JM

I'm unsure I understood your comment about gold in the 30's. I think Friedman (I talk about him a lot, don't I) in "Free to Choose" describes the events that lead to the severity of the downturn. Economic downturn occurred before the 30's. Generally, previous downturns lasted only 2-3 years. The 30's saw government interference in the flow of gold which made the depression last much longer and be much more severe.

Stability in the currency supply requires the amount of currency IN CIRCULATION to balance the assets in the country. If an economy is growing, the currency must grow or the economy stops such as in the 30's. Putting currency (or gold) in the mattress takes money out of circulation.

"Now, rather than people thinking of money as some material property which can be harmlessly stored, if they really understood it to be a contract, a bookkeeping entry, where one's asset is another's debt, there would be a much greater appreciation for how the larger economy is fundamentally tied together and harming one part unnecessarily creates negative blowback for the entire system, etc."

I think your talking about something other than money. Money has always been about trading assets. A farmer with lots of chickens trades chickens for pigs with a farmer with lots of pigs. No debt here. But modern times have produced a situation where money is exchanged for debt. As I noted, this has the effect of fooling the system into acting as if there is more money in the system than there really is. Like debasing the currency, inflation, bad stuff. Hence, when the homeowner cannot pay the mortgage, the system collapses. The interest rate controls this flow in a free market., a great negative feedback system. The problem the government kept the interest rate artificially low. I would think the problem you are addressing is really too much debt.

Are you thinking the system is a zero sum game (one wins at the expense of another)? That the economy grows and humanity advances shows a positive sum game. Actually it may be more like prisoners dilemma.

Well, such is my understanding. But I don't study this enough and could be way off base.

Dear John,

Please accept my admiration for your style and for the presentation of the problem. In my opinion, there are actually 3 Fundamental sciences- those of existence, of life and of thinking. In 1953 when I still thought everything is

possible and I will have a chance to become a physicist even in a communist country, I wrote a letter to "Albert Einstein, Princeton USA) telling him about my theory of the isotach space and about a super-Einstein created by me FIBIEGO from physics-biology-egology, as I thought the three great sciences have to be called. (Egology was in a sense used by Arthur C Clarke; I have received his EGOGRAMS in his sunset years. Beyond cosmology and elementary particles we have to solve myriads of problems reagarding evolution of life and developing superior modes of intellectual and ethical modes of thinking- fpr individual and

collective egos.

I still have to meditate about your solution part. Have to confess sincerely thta from my geographically specific cultural heritage if kings could receive a 5, barons are totally negative- less than 1 (aristocratic gangsters, mainly)

The involvement of military is good if they receive the lions share of the GDP

I have to recognize that I am very positively impressed by your ideas even if I do not agree with them all.

Peter

    JH,

    I haven't read Friedman on it, but the story of the 30's was mostly blowback from the 20's. Which was the first real consumer credit bubble, with all those cars, radios, washing machines, Sears even selling houses through their catalog, etc. Then stocks could be bought on 10 percent margin, creating an enormous bubble there, with lots of the small banks were playing in it with deposits. Leading to runs when they lost it. Then the dust bowl hit and a lot of farmers fell further into debt and started losing farms and eventually the whole bubble popped. Not to mention all the chaos and machinations going on in Europe and the rest of the world.

    I also suspect Roosevelt's New Deal likely served to soak up a lot of the under-employed capital and used it to put the under-employed workers back to work, so was not nearly as anti-capital as some like to paint him.

    I have to admit I should read more economics than I do, but I tend to be more of a history buff and see how all the parts fit together. Economists tend to have a political agenda and my view of politics is that the opposing sides are generally complimentary and through the force of opposition, support their opposite. Being of the old country farmer sort, I'm probably far more conservative than I would admit, but like to have a very close perspective on what nature is up to, which makes me something of an ecological liberal, but I don't get worked up about it because to nature, we are just a little pet on a string. She likes to push the reset button frequently.

    Regards,

    JM

    Peter,

    Thank you and I'll finish reading your entry and comment there. Between limited time and powers of concentration, it's difficult for me to absorb many of the entries in this contest.

    Regards,

    JM

    JH,

    In some ways, we are still in the tail end of a hundreds year long process of transitioning from a direct precious metals based currency to a certificate of deposit(gold, grain, etc) based currency.

    Now, rather than greasing the process of trading goods, etc, most trading, value wise, is of currencies themselves. I think this really got started after the seventies and was the real basis of Reaganomics. Volcker is credited with curing inflation by raising interest rates, but higher rates penalize those wishing to borrow money and reward those with money to lend. Since inflation is presumably due to excess money already in the system, this seems counter-intuitive, even though the higher rates were in part due to money being pulled back out of the economy by the Fed selling debt it bought to create the money in the first place.

