Chapter 60 - Economists Have Failed Us

Economists have watched over a system where damage and loss to the assets of the nation take second place to short-term gain and profit. Economists have watched as short-term profit has caused immense damage to our environment at the cost of future generations. Depletion of resources and irreversible damage seem to have no place in economists thinking. They have presided over a world economy where all but a handful of nations are massively in debt to international banks. They happily talk in their jargon as poverty and inequality increases. They completely fail to comprehend that a system where there is ‘more debt than money’ is a failed system. Many argue for balanced budgets without considering that governments have the authority to create the currency of the nation and thus, should never be in debt for their own currency. If we were to demand that these same politicians and economists fix the situation we would be wasting our talk because these people have no mind to fix it, nor would they know how to fix it. Until they realize that no nation should be in debt for its own currency, we will remain on a road to debt servitude or disaster. Jerome, a Wall Street trader, who I shared my sandwiches with, on a plane from Stockholm to New York, expressed it as: “They will be fighting over the last sandwich with machine guns”. Amongst his other comments were: “The greatest threat to the world is not nuclear Armageddon, it is economic Armageddon.” And another comment was: “Andy, no-one knows how to stop this.”

The economics profession failed to predict the biggest economic crisis in decades. It failed to repair the problems and failed to relieve the suffering. It has failed to explain why the recovery was a failure. It has failed to provide preventative measures to prevent another crisis. Under their guidance, the issues have become significantly worse. Under their guidance, the solution in 2008 was not less debt, but even greater levels of debt.

Current economists are not going to reform economic thinking. We have no chance, and the world has no chance, if we leave the economics of the world to current university trained economists. We need the public to talk and discuss real economic ideas so that we can get closer to having a democracy that is democratic and a money system that serves the people. Here is a string of quotes, by persons better known than me, along the same lines:

Dr. Evan Jones, University of Sydney

“Economists have become a plague as dangerous as rabbits, prickly pear or cane toads. Economists have become the cultural cane toads of Canberra, oozing over the landscape and endangering myriad indigenous species. Not only the economy but also mental health would be greatly improved if we could lift the fog of obfuscation on things economic. The first step is to take economists from their pedestal and to see them as the curiosities they are. The first step to reducing their power is to reduce their legitimacy. How is this to be achieved? First, economists’ outpourings should, as a matter of principle, be met with laughter, derision, benign paternalism. They should cease to be employed as media commentators. In the long term they should cease to be hired. Let them be pensioned off and die out. Extinction is a worthy end for a profession whose brief is rotten to the core.” [1]

Andy Chalkley I have found quite a few glaring faults with economics during my researches for this book. A big one is right in the very definition of money. The third item of the definition of money is ‘Money can be used as a store of value.’ Money that is held as a ‘store of value’ loses some of its value if an equal amount Circulating Money is not converted to Hoarded Money at the same time. Any big movement of money from hoarding will cause the value of all money to collapse. I am talking about a total failure. Money is not a ‘store of value’ and it cannot be used as a store of value. And worse, any rapid large scale conversion of stored money becomes the avalanche stage of hyperinflation. It is only used as a ‘store of value’ when the unwise are running the money system.

    Hoarded Money has no value.

   Money is not a ‘store of value’.

    Hoarded Money is a money avalanche waiting to create hyperinflation.

An old joke

“Why did God invent economists?”

“To make weathermen feel good about themselves.”

Andy ChalkleyAnother error of economics is that debts exceed the money available to pay those debts. This means that the banks are trading insolvent. It also means that the debts are collectively unpayable.

The next glaring fault is the belief that economy can be controlled by altering the money supply. This belief includes the belief that it can be adjusted by altering interest rates. The economy is controlled by altering the volume of Circulating Money, not money supply. Velocity and hoarding are significant factors that are not taken into account.

The next great falsity is the belief that increased taxes on transactions in the form of sales tax and income tax are going to produce greater tax revenue. My graphs demonstrate that the reverse is the case. These people need to be thrown out, not because of incompetence but because they are a danger to the economy. They are like the old quack doctors with their magic potions.

