Financial Crisis 4April 2009
4 Apr 2009
"A trillion here , a trillion there . Pretty soon we'll be talking real money ."
Or any money at all .
Money's only purpose is to serve as a one-to-one counter for real wealth .
Real wealth is measured according to the criteria set out in
http://andreswhy.blogspot.com "Financial Crisis 31 Jan 2009"
It is to satisfy the human needs , weighted according to the Maslow hierarchy .
1.Air to breathe
2.Water to drink
3.Food to eat
This happens when real wealth increases faster than the growth of the monetary system .
This has been of real concern just before the present crisis .
In fact , it is the present crisis .
The system hunts for stability by creating money in futures .
It creates money by discounting future earnings .
The Central Banks are not creating money fast enough to keep up with the accounting demand .
Literally billions of people are hauling themselves up by the their bootstraps . Creating enormous wealth . The number of dollars , euros , yuan , etc in circulation is not sufficient to reflect the wealth . But the governments concerned try to limit the creation of new money , under outdated theories .
The system promptly bubbles up in futures , which are inherently more unstable than a currency .
Historical examples :
There are many . I will mention two :
1.British Empire circa 1880
A gold based trading empire in an industrial revolution created wealth faster than the discovery of new gold , until the South African goldfields . This created an explosion of wealth .
2.The 1929 crash .
Post-WWI created new wealth , but the monetary system did not keep pace . A bubble in futures (stock exchange) followed . In the ensuing collapse , wealth-creation was decreased . War , in other words .
But the system enforced balance .
And for now ?
The fear is that inflation might follow the creation of trillions of dollars .
The real problem is that they are too modest .
The point is that the excesses of futures transactions reflect a real shortage of money .
The system needs and will need a continuous creation of money just to keep up with the demand in real-wealth creation .
Look at the scale . The world economy is about 100 trillion a year . Wealth creation is about 10% per year . This can be summed , even for the last 10 years this gives a demand for money of about 100 trillion dollars . The money creation systems cannot keep up .
Can you see why we are talking about post-monetarism ?
Any conceivable command-and-control mechanism cannot hold .
It will , and has , fractured .
An example :
http://andreswhy.blogspot.com "Negative pressure : an important update"
If this technology is patented through the Danish embassy in Second Life , future income streams are irrevocably fractured . Linden dollars will become one of the hardest currencies on the planet .
How does this affect you right now ?
If you have any exposure to hedge-funds or futures , get out now . Immediately .
As far as I can see , the funds have been given an extraordinarily wide leeway , but they still have been using short-selling to panic the sheep .
I estimate their exposure to be about 10 trillion on the positive side . This will be dumped into the Market as the new measures come into effect .
The day of the unbridled hedge-fund , like the cheap car , is over .
After that , roughly 20 trillion a year for 5 years will have to be created just to wipe out the back-log .
But in the meantime , wealth-creation will be proceeding at an exponential pace .
Money will become increasingly fractured and meaningless .
New ways of accounting will develop .
I draw your attention to Denise Schmandt-Besserat "How writing came about" (ISBN 13 978 0 292 77704 0 .
She shows conclusively that writing developed out of accounting practices over a period of 4 000 years .
Similarly , new accounting practices for fractured systems will need new descriptive terms .
And so it goes .