Saturday, August 9, 2008

Judgement Day

Judgement Day is near at hand, the signs are everywhere, you just have to open your eyes. Except it isn't going to be just one day, it's going to be an extended period of years that for most will seem to last forever.

The only ones who don't see the inevitable collapse of the global pyramid scheme are those who don't want to see the collapse of the global pyramid scheme. In other words the majority in the West are fully invested in the current world order and don't care how many others on this planet have to suffer in order to propagate their consumption-oriented lifestyle. Therefore, in order to see that the decline WILL occur, it's first necessary to believe that the decline SHOULD occur. Those, like me, who believe in moralistic determination, also understand that this current consumption-oriented system which ignores the needs of the majority on this planet, is doomed to fail and was always doomed to fail. The West won the Cold War but far from spending the peace dividend to raise the standard of living for the Rest of the World, instead went about the fevered task of consuming the remainder of the planet.

There is no doubt in my mind that we easily could have solved the world's poverty issues, but we never seriously wanted to, for fear that it would affect our consumption-oriented lifestyle. Any serious attempt to actually solve the issue of poverty has met with the inevitable obfuscating debates around capitalism vs. socialism, which conveniently redirected energy and resources away from the underlying problem at hand. Those economists who say that poverty will be solved under the current globalized (pyramid-scheme) system, are both cynical and callous (not to mention soon-to-be-bankrupt for drinking their own Kool-Aid). The current globalized pyramid scheme is seriously broken and we can't afford to wait another several decades only to realize the situation hasn't gotten any better. Whatever improvement in poverty these past decades, if any, has come at such a glacial pace that only the most hardened or cynical of observers could take heart in the progress to date e.g. The Economist . And sorry Jeffrey Sachs, China is not a model of economic success, it is an environmental, forced labour, and human rights catastrophe of historic proportions. Calling China's unevenly distributed economic rise a miracle, only proves the saying that (even the "best intentioned") economists know the cost of everything and the value of nothing.

Most people on this planet are producers, but they are not consumers. Through hard work and sheer attrition, they literally put their blood, sweat, and lives into the globalized pyramid economy, and they receive a nominal wage in return. The surplus between what they give and what they receive is captured in the wealthy economies in the form of excess return on capital and cheap goods. In other words, our Westernized lifestyle is predicated on exploiting people who are compelled to give their labour (to survive) in return for a sub-human wage - a system most commonly known as slavery.

Forced labour trap
Modern economics is based upon the supply/demand equilibrium model. According to this classic model, supply is shown as an upward sloping line, running from left to right i.e. the greater the price, the more will be supplied. Therefore, according to theory, the higher the price of labour, the more labour will be supplied and the lower the price/wage, the less will be supplied. Unfortunately, this theory is entirely predicated upon the notion that a given 'supplier' (labourer, independent farmer etc.) has sufficient alternate income that she has the choice as to how much of her production she will bring to market i.e. as wages fall, she can choose to withdraw her labour from the market. Clearly, in the real world, poor people don't have this theoretical choice of working less, just because wages have fallen. To the contrary, as prices fall, a labourer or farmer is actually forced to bring MORE supply to market in order to simply survive i.e. at a lower wage, an individual will work more hours just to maintain a bare minimum survival income. Worse yet, as each individual labourer/independent producer brings more supply to market, this leads to a downward collapse in wages/prices. This price trap is in full exhibit across the developing world (and has been forever), having drawn wages and prices BELOW their long-term replacement rate. Wage rates below the long-term replacement rate means that workers are sacrificing their health and long-term well-being by working brutally long hours at ultra-low wages; not to mention, forcing them to accept highly adverse/unhealthy working conditions, just to make ends meet.

As mentioned, this is highly prevalent behaviour observed throughout the developing world - and parts of the developed world as well (Read: Nickel and Dimed: On (Not) Getting By in America), and yet economists cling to their text book supply/demand theories. In other words they have no way of explaining this type of "irrational" behaviour, so they just pretend this behaviour does not exist or if it exists, it's deemed aberrant. Far from being irrational or aberrant behaviour it's typical depression-era mentality which sacrifices long-term sustainability for short-term survival. This same over-supply phenomenon also explains the widespread environmental degradation occurring throughout the developing world as farmers and other independent producers compete to bring as much supply to market by any means possible just to survive.

But then we are quickly reminded that those with jobs are the "lucky" ones. After all, the rest are forced to beg, steal or sell themselves just to survive. So, clearly we are really doing those underpaid workers a favour by exploiting them (apparently it's better to die slowly, rather than quickly...). We are told, and desperately want to believe, that this globalized catastrophe is the best possible economic system ever conceived -irrefutable proof that we are truly a godless species with no value to this planet.

I don't have every answer, and I fully understand that solving poverty will require all of us to significantly downsize our lifestyle. Just as luck would have it though, a forced downsizing is already upon us, so we should take advantage of this coming depression to produce a more equitable distribution of resources. Unfortunately, I have no doubt that this contractionary "retribution" phase will be somewhat acrimonious (to say the least) and will not solve anyone's problems around poverty - far from it.

The fact remains that the poverty issue will never be solved on a worldwide basis until there is a humane minimum worldwide labour and environmental standard. We implement and enforce worldwide/multi-lateral trade agreements all the time, so why can't we implement a global minimum wage and environmental standard? No single developing country can implement its own unilateral labour/environmental standard, because that country would be priced out of world markets; therefore, the standard would have to be enforced by a centralized trade authority and/or the individual Western nations procuring the goods/services from the developing nations. I know, there are always those pesky multinationals to consider, with their penchant for moving their factories around to exploit the next cheaper pool of labour and resources, but I think with enough collective coercion (boycotts, trade sanctions etc.) we could force them in line - if we really wanted to...

Build your own Ark

For those who want to protect themselves from the impending collapse, you need to build your own "ark". Noah had an ark to protect his family from the Deluge. You need a figurative ark to protect yourself and your family from the coming depression. God himself could not have devised a more devastating calamity than the one mankind has brought upon itself.

Your ark should be minimalistic: Hold on to whatever job you have as long as you can, as now is not a good time to start foraging for a new career. Protect your banks deposits - no more than $100k at any one bank. Eliminate as much debt as possible and free up cash flow for necessities - food, clothing, shelter and ammunition. Those who stubbornly hold on to their materialistic lifestyle will suffer in direct proportion to their level of greed and gluttony.

Over and Out (This is my last post)

When I first started this blog back in late 2006, the problems I was predicting were still largely in the future - sure the housing market was in decline, but subprime was not yet an issue, the stock market was still strong, commodities were soaring, and the Fed was in hibernation. Fast forward to today and, as you can see from the news - we've come a long way Baby!

So, there isn't much more for me to say at this point that you can't read about in the newspapers. Reality has finally caught up with fantasy and will soon overtake the lead. So, the sooner you embrace reality the better off you will be, as I am fully certain that everything I have predicted in this blog will come to pass in its own due time.

Good Luck.