Uncertainty, evolution, competition, and cooperation

Wolfgang Munchau laments in his Financial Times article (6/13) the small country mindset that in his opinion endangers the future of the European Union. Rightly he diagnoses the problem as one of insufficient focus, valuing competitiveness over growth. He also cites the lack of coordination at the macroeconomic level. While he is specifically referring to the forthcoming austerity measures being adopted by most European nations, his observations can be applied to a greater scope.

Economic wisdom hates uncertainty. Random events that can change the economic landscape are the anathema of investors. Hence, investors are always looking for the safest bet. So it is no surprise that the deficit hawks are currently pressuring governments for debt reduction. They are lobbying for what they perceive as certainty in the most volatile markets since the Great Depression.

Unfortunately, and as Munchau correctly asserts, they are being shortsighted. Long term debt reduction cannot be achieved without growth and premature measures towards that end are recessionary. In fact, the austerity measures planned will almost certainly add to the economic uncertainty.

The emphasis on competitiveness over growth cited by Munchau shows the lack of focus and the misunderstanding of macroeconomics, but it's a flawed thinking that has greater repercussions than just in Europe. He points to a lack of cooperation and coordination between EU countries in their financial decisions.

Lack of cooperation and too much emphasis on competition is also hampering global growth since all nations and alliances tend to base their decisions much more on the latter than the former. In fact, economics is mostly based on these principles, with political economists justifying the economic principles with the argument that the benefits are shared by society.

Nations that have experienced the type of austerity measures being proposed now would tell a very different story from the one being pushed by prominent financial chiefs the world over. The misery and discord that are sowed by irresponsible governments in the name of fiscal responsibility are great. And rarely can these measures be pursued without violence, bloodshed, and oppression. Chile, Bolivia, Brazil, Poland, Russia, and Indonesia are just a few examples.

The problem, for any country trying to avoid such damaging austerity measures is the "lack of any viable strategic alternatives" according to Munchau. France is the only country who is so far refusing to take such actions. And here is the rub: we continue to live in a bad situation, and continue to make it worse, because we don't know what else to do.

At the G-20 the divisions were clear. And there will be no consensus as to when or how financial monetary policy will be carried out globally, basically because e eery country will act in it's own best interest rather than understanding the underlying mechanics of the global market and basing policy in conjunction with it's partners. We are all sharing the same resources, yet we refuse to cooperate to form one clear market.

But non-cooperation is good for some. The ultra-competitive will take every opportunity to exploit every flaw in the global financial system for personal gain. So while nations dither as to how to get us out of the depression, and they postpone the inevitable evolution of a better system, corporations, financiers, and oligarchs can continue to plunder the wealth of the world.

Evolution is change. And that is the true constant. Finance knows and lives by this. They will evolve however necessary to continue their exploitation with innovations of no true value, except their capacity to inflate the pockets of the wizards of finance. But companies understand evolution, for they live the reality of the underlying process: competition and cooperation.

Many things must evolve before changes can be identified, but currently we are evolving towards a world where human misery is going to increase manyfold. To evolve towards something better A viable strategic alternative must be defined.

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They Keep Stealing - Why Keep Paying?

Economic progress risks massive stagnation and possible or even probable deflation in the long term. There are no viable strategic alternatives... Until viable alternatives are formed, promoted, and adopted, the current state of global economics will continue to evolve in the direction it has been headed for decades.

The suggestions in this article are good and reasonable, but without a more robust strategy and implementation may fall short of the desired outcome. Move your money. Rethink your investments. And if applicable, use this strategy in conjunction and coordination with your neighbors, acquaintances, and friends. It will not solve the problems (which are deep and fundamental) but it may help in moving things in the right direction.
Read the Article at HuffingtonPost

Paul Krugman Vs. Alan Greenspan On Deficits (POLL)

I'm with you. Cut the war an military-industrial complex. Spend on society which is the true wealth of the nation.
About Alan Greenspan
Read the Article at HuffingtonPost

Double Dip?

Well, it certainly seems like we may be on our way to our double dip recession. Jobless numbers continue to be well below what they need to be to indicate a recovery. Senators left for a break without extending benefits for the unemployed (the House passed the bill HR4213.) And deficit hawks in Congress have diminished the probability of another stimulus package being passed. Add to all of this the European financial turmoil and prospects of any recovery seem far-fetched at best.

The ever-worsening situation seems to have no end in sight. In fact, few proposals that deal with the crisis are even being discussed, probably because to do so would be an admission that fundamental system imbalances exist. But to most of us lay-people (non-economists), it seems quite obvious that things, in general, are not working.

This is still an opportunity to expand our understanding of our economic system and to address some of its fundamental problems. If I had to single out one factor that skews economic wisdom and clouds the views of most economists, it's evolution. Market gurus are oracles of sorts, they are constantly predicting trends based on historical data, and evaluating companies and markets to offer their best educated guesses as to performance and fundamentals. But for all of their trying, their models only work when it's assumed that markets don't evolve.

Evolution, the concept of constant change, is disruptive to prognostications of all sorts. Economies have to become more capable of adapting to change and so must societies. Our predispositions may never be correct since evolution is the constant. In Puerto Rico a student protest is demonstrating how social evolution may affect economic evolution.

In a strange but not altogether unexpected turn of events, austerity measures in Puerto Rico have led to one of the longest student protests in the history of its centenary university. The student leadership is represented by a group, not a single individual, and they manage to stay on point regardless of who is speaking. They are exploiting new media, social media, and local media to educate society and challenge government claims and actions. A consensus is beginning to arise that the students are charting new paths in Puerto Rico's political system and are educating the population on the power of democracy and social coalitions.

We may well be heading into a double dip recession, but we have the ability and responsibility to evolve and create. We must not stop creating and trying to evolve. It's not just hope that makes things better, it's effort, action, and time.