John Kenneth Galbraith 1908-2006

“The study of money, above all other fields, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.”

kamron

“I had dinner once with a recently graduated Harvard economics student and I was amazed at how this intelligent young man was totally brainwashed by academia into believing the Fed was the salvation of the world. He was sobered by the fact that all money is loaned into the system at interest. Somehow this crucial fact was not part of his education.” [2]

Andy Chalkley I had a similar discussion with a recently graduated economics student on a train from Dublin to Belfast in December 2014. He was fascinated that I was writing a book on economics. He could not accept that there was anything wrong with a situation where there was more debt than money. He could not accept that these were unpayable debts in an Impossible Contract. The discussion got heated when I pointed out that economists created lists of the debts of all the nations in the world, without noticing that it was ridiculous for all nations in the world to be debt. Half should be in credit.

keenomics

“The global financial crisis has revealed the need to rethink fundamentally how financial systems are regulated. It has also made clear a systemic failure of the economics profession.” [3]

Andy Chalkley The current flock of economics students are being taught that it is only the bottom line that matters. ‘Greed is good’ is being accepted as a norm rather than a social sin. Business ethics is not run with the ideas of Jesus where one would treat workers as you would have the workers treat you. Business ethics is run with the concept that “If you treat the workers well. they will work harder which will help the bottom line. Otherwise, don’t worry about it.” Rationality and efficiency override the human needs of the employees.

Guardian

“When the history of how a good crisis went to waste gets written up, it will surely contain a big chapter on the failure of our academic elites. Because just like the politicians, the taxpayer-funded intellectuals at our universities have missed the historic opportunities gifted to them by the financial collapse. And it will be the rest of us who pay the price.” [4]

Claudia Von Werlhof

“Is there an alternative to plundering the earth? Is there an alternative to making war? Is there an alternative to destroying the planet? No one asks these questions because they seem absurd. Yet, no one can escape them either.

Until the onslaught of the global economic crisis, the motto of so-called "neoliberalism" was TINA: ‘There Is No Alternative!’ No alternative to ‘neoliberal globalization’? No alternative to the unfettered ‘free market’ economy?

The notion that capitalism and democracy are one is proven a myth by neoliberalism and its ‘monetary totalitarianism’. The primacy of politics over economy has been lost. Politicians of all parties have abandoned it. It is the corporations that dictate politics. Where corporate interests are concerned, there is no place for democratic convention or community control. Public space disappears. The res publica turns into a res privata, or - as we could say today - a res privata transnationale (in its original Latin meaning, privare means ‘to deprive’). Only those in power still have rights. They give themselves the licenses they need, from the ‘license to plunder’ to the ‘license to kill’.” [5]

Shamus Cooke

“The mainstream media is now - for political reasons - in a constant clamor for the economy’s elusive ‘rock bottom’. This is so people will be more hopeful, less agitated, and more willing to let those who destroyed the economy continue running the country un-challenged. Every time a new economic indicator comes out that wasn’t ‘as bad as expected’, Wall Street cheers and politicians give their "we’ve turned the corner" speeches. Reality is thus turned on its head.

The recession is creating a “fight or die” environment for corporations and governments around the world. The super rich that currently control both entities are using their influence to ensure that workers carry the brunt of this burden. It doesn’t have to be so. The fight for jobs, a living wage, progressive taxation, social security and single payer healthcare are all issues capable of uniting the vast majority of U.S. citizens.” [6]

Michel Chossudovsky 2014

“The economics profession, particularly in the universities, rarely addresses the actual ‘real world’ functioning of markets. ...

By failing to examine the interplay of powerful economic actors in the “real life” economy, the processes of market rigging, financial manipulation and fraud are overlooked. The concentration and centralization of economic decision-making, the role of the financial elites, the economic thinks tanks, the corporate boardrooms: none of these issues are examined in the universities’ economics programs. The theoretical construct is dysfunctional; it cannot be used to provide an understanding of the economic crisis.

Economic science is an ideological construct which serves to camouflage and justify the New World Order. A set of dogmatic postulates serves to uphold free market capitalism by denying the existence of social inequality and the profit-driven nature of the system is denied. The role of powerful economic actors and how these actors are able to influence the workings of financial and commodity markets is not a matter of concern for the discipline’s theoreticians. The powers of market manipulation which serve to appropriate vast amounts of money wealth are rarely addressed. And when they are acknowledged, they are considered to belong to the realm of sociology or political science.

This means that the policy and institutional framework behind this global economic system, which has been shaped in the course of the last thirty years, is rarely analyzed by mainstream economists. It follows that economics as a discipline, with some exceptions, has not provided the analysis required to comprehend the economic crisis. In fact, its main free market postulates deny the existence of a crisis. The focus of neoclassical economics is on equilibrium, disequilibrium and ‘market correction’ or ‘adjustment’ through the market mechanism, as a means to putting the economy back ‘onto the path of self-sustained growth’.” [7]

Helge Nome 2011

“Why do mainstream economists studiously ignore the role of debt in their ‘analysis’ when the whole system is based on debt generation?

