Monday, July 9, 2018

The Inward Journey

As we learn more about China, there is much potential to ponder. And as we ponder that potential, another lesson is taught about the morality (or lack thereof) of our financial markets and the money to be made through the activities of financialization.

As we consider the BRI project, and its goals, what do we make of it? Well, there is a huge poverty class in China that is just beginning to ascend into lower middle class status. As high speed trade, technology and mobility, energy flow routes and other real world physical economic activity create jobs for these people, we can see a positive social impact on the populace. If this same infrastructure creates trade economies that reward the new middle class with a better lifestyle, this can also be seen as economic activity that has a positive social value.

Conversely, in the West, we see the flip side of economic activity as we look at the money which is made through the activities of financialization. Credit default swaps and hostile takeovers, complete with asset stripping and the like, are a prime example of economic activity that does very little to uplift one's fellow man. But the Gordon Gekko's of the world and their real life sociopathic Wall Street character models (who created mayhem earlier in this century) will always be enabled as long as the system that enriches them exists.

In the East (China, Russia, India, etc.) there are vast populations which would have the means to repay huge sums of debt over time. This is very profitable for the banking class, as is the repayment of loans for heavy equipment and raw materials.

But in the West, while there are many unemployed (who could work to replace crumbling U.S. infrastructure for example) there is also a huge population of opioid addicts - at crisis levels among the working classes. There is discussion taking place vigorously today about importing appropriate working classes (or not) while leaving the opioid addicted to the care of the system (or the streets).

Be that as it may, we are shown that the "real money to be made" after all (at least in these "progressive" economies) is in the financial markets, which represent an ever-increasing share of US GDP. Some sources will say 20%. But when one considers the impact of financialization on traditional brick and mortar businesses, we find a financial arm of nearly all large corporations driving a leading profit center for business activity.

There is probably no accurate way to measure the impact of financialization upon a stated GDP, but it could easily represent 40% of profit (in GDP calculations) among 60% of large corporations. Let's not even broach the subject of stock buybacks and the economic impact (or social value) of this activity at its recently elevated scale.

Two things of note above. Notice that Roacheforque has not called the "money made" through financialization "wealth". We may wish to consider (or reconsider) our definition of true wealth in terms of its positive social value, when so much money is made through financial activities which have such a devastating societal impact - as in the bailouts of 2008. Likewise this calls into question the basic moral value of economic activity with highly sociopathic consequence.

But please do not blame capitalism for the brand of greed, corruption, fraud and exploitation which enabled the crisis of confidence that nearly collapsed the system in 2008. Do blame financialization and the deregulation which gave it sociopathic teeth.

Note also that China is not without its similar breed of fraud and corruption within it's banking class, but if and where it may be state sponsored, at least there is the counter balance of positive economic activity which may at some point overtake the "social profitability" of it's national economy.

Secondly, we must - after acknowledging the widespread global growth of particularly "anti-social" financialization activities - ask ourselves: what is the root cause of this widespread growth?.

Two things really. Both the "human nature" of our debt based money, and our own "human nature" that begets it. Culturally, especially in the West, we have glorified our darker nature to exploit and defraud our fellow man. We both love and hate the Gordon Gekko archetype. We hate his lack of empathy, but we love his street smarts and resourcefulness, and we crave the lure of "get rich quick".

Such is the human nature that creates "easy money" by basing it upon that which places one man in bondage to another - debt. Yes my friends, it's been said many times and many ways in these annals, but debt based money is the root of much evil in the world today - and our insatiable lust after it covers the rest.

Gold stands as a defiant challenge to the dark side of our human nature. It enables the light - our freedom, liberty and love for one another. Gold celebrates freedom from bondage to one another. To possess it enslaves no one. It represents the equity of debt-free men and women living a good life today (with some savings put aside for tomorrow). The duality of our human nature and it's impact on our lives is the great paradox of our humanity.

The dark side of human nature has nearly vanquished the memory of a time when Western values were admired across the world as being the hallmark of a prosperous nation with a thriving and virtuous working class.

Now we look to the East to see where the true wealth of moral value has gone, and what comes next of it. We may never see the age of America that was born of its exceptional leaders, its revolution, it's Constitution and its United States. But something good always comes of gold when it re-enters the global economy as "money". The CBs always held it as such, for when the need to cleanse the system arises.

Have another take on this and journey inward to where both the dark side and the light dwell. There you will find the two archetypes of social value and self preservation. How do we account for them? We use two very different types of accounting units for each. A time comes when the need arises ... for when one type chases out the other. Increasingly, that time seems upon us - the moment waits for a single domino to drop.