A new theory of energy and the economy – Part 1 – Generating economic growth

Originally posted on Our Finite World:

How does the economy really work? In my view, there are many erroneous theories in published literature. I have been investigating this topic and have come to the conclusion that both energy and debt play an extremely important role in an economic system. Once energy supply and other aspects of the economy start hitting diminishing returns, there is a serious chance that a debt implosion will bring the whole system down. In this post, I will look at the first piece of this story, relating to how the economy is tied to energy, and how the leveraging impact of cheap energy creates economic growth.

Trying to tackle this topic is a daunting task. The subject crosses many fields of study, including anthropology, ecology, systems analysis, economics, and physics of a thermodynamically open system. It also involves reaching limits in a finite world. Most researchers have tackled the subject without understanding…

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Why Is Economics Rubbish? (1)

Economics is clearly junk, like other religions.  The problem is how to get free of it.  Argument obviously fails, as it does across the religious spectrum and there is an Inquisition to combat.  Meanwhile, most people live in poverty, with more of it (austerity) being the ‘answer’ to provide planet-burning groaf through libidinal mobile phone consumption of lucid-trash no one not under mind-control could want.  25 million people have died in war in more than half a century of peace.

One idea is that academics could somehow produced the killing factual argument on what is going on.  My view is this is part of the problem.  We don’t have the question marks in deep enough on argument and reasonable expectations of it.  Sure, jaw-jaw is better than war-war – but this itself is not much of an argument.  There is complex ‘argument on argument’ in the academy.  Sextus Empiricus knew many equally powerful arguments can be made about the same issue.  Dan Sperber has a current theory involving how we avoid the best arguments for those with easy evidence, and we now have defeasible logic that allows what is axiomatic to be under-cut and reformed by facts.  Scientists know approximation takes place early in theory formation, concerning maths and measurement chosen (Ludwig, Sneed) and even physics is structuring reality.  We should all know terms like ‘paradigm’, ‘root metaphor’, ‘postmodern moment’ and ‘revolutionary rather than puzzle-solving science’ if education really worked.

I’d love to have time and finance to do a defeasible analysis of economics.  I doubt the subject would survive if it was really up for argumentative defeat.  I don’t believe it is open to fair argument at all.  This may seem very insulting to economists.  Yet how would they fare when asked to describe what fair argument is?  I contend they don’t know and that can be demonstrated.  I’m also sure they know little on the nature of insult and who is doing what to whom and how.

Hard Working Families To Face Triple Whammy Of Benefit Cuts Announces Multi-Millionaire Osborne

Originally posted on the void:

gideon-osborneThe lowest paid working fmilies are to face a triple whammy of in-work benefit cuts multi-millionaire George Osborne announced today.

Those with jobs, but on shit wages, will see Tax Credits, Housing Benefits and Child Benefit all frozen in a real term cut to the incomes of the very poorest should the Tory Party be re-elected next year.  According to The Guardian the Tories are planning to freeze almost all benefits for two years including: “jobseeker’s allowance, tax credits, universal credit, child benefit, income support, the work-related activity component of employment and support allowance and the local housing allowance.”

Despite Tory lies to the contrary disabled people are also likely to be the hardest hit by these changes.  Whilst Osborne claims they will be protected, the inclusion of most claimants on Employment Support Allowance means that hundreds of thousands of sick and disabled people will see already meagre incomes…

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Rugged Egalitarianism – Hope in the Ruins

Originally posted on Rugged Egalitarianism:

As I write, American conservatism has gone mad: openly, disturbingly and resoundingly bats. There is no mistaking it. But the furious imprecations and cracked laughter of the lunatic conservatives echoing loudly down the halls of our sad American bedlam have helped obscure the fact that liberalism in the United States is moribund.  While conservatives strive to tear down our rotten and unjust system and replace it with something even more terrifying, liberals offer nothing but a determination to patch up some of the superficial rot while approving the general injustice.

