Tag: Euro

Growth Beats Austerity 100 to 1

On May 15, 2012

Bridge Over Troubled Water - by Cairn

Suppose a team of 10 engineers designs a bridge that spans a body of water connecting two small towns and cutting 1 hour off the alternate route for 14,000 people per day. Over the 75-year life of that bridge, those 10 engineers are responsible for 380 Million hours of increased productivity.

At 25 dollars per hour per person whose time is saved, 10 engineers create nearly 10 billion dollars of NEW VALUE. As such, only 100 engineers and a 10 bridges could create the same amount of New Value as Facebook is worth in an IPO.

Now compare the Old Value of the engineers.

Suppose that during the course of those same engineers’ careers, they could each borrow (capitalize) around 1 million dollars in personal debt for cars, homes, credit cards, and family education – debt that they would need in their lifetime.

By the miracles of the fractional reserve system, their 1 million dollars may be multiplied into 10 million dollars of new money available to the financial system for distribution. As such, those same 100 engineers would be worth approximately 1 billion dollars as economic beings in the Old Value economy.

100:1 Ratio

So in review, 100 engineers are worth 100 billion in New Value versus only 1 Billion dollars in Old Value. Of course, I purposely picked an example that would make the numbers come out all nice and orderly, but the most important point is that New Value leverages Old Value by several orders of magnitude.

Only two possible outcome of the global debt crisis.

1. The first is for all the countries of the world to get together and lop 3 zeros of the global accounts balance sheet and reboot. As such; 40 Trillion dollars becomes a quaint and manageable 40 Billion dollars. If it happens quickly, that’s called hyperinflation. If it happens slowly, that is called Austerity.

2. The second outcome is currently raging in Europe today with austerity protests toppling governments in France and Greece with the idea of growth vs. austerity. New candidates are promising to “grow” the economy out of its crisis. While this may be a bold and populist idea that is sure to spread, nobody knows exactly how it will be implemented without triggering number 1.

The New Value Movement:

By making so called “intangibles” tangible, vast amounts of New Value can be added to global accounts balances which could stave off wholesale collapse of the financial system. This will not be without hardship for some people; social priorities must drive Wall Street priorities, not the other way around.

We don’t have a financial crisis, we have a value crisis. One thing is emerging as a certainty, new value leverages old value by several orders of magnitude and The Value Game provides the capitalist model to access this astonishing wealth creation – in case anyone is wondering.

That Pesky Little Problem With Market Capitalism

By Admin

On December 11, 2008

In General Information

Technological change must always precede economic growth. We are going about the process of market capitalism as if economic growth can precede technological change. Somewhere along the line we have gotten the cart in front of the mule.

It seems that this situation can be fairly easily corrected – after all, it’s the same cart and the same mule. All we need to do is get the same driver to point the same carrot on the same stick in the opposite direction; and the system should turn itself around. Impossible we ask? Well, maybe not….yet.

The same species…

Economic growth and technological change are the same species; each is represented by human productivity. If I take a loan to buy a house, the debt is “counted” as economic growth backed by my future productivity. If I go to work and invent a method that provides a better way for people to accomplish something, that same productivity increases with my innovation. They should hedge each other much like insurance. The problem arises when we forget to count the mule.

If A = C and B = C, then A = B

If any two currencies are backed by the same standard, they should be readily convertible. If Euro’s and Dollars are both backed by Gold, they would be convertible between each other and the market can simply choose to trade one or the other. Arbitrage opportunities would keep the system balance.

This is the same case with debt and innovation; two currencies represented by the same standard, i.e., productivity.

What if a new currency was introduced and pegged to human productivity? That currency would also be proportional to the dollar. Arbitrage opportunities between debt and innovation currencies would seek a balance. The two scorecards would hedge each other as they should.

It is going to happen eventually, why wait?

While this may seem odd to talk about one State, two currencies, it is not so odd to talk about what happens if the dollar fails. People will start trading a different currency. The Plumber will trade ideas with the lawyer who will trade with the doctor, carpenter, teacher, grocer, laborer, etc. A computer enabled society will build a knowledge inventory of who knows what. Reputations will arise thus organizing knowledge in the form of a financial instrument. This social medium will be the tool that organizes trading schemes and establishing supply and demand. An Innovation Bank will keep track of who owes what to whom and distribute wealth in the form of tangential innovation. Venture “capital” will be the cheapest money in town – it’s like money in the bank for an innovation economy. This is in fact, the nature of society and largely the function it has served for thousands of years.

Little carrot on a big stick

The difference between now and any other time in history is that society is computer enabled. Human knowledge has been held hostage behind the construct of “intangible assets” on a corporate balance sheet for too long. There is a great deal of energy building up and it can now find a productive outlet through social media. The best government policy is to accommodate what people will do naturally. It would be extremely inexpensive to empower society to form an innovation economy to hedge market capitalism. People need a currency that is first and foremost natural for them to trade. Later, Wall Street can convert and gamble at their peril. But first, point the stick in a different direction and the system will correct itself.

[The Ingenesist Project (https://ingenesist.com) has specified three web application which if deployed to social media would allow social capital, creative capital, and intellectual capital to become tangible inside social networks.]

The Next Economic Paradigm