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Making a Living vs. Making a Killing: Creating a Healthy Democratic Foundation for Economies

Without a distinction between productive activities and parasitic activities there is no viable way forward economically. This three-part essay (“Part 1: Introduction”; “Part 2: Making a Living”; and “Part 3: Unmaking a Killing”) will begin to make those distinctions and provide recommendations on increasing healthy productive capacity and eliminating harmful parasitic activities. If the sick care industry is booming due to a dramatic increase in obesity and diabetes in the population, this ought not boost the GDP if one is interested in macro indicators reflecting the health of the economy and its people. You would not treat a cancer patient by considering cancer cells on par with healthy ones, and you should not attempt to heal economies without analogous distinctions.

Part 3: Unmaking a killing: Rooting out entitlement, parasitism, fraud, rapacious greed, and other guarantors of destruction

“The mission of cancerous economic organizations is to maximize profit, withdraw as much energy as possible, and give as little back as possible. When “maximizing (financial) profit” is allowed to gain power without reference, balance, challenge, or duty, no other cherished capitalist principle can long endure.”(http://www.oftwominds.com/blogjun10/zeus06-10.html) “We no longer have a global economic system that is tethered to concrete reality. Parasitic, amoral, slight-of-hand value-shuffling (what I would call the “unreal economy”) has effectively trumped the “real economy,” the production and exchange of meaningful goods and services.” (http://www.oftwominds.com/blogmay10/market-unhinged-from-reality05-10.html) What constitutes value has migrated from actual value, based in something you earn and related to something you can actually concretely use, to “references to value,” some number merely assigned to some financial instrument attached to some good or service somewhere several degrees removed from its source.(http://www.oftwominds.com/blogmay10/market-unhinged-from-reality05-10.html) “We cannot live on bets. We require healthy air, food, water, reasonable housing, and real health care to live.” (http://www.oftwominds.com/blogjun10/zeus06-10.html)

Unrest in Greece, rebellion against bank bailouts in Iceland, expanding Occupy Wall Street citizen resistance in the U.S. all signal the coalescing of national grievances into increasingly international movements to bring accountability to the global economy.

Right now the injustices are apparent and the basic call to action is plain: “Stop the looting. Start the prosecuting,” as summed up nicely Karl Denninger of The Market Ticker. Banks have, to growing public awareness, engaged in multi-tens of trillions of dollars of outright fraud. Failure to stop the looting and failure to prosecute is quickening the hemorrhaging of world economies, accelerating poverty, depressing asset values, and further creating opportunity for “disaster capitalists” to profit from their own misdeeds and the suffering of others. If this were only about moral hazard, it would be much more manageable. Instead it is about a system, sanctioned and rewarded at the highest levels of international government, actively abusing and victimizing citizens for greater financial profit. This is full-scale class warfare of the financially powerful against free enterprise capitalism and against citizens: “We will take your money, and you will eat our losses, even if we are the ones who created failure.” This Marie Antoinette-style “let them eat cake” arrogance and disconnect has started to make unlikely allies out of working class conservatives and shaggy-haired progressives. This cartoonish ignorance and double-speak by an hyper-entitled class of multi-trillion dollar corporate welfare recipients is only further amplified by images of Wall Streeters pouring champagne on the heads of protesters from balconies and Republican primary contenders fawning over and defending Wall Street crimes against accountability. One hopes citizen voice and action only gain strength under these conditions. The most direct way to clean out rot in the system, of course, is to pursue criminal prosecutions. Those companies and individuals who profited from fraud are receivers of stolen property. Investigate, indict, prosecute, and turn state’s witness. Squeeze them. Freeze them

However, actual concrete reforms must undergird ousters or criminal convictions. These in turn must reflect productive commitments. Primary among them is the simple notion that people are more important than money. Further, quality of life is more important than profit. Direct, pure productivity is better than diluted productivity. The fewer intermediaries taking their unwarranted chunk from productive effort the better. If we can all contribute from deeper talent, effort, and aspiration, if we can directly connect with and maintain the sources of a good life minimizing supply chains, commissions, bureaucracies, taxes, and other drains of value, we will all be that much richer. Now we have to walk our talk and imagine some ways to rehabilitate an entrenched habit of making a killing as a substitute for making a living. Here are some recommendations for getting rid of those parasitic bad habits, money sinkholes, productivity drains, and the twin idiocies of savior state entitlements and corporate welfare:

Transparent and accountable markets:

The attitude appeared to be: “Everyone can get wealthy by riding the Ponzi scheme of a stock market. Hey let’s privatize Social Security too, so old ladies can get in on the action!” Under the Obama administration, the Department of Justice and regulatory agencies have been essentially instructed to ignore rather than undermine regulations and proper accounting. This was all done under the ironic rubric of “not hurting the little guy” and preventing economic collapse. Mark to market accounting rules have been suspended. Not a single major financial player or institution has been investigated even amid hundreds of thousands of proven forged documents in the robo-signing scandals around foreclosures.

Without any federal champion, liberal or conservative, effectively looking out for citizens, it will fall on voters to insist on citizen-empowered groups at the highest levels to ensure financial rule of law.

In addition it would be a very wise investment to have a public tax payer team of Elliot Ness-style financial forensics officers like Harry Markopolos (http://en.wikipedia.org/wiki/Harry_Markopolos), who specialize in detecting the double-speak and technical smoke screens in financial reports. Lastly, citizens must have a publicly funded, publicly accountable board to oversee stock and bond ratings. Moody’s, Fitch, Standard and Poor’s have proven to be dangerous shills, not ratings agencies. Their collusion makes any trust in their ratings irretrievably compromised.