    Now ask yourself, wouldn't the Treasury issuing lots of new debt, as it was doing in the early 80's, have the same effect as the Fed selling debt, especially since the Treasury was issuing far more new debt than the Fed was selling?

    It leads me to suspect inflation was largely cured with extra government debt, then higher rates. Especially since the higher rates went in by '78 and Volcker tried lowering them in 79-80, but inflation came back and it was only in '82, by which time the government was running a 200 billion dollar deficit.

    So a lot of the economic growth of the past thirty years was fueled by increasing amounts of debt. Everything from wars to healthcare is being put on this tab. Is it because politicians have no spine, or because the bankers pay them to keep the public tab running? It is not as though this debt was the basis of all the growth, but it did provide a carrot for many people. So long as people just kept folding old debt into new debt, it works... The idea is how to get people motivated honestly and not with growing piles of ultimately unfulfillable promises.

    Regards,

    JM

    JM

    I think I'm beginning to see our difference. Reading between the lines, I think you are following the Keynesian derived doctrine (political/government). As the essay suggests, the Keynesian derived doctrine predictions have not only failed, the opposite of their forecasts has happened. I have limited understanding of economics, but I can recognize Friedman's predictions were correct. Therefore, I think his model (monetarists) is the better model. I argue this without real economic understanding, but based of the science that the model that predicts is better regardless of how weird it sounds.

    I suggest your next step should be to get Free to Choose. It is a book and a 10 part TV series (DVD) (comes in 2 series - the first/older is much better, the second is nearly worthless). The end of each segment has his opponents asking questions and making statements with Friedman replying. As near as I can tell, everything you are addressing is in the series. You may know more than I at the end of the series as you have a real interest in the subject. BTW part of Friedman's solution was to abolish the Federal Reserve.

    Dear John,

    I appreciate the nice remarks of political-historical nature in the first part of your essay. I also agree with your remark that: Humans lack sufficient knowledge to predict outcomes of actions. Therefore, a trial-and-error method must be adopted.

    I confess that I have more difficulty in following the line of reasoning in Section 2 (The fundamental principles of humanity that apply to physics).

    Perhaps due to space limitations, you present interesting facts, but I did not manage to grasp the final message you wanted to give here, other than the observation that life absorbs more free energy and produces more entropy (in order to keep itself ordered) than non-living matter.

    In particular, I did not understand the issue: `The fractal universe philosophy should be promoted to a fundamental principle. That is, the universe is a collection of reproduced mechanisms`. Did you mean that the mechanism of self-reproduction is at work not only at the level of the biosphere, but also at lower levels (inanimate matter, or even the spacetime texture), as well as at galactic scales? Or are you perhaps referring to the controversial work of Laurent Nottale (Scale Relativity and Fractal Spacetime)?

    Any serious attempt to unify or at least to find similarities between the laws of the biosphere and those of physics deserves the highest attention, in my opinion. Lee Smolin s `The Life of the Cosmos` is a good example. Another example, in a completely different direction, is provided by Teilhard de Chardin s `The Human Phenomenon`.

    Any clarification on the essential message that you wanted to convey with this section is welcome. And good luck with the Contest.

      John H,

      If there is one thing I've learned in life, it's not to listen to what the powers that be say, but watch what they do. Presumptive monetarists have been running the Fed since Volcker and yet they keep using Keynsianism to keep the wheels from falling off. Why? Everyone says it is because the government can't control its spending, so it has to keep borrowing. There are two sides to that relationship though, the spending and the borrowing. It is safe to say the real powers in this country are the ones doing the lending, while the spending is for things like welfare and warfare. So with a little logic, it might be reasonable to consider that what is driving this is the need to keep borrowing those piles of surplus wealth, in order to maintain their value. Now you are not going to find expensive books and well publicized treatises telling you this, because those with the money to put out that kind of material would prefer you not think in those terms. As I keep saying, this isn't going to stop until it all blows up, so you don't have to believe anything I say and are welcome to read whatever you want, but don't say you were not warned that it's all politics, not logic.

      Regards,

      John M

      TB

      Thanks very much for your comment. This essay is at the limit of my thinking. I see no reason to regurgatate establish ideas of others. Rather, the attempt is to combine thoughts/models.

      "I confess that I have more difficulty in following the line of reasoning in Section 2 (The fundamental principles of humanity that apply to physics)." The idea behind the essay was that life (biosphere) is a part of our universe. Postulate of the essay: whatever the fundamental principles of the universe are, life must be operating on those principles. Therefore, the observations of life such as natural selection must apply to the study of physics. You noted Lee Somlin's book. The problem is how do we interpret the processes of life into physics? The interpretation of life by biologists may not yield fundamental principles as physics uses them. Section 2 is more of a set of examples following this premise rather that a line of reasoning within itself. Each paragraph starts with "this is biologists view" and follows with this is a way for physics to view the observation. The listed principle additions are my suggestions for physics. Certainly, these are outside the box of today's orthodoxy. Further, I'm only starting to think along these lines. Please share your thoughts.

