.

Our present culture is dominated by the idea that more is always better than less–that expensive is always better than inexpensive. Two phrases in common use today encapsulate this attitude: “The only difference between men and boys is the price of their toys.” and “He who dies with the most toys wins!”

Scientists have discovered that Nature is always seeking more for less–always seeking maximum efficiency in all that she does. R. Buckminster Fuller called this principle of seeking more for less the “dymaxion” way.

This is of course simply another way of stating the “Principle of Least Action”. In science the most elegant solution is the one that explains the most with the fewest variables. A synergic culture will be dominated by the dymaxion ideal. The best will be that which accomplishes the most with the least.

Doing more with less will makes more available to help others. Helping others so that you are helped in return is the operating basis of synergic culture. There our human wants will move towards congruence with our human needs.

But, back to the present world, today’s wants are not only more than we need, but they often are not even good for us.

I want a cigarette, but what I need is to relax.

I want a drink of alcohol, but what I need in to reduce the stress in my life.

I want an extra dessert, but what I need is more love in my life.

Much of what we want is not helpful for us and often times even harmful. But the laws of supply and demand respond as well to human wants as they do to human needs.

Those products most demanded whether for wants or needs are considered valuable. And it is the possession of valuable things that is the usually definition of wealth. This means in today’s world many harmful things are valuable–cocaine is very valuable, and possession of a ton of cocaine would make me wealthy.

In a synergic science, we make a major distinction between creating mutual life support or synergic wealth and just making money which is neutral wealth.

Synergic wealth is more than just what humans want or value. Synergic wealth is that which supports mutual human life. Synergic Wealth is defined as life itself and that which promotes human well being generally–that which satisfies the human needs of self and other–that which promotes mutual survival and makes life meaningful for self and other.

While money is considered wealth in our present neutral society, even here it is not really wealth. Money is a symbolic tool that can be used to represent real wealth. It was originally invented as a mechanism to protect real wealth. This distinction has been lost in our modern world. Today there is no distinction between money and real wealth. (12/24/08)
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James Howard Kunstler writes: Zounds! Public sentiment toward the accelerating economic fiasco has shifted, seemingly overnight, from a mood of nauseated amazement to one of panicked grievance as the United States moves closer to an apparent comprehensive collapse — and so ill-timed, wouldn’t you know it, to coincide with the annual rigors of Santa Claus. The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake. It’s like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve. And out in the heartland, of course, there is the spectacle of Illinois governor Rod Blagojevich trying to desperately dodge a racketeering rap behind an implausible hairdo.

What seems to spook people now is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system. Not even the the legions of Obama are immune as his reliance on Wall Street capos Robert Rubin, Tim Geithner, and Larry Summers seem tainted by the same reckless thinking that brought on the fiasco. His pick last week for chief of the SEC, Mary Shapiro, is already being dissed as a shill for the Big Bank status quo. In a few days we’ll discover what kind of bonuses are being ladled out by the remaining Wall Street banks with TARP money and a new chorus of howls will ring out.

This is very dangerous territory. In dollar terms, the numbers being applied to the various problems are so colossal — trillions! — that the death of our currency seems assured. And in defiance of congress’s express intentions, none of the TARP “money” has been applied to its targeted purpose of buying up “toxic” (i.e. fraudulent) securities hidden in the vaults of banks, pension funds, and municipal portfolios. (12/24/08)
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Barry
Ritholtz writes: Some time ago, I asked if “Milton Friedman was
the next economist whose once lauded reputation may soon slide?”

Turns out it happened much quicker than expected. A long
Bloomberg piece, Friedman Would Be Roiled as Chicago Disciples Rue
Repudiation, discusses the tarnishment of the Chicago school
of thought.

Its long overdue. From the efficient-market theories, to the
concept
of man as rational profit maximizers, much of the edifice that is was the
Chicago school of economics is based on a foundation that is false,
disproven or otherwise questionable.

I first encountered the Chicago theory in law school. The
Chicagoists somehow read into law a market efficiency component that
was never there. I recoiled against it — not because of the
libertarianism, which I embraced. Rather, it seemed a backdoor way to
circumvent democracy, and force into the legal system rules that were
never debated, voted on, or agreed to by a representative government. I
found the extremist legal theories of Judges like Richard Posner and
Frank Easterbrook intellectually repulsive. They were undemocratic,
anti-representative government. When I told a professor that the law
and economics movement was an attempt at a political coup, he laughed
and said, try to stop it.

I disliked the neoclassical price theory. It was
authoritarian, a
worship of a form of mob rule outside of the usual legal channels. The
view that regulation and other government intervention is always
inefficient compared to a free market has now been made laughable.  Its
always the extremists that seem to control a discipline or school of
thought. If I have any dogma, its extremism in all forms is undesirable
(I know, radical, huh)

If there is one silver lining in the entire collapse, its that this
group of intellectual charlatans have been revealed as utterly wanting.
(12/24/08)
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Financial Times Interview of Nouriel Roubini by Aline van Duyn: FT: What’s in store for 2009?

NR: It’s going to be a year of economic stagnation and recession for most of the global economy with deflationary pressuresÖI expect a global recession and a severe one.

FT: So you think next year will probably be the worst year?