Get rid of all outright government subsidies and convert them into investments:

If taxpayer money is being used to sponsor cutting-edge research that gets monetized by drug companies or technology companies, then the taxpayer (represented by government) should claim patent or intellectual property rights as well as a capital stake in the monetized enterprise. As with venture capitalism, a nice chunk of the profits harvested could be re-invested into other innovations. We do need champions of innovation (energy, medicine) and infrastructure (paved highways to internet highways). The government in collaboration with research universities and non-profits are often the only entities big and broad enough to design and fund these innovations. Innovation, around alternative energy, for instance, is also in the national security interest and could make society healthier, more self-reliant, and more efficient. But currently government uses taxpayer money to fund research or subsidize a solar company but gets effectively nothing in return. Jobs? Very few jobs come out. Stake in the company? Currently no. If a subsidized company goes bankrupt, the government/taxpayer gets nothing, which is also what they are getting now even when the company is successful.

Incentivize stewardship over “owning”:

Pay corporate farms not to grow crops? No. Allow them to overproduce using damaging shortcuts like toxic pesticides that poison ground water and cause massive bee die-offs. Also no. Land should be used responsibly. Why not encourage tax abatements and even job creation and income streams by leasing fertile empty land through an on-line exchange for organic farming, or other healthy, sustainable resource generation purposes. Best practices allowing regenerating land to lie fallow, or to be planted with trees, could also be part of a sane system of maximizing health and productivity for land. Tax deductions for interest payments on mortgages to support home ownership, on the other hand, are nothing more than a direct subsidy to banks. This privatizing perk should be eliminated. In fact, home ownership should not be the goal; responsible stewardship should be.

Current “ownership” does not promote the community stability promised by its advocates.

In addition, market distorting laws like California’s Proposition 13 (which artificially suppresses taxes for some and loads tax burdens on others), should be constitutionally overturned as a violation of equal protection, equal treatment, and equal opportunity. Young couples in a newly purchased “starter” home should never be paying several times more in taxes than million dollar homes bought a long time ago. Nor should corporations be paying pennies on the dollar for their property taxes because they can somehow transfer ownership of commercial properties without actually selling them.

Hit disaster capitalism hard:

Whether land or air or water, even food and housing, the necessities of life never were and never are truly owned. They are all produced from resources that are nature’s “property,” and therefore a gift and nobody’s to own. They are also public, and must be managed in the public’s interest. Stewardship in this sense means that you can’t do whatever you want with nature’s property. You have a primary stewardship obligation to the planet and future generations even if you have a present nominal claim to ownership through a deed or other document. That deed does not give you the right to endlessly extract, defile, or otherwise exploit property that was nobody’s to begin and never can be truly owned.

Encourage giving over receiving:

No guarantees on return for speculative investment or government contracts.

Social Security as insurance against poverty, not a bonus or a retirement plan.

Currently Social Security has become something other. For many it is their only retirement income. Demands by a growing pool of retirees to support them in a life to which they have grown accustomed would bankrupt younger generations. It would be better to develop housing and community cooperatives with a portion of social security payments so that resources can multiplied and enjoyment can be increased in old age.

Single payer health care, period, primarily administered by local cooperatives.

These up front savings would be even more enhanced if local cooperatives staffed and supported programs around smoking cessation, weight loss, and nutrition and lifestyle education. If people wanted expensive diagnostics, gold-plated hospital stays, unnecessary plastic surgery, or million dollar interventions to eke out a few more months at end of life then they are welcome to pay for supplementary insurance or use their own cash. Public responsibility for health involves redressing serious injury and illness, helping others maintain productive, vital lifestyles and emphasizing prevention.

No exemptions from anti-trust laws.

Conclusion

About the only guarantee we have in life is one another. We are alternately stuck with or blessed with others. We can make the latter a true resource by developing good will and democratic mechanisms that support a shared productive life. False “greatness” is also a guarantee--of destruction. Before the catastrophic civil war that erupted in Ancient Greece between Athens and Sparta, the only way to become immortal was to become a war hero. So, what better way to give everyone a chance at immortality then to start the endless wars? Well, this mentality essentially wiped out formerly prosperous Athens. (http://en.wikipedia.org/wiki/Peloponnesian_War). The modern equivalent is probably the material American Dream, where everyone could strive for a McMansion and a riding mower. Of course this was always a false dream, dependent upon unsustainable growth and resource use, and eventually simply debt upon debt to maintain. It too has crashed spectacularly.

Self-serving dynasties are a very poor substitute for mutually serving care.

We have undiscovered talents to develop and exert. We who were once distracted, occupied, and oppressed by a glut of consumption must now use different means to avoid self-destruction and to reach a new frontier. In stepping forward, we take our place in a lineage of generations building something better, higher quality, and more sustainable for our children and the earth upon which we depend to live. This is never about bombing others into submission, nor about banks creating fictitious financialized wealth so we can be sold on endless riches. Instead, global interest and personal integrity call us to be invested in the social and individual enterprise of a creative, industrious life. When a false dream is lost, a new and exciting reality is possible. Zeus Yiamouyiannis, Ph.D. Thank you, Zeus, for contributing to our understanding of an alternative economy based on common sense and community rather than exploitation, self-serving fiefdoms, looting, parasitism and an oppressive partnership of Financial Elites and the Central State.