      "In particular, I did not understand the issue: `The fractal universe philosophy should be promoted to a fundamental principle. That is, the universe is a collection of reproduced mechanisms`. Did you mean that the mechanism of self-reproduction is at work not only at the level of the biosphere, but also at lower levels (inanimate matter, or even the spacetime texture), as well as at galactic scales?" Yes. I mean no. Well, kinda. "Reproduction" is a biological term. The paragraph on change suggests making the same structure such as a sun may be done is several ways. The universe makes copies. Suns are made by similar means guided by the same principles. But this is not self-reproduction. Self-reproduction is another change method. We should not rule out self-reproduction as a means of making copies in physics at any scale. The principle is change. This leads to the discussion on self-similarity as in fractals.

      Or are you perhaps referring to the controversial work of Laurent Nottale (Scale Relativity and Fractal Spacetime)? Again, kinda. Certainly, it seems there must be a limit on bigness and smallness. Nottale suggests this limit is approached (mathematically) the same as the speed of light by some form of Lorentz transforms. Scale relativity concerns the ability of the physics to do differentiation as a mathematical tool. I suggest the assumptions of differentiability totally fail at smaller dimensions. That is, math calls this breakdown a "singularity". The math operation of division become questionable unless a truly continues medium is concerned - my plenum- but not particles. Instead, I propose (way outside the scope of this essay but I'll burden you with it anyway.) that we have to change our model of the fundamental physical constituents of our universe and of how they interact. Then we have to derive how they produce the observations on our scale and the cosmological scale. Scale relativity as a model is closely related to self-similarity but starts from the large scale. For example, this is going to get into a discussion of the derivation of the Lorentz equations, why the speed of light is a limit ("What characteristic of light that gives it the speed limit?" is my question. Nottale merely accepts it.), and how can we derive from these characteristics the observations such as diffraction and light momentum. My paper STOE correspondence to general relativity and quantum mechanics shows my current model.

      The concept of fractal is more than just self-similarity, but also the idea of a detailed pattern repeating itself. Therefore, perhaps the idea of complexity in life can be applied to the size of the various scales. Perhaps the size of scales is discrete - I think Nottale considers the scale continuous.

      John,

      Interesting read. I agree that the "Theory of Everything" should include life and our social organization, but I'm not sure how that is accomplished. You speak of organizing to preclude war while allowing competition and change, which is sound advice. You suggest a sort of "states rights." Our history has many theories which proclaim natural rights and natural laws but its application always seem vague and/or ambiguous.

      What do you think?

      Jim

        JLH

        I was suggesting the accomplishment of inclusion is by the idea that the fundamental principles should correspond to cosmology, quantum mechanics and life. The suggestions for a beginning were in sections 2 and 3. STOE correspondence to general relativity and quantum mechanics and develop this idea a little. STOE application to life. There is a long way to go.

        The "states rights" I was suggesting for a constitution similar to the constitution of 1789 (without the individual laws added later). That is, they are laws in a constitution.

        I agree, the "natural rights" and "natural laws" are vague because people claim a right when it is only their idealism. That is, these people are claiming a "natural rights" and "natural laws" to support their vague idealism where no real right or law exists. People's idealism must be turned into concrete laws. The barons showed the idealism must be turned into a law that a court can adjudicate and revolutionized humanities organizing methods. We must form a nation.

        What do you think? What principles unite life with physics?

        Dear John :

        You stated that "each difference of view" leads to war...

        At our age we become aware that a difference of view, mentality or whatever is always leading to discussion, if you would call that war ....

        Of course any discussion can lead ultimately to war if one part of the object of discussion is becoming the conviction of a group, and the other part is becoming the conviction of another group...

        So mankind has as many "convictions" as there are individuals (7 billion) so we are at the threshold of 7 billion wars...

        At the other side it si "L'Unité fait la force" as we see in science where different people are working with their own different ideas on the sma object to get a solution.

        It is always the "duality" of mankind (man and woman) that is the origin of getting forward (man and woman together create children) like it is in wars that w make the most of new inventions (weapons).

        So our future will indeed always be directed by differences of opinion , leading to one side aggressive actions and on the other side new scientific advances (that can lead indeed again to new weapons...)

        So the procreation at one side leads to annihilation at the other side...

