Jun 20 2011

Pulling us Back from the Brink – Economics?

Published by under Talks

Pulling us Back from the Brink:


Economics? Science? Religion?






Evelyn: Economics may bring disaster upon us

Andrew: Economics can deliver us



Evelyn: Economics may bring disaster upon us

Faults of Economic Theory

1. For Soddy, (1) the basic economic question was


“How does Man live?”


And the answer was, “By Sunshine.”


The rules that man must obey, in living on sunshine, whether current or palaeozoic, are
the first and second laws of thermodynamics,
= branch of physics dealing with heat,
transformed into other forms of energy.


Economics ignores the second law of thermodynamics.


Carnot: (2) It is impossible for an unaided self-acting machine to convey heat from one body to another at a higher temperature.
This law was put into a song by Flanders and Swann:
“Heat won’t flow from a cooler to a hotter
“You can try if you like
“But you far better notter!”


Clausius (3) Entropy Law (energy no longer able to do work, i.e. waste) of an open system always increases.
(Note added by Evelyn: Clausius put what Carnot had said into more sensible words that people could understand.)
1. Continuous growth is impossible, and
2. Growth can only be unidirectional.


An open system spontaneously runs down
All industrial and household processes use heat.

Andrew: Economics can deliver us


Proposal: “That economics can save us from the brink.”


I am convinced that a well structured economic system is vital to our survival as a race.


Firstly: Money, which is nothing more than a commonly accepted medium of exchange, is crucial.


“An economy not based on a commonly accepted medium of exchange would in essence be a barter system and would severely limit what people could achieve. Money is what has allowed civilization to progress beyond the extreme poverty that is our natural state. It has raised our standard of living.
The lack of money and its concomitant market processes and calculations, as defined above, are the reason you’ll never see isolated tribes produce beyond what they’ll need tomorrow.
So if we are going to get ourselves clear of the brink we will need to use everyone’s talents and abilities in the best way possible and to do this they need to be free to specialize in their particular field of expertise and still be able to eat and stay warm etc. Without money and clear rules around its use this would not be possible.”
Extract from Inside Voice. http://blistexfan.tumblr.com/post/3797301180/money-savior-of-mankind


Secondly: Where does the money come from?


“One day the Skipper takes a boatload of tourists on a three-hour tour. A terrible storm comes up and they get marooned on a deserted tropical island, totally cut off from civilization.
There is lots of work to be done: They need to build shelters for themselves, gather food, and figure out how to get off the island. Everyone is eager to get to work, but they all just sit around because there is no money to pay anyone. 100% unemployment. The island folk get tired and hungry sitting around, so they elect the Skipper mayor and ask him to find money to pay people. Not knowing what else to do, the Skipper writes a note to Bank of America asking to borrow a million dollars, puts the note in a bottle and throws it into the sea. He goes to bed worried that the bank won’t get the note and has a vivid dream about the island’s zero balance. In his dream, the bank grants the loan request and it does this, which is what banks actually do when they make a loan…   It changes the amount in the database to a higher number. The money doesn’t come from somewhere else. The bank just changes the database entry.
It’s just a dream, so the bottle that washes up on the beach the next morning is empty, but it gives the Skipper an idea. He makes checkbooks for everyone out of palm bark and at the top of the island checkbook he writes $1,000,000, just like the bank would have told him to do if they had granted the loan. The islanders decide together who’s going to do what and everyone gets paid with a check. They also pay each other to do this and that and the money circulates in the community.
The island prospers.
Until one day, about a year later, another bottle washes up on the beach with a note from the bank. It says “Got your note. Your loan request is granted at 6% interest. You now owe $1,060,000.
Sign here.”
Should they sign the loan agreement? No! They don’t need it. They already have a million dollars that they created.”
Edited from video on Common-good-banks at:  http://dotsub.com/view/000995df-5aaf-4209-a4be-cc3caab95a1b


Thirdly:   What can be done?


The reason our financial system has routinely gotten into trouble, with periodic waves of depression like the one we’re battling now, is due to a flawed perception not just of the roles of banking and credit but of the nature of money itself. In our economic adolescence, we have regarded money as a “thing”—something independent of the relationship it facilitates. But today there is no gold or silver backing our money.


Instead, it’s created by banks, mostly privately owned, with obscene salaries being paid and with profits going to shareholders.
We need a change in the banking system from private ownership to Common-Good-Banks.  These are to be the cornerstones of a new economic system — a democratic, community-based banking system that can support and empower ordinary people with profits going back into the community.
Thoughts gathered from: http://dotsub.com/view/000995df-5aaf-4209-a4be-cc3caab95a1b
and:  http://www.futurestrust.org.nz/index.php?option=com_content&view=article&id=57:theory-of-money&catid=5

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