Why is the world in such dire economic straits, and what can we do about it?
POSTED BY: SignyM
UPDATED: Sunday, August 23, 2026 20:19
VIEWED: 10090
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First of all, why are so many nations in such trouble? It seems like every nation's cause is a little bit different from every other nation's:
The USA has a significant wealth gap, and personal consumption fueled by credit.
The USA and Britain had massive real estate bubbles.
The Greek government overspent its budget.
Portugal, Ireland, Greece and Spain (PIGS) didn't have personal over-consumption and a high personal debt load, but were the recipients of over-investment from other EU nations.
Despite a lot of “socialist spending” and redistributive policies, the Icelandic government ran in the black. Iceland was brought down when it's three major banks engaged in out-and-out commercial bank fraud.
Italy, which is a large exporting economy, got caught by rising interest.
If we are to prevent this all from happening again, what are we to make of all of these disparate causes? Each nation seems to belie whatever cause we want to attribute to another nation. So we can rule out Fannie and Freddie because they don't apply to Europe. We can rule out socialist spending that doesn't apply to the USA. We can rule out government deficits and the wealth gap because those don't apply to Iceland, and we can rule out personal debt because that doesn't apply to the PIGS. There is a lot they DON'T have in common!
But, the one thing they DID have in common was “investment” in projects or sectors which were not about to generate a return, even in the medium-term. In the USA and Britain, the over-investment was in homes. In the PIGS, it was in large infrastructural projects; in Greece it was also in government bonds, in Iceland it was actually in fraudulent self-dealt bank loans for commercial projects.
The other thing to realize is that this has happened before: In the 1970's, due to a huge increase in oil prices, the Middle East nations (Saudi Arabia particularly) became the holders of a mountain of cash, specifically the USA dollar, and invested in huge infrastructural projects in Brazil, Chile, and Argentina- projects which could not be supported on a cash basis due to lack of either internal or external demand. This led to the Latam debt crisis of 1982. The same thing happened to the Asian "tiger" economies of 1997: over-investment by outside money created a "bubble" which led to an ephemeral rise in GDP, leading to the illusion of growth, which sucked in more money, until the illusion of growth could no longer be sustained. The same problem started the Great Depression.
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It seems there are epidemics of horrible investments, rash investments, possibly even desperate investments, not just now but throughout history. Rich people who have bought all of the yachts, mansions and jets that one can possibly buy and are now looking to make money with their money.
So why do the investments go sour?
Well, I think in a way it's the eternal mismatch of production and consumption under capitalism. Think of it this way: If the world produces a trillion dollars worth of goods and services, but the small fraction of ppl who own the companies only pays their workers $900 billion, the companies can only sell $900 billion dollars worth. That's $100 billion worth of goods and services that's not about to be sold, and $100 billion in the hands of a few who are NOT going to “spend” all of that money, they are going to “invest” a certain amount. Now, that investment can either go to loans (to increase consumption – which won't be ultimately affordable), or to increase production (which can't be sold to ppl who can't afford the goods), or to consolidate ownership, or to increase automation (which throws even more ppl out of work,who will not be able to buy much), or to speculation (diamonds, artwork, tulip bulbs) ... Each time money goes through the production-consumption cycle, more money goes up into the stratosphere... there is a bigger and bigger bundle of money looking for a home... but there is also less and less money available to buy stuff, and sooner or later the consumption-engine runs out of steam, mak
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I got it, but now my head hurts.
But yeah - I've had that idea about a cut of the money going off to the wealthy at each turn of sale-cycle. I just never put it together with investments.
We have to realize that the biosphere we live in is fragile and cannot be treated like a battered wife because the surface of the planet itself is not fragile. It will simply adjust probably eliminating us in the process. The core of the planet is beyond our ability to affect and can deal up some pretty horrific to us events. The space around the planet is hostile beyond our comprehension. And there are no exits.
EVERY SINGLE YEAR BETWEEN 1996 AND 2005 66% OF ALL FCDS CORPORATIONS PAID NO TAXES.
I think the current tax structure is about right for corporations. - Geezer
Without the benefit of the surrounding society, a corporation dies. If society looks at a corporation and says 'work, or die', what work should be demanded of the corporation for it to earn its survival?
While Wall St. is going through the roof, Main St. is paying all the bills.
Remember when teachers, public employees, Planned Parenthood, NPR and PBS crashed the stock market, wiped out half of our 401Ks, took trillions in taxpayer funded bailouts, spilled oil in the Gulf of Mexico, gave themselves billions in bonuses, and paid no taxes?