Answer: Because they have been deliberately conditioned to ‘look the other way’.

And are richly rewarded for doing so.” [8]

Here is a typical graph to illustrate the role of debt as mentioned by Helge Nome

Graph of Poland Money Supply and Debt. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au

Andy Chalkley The individuals within nations and the nations themselves have been subjugated by usury by local private banking corporations that have created a monopoly on the creation of money, hidden behind an illusion that money comes from a central bank. Usury is not studied as a topic in economics. There is no awareness of the consequences of usury that was banned by the church. Here is Aristotle talking on the subject:

Aristotle on Usury, 350 BC: “The most hated sort of money-making and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural use of it. For money was intended merely for exchange, not for increase at interest. And this term interest, which implies the birth of money from money, is applied to the breeding of money, because the off-spring resembles the parent. Whereof all modes of money-making, this is the most unnatural.”

Aristotle recognizes that nature of money was invented as a ‘medium of exchange.’ He recognizes that it is not reasonable for persons to ‘make money from money’ and that exchange is the purpose for which money was invented.

Ann Pettifor

“the transfer of economic power away from sound, elected, accountable institutions to wealthy elites have hollowed out democratic bodies and placed key decision-makers - like the heads of global banks - beyond the reach of the law, of regulators and politicians.

The economics profession and the universities stood aloof, as enormous powers were concentrated in the hands of small, reckless financiers. Academic economists focused myopically on micro-economic issues and lost sight of the macro-economy. They obliged the finance sector by largely ignoring its activities. To this day, the economics profession remains distanced from the crisis, and irrelevant to its resolution.

While our universities turned a blind eye to this capture of a great public good for private gain, knowledge of the monetary system was scant, and sometimes deliberately burried. Politicians and the media were dazed and confused by the finance sector’s activities.” [9]

Andy ChalkleyMy Thoughts Capitalism has become a movement where a parasitic few gain at the expense of the remainder of the population, who are now shouting to get their needs met. Capitalism may fail, not because it is incapable of working, but because the working poor sees it as a system where the privileged can abuse them. If we are to make capitalism work, the 1% will need to see the logic of looking after the 99% so they can prosper in peace. If the 1% push the 99% too hard, the 1%, itself, will suffer in numerous ways. The collapse of the Roman Empire did not benefit the elite. The Roman financial elite had a greater degradation of lifestyle than the serfs and plebes. I remember reading a book when I was much younger, about dynasties in China. I remember one thing. The author taught me that ‘the rich get richer in a cycle usually lasting 300 years’. When the rich get too rich, the whole system gets tipped upside down. And the rich get turned into peasants and the whole cycle starts over again. Please heed my warning. It will happen again. We need to take this seriously. When the collapse occurs, it will happen overnight. A gun or a loaf of bread will be worth more than a house. People will be fighting in the streets over a sandwich with guns.

My Past

These things, I have largely worked out for myself over the past three years. I went to a British grammar school where I got the school mathematics prize, although I failed English ‘O’ level five times. I then studied Mechanical Engineering at Imperial College London. I always had problems remembering items such as formulae, but I made up for it by working out the logic of the situation. I had difficulty working out the formulae. I would work out the formulae from basic principles and see if they matched anything I remembered. My training always got me to puzzle out how things work so that I could fix them. I tend to joke: “It doesn’t matter whether it is a broken gearbox, a broken transport system or a broken heart, Andy will fix it.” My mother recanted to me last Christmas that as a three year old I said: “Mummy. I have made a chair to keep you warm. It’s called an electric chair!” I remember as a young teenager being given a complete motorcycle engine including a gearbox in pieces by a friendly development engineer. I put it all back together which left one part lying in the middle of my bench. The engineer informed me that they no longer used this part. In a previous business, there was no software available to run the business. I fixed it by writing a database system. The software is still used by many bus companies. I applied the same procedure to the money system and was surprised by what I found. It was not broken in one area, it was wrong in almost every area that I looked. Some of the things, that were obviously drastically incorrect, could actually be lived with and other things that did were initially hidden, had the potential for catastrophe. As I read book after book, article after article, blog after blog, I realized none had a workable formula. Some of the very old books from centuries ago were the most facinating. Centuries ago the people were having a right ding-dong with the money lenders. They knew exactly what the moneylenders were upto and they faught them tooth and nail. Religious texts had surprising amounts of economics written into them. However, none of them had a workable formula. The Quran has an item that I have found nowhere else: a ban on hoarding. It also has concessions on trading that override the general ban on usury. It took three years to puzzle what was wrong with the money system. I had puzzled out how to express some of this knowledge in graphs. I had a dilemma with the solution because there was no single solution. The concept of money is itself flawed and there is no single solution and there is no perfect solution. There are things to change to make up for the inherent shortcomings of money. There are quite a number of procedures that will fix the system. Some procedures are needed to protect the system from catastrophic collapse. These include:

Glass-Steagal separation of the Investment Banks and the Commercial Banks is needed to prevent a collapse of the Investment Banks bringing down the Commercial Banks.