My interview with Max Keiser and Stacy Herbert (recorded live in Paris).

Zeus's interview with Max Keiser and Stacy Herbert.

If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition)

Kindle ebook format

Readers forum: DailyJava.net

My new book is available in both print and ebook formats: An Unconventional Guide to Investing in Troubled Times (print edition)

Of Two Minds Kindle edition:

Thank you, William B. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Thomas E. ($20), for your much-appreciated generous contribution to this site -- I am greatly honored by your support and readership.

Part 2: Making a living: Cultivating productivity, ingenuity, diversity, and diligence in a verdant economy

“The only “real wealth” here revolves around ability to produce real and needed goods (to allow us to survive), and the ability to create something that increases quality of life (to promote our thriving).” (http://www.oftwominds.com/blogsept11/Zeus-debt-forgiveness-9-11.html)“Free enterprise, well understood and executed,… prizes productivity, quality of life, quality of goods and services, innovation and creativity, transformative learning, honest and diligent labors of love, and enjoyable and engaging relationships and experiences for its citizen members. These are functions that create health synergistically both for the smaller and the larger, a win-win.” (http://www.oftwominds.com/blogjun10/zeus06-10.html)“We are coming to the big face-off between top-down control by those who would be gods over us and impose value on us, and bottom up creativity which recognizes that any “god” (energy, good, intelligence) comes up through us and is connected between us. It is this “within” and “between” well-negotiated and exchanged that produces real value.” (http://www.oftwominds.com/blogjan11/Zeus-three01-11.html)

"Making a living” is “making a life,” adding something to an economy, providing a necessary good or service that enhances survival and thriving.