Entered in evidence: Paul Krugman takes issue with Peggy Noonan’s recent assertion that the Republican Party is a party of roiling intellectual ferment and new ideas, while the Democratic Party has nothing novel to offer. Krugman plausibly, though pedantically, resists seeing the radical right ideas of the contemporary Republican Party as genuinely new, since most of those ideas go back…

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Getting to the Bottom of Things

Originally posted on Rugged Egalitarianism:

Since the crisis of 2008, professional and academic economists have grown increasingly concerned that something is wrong with their profession.  Sometimes that anxiety springs only from the recognition that most of their colleagues failed to predict the oncoming crisis.  But sometimes a nearly opposite concern is voiced: We sometimes hear the complaint that economists are offering good advice, but none of the decision-makers are paying attention.

I am not a professional economist, so I can only speak to the way the profession looks to me from the outside.  Now, if people are not paying attention to what an expert has to say, it could be that those people are too ignorant or inexperienced to grasp the important things that the expert is trying to get across.  But it could instead be that the expert doing the saying is not offering anything relevant to the most urgent problems the listeners are…

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ANALYSIS: It’s easy to explode the Government myths. So why aren’t the mainstream media doing that?

Originally posted on The Slog.:

We need a new medium to ask awkward questions

There are many idiotic fantasies we are asked by neoliberal economists to accept: that there is no alternative, that wealth trickles down, that Milt Friedman was right about everything and so on. As their world falls apart at a snail’s pace (the deceleration having been paid for by taxpayer-funded nationalisation and subsidy – the two things these numpties claim are the root of all evil) the arguments in favour of a failing system become ever more desperate and mendacious.

The funniest was, without doubt, the bollocks about “There is a recovery, but it’s jobless”. Hilarious: rather like saying, “We’ve found some gold, very special gold – it’s made from lead”. Having been found out on that one, the latest ruse is the invented evidence of rising employment, and the risibly persistent attempt by the likes of Dan Hannan to tweet “Britain…

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Dumb and dumber Britons Not Ruling Waves

There’s a poll here demonstrating how stupid most Britons really are.

http://www.ipsos-mori.com/researchpublications/researcharchive/3188/Perceptions-are-not-reality-the-top-10-we-get-wrong.aspx

It seems most of us think one in four of us is Muslim.  It’s one in twenty.  The list goes on and it’s pretty clear we have no clue what really goes on.  This is no shock to a university teacher.  It is truly amazing how uniformed our students are – and they are supposed to be the top 50%.

The top ten misperceptions are:

1.       Teenage pregnancy: on average, we think teenage pregnancy is 25 times higher than official estimates:  we think that 15% of girls under 16 get pregnant each year, when official figures suggest it is around 0.6%[i]

2.       Crime: 58% do not believe that crime is falling, when the Crime Survey for England and Wales shows that incidents of crime were 19% lower in 2012 than in 2006/07 and 53% lower than in 1995[ii].  51% think violent crime is rising, when it has fallen from almost 2.5 million incidents in 2006/07 to under 2 million in 2012[iii].

3.       Job-seekers allowance: 29% of people think we spend more on JSA than pensions, when in fact we spend 15 times more on pensions (£4.9bn vs £74.2bn)[iv].

4.       Benefit fraud: people estimate that 34 times more benefit money is claimed fraudulently than official estimates: the public think that £24 out of every £100 spent on benefits is claimed fraudulently, compared with official estimates of £0.70 per £100[v].

5.       Foreign aid: 26% of people think foreign aid is one of the top 2-3 items government spends most money on, when it actually made up 1.1% of expenditure (£7.9bn) in the 2011/12 financial year.  More people select this as a top item of expenditure than pensions (which cost nearly ten times as much, £74bn) and education in the UK (£51.5bn)[vi].

6.       Religion: we greatly overestimate the proportion of the population who are Muslims: on average we say 24%, compared with 5% in England and Wales.  And we underestimate the proportion of Christians: we estimate 34% on average, compared with the actual proportion of 59% in England and Wales[vii].