NR: Yes; I see a recession throughout 2009…and maybe there’ll be return to positive economic growth by 2010.

FT: What other policy actions do you think need to be taken?

NR: Well, part of the answer is the degree of these policy actions. For example, in the US monetary policy right now is very aggressive…I believe the ECB is behind the curve…But also on top of everything else I think that we have to recapitalize financial institutions much faster, more aggressively in the U.S. We also need a plan to reduce the debt burden of households that are now distressed and bankrupt.

FT: So it’s going to cost the taxpayer a lot more?

NR: The fiscal deficit in the U.S. is going to be huge; at least a trillion dollars in 2010; another trillion dollars in 2011.

FT: Is there a risk that the capitalist system doesn’t recover from this shock?

NR: We’re going to avoid the Great Depression and a severe recession even if there is a risk of protracted slow economic growth. So I don’t think this is the end of capitalism, of market economies, but it suggests that really there are significant market failures, that markets don’t self-regulate each other. …

FT: What could be the next shoe to drop?

NR: There are many of them. I think the process of deleveraging is going to continue. You could have a thousand if not more hedge funds going bust all at the same time.

Another source of stress is emerging market economies. There are about a dozen of them that are on the verge of a potential financial crisis: Latvia, Estonia, Lithuania, Hungary, Bulgaria, Romania, Turkey, Ukraine in emerging Europe…Pakistan, Indonesia or Korea in Asia. Places like Ecuador that just defaulted. Argentina and Venezuela in Latin America. Some of these countries could get in trouble and there could be contagious effects to other financial markets in other emerging markets.

This credit loss is going to spread from mortgages to commercial real estate, to credit cards, to auto loans, to leverage loans, to industrial and commercial loans…There are many sources of financial stress. (12/24/08)
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Ilargi writes: The prevailing economic theory in the western world today remains a Chicago school type of Keynesianism, in which markets absolutely must be free unless the gambling encouraged by that freedom runs into debt, in which case the money of the poor, and their children, must be confiscated by their governments in order for the rich to be able to continue gambling. If that still fails, too bad, but it certainly doesn’t mean their theory is wrong.

It’s one-dimensional thinking at its best. Fight fire with fire, debt with more debt, and gambling debt with more gambling. The only person who ever drew the correct conclusion from this, who peaked into its second dimension, was Benito Mussolini, who had no qualms about promoting corporate fascism. The present bunch of supporters are too smart for that (and they know what happened to Benito), so they defined it as the much more benevolent sounding free-market capitalism. But forcibly using the money that rightfully belongs to people who have more or less voluntarily voted away their control over it, in alleged democratic elections, to politicians who have much closer ties to domestic and multinational corporations than they are willing to reveal, to cushion the lives of the largest stakeholders in those corporations, that just so happens to be precisely what Mussolini had in mind.

The best way to explain exactly how one-dimensional the IMF, Britain’s Gordon Brown, and the Citi/Goldman made men who direct the US government are, can be found in the words “necessary to stimulate economic growth”. For these people, the Greater Depression we now have entered in full with our eyes open and closed at the same time, is but a boring snag on the road to the liberation that huge increases in their already huge wealth will bring. And the most clever ones even recognize it as an opportunity to vastly add to their power, money and glory. To them, it’s utterly inconsequential whether or not they leave hunger, death and despair in their wake. They have only one theory, and therefore it’s impossible that this theory might be wrong. In a one-dimensional world, there are two directions: forward and backward. There’s no sideways, let alone up and down.

The problem is that we don’t live in the sort of world our most powerful people think we do. But while those of us who realize this get distracted by all sorts of three-dimensional issues, the big boyz lose no time with that kind of stuff. For them it’s straight ahead, always and forever till death do us part. What happens to the side of them, or above or underneath, is beyond their vision. And that is why they have their power. That and the fact that in their minds, you, the workers and voters, will always be there to catch their fall. Will you? (12/24/08)
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Paul Krugman writes: Whatever the new administration does, we’re in for months, perhaps even a year, of economic hell. After that, things should get better, as President Obama’s stimulus plan - O.K., I’m told that the politically correct term is now “economic recovery plan” - begins to gain traction. Late next year the economy should begin to stabilize, and I’m fairly optimistic about 2010.

But what comes after that? Right now everyone is talking about, say, two years of economic stimulus - which makes sense as a planning horizon. Too much of the economic commentary I’ve been reading seems to assume, however, that that’s really all we’ll need - that once a burst of deficit spending turns the economy around we can quickly go back to business as usual.

In fact, however, things can’t just go back to the way they were before the current crisis. And I hope the Obama people understand that.

The prosperity of a few years ago, such as it was - profits were terrific, wages not so much - depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn’t coming back, the spending that sustained the economy in the pre-crisis years isn’t coming back either.

To be more specific: the severe housing slump we’re experiencing now will end eventually, but the immense Bush-era housing boom won’t be repeated. Consumers will eventually regain some of their confidence, but they won’t spend the way they did in 2005-2007, when many people were using their houses as ATMs, and the savings rate dropped nearly to zero.

So what will support the economy if cautious consumers and humbled homebuilders aren’t up to the job? (12/24/08)
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