Large corporations and even bureaucracies can contribute to making a living, providing everything from swimming pools to social work. Their problems, if anything, center upon what portion of their resources goes into direct service, production, and exchange and how much gets consumed in indirect, personally and institutionally self-serving ends—job justification, bonuses, extravagant salaries, etc. A healthy society maximizes the former and minimizes the latter.A sane and healthy economy recognizes the need to be “lean and clean,” cutting out the fat of self-service and optimizing giving and circulation of pro-social goods and services. This principle is at the root of “value added.” This means that corporate welfare in the form of tax breaks for corporations paying their CEOs hundreds of millions of dollars and government workers with gold-plated benefits both need a reality check. They tend to consume a lot more value than they add.In this, it is time to call out the fallacy of a zero-sum war between personal and social interest. People admit that the most fulfilling personal activities rely upon healthy relationships. Healthy relationships are impossible without giving to others. Our problem stems from failing to practically follow through on our purported convictions:“What is the economy and society meant to serve? What is most fulfilling and important in life? When asked these questions for themselves and their societies, most people offer answers like: health, family, community, friendship, love, learning, creativity, collaboration, liberty, new experiences, diversity, meaningful work, cultural enjoyment, literacy, curiosity, responsibility, spirituality, faith, and so forth. If you ask those same people how much time, energy, and money they are spending enacting these practices, principles, and values, the answer would likely be (if they were honest), “Comparatively little.” (http://www.oftwominds.com/blogjun10/zeus06-10.html)Aristotle said, “We are what we repeatedly do.” He was right. So how might we do something different beyond mere talking and imagination? How might we transform economic practices to reflect those activities—giving, production, caring— that we know to be revitalizing. Here are some recommendations meant to provoke possibility:Investment for the productive long haul: Short term, speculative investing is one of the economy’s greatest thorns, distorting stock valuations, bond markets, etc., and destabilizing economies. This is perfectly embodied in the phrase, “play the market.”The lion’s share of stock market “playing” is not investment or stakeholdership; it is simply gambling and looking for a greater fool to pay more money for a stock. This mentality incentivizes insider trading, artificially produced volatility, naked short selling (phantom selling to depress value), and a host of other parasitic ventures. Often more profit can be made when a company fails, so there exists an inducement to aid failure, rather than success, in our current unhealthy system.We certainly could discourage speculation by charging people per transaction for day trades and high frequency trades. However, there are also ways we could reward stalwart investors with a stake in a company’s health: Give increasingly greater dividends per share (up to a reasonable point) to people who have stayed with a company longer. Call it a loyalty premium. This would incentivize sticking through tough times. It would also create a good gauge of stability.If a public record was assembled to display the relative percentages of different types of investors (long-term vs. short term), this could both unmask manipulation and inform potential future investors. If a stock has a high percentage of long-term investors, their satisfaction and return are reflected in their actions, and this provides evidence for a stable investment.Governments as supporters of individual and community life, not social engineers: Even as a progressive, I support the largely libertarian position on government intervention. For instance, it is not a government’s job to subsidize home ownership but to make sure people have a roof over their heads. Keep it simple. Focus only upon those things that promote the core elements of citizens’ surviving and thriving.Surviving: Make the means available to provide for 1) basic food, shelter, and clothing to those who don’t have it, 2) medical care for wounds or illnesses, 3) common defense only (not a world-dominating military-industrial complex), 4) environmental protection (so we have clean food, air, and water).Thriving: 1) Ensure political integrity and proportional representation in voting, legislation, and campaign contributions, 2) uphold both opportunity and ability in developing talent and enforce laws that protect against discrimination on the basis of age, race, sex, sexual orientation, etc., 3) civilly and criminally prosecute financial fraud, counterfeiting, “misreporting,” etc., 4) promote pluralistic cultural opportunity, exchange, and practice. Whether it be public prayer, intellectual dissent, or “offensive” forms of freedom of speech, or some other chosen, non-harmful means of expression, government policy should support tolerance and even appreciation of other perspectives.Local currencies, what Bernard Lietaer in his must-read book, The Future of Money, (http://www.lietaer.com/writings/books/the-future-of-money/) calls “complementary currencies” and “work-enabling currencies” apply to community transactions taking place alongside the commercial transactions covered by mainstream economies and monies.Local currencies are “cooperative and sufficient” in operation rather than competitive and scarce, generating additional work and wealth at the local level without causing inflation. How? Such currencies create a system of formalized exchange of local goods and services in voluntary, rather informal networks that are self-regulated by choice and local supply. This positions local currencies to better and more quickly meet basic needs in a community. They also personalize markets in terms of seeing where one’s money goes, keeping wealth circulation local, and better enabling local, small-scale businesses to compete with “big box” stores.Responsive national monetary policy combined with local currencies creates a workable framework for macro meeting micro and helps ensure that local economies and taxpayers will not be bailing out “too big to fail” banks. As shown in another excellent book, The Truth in Money Book, (http://www.truthinmoney.com/main.html), there is a way to design debt-free monetary creation, supply, and management such that it expands and contracts with national economies and populations and challenges the delusions of unending exponential growth.“A properly balanced money system doesn’t do away with borrowing or debt. But it does do away with the impossible demands of an all-debt money system… (A) channel is provided for money to flow into the economy which can be used by people to pay the interests on their debts. This money is debt-free money and when it is extinguished it does not cause a critical money shortage…” (p. 152, The Truth in Money Book, 3rd ed., Thoren and Warner).In this design for the U.S., money is created by the U.S. Treasury and lent to banks, rather than vice versa. The U.S. Treasury has capital requirements guided directly by the needs and size of the national economy. There is no need for fractional reserve, leverage, or original debt.Independent, non-profit, multi-stakeholder agency setting monetary policy. It is clear that U.S. money creation, supply, and management can neither be handled by Congresspersons beholden to their own careers nor by The Federal Reserve, an agent for private, profit-seeking banks. Politicians have proven they will use fiscal policy to bribe voters by pumping up the welfare state and by cutting special favors for major funders. The Federal Reserve has been a one-stop anti-capitalist shop for bailouts of banks.Public interest does not align with either of these constrained purposes. We need an independent body governing monetary policy accountable to the democracy at large, involving the spectrum of stakeholders in proportion to their representation in the populace. Qualified individuals could be nominated/elected by groups representing various stakeholders. Their qualifications and conflicts of interests could be checked, and they could be appointed to a panel that sets monetary policy. Congress would create money, and this agency would regulate its lending into the economy.Policy-setting would require deliberation, advocacy, and sacrifices, and hopefully larger citizen education as well. House parties could be crucibles for invested, aware citizen discussion of monetary policy trade-offs and options.Citizen lending and micro lending. We have the technology to skip private banks in the lending process, lend directly from peer to peer, citizen to citizen (http://www.fundingcircle.com/), and possibly do to banks what Craigslist did to newspaper want ads. We could lend to one another in local currency and national currency and in amounts smaller than would be feasible for profit-seeking banks. Banks and their profit margins and interest rates would have to compete.Perhaps we could even allow regulated community or non-profit groups to apply for direct lending from the U.S. Treasury at the same rates as private banks. Again the national interest is upheld by a much more diversified risk, a more stable base of lending, and an economy built on productive real investment and return rather than financialized mumbo-jumbo.From the national level money supply could be regulated and inflation managed by interests and taxes in tune with the expansion and contraction for the productive real economy. Strong standards would be established for lending. Lax lending standards for banks would end in borrower default and their own bankruptcy. The value of savings would be magnified as purchasing power would be maintained, and when prices fell due to lower demand, savers could be rewarded for their prudence and foresight.Savers could buy, invest, and lend and thus expand the economy again creating grass-roots liquidity. When prices for commodities and wages dropped, the national agency regulating monetary agency could work in collaboration with Congress to create money to prudently invest in infrastructure, and thus take advantage of value and spur the job market in a way that makes constituents happier and the economy healthier.“Service swaps” and the end of work as we know it: Jeremy Rifkin and Charles Hugh Smith have spoken extensively about the “end of work” as we know it. There is increasing awareness, due to automation, environmental limits, saturation of the world with material things, open source software and content, etc. and a growing trend away from possession and toward experience as the arbiter of the good life, that we simply need fewer jobs. Spurring job growth merely for the sake of earning a living, i.e. expanded bureaucracies, is simply no longer sustainable or desirable. We don’t have the money to pay for unneeded jobs.And yet there are multitudes of real needs out there that need to be addressed beyond the purview of mere volunteerism, charity, or government agencies. There is a huge oversupply of indebted, educated, idealistic young people raring to use their skills and engage their passions. Let’s simply have a trade.Make it the business of educational and community groups and institutions to identify, strategize, organize, and meet real needs. “Hire” people who are unemployed but eager to be active and create a currency exchange where debts, services, and surplus goods can be exchanged (perhaps with local currency) for this pro-social work.This takes care of joblessness, waste, and unmet community needs in one fell swoop. Supermarkets alone throw out an ungodly amount of perfectly acceptable food, because it exceeds the sell-by date or its apples have a few spots on them. There is every reason to embrace such an obvious opportunity to integrate productivity and waste reduction.Zeus Yiamouyiannis, Ph.D.