7.       Immigration and ethnicity: the public think that 31% of the population are immigrants, when the official figures are 13%[viii]. Even estimates that attempt to account for illegal immigration suggest a figure closer to 15%.  There are similar misperceptions on ethnicity: the average estimate is that Black and Asian people make up 30% of the population, when it is actually 11% (or 14% if we include mixed and other non-white ethnic groups)[ix].

8.       Age: we think the population is much older than it actually is – the average estimate is that 36% of the population are 65+, when only 16% are[x].

9.       Benefit bill: people are most likely to think that capping benefits at £26,000 per household will save most money from a list provided (33% pick this option), over twice the level that select raising the pension age to 66 for both men and women or stopping child benefit when someone in the household earns £50k+.  In fact, capping household benefits is estimated to save £290m[xi], compared with £5bn[xii] for raising the pension age and £1.7bn[xiii] for stopping child benefit for wealthier households.

10.   Voting: we underestimate the proportion of people who voted in the last general election – our average guess is 43%, when 65% of the electorate actually did (51% of the whole population)[xiv]

 

I think this survey is enough to start sacking teachers and lecturers – I’d want a bit more evidence, but our schools and universities are clearly failing.

Slave Finance, Max Keiser, the Next Bank Collapse and Rehypothicated Lager

Most people who like to think of themselves as living in developed countries are sitting around hoping the financial crisis will go away without any effort from them.  It’s a bit like students put into groups to do something on their own – most are work shy, shy or just want to free-ride on someone else’s efforts.

Of course, the crisis hasn’t gone away and most of us have no clue what it has cost us – £6K each in the UK for QE alone.  We don’t know anything about the ‘opportunity costs’ – like, say, where Britain would be if we had not allowed Big Bang and focused the money into agriculture and manufacturing.  The real rip-off of financial services remains unknown to most, though it could have been picked up with 20 minutes a week of Mad Max Keiser on RT (ignoring his dud stuff on return to a gold standard) and the blogs golemxiv, naked capitalism and zerohedge.  Given it’s really almost that easy, we have an awful lot of free-riders prepared to vote without the effort of knowing why.  Of course, I have no vote because I have put the effort in.  I should really cash in, join a bank and laugh at my derision as a know-all, waving my bonus cheque in your face.

The banks started lying when they conned us into thinking they were a valuable part of our economy.  Finance is a cost on production (our hard work) just like any other in standard profit and loss.  You want to push that cost down, like any other, to get reasonable profit.  If we lived subsistence lives turning sod, keeping sheep and cattle, building our own homes, what would we think of a set of suits wanting 15% of our output for doing nothing?  We’d tell them to engage in overexertive sex and travel.

Of course, in our quasi-modern world, finance is partly a genuine work activity – estimates I think generous are that about a third of what is done is legitimate, the rest parasitic.  Down at the pub, my mate Dave can put up a litre of vodka, put the takings through his special till and make £60 quid.  Most of what he steals is tax.  The pub trade is hard these days and Dave is competing with low priced drugs and unlicensed premises where you can get a speedball, a few lagers and a whore for about 50 quid.  Finance has a lot in common with the smuggler-tax-stealer.  Think Starbucks, Google, Amazon – any of the companies you use a lot in the UK and what they declare as profit for tax.  All legal and above board and called tax avoidance, global wage arbitrage, transfer pricing …

It’s much worse than this because tax is not the only pot to be stolen from.  You may think it’s great your house has gone up in price.  Yet much of this inflation is stolen by the banks in a Ponzi scheme in which they lend more and more, taking more and more in fees and interest.  This steals from the next buyers because they have to pay more.  Imagine your reaction to someone trying to sell you a five year old car for twice its original cost.

Now imagine what you would want to happen to a bunch of people discovered investing in slavery.  Have a look at what actually happened to this bunch when Britain abolished slavery.  They got paid out half our exchequer costs in that time (vast amounts in today’s terms), the slaves were ‘freed’ into indenture (40 hours work a week for board and lodging) for seven years to allow the slavers to adjust.  No slave financiers in gaol.  Gladstone was a major player protecting his family’s investments.  Cameron’s lot got a major bail out.