Yeah, me neither....
We're not rich because we work for our money. Rich people have their money work for them. Mrs. Huxtable
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Greed.
And economic policies based in fiction and wishful thinking instead of cold, hard facts.
As to what can be done, I doubt many if any of my reccommendations would be palatable to most people cause just about all of them involve some level of retribution against folk who laid down and carried out those policies KNOWING the result, so long as THEY benefitted.
-Frem
I do not serve the Blind God.
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(Reposted with explicit permission)
THE ELEVENTH MARBLE
by Michael Rivero
Any five-year old child knows that if you put ten marbles into a tin can, you can only take ten marbles back out. No amount of wishful thinking, dreaming, or praying, will yield that eleventh marble from inside that can. That eleventh marble does not exist. It never did, and it never will. All discussions about the eleventh marble are the product of imagination. The eleventh marble is a fantasy.
Private central bankers issuing the public currency as interest-bearing loans operate on the belief that they can put ten marbles (dollars) into a tin can (the world) and magically get 11 marbles back out. Thus, we may conclude that the bankers are dumber than five-year old children! But unlike five-year old children, the bankers will take your home, your business, and your nation when they don't get that eleventh marble! The spoiled child may cry and throw a tantrum, but that will be the end of their upset. The spoiled banker, however, in his or her arrogant rage that they cannot have the eleventh marble their imagination says must still be in that tin can, may start a war before they will admit that eleventh marble was never really there.
Economies are like tin cans. Before you can take a marble out, you must have put a marble in. Nobody can give you a marble that does not exist, yet this simple reality is lost to the priests of that fantastic religion called banking in that unholiest of temples called the IMF. Their religious doctrine seems to be that there must always be an eleventh marble inside the tin can, and that the tin can unfairly withholds that eleventh marble, indeed cheats them of their right to the eleventh marble, purely out of spite. That faith in the existence of the eleventh marble, unseen and improvable, is the article of faith the religion of banking rests on. It is far easier to burn the heretics than to question the dogma.
Today we see the bankers, having already retrieved their ten marbles from the tin can, flogging the world for that missing eleventh marble. Greece does not have that eleventh marble, so they turn to Germany and ask, "Do you have an eleventh marble", and Germany replies, "Sorry, but the bankers already took the ten marbles they put in our tin can, and we are searching for an eleventh marble ourselves. Try the Americans." The Americans, of course, have only just surrendered the last of their ten marbles back to the bankers and are looking under seat cushions for that missing eleventh marble nobody seems able to find.
But the eleventh marble will never be found. After all that mayhem brought down on the tin can there still will be no eleventh marble. It does not exist. It never did, and it never will.
The problem with all modern reserve banking systems is that the moment the first bank note goes into circulation as the proceed of a loan at interest, more money is owed to the banks than actually exists. Ten marbles have been put into the tin can, but the bankers see 11 marbles owed back to them. Sooner or later the non-existence of that eleventh marble will create a crisis of faith. People will stop believing in the religion called private central banking, and that crisis of faith will bring the system crashing down, as did the Temple of Baal in ancient times when the Syrians saw through the priests' trickery. This evil magic of creating money out of debt was a fraud all along, as fraudulent and silly as the idea that one can put ten marbles into a tin can, and take out eleven.
In ages to come economists will look back at this failed experiment in debt-based currency, and dump it into the same category of human folly as Tulip mania, The Nation of Poyais, Credit Mobilier, the Great South Seas Company, and Mortgage-Backed Securities.
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Frem,
Excellent article. Go Michael!
The problem as I see it, is not just the fantasy 11th marble. Because there are many tin cans (mini-economies) out there, all with 10 marbles each. When you take the 10 marbles out of your own tin can, you look to someone else's tin can for the 11th marble, leaving them with only 9. They go to another tin can to get their missing "2" marbles, and the next tin can is left with 8. Eventually, you get the tin can with 0 marbles, because its marbles went towards the 11th marble fund of 10 other tin cans.
The 11th marble model illustrates that wealth is a finite commodity. If some people have more, it came from people who have less.
Which brings us back to your first post: Greed.
The 11th marble must come from somewhere. It comes from making a huge proportion of our population less than poor. Some people have plusses because the rest of the people are in the minuses.
Why do investments fail? Because it is not only that they are looking for the 11th marble. They are SELLING the 11th marble. It is a gambling/lottery racket. There are not enough "11th marbles" to go around, so in greed, they start selling the HOPE of the 11th marble.
I tell my kids this story, which you all have heard before.