Look for Part 3 of this series on Friday.

Thank you, Michael M. ($20), for your extremely generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Sig T. ($30), for your lavishly generous contribution to this site -- I am greatly honored by your support and readership.

Part 1: Introduction and basic principles

“The current global financial unraveling and meltdown has brought us face-to-face with a stark and uncomfortable truth: with all its reassuring numbers, our financial system is a human system, based on human frailties and desires, resting almost completely upon imaginary notions of worth. Historical financial innovations have led us piece by piece into a phase shift from ownership of real assets to control of concocted wealth that no longer has a credible authoritative connection to productivity, life needs, or the day-to-day requirements of commerce.” (http://www.oftwominds.com/blogoct08/positives3-10-08.html)I wrote this three years ago in October of 2008. Since then the only thing that seems to have changed is the intensity, complexity, and ferocity with which global agencies are trying to pretend and extend past our insolvent, incoherent, and fantasy-riddled global financial system. I continued:“From the bartering of material goods and services, to the convenient exchange of dollars no longer backed by anything but faith, to "creative" financial vehicles that leverage essentially symbolic wealth to an infinite degree, we have progressively departed from the foundation of what was once considered financial worth—the competent stakeholdership, ownership, and stewardship of real property involving labor, earnings, investment, risk, reward, and responsibility. In other words, we’ve reached the "asymptote," the mathematical limit whereby even an infinite increase in concocted value produces no growth of worth on the real level.”(http://www.oftwominds.com/blogoct08/positives3-10-08.html)In this current essay I outline some possible ways to press onward from this stalemate with reality. First we must be willing to pierce economic illusions and to draw out the differences between what we claim we want and what our actions actually support.Everybody says they want free enterprise in a democratic market exchange economy that seeks to maximize life engagement, enjoyment, responsibility, and fulfillment. So how come we are currently stuck with the opposite? How could the laziest, least inventive, most crony-connected, monolithic, and parasitic companies siphon up the cash, feast on the bailouts of the industrious, and make it more difficult for us to live a good life? It was not supposed to happen this way, but it did, and it continues to persist.

Part of the problem is that “prosperity” has been degraded and falsified and been made synonymous with getting your “goodies”

We can also notice how this latest mutation of capitalism has grown to encompass the global system, since most citizens from Greece to America to China fell for the “too good to be true” hype, including promises of never-ending stratospheric government benefits and forever skyrocketing housing prices and stock valuations. “Don’t work for a living. Let your money work for you,” became the new mantra. Contributing to society, applying oneself, and caring for others became quaint notions for old-fashioned dupes.Now that we have tasted the fruits of this false prosperity and experienced the consequent world-wide indigestion, what ought we do? I assert that whatever we do requires a different foundation that rewards and supports productively adding to economies (“making a living”) and discourages using the levers of society to parasitically subtract from productive growth (“making a killing”).Making a living does not need to be eking out survival at an underwhelming job. It can and should mean literally what it says— “making a life” with all the most energetic and interactive tools at our disposal. Making a killing ought not be the “I’ve hit the jackpot” bounty that people pretend either. It can and should mean what it literally says— “killing the economy and people’s well-being.”

Working premises:

*

Applied effort can even be things like constructive play that brings fulfillment and enjoyment. Physical health requires applied effort in the form of exercise and dietary discipline. Music and language fluency requires practice. Even “effortless” enlightenment takes great effort. The lives of ostensible masters like Jesus and Buddha were anything but easy. Why should markets be any different?

Private entities, including the Federal Reserve, who want to create their own private funny money through fractional reserve, leverage, and other forms of fiat backed by nothing are free to do so as a medium of exchange between private parties.However, this private currency should not be redeemed, backed, mixed with, or supported in any way by public money. Leverage is literally “money for nothing” (and from nothing).” In addition, leverage, by artificially expanding debt-money, drastically inflates prices of even necessary goods making it very difficult to make a living. (http://market-ticker.org/akcs-www?post=195434)

Given these principles and working premises, it is important to note that the current national U.S. economy and global economies do not make any meaningful distinction between healthy and harmful growth.

And yes, financial cancer, like biological cancer, does grow very fast as it consumes the economic body, but it destroys that body and should be calculated as a negative in proportion to how much of the productive economy it is destabilizing, dismantling, or replacing.Without a distinction between productive activities and parasitic activities there is no viable way forward economically. This three-part essay (“Part 1: Introduction”; “Part 2: Making a Living”; and “Part 3: Unmaking a Killing”) will begin to make those distinctions and provide recommendations on increasing healthy productive capacity and eliminating harmful parasitic activities.If the sick-care industry is booming due to a dramatic increase in obesity and diabetes in the population, this ought not boost the GDP if one is interested in macro indicators reflecting the health of the economy and its people. You would not treat a cancer patient by considering cancer cells on par with healthy ones, and you should not attempt to heal economies without analogous distinctions.Zeus Yiamouyiannis, Ph.D.

Look for Parts 2 and 3 of this series on Thursday and Friday.

Thank you, Lee V.D.B. ($15), for yet another extremely generous contribution to this site -- I am greatly honored by your ongoing support and readership.

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For the past 18 months, every time reality threatens to intrude in Europe, Merkel and Sarkozy rush onto the global stage for a repeat performance of their dog-and-pony show.