Now you could say that investment in slavery was legal back then (around 1830), much as you might say the Moses of Numbers 31 (a clear war criminal) was a man of his time. This is moral piffle.  Our governments have been bailing out banks – the finance system generally – to massive tune and the crimes are going unpunished much as the slave investors were bailed out.  What would you have wanted in 1830 – for the slavers to have lost their investments and gone personally bankrupt, the slaves receiving what could be liquidated of the estates or what actually happened?

One bank manager I knew went to jail because his investment scheme involved donkeys at Haydock and his bets left a £7 million hole.  Finance as a whole has left Greece and Cyprus in a mess, and Ireland probably has a hole (after the bail out) as big as a third of planned total EU rescue.  You must have noticed the first submissions of bank holes are tiny compared with reality – pulled as someone from Anglo-Irish said from his arse.  The Irish face a bail-in similar to the Cyprus template – from deposits.  Even the Coop, supposedly ethical, are in trouble.  It’s hard to think they weren’t in trouble before they bought Britannia and were about to take on the unwanted bit of Lloyds – this looks like a gamble to cover-up by takeover.  If people in banks are so dumb they can’t do due diligence, why don’t we pay them accordingly – that is sack them as incompetents.  If the Coop got in this trouble without fly-boy wizards into high-yield Zambian collateralised dead donkeys, what is the state of the rest?

I should be able to tell you the current state of banks from their accounts.  After all, I could be teaching your kids finance.  I can’t tell you because no one could on the basis of what they publish.  Like poor students with a bit of guile they can equalise the balance sheet by pulling something from thin air.  Equity (from shares) and deposits are about 30% and after that we are into the nether world of derivatives and values from bank models.  Further in you discover they are claiming past losses as capital – because this can be claimed against tax on future profits.  Spanish banks alone want to turn 35 billion in losses as tax credits so they can use this in Basel III capital.  Don’t smirk about southern Europeans – our banks are already allowed to do this.  70% of what the banks are claiming as assets are valued by – er – banks.  If they gave me the details I could run up a spreadsheet that would show what these assets are worth in a range of situations – my current guess is that as little as a 4% drop in asset prices would crash most banks.  The capital they claim to hold is not a reserve pot they could dip into – much of it is futurology accounting including tax they won’t pay in the future and a variety of tricks with CDOs and other acronyms to make transactions look profitable in future outcomes – very Enron.  Academics have produced a spreadsheet to warn of crash potential – but guess what – the data needed for it is ‘confidential’ and it can’t be run on the real figures.

Ask yourself how, if banks got us into all this trouble (I think 10 times worse than admitted) on past practices, how can we expect them to recover if they are just doing the same things over again?  Many of the assets they are claiming and the security of loans made depend on the real economy they are not investing in (like house prices might rise if we got more wages – but how can this happen without good jobs for us invested in by them).  Do we want them selling us more dud insurance like PPI and interest-rate swaps?  Or front-running our trades?  They were doing much worse.

In a standard liquidation of, say, a manufacturing company, I would be sent off to visit assets.  Plant and machinery listed as worth £100K often turned out to be a liability worth how much it cost to get scrap people to shift it.  What we should do with the banks is send people in with cops to identify what needs to be kept running as a utility, with the rest put to market to find the real value.  I’d actually sequestrate this as I would have sequestrated the slavers’ assets.  The cops should be allowed criminal investigation without political interference.  As we find out what has really gone on, we should decide on a structured debt jubilee (we have, after all, been quasi-slaves of the rich) and economies based on job guarantee before it is too late.

None of this is about capitalism – it’s about getting to genuine democracy and real changes in the way we can live.  Our society is as captured by an idiot, dominant ideology as surely as the Soviet Block once was, or the society that allowed slavery (pretty much all in history).  We need a sea change in our attitudes on money as surely as we needed change on slavery in the past.  The crisis is in leadership – and take a look at what that really was across history (Barbara Kellerman‘s ‘The End of Leadership’).  They have made us apathetic and snide in attitude to criticism, politics so boring no sane person not after feathering his own interest could take part, our political parties hence wide open to infiltration by vested interests of left and right minorities and most of the world in poverty.