Little boy named Ken moves from the city to the country. He decides to buy a donkey. He pays the farmer $200 in advance to pick up the donkey on Friday. However, when he shows up, the farmer tells him the donkey died Thursday night, and the money is already spent. Ken says, "Fine. But at least give me the dead donkey." The farmer asks, "What are you going to do with a dead donkey?" Ken answers, "I'm going to sell him."
Months later, Ken bumps into the farmer, who asked what happened with dead donkey. Ken explains that he sold $2 raffle tickets for a chance to win a free donkey, without telling anyone that the donkey was dead. 150 people buy the tickets, making him $300.
The farmer asked, "My gosh! Didn't anyone complain that you were raffling a dead donkey?" Ken replied, "The guy who won the raffle did. But I just gave him his $2 back."
(The story goes on to say Ken grew up to run Enron....)
Anyway, substitute "11th marble" for "dead donkey," and you get the picture of what our investment system is like. We no longer operate the old-fashioned dividend-based capitalism, but some sort of complex gambling racket we call "investment." Brokers are simply bookies.
Asking why investments fail is like asking why gambling or lotteries fail. They don't, for the house. They are expected to fail for everyone else.
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Never be deceived that the rich will allow you to vote away their wealth. -- Lucy Parsons (1853-1942, labor activist and anarcho-communist)
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FREM that is a great analogy, and CTS, that is a great extension.
What you are referring to is the creation of debt, specifically interest-bearing debt.
I left that out of my post because there will be still booms and busts even without the banksters (who do indeed have their paws in everything we do nowadays!)
Imagine many tin cans with ten marbles, everyone in a circle having to pass a marble to their left. Now imagine that Freddy is allowed to take an extra marble every ten marbles, and keep it for himself. It becomes clear that eventually all of the marbles will be in Freddy's hands and the game (economy) stops
The Keynesian solution to this problem is to have someone feeding extra marbles into the game... if they are good at it, they will feed in those extra marbles at about the same rate as the marbles are being withdrawn... that is called "monetary policy", or "printing extra money". The game goes on, and the marbles in Freddy's hands become worth less over time because of inflation ("the invisible tax").
If marbles are merely added to the game, then the solution is relatively benign. But let's say that marbles are LOANED to any one of the players,,, it doesn't matter who, it could even be Freddie... with the idea that those extra marbles will be re-payed with even more marbles... then we in the imaginary eleventh-marble model, which ultimately accelerates the w/drawal of marbles from circulation.
The reason why I bring this up is because there were depressions even before there were central banks (IMF, ECB, World Bank, the Fed, etc). Getting rid of interest-bearing loans would help, but would not be sufficient to stop economies from falling into depressions.
And yes, CTS, TPTB know about booms and busts... they create them, and ride them to even greater wealth. There were never so many luxury cars sold per capita as during the Great Depression. But everyone else is left to struggle in very choppy economic waters.
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In any case, that still leaves us with the conundrum of "what to do about it".
Getting rid of those marble-loans would help, but there is still that concentration of marble's in Freddie's hands.
So, do we work on taking the marbles out of Freddie's hands? Changing the rules of the game so Freddie doesn't get to keep those extra marbles? But isn't there some sort of benefit to keeping some marbles in reserve (savings) for unanticipated expenses?
Anyway, in terms of money flow the marbles are a great analogy, but once we get into production we get into an area where the analogy breaks down.
Also, while I agree that greed is at the heart of the matter, I don't think raising people to be "not greedy" is the answer, because there will be that very very small percentage who will still be greedy nonetheless. And they can siphon off just a little from a lot of people, and no one would notice. Furthermore, there is no system of redress.
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I agree.
I think that the best way to mitigate concentrations of wealth and less wealth on the consumption side is to create a competing economic system. Perhaps one which does the virtual side of things better than the current system, or one that does the real world asset side of things better. Or both. If an economic system can do that, and it benefits the participants of that economic system, it will thrive and displace the old school systems.
The only thing you have to watch out for would be the people with a keen interest to squash any possible competition or rising lower class.
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Quote:Personally, I like the idea of saying "Fuck you, you can keep your fucking marbles" to Freddy, and inventing widgets to fill our empty tin cans.
Originally posted by SignyM:
So, do we work on taking the marbles out of Freddie's hands? Changing the rules of the game so Freddie doesn't get to keep those extra marbles?
THEN set up rules so that no one can sell or lend the 11th widget.
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Never be deceived that the rich will allow you to vote away their wealth. -- Lucy Parsons (1853-1942, labor activist and anarcho-communist)
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