The fact that we've seen the exact same performance repeated again and again appears to be lost on the financial media, which never tires of declaring "this is the solution that will end the European bank crisis."A few days or weeks later, reality once again intrudes, the ugly truth of systemic insolvency rears its frightening head once again, and the Dynamic Duo of Eurozone political theater rush onto stage for another tiresome performance of their cliche-ridden dog-and-pony show.Few in the corporate media stop to even ask if the dog and the pony even have the power to summarily re-capitalize banks and all the rest of their grandiose pronouncements. Few dare observe that Merkel and Sarkozy might as well demand the seas divide; the situation is out of their control, and their theatrics are all in service of percepotion management, i.e. to foster the illusion they still grasp some meaningful control over the situation (they don't) and the the situatioin is controllable by manipulation of perception (it isn't).

Merkel and Sarkozy's dog and pony show is perception management ripped right from the Federal Reserve's playbook.

the problem is all perception.

This is a fundamental ontological error.

Sarkozy and Markel's absurdist theatrics--"we have a secret plan right here in our pockets"--are not just incredible, they are uncredible.

The day the global audience finally tires of the bumbling act of the Merkel and Sarkozy dog-and-pony troupe, then real solutions--writing off trillions of euros of uncollectable debt and illusory assets, breaking up the dysfunctional Eurozone, etc.--can proceed.If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition)

Thank you, Brian M. ($50), for your most-excellently generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Bob C. ($9), for your much-appreciated generous contribution to this site -- I am greatly honored by your support and readership.

There is only one word to describe the opinion that the U.S. dollar is in a multi-year uptrend: heresy.

Embracing the contrarian viewpoint offers little joy, because heretics are constantly being hounded by devotees of orthodoxy seeking their conversion to the one true faith or their crucifixion as mortal threats to the orthodoxy.Why is this so? For two simple but profound reasons. The human mind strongly prefers certainty to uncertainty and simple, fixed explanations over complex, contingent explanations.The human mind has a second, superglue-like quality: Once a viewpoint has been plucked from the swirling chaos of beliefs and explanations, then the mind quickly solidifies that view, resisting any future modification. Very little energy is devoted to questioning the position, while enormous energy is devoted to defending it.This reality is expressed via “confirmation bias,” the term used to describe our tendency to focus on data that supports our pre-selected view and ignore data which challenges it.Orthodoxy—fixed positions that are articles of faith to be defended against all challenges—is thus a psychological safe haven in a risky, dynamic world. Having a belief system or global explanation not only offers us the comforts of certainty, it also enables us to make forecasts based on that explanation. Those forecasts become part of the orthodoxy which must be defended.Being a trader makes one a heretic, because traders see orthodoxy not as a safe haven but as a mortal danger. This is the root of trader expressions such as “Marry your spouse, not your portfolio.” From painful personal experience, traders learn that trading based on orthodoxy eventually leads to crushing losses.Why is this so? There is a difference between being “right” and making money. The devotee of orthodoxy is committed to being “right” in a global sense; i.e., confirming that the orthodoxy’s forecast will be proven correct. The trader is only interested in being “right” in a much narrower definition: Did the trade gain value or lose value? The market is the only arbiter of “right” and “wrong” to the trader, and all of the ceaseless debates and arguments between the believers of various orthodoxies are viewed as potentially dangerous distractions.The trader recognizes multiple timeframes and grasps that a trade has to align with the market action of a specific phase to be successful; i.e., gain in value. A trade may be successful in a three-day timeframe, but unsuccessful in a three-week timeframe, and ultimately successful in a three-year timeframe.The problem with orthodoxy is that adherents believe it must be correct in all phases and timeframes. Thus the Bull is wiped out in Bear markets and the Bear is wiped out in Bull markets, trend followers are wiped out in volatile phases, and those trading volatility churn away their capital in non-volatile trending markets.This partly explains why the number of traders/money-managers who outperform index funds in the long run over both Bull and Bear markets is essentially statistical noise. The appeals of orthodoxy are that powerful.Traders are heretics for another reason: They reject the illusion that there are “investments.” To a trader, the word “investment” is simply a marketing ploy of the financial Status Quo, a word designed to evince a plummy, wood-paneled security from risk. This reflects the core article of faith of the financial Status Quo orthodoxy, which is that risk can be massaged away.Traders understand that risk cannot be massaged away, and that capital put into any market at any time is always at risk. Every investment is a trade, and every trade is a speculation. Thus there is no “investment,” there is only speculation, and the slightly sweaty, unpleasant proximity of speculation to risk is not masked with the heavy perfumes of PR, it is embraced as the one true lodestone.Traders understand that suppressing risk simply guarantees a greater eruption of volatility in the future.Traders are anathema to orthodoxy on multiple fronts. Devotees of orthodoxy understand the devotion of others in opposing camps, and even as they argue they feel comfortable with their shared worldview. But devotees distrust traders because they reject orthodoxy as the “solution;” it offends devotees that traders either change camps constantly or are studiously unattached to all camps. To the true believers of one investment orthodoxy or another, traders are renegades profiting where they “shouldn’t”--being short as the market declines, for example. In other words, the “right” way to “invest” is to choose an orthodoxy and cling to it through thick and thin until proven “right.”To the trader, this approach is equivalent to lighting one’s capital afire and watching it burn. The trader thinks in terms of probabilities, not certainties, and looks to charts as reflections of human behavior. A forecast is simply an assessment of probability, a snapshot taken in the present of multiple dynamics and timeframes.The trader also offends orthodoxy, not just by refusing to place his faith in one camp or another, but in rejecting the entire notion that “big” global forecasts have any meaning in terms of making money in the here and now. The trader is aware of the various dynamics of hyperinflation, deflation, stagflation, biflation, “muddle-through” sideways markets, “stocks are cheap,” “don’t fight the Fed,” the potential collapse of advanced civilization, and so on, but doesn’t base trades on these dynamics.Traders understand that the market, and indeed, human history, is fundamentally a highly complex non-linear system. Change the parameters or the inputs, and even small fluctuations can trigger outsized consequences.As a result, forecasts of future events become less predictable the farther out in time we extend the forecast. Traders understand that X and Y might well occur in five years, but it’s difficult to distill that potentiality down to a money-making trade in the near term.We all like being right and making money trading the markets, but the two are not identical. The adherent of orthodoxy finds the markets confounding when they don’t conform to the orthodoxy’s forecasts and explanations, and this frustration finds expression in confirmation bias; i.e., seeking data that supports the position and downplaying whatever doesn’t, arguing vociferously on the basis of financial fundamentals, and seeking external explanations for the failure of the forecast (manipulation, seasonal trends, and so on).The one phrase you will rarely hear issuing from orthodoxy is “I was wrong and I’m radically changing my view.” It’s painful to be wrong; our human pride is wounded when our convictions turn out to be misplaced. It’s also painful to lose money in a losing trade, but when given a choice between the two, adherents of orthodoxy prefer to lose money rather than surrender their convictions.Traders view convictions as a potentially deadly trap, and have trained themselves to find comfort in uncertainty and permanent contingency. It’s easier to jettison a trade than a conviction.As a thought experiment, look at this chart and decide if it is bullish or not.Does your view change if it is a chart of a commodity? What if it is a chart of a mining company, or a tech stock?What if it is a chart of the U.S. dollar index, the DXY? Well, it is. How resistant do you find yourself to viewing this chart as unambiguously bullish? Do you find yourself seeking evidence that it isn’t really that bullish, evidence that “this looks ready to roll over and decline?”In certain camps, it is an article of faith that the U.S. dollar is deservedly doomed to extinction. The trader accepts this as a future possibility, but does not see any tradable evidence of this possibility in this chart/snapshot of the past two years.As traders, we are well-served by a willingness to seek evidence which undermines or challenges our positions, as this habit counteracts confirmation bias. As traders, we see probabilities for advance and decline in all charts, and the assessment isn’t about being “right” or “wrong” but about the higher and lower probabilities implicit in the chart.Anything, including a bullish dollar, can become an article of faith in an orthodoxy, just as anything can become heresy.If this chart is bullish, what does that suggest about the probabilities of future price action in the US dollar (i.e., the DXY)? In Part II: The Technical Argument for a Stronger Dollar, we use technical analysis to explore the case for a possible multi-year advance of the dollar from here. A key question for investors to ask here is this: Whatever the probability, what impact would a sustained rise in the dollar have on your current portfolio?This entry was commissioned as Part 1 of a 2-part series for ChrisMartenson.com.Click here to access Part II of this report (free executive summary, enrollment required for full access). Readers forum: DailyJava.net