        IF we would be able to change our mentality...which means that our consciousness may become aware of the positive side of ambiguous being and appreciate its values not only for the differences we will be able to move on without the wars of economy...

        I hope that you can spare some time to read and maybe comment my essay "STEERING THE FUTURE OF CONSCIOUSNESS" and eventually give it a rating too.

        If you comment on my thread I will answer on yours , this is easy because we will be both warned when a post comes in...

        best regards

        Wilhelmus

          1st response:

          Where did I say "...'each difference of view' leads to war..."?

          I did say, "Competition must be allowed between religions, between approaches to technology, and between approaches to the environment." in the paper and "The room for different views may be had if the views include tolerance for other views (as the rise from tribes to chiefdoms suggests) and include the cooperation with the different views." in a reply.

          Hodge

          Dear John,

          Yes, those papers, on alternative interpretations of the cosmological red shift, and alternative view of unverse expansion, are written by me. I shall be happy to receive your valuable comments. My e-mail-address is written in the papers.

          With my best regards,

          Hasmukh K. Tank

          Fellow Comrade,

          I have respond to your questions on my wall. Your article was entertaining and interesting.

          Keep the it up!

          Thanks

          John,

          An interesting essay, you are picking up many good points. You might find Homer-Dixon's book "The Upside of Down" interesting. He argues that civilizations collapse due to the inability to generate enough energy to support their high level of complexity. This is of course over-simplistic if you look at the details but I think the underlying idea has much truth to it. Best,

          Sabine

            Sabine

            Thank you so much for your note. Now I see your comment "No, the major challenge,..., is to convert these ideas into action."

            I have "The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization" but have only scanned it. The same with his "Environment, Scarcity, and Violence". I omitted a reference to them because he makes things a bit more complex than they are, in my opinion. That is why I went with Tainter. For example, I agree with Friedman that the Federal Reserve was a big mistake. I suppose he would call me a "neo-Malthusisn". I did like his stages of denial, some of his income gap comments, and the chapter of "why don't we face reality". You can see examples of the latter in these essays.

            All his tectonic stresses and conditions in Tainter are present today and have been for a long time. The limited space left me with commenting, "However, the collapse is a failure of the society's organization to adapt to nature and to the changing conditions." That is, he is only describing some of the natural conditions imposed on humanity all th time.

            Let me take this opportunity to address another idea I think you are tending toward. Almost all the essays have suggestions with little chance of happening. My last comment "The barons are organizing." suggest the required action is already happening. Look at the conditions that forced the barons to action. They are all present in the US today. Many today are already taking action toward a thing like the Magna Carta that I suggest is a new constitution. The TEA party (they want a smaller Federal Government) is becoming stronger. The secession movement is small but growing. Many are writing books and article s suggesting constitutional amendments (Friedman, M. R. Levin, R. E. Barnet, etc.). The path toward the kind of constitutional change is already happening. I hope the leaders of today are as smart as the leaders in 1787.

            John,

            How does corruption fit into your national organization?

            Corruption is actionably defined as: unethical allocation, or

            in legal consideration, illegal allocation

            abuse of allocation typically involves resources and/or opportunities

            Corruption acts on opportunities quickly and then entrenches itself to prevent fair access to resources and/or opportunities.

            In a natural state, anyone not born into a affluent family is to be denied access to all opportunities except those that are offered to them by affluent families. This is slave labor and indenturement.

            The natural tendency to fight against oppression is war.

              Iran is different than most countries that fight against oppression. Typically groups of the oppressed would start killing off the families of the oppressors. In Iran, the mafia government kills and maims families that speak against the government. Most recently, 300 young men were blinded because they spoke out against the government diverting the river to supply another city where a governor had family. The agricultural area is drying up as the river fed aquifers are emptied.

              The people of Iran have been making slow, unarmed changes at great personal expense. But they have had a long history of being occupied. The British, the French, and now Saudi Arabia backed Iranian thugs.

              Many billions are stolen out of the Iranian taxes, and the Government officials steal on an on-going bases. The intellectual people have learned to fight oppression through integration. The oppressed families eventually have representatives within the families of the oppressors. Fighting corruption is done from inside the oppressor's families.

              Eventually, oppressors are replaced by people who want economic prosperity fostered by ethical collaboration. They want to live in a safe society, not fearing for their family's lives.

              But it takes time to oust self-serving people that have low regard for anyone else, including themselves and their family.

              Some are forced into corruption as a means to make changes slowly. Over time they support their family, and make incremental improvements for their country.

              The Iranian people have never raised weapons against its oppressors. As a result, the government had to create a mafia militia to do its dirty work because the formal military refuses to attack its own people.

              Many hundreds of thousands of Iranian people have lost their lives in fighting oppression. But this has been an alternative to war.