I don’t think we have much time to take control.  Flat-bust Germany was able to re-arm under the Nazis in a few years.  They were despicable scum and what we should learn from this is we could mobilise for world peace and to make poverty, like slavery, a thing of the past.  So far, the nearest we have got is Italy and the election of a real clown.  In the UK we have UKIP – much as I like Farrage – and what we need is the opportunity to vote for what matters.

The big crash is coming, the plan now for rich interests to be holding the cash and physical assets when it comes and then buy the rest of the world in the fire-sale.  The crunch may come in Greece, Spain and Portugal (Ireland will go under in a whimper) where there is substantial communist and fascist pedigree (all bent in the past) and the potential for governments that will give up on international debts by declaring national insolvency.  It will start in a couple of months by deposit haircuts in Ireland and later EU (German) moves against Iberia.

I really don’t think our Establishment could bail out slavers today – but the point is they will bail out (and have) the modern slavery we haven’t recognised as such yet, and given the access I could probably link a lot of old slavery money to today’s oligarchs.  1% own nearly everything you can put a monetary value on in a non-slave economy?  I don’t think so.  A lot of the world does live in what we would call slavery – the sweat shops we buy our clothes from and worse.  There has been a third world war (in Africa) most of us didn’t notice – remember the UK war with Indonesia (28,000 dead plus 128 of our brave lads).

There will be a burglar-borrower-from-shops family in the next street to you.  It’s likely they stole a lot less than the bank clerk next door through PPI.  Welfare is puny and mostly well spent compared with what financial services cost us.  Try to work out how the banks make money.  You don’t really know – and there lies the rub – education  didn’t tell you. How is money created and by whom?  The banks create it from thin air and they make money because they get first use of it (the Cantillon effect).  If you put money in a shoebox under the stairs does it breed?  Go and put £100 in your pub’s one-armed bandit and see how long you last until it has gone.  That machine takes 25% of all money that goes in it. Banks are looking for that kind of cut too.  Supermarkets run on 4 – 5% – but some of them may be creaming profit from elsewhere like paying their people squat, laying-off health care costs on welfare, transfer pricing offshore …

Look around and find out what has happened to CEO and bankster “wages” over the years since WW2.  They have been getting more and more money as unemployment rises and everyone else’s wages and general share of wealth has been going down.  So their claims to be working harder and smarter seem unlikely – if they were the engine of  rugby team we’d boot them out and bring in someone else – but their work is not under the scrutiny of the modern rugby player.

Imagine ordering a couple of lagers in a pub.  You have no money, but do have capital to back up your order.  This is in the bank form of previous losses on various derivative bets that failed.  You can use this as Tier 1 capital because you can claim it against future tax liability on future profits.  The economically literate barkeep asks where your future profits will come from and you say your future bets are bound to come up smelling roses.  The barkeep says it will take a minute or two to authorise the transaction..  He comes back with two full glasses.  You take a sip and announce ‘But barkeep, this is urine’.  He points to two large gentlemen sitting in a corner.  ‘No mate, it’s rehypothecated lager those two drank earlier’.  The situation is not eased by the appearance of an Irish banking colleague claiming he can pull 7 billion Euros from his erse.

Moral: the average barkeep knows more about money than the smartest politician or Gaussian copula swinging banker.

Cost of Crime (2)

It’s hard to explain how we might go about establishing facts in order to create a more rational and ‘better’ society.  There is room to doubt that even schools and universities have failed us in this respect.  These days most of us could home school through the Internet.  There is some cracking stuff about in the mire of 99% porn and crap.

Google is now our first route into knowledge – I use duckduckgo too.  I refinement on Google is Google Scholar.  This puts you into the academic world of books and papers – porn is rare but the 99% crap rule applies.  Without organisational/university access you have to pay to read many journals.  Paying $20 – 50 a pop for goat-poo doesn’t feel good.  Some academics post their work free on their own or university sites.