Other procedures are needed to fix the functions of the money system after it has been protected from total collapse. Of these, many will work giving a benefit on their own, but the maximum benefit will arrive from implementing all of them. This current dogma is tricky to follow. Some proposed solutions, such as Austerity Economics, are unworkable. I have attempted to give the reader a significant understanding so that he/she can clearly see the road ahead. I look on the task in the same way that I approached teaching. During my years as a mathematics and science teacher, I described teaching as the painting of a picture into the minds of my students. Please enjoy. I hope this book is part of the economics revolution as suggested in the ‘Kick It Over Manifesto’ below.

 

www.kickitover.org

Kick It Over Manifesto

We, the undersigned, make this accusation: that you, the teachers of neoclassical economics and the students that you graduate, have perpetuated a gigantic fraud upon the world.

You claim to work in a pure science of formula and law, but yours is a social science, with all the fragility and uncertainty that this entails. We accuse you of pretending to be what you are not.

You hide in your offices, protected by your mathematical jargon, while in the real world, forests vanish, species perish and human lives are callously destroyed. We accuse you of gross negligence in the management of our planetary household.

You have known since its inception that one of your measures of economic progress, the Gross Domestic Product, is fundamentally flawed and incomplete, and yet you have allowed it to become a global standard, reported day in, day out in every form of media. We accuse you of recklessly projecting an illusion of progress.

You have done great harm, but your time is coming to a close. Your systems are crumbling, your flaws increasingly laid bare. An economic revolution has begun, as hopeful and determined as any in history. We will have our clash of economic paradigms, we will have our moment of truth, and out of each will come a new economics - open, holistic, human-scale.

On campus after campus, we will chase you old goats out of power. Then, in the months and years that follow, we will begin the work of reprogramming your doomsday machine.

Andy ChalkleySign the manifesto at www.kickitover.org

 

In 1939, Robert H. Hemphill of the Federal Reserve Bank of Atlanta stated:

If all the bank loans were paid, no one would have a bank deposit and there would not be one dollar of coin or currency in circulation. ...... Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous: if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.

History

The use and abuse of money is closely tied to the history of mankind. It is a pointless study of History that does not look at the source of money for wars, church, and monarchs. The study of history has been tainted. Only ‘approved’ documents may be used. The battle to control the issue of money has been a constant influence on the history of human civilization. Our history books quietly avoid discussing who funded the wars and the overthrow of monarchs. They conveniently ignore the role of usury in the Roman Empire. It was collapse of bank-credit that collapsed the Roman Empire. the collapse was so comprehensive that it us into the Dark Ages. Almost all historical events have a money component that is ignored. Most prophets were also money reformers. Most so-called news that describes certain groups as bad-guys is propaganda about control of money or territory.

Money Has Inbuilt Flaws

Money cannot be hoarded with out compromising its ability to conduct transactions. Money is capable of creating unpayable debts. Situations occur where there is more money than debt. A money system is not self correcting. The issuance of money confers great privilege on the creator. Groups will go to any lengths to obtain the rights to control a money system. The list includes: assassination, murder, propaganda, lies, and even war. The study of these is an important component of any education.

The Future

What is clear is that the economists cannot predict the future. We must prepare for sudden changes in our economies and protect our system from instability. There are very real threats to our system that have the potential to collapse the system and send us back to the dark ages. We cannot leave this to the current team of economists, politicians, and those that benefit from the current system. It is impossible to say whether and when the system may collapse. It is not possible to predict the future. We must prepare for the worst. The worst is a total collapse of the money system as occurred in 1345 and at the end of the Roman era. Leaving this to vested interests is to accept a bad outcome. There are threats to the very money system that underpins our civilization. The effects of these threats are impossible to predict. The outcome of the collapse mechanism is difficult to fully understand, but it will be unpleasant. We may soon get a new learning experience. We are likely to learn what happens when multiple bubbles burst at the same time?

There is no way to predict the future.