Thank you, Michael H. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Alan B. ($75), for your stupendously generous contribution to this site -- I am greatly honored by your support and readership.

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Oftwominds.com is honored to present a profoundly forward-thinking three-part essay by frequent contributor Zeus Yiamouyiannis, Making a Living vs. Making a Killing: Creating a Healthy Democratic Foundation for Economies. Part 1; Part 2; today we present Part 3.

Without a distinction between productive activities and parasitic activities there is no viable way forward economically. This three-part essay (“Part 1: Introduction”; “Part 2: Making a Living”; and “Part 3: Unmaking a Killing”) will begin to make those distinctions and provide recommendations on increasing healthy productive capacity and eliminating harmful parasitic activities. If the sick care industry is booming due to a dramatic increase in obesity and diabetes in the population, this ought not boost the GDP if one is interested in macro indicators reflecting the health of the economy and its people. You would not treat a cancer patient by considering cancer cells on par with healthy ones, and you should not attempt to heal economies without analogous distinctions.

“The mission of cancerous economic organizations is to maximize profit, withdraw as much energy as possible, and give as little back as possible. When “maximizing (financial) profit” is allowed to gain power without reference, balance, challenge, or duty, no other cherished capitalist principle can long endure.”

“We no longer have a global economic system that is tethered to concrete reality. Parasitic, amoral, slight-of-hand value-shuffling (what I would call the “unreal economy”) has effectively trumped the “real economy,” the production and exchange of meaningful goods and services.”

What constitutes value has migrated from actual value, based in something you earn and related to something you can actually concretely use, to “references to value,” some number merely assigned to some financial instrument attached to some good or service somewhere several degrees removed from its source.

“We cannot live on bets. We require healthy air, food, water, reasonable housing, and real health care to live.”

The Market Ticker

Zeus Yiamouyiannis, Ph.D.

Thank you, Zeus, for contributing to our understanding of an alternative economy based on common sense and community rather than exploitation, self-serving fiefdoms, looting, parasitism and an oppressive partnership of Financial Elites and the Central State.

My interview with Max Keiser and Stacy Herbert (recorded live in Paris).