You can build quite a library through the Internet – but how do you sort the wheat from the chaff?  In Cost of Crime (1) I tried to give the reader a glimpse into how hard this can be.  Slack use of words by academics reporting a cost of crime project from Cambridge had be thinking each of us in the UK pays 12 quid a year to support just one miserable male criminal prolific offender.  Actually, its 12 quid from each of us on average to support all 780 thousand in this category.  Pity – as I pointed out – as culling just 4 of them would pay our country’s EU fees if my first reading had been true – whereas the fact is culling all of them would only pay a quarter of this.  I think killing people is wrong – but this is incidental to the thought experiment.

One reason I was tempted into false belief on the cost of an individual recidivist scrote is personal impact when they have crossed my path.  Our former next-door neighbours were so damaging on our lives that I should have killed them at the start and done the time – I’m a bit ashamed I couldn’t have lived with the guilt.  In more recent times, our grandson and many others have been terrorised over two years by a 15 year old piece of vermin.  Action and attitudes amongst the relevant authorities has improved, but the ease with which such scrote can ruin victims lives remains as was.  How does one cost such stuff as finding a grandchild on suicide sites?

The devastating impact of these shits on people forced to put up with them is so massive I can imagine 4 or 5 of them costing us more than EU membership.  The truth is that we are very reluctant to spend the money needed to prevent crime fucking the lives of victims.  12 quid each a year is peanuts, even in dealing with the part of crime committed by the male, high-rate offenders.  Yet the peanuts add up to us not having a university of the air – or whatever.

The 15 year old I mention first came to light in our street waddling about in his nappies.  A decent neighbour used to take him in.  He caused so much trouble at his junior school he was transferred to the one our grandson attended.  He needed a firm hand, but I quite liked him at this time.  He lasted almost no time at all at secondary school as was sent to one for behaviourally disturbed kids – only to be such a problem there parents started to withdraw their kids – he will be excluded.  A six week custodial had no effect and his crimes include burglary and blackmail.  The story is long and he has probably done years of damage to other kids.  One ‘answer’ could have been to evict the family, but not only would this have punished the rest (decent enough) of the family, they were able to evade this by putting in to buy the house.

Loads is written on all this – https://www.ncjrs.gov/pdffiles1/ojjdp/208804.pdf – is an American example.  My own feelings on discovering my grandson’s terror concerned killing the source of the problem – I’m almost non-violent.  When I did warn the scumbag off he caused £500 of damage to our car.  I accept that we give up personal retribution, prevention and vendetta for good reasons..  Even Hobbes knew that.

We can ask what it would cost to do the best we can for the 15 year old lout.  He could go to a semi-secure boarding school – cost vast.  This would, of course, remove the cost burden from our grandson and 50 or so others.  A major feature of our CJS is that it defrays costs onto victims.  Decisions are made in cash not pain – and in devolved budgets.  And we should consider that paying out for facilities to perpetrators feels lousy.

It costs a fortune to sneeze these days.  The amount we probably need to spend on the people who commit most of what we consider crime is probably so massive we can’t afford it.  Instead we have  CJS that tries to keep the lid on and a lottery attitude to being a victim. You’re lucky if you win the money lottery and it’s just tough luck if you ‘win’ the victims’ one.

The financial cost of dealing with problem families is so vast one has to wonder whether giving them the £500K with plane tickets to Bulgaria would be better.  Looking ahead of being able to marshal facts, I’d say most already written is likely to be cloud-cuckoo-land posturing.  I’m sick and tired of ‘project solutions’ set up with no clue how to put intensive care operations into the financial mainstream.  I currently believe we are ignoring paid work as an answer.

We need some imagination – so imagine this.  We do some charity stuff to buy some tractors and such (plus the means to fuel and maintain them etc.) and take them to rural India to boost agricultural production.  Before getting carried away, you need to think that this excellent idea might end up killing peasant farmers and their families made redundant by the technology.  This warning applies well to crime thinking.