Blog 47

Hundreds of thousands of economists around the world are still arguing about 'what caused the current financial crisis'. In the universities around the world there are whole libraries stuffed full of economic facts, fiction, theories, solutions catalogued to the finest detail. And yet still, the fundamental reason for the world’s financial woes appears to lie dormant.

Why?

Well, perhaps it's because the real reason is too simple and the solution too radical for those people in society who profit from the financial status quo and who have a vested interest in leaving things just the way they are.

In order to come to the conclusions that I will present here I have coined a new branch of economics that I call Hyper-Macro-Economics. In fact, though I’ve applied the principles of this to economics, it’s equally valid when applied to other social and practical situations. It's not new; it's just the principle of stepping as far back as you can to get the biggest possible picture. That means shedding all pre-conceptions and looking for the fundamental cause-effect of any situation in its simplest terms. And even when you think you’re looking at the so-called ‘big-picture’ try to take another step back, just to see if you can.

Now, why is it that the financial community is so cock-a-hoop this week with the announcement that Goldman Sachs reported a 5 Billion dollars profit for the first quarter? Why are the media economic pundits cock-a-hoop singing that this is a sign of economic recovery?

Well before you go off and celebrate, just ask yourself this question, how much wealth did Goldman Sachs actually create for the benefit of society in the first quarter of 2010?

Quick answer, none. That's right none, not one puny cent. The 5 billion dollar bills they acquired were simply [or otherwise] moved from one repository to another [metaphorically speaking], their gain was somebody else's loss [moneywise]. Instead of someone else having the cash potential to purchase wealth, that potential was transferred to Goldman Sachs.

Which begs the question, where in there was the economy stimulated? In reality it wasn’t, it's the same, no wealth creation, just the movement of money. The ‘Economy’ doesn't care whether 'Conned Joe' or 'Goldman Sachs' spends the cash; it only cares about the guy who creates wealth. An economy where no wealth is being created is stagnant, just moving money around does nothing to stimulate any economy, absolutely nothing.

So who was the guy who created the wealth? Well it was 'Miss Toilet Tissue Packer 'who works 50 hours a week in Wisconsin; she created more wealth on the first day of the first quarter than Goldman Sachs has created during its entire existence.

That’s the hyper-macro-economic viewpoint, money is not wealth, it's just money. Money is supposed to represent wealth, but since the abolition of the gold standard nearly a hundred years ago governments, banks and other financial intuitions have manipulated the value money to suit their own wealth acquisition programs. Because, in order for those involved in the financial community to survive they have had to become parasitic upon the wealth creation class, it’s as simple as that.

That the financial services sector has over the years become ever more adept at extracting the maximum amount of wealth from those who create it and the recent proliferation of this parasitic class is one of the fundamental causes of the world’s financial woes.

It's not financial services sector profits and stock market activity that will rejuvenate the world economy, its wealth creation, in other words getting all the people who create wealth, back to work.

I’ll throw a cat onto the pigeon loft here. China, is it a wealth creator or a money-go-round?

What to do about the parasitic classes? Well that's another story.