Zeus's interview with Max Keiser and Stacy Herbert.

If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc.Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.

Readers forum: DailyJava.net.

My new book is available in both print and ebook formats: An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook now on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One.

Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Mobi ebook) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller.

Of Two Minds Kindle edition:

Of Two Minds blog-Kindle

Thank you, William B. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Thomas E. ($20), for your much-appreciated generous contribution to this site -- I am greatly honored by your support and readership.

Oftwominds.com is honored to present a profoundly forward-thinking three-part essay by frequent contributor Zeus Yiamouyiannis, Making a Living vs. Making a Killing: Creating a Healthy Democratic Foundation for Economies. Part 1 was published yesterday; today we present Part 2.

“The only “real wealth” here revolves around ability to produce real and needed goods (to allow us to survive), and the ability to create something that increases quality of life (to promote our thriving).”

“Free enterprise, well understood and executed,… prizes productivity, quality of life, quality of goods and services, innovation and creativity, transformative learning, honest and diligent labors of love, and enjoyable and engaging relationships and experiences for its citizen members. These are functions that create health synergistically both for the smaller and the larger, a win-win.”

“We are coming to the big face-off between top-down control by those who would be gods over us and impose value on us, and bottom up creativity which recognizes that any “god” (energy, good, intelligence) comes up through us and is connected between us. It is this “within” and “between” well-negotiated and exchanged that produces real value.”

“What is the economy and society meant to serve? What is most fulfilling and important in life? When asked these questions for themselves and their societies, most people offer answers like: health, family, community, friendship, love, learning, creativity, collaboration, liberty, new experiences, diversity, meaningful work, cultural enjoyment, literacy, curiosity, responsibility, spirituality, faith, and so forth. If you ask those same people how much time, energy, and money they are spending enacting these practices, principles, and values, the answer would likely be (if they were honest), “Comparatively little.”

Look for Part 3 of this series on Friday.

Thank you, Michael M. ($20), for your extremely generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Sig T. ($30), for your lavishly generous contribution to this site -- I am greatly honored by your support and readership.

Oftwominds.com is honored to present a profoundly forward-thinking three-part essay by frequent contributor Zeus Yiamouyiannis. It is easy to focus on the current financial dysfunctions of the global economy, but the real work is in designing alternatives. This essay is devoted to that work.

“The current global financial unraveling and meltdown has brought us face-to-face with a stark and uncomfortable truth: with all its reassuring numbers, our financial system is a human system, based on human frailties and desires, resting almost completely upon imaginary notions of worth. Historical financial innovations have led us piece by piece into a phase shift from ownership of real assets to control of concocted wealth that no longer has a credible authoritative connection to productivity, life needs, or the day-to-day requirements of commerce.”

“From the bartering of material goods and services, to the convenient exchange of dollars no longer backed by anything but faith, to "creative" financial vehicles that leverage essentially symbolic wealth to an infinite degree, we have progressively departed from the foundation of what was once considered financial worth—the competent stakeholdership, ownership, and stewardship of real property involving labor, earnings, investment, risk, reward, and responsibility. In other words, we’ve reached the "asymptote," the mathematical limit whereby even an infinite increase in concocted value produces no growth of worth on the real level.”

Look for Parts 2 and 3 of this series on Thursday and Friday.

Thank you, Lee V.D.B. ($15), for yet another extremely generous contribution to this site -- I am greatly honored by your ongoing support and readership.

Thank you, Ron W. ($10), for your most generous contribution to this site -- I am greatly honored by your support and readership.

Does anyone take the Merkel-Sarkozy dog and pony show seriously any more? Perception management is not a solution.

Thank you, Brian M. ($50), for your most-excellently generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Bob C. ($9), for your much-appreciated generous contribution to this site -- I am greatly honored by your support and readership.

A stronger U.S. dollar is heresy in some circles. Calls for a major top in the USD are already circulating. Can orthodoxy be misleading?

Does your view change if it is a chart of a commodity? What if it is a chart of a mining company, or a tech stock?What if it is a chart of the U.S. dollar index, the DXY? Well, it is. How resistant do you find yourself to viewing this chart as unambiguously bullish? Do you find yourself seeking evidence that it isn’t really that bullish, evidence that “this looks ready to roll over and decline?”In certain camps, it is an article of faith that the U.S. dollar is deservedly doomed to extinction. The trader accepts this as a future possibility, but does not see any tradable evidence of this possibility in this chart/snapshot of the past two years.As traders, we are well-served by a willingness to seek evidence which undermines or challenges our positions, as this habit counteracts confirmation bias. As traders, we see probabilities for advance and decline in all charts, and the assessment isn’t about being “right” or “wrong” but about the higher and lower probabilities implicit in the chart.Anything, including a bullish dollar, can become an article of faith in an orthodoxy, just as anything can become heresy.If this chart is bullish, what does that suggest about the probabilities of future price action in the US dollar (i.e., the DXY)? In Part II: The Technical Argument for a Stronger Dollar, we use technical analysis to explore the case for a possible multi-year advance of the dollar from here. A key question for investors to ask here is this: Whatever the probability, what impact would a sustained rise in the dollar have on your current portfolio?

This entry was commissioned as Part 1 of a 2-part series for ChrisMartenson.com.

Thank you, Michael H. ($50), for your marvelously generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Alan B. ($75), for your stupendously generous contribution to this site -- I am greatly honored by your support and readership.

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