Why The World Economy Is Doomed?

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Doc
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Why The World Economy Is Doomed?

Post by Doc »

http://etfdailynews.com/2013/03/21/why- ... is-doomed/

http://www.youtube.com/watch?feature=pl ... 0uw#t=257s
Why The World Economy Is Doomed?
March 21st, 2013

Why is the global economy in so much trouble? How can so many people be so absolutely certain that the world financial system is going to crash? Well, the truth is that when you take a look at the cold, hard numbers it is not difficult to see why the global financial pyramid scheme is destined to fail. In the United States today, there is approximately 56 trillion dollars of total debt in our financial system, but there is only about 9 trillion dollars in our bank accounts. So you could take every single penny out of the banks, multiply it by six, and you still would not have enough money to pay off all of our debts. Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.

The global financial system is more interconnected today than ever before, and a crisis at one major bank or in one area of the world can spread at lightning speed. As I wrote about yesterday, the entire European banking system is leveraged 26 to 1 at this point. A decline in asset values of just 4 percent would totally wipe out the equity of many of those banks, and once a financial panic begins we could potentially see major financial institutions start to go down like dominoes.

We got a small taste of what that is like back in 2008, and it is inevitable that it will happen again.
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Anyone that would tell you that the current global financial system is sustainable does not know what they are talking about. Just look at the numbers that I have posted below.

The following is the global financial pyramid scheme by the numbers…

-$9,283,000,000,000 - The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to “guarantee” those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.

-$10,012,800,000,000 - The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.

-$10,409,500,000,000 - The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.

-$15,094,000,000,000 - U.S. GDP. It is a measure of all economic activity in the United States for a single year.

-$16,749,269,587,407.53 - The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.

-$32,000,000,000,000 - The total amount of money that the global elite have stashed in offshore banks (that we know about).

-$50,230,844,000,000 - The total amount of government debt in the world.

-$56,280,790,000,000 - The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.

-$61,000,000,000,000 - The combined total assets of the 50 largest banks in the world.

-$70,000,000,000,000 - The approximate size of total world GDP.

-$190,000,000,000,000 - The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.

-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.

-$600,000,000,000,000 to $1,500,000,000,000,000 - The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.

Are you starting to get the picture?

Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.

What we witnessed back in 2008 was just a little “hiccup” in the system. It caused the worst economic downturn since the Great Depression, but global financial authorities were able to get things stabilized.

Next time it won’t be so easy.

The next wave of the economic collapse is quickly approaching. A full-blown economic depression has already started in southern Europe. Unemployment is at record highs and economic activity is contracting rapidly.

The major offshore banking centers in Cyprus are on the verge of collapsing. It was just announced that they will now be closed until Tuesday, but nobody really knows for sure when they will be allowed to reopen. And there is already talk that when they do reopen that there will be strict limits on how much money people can take out.

And now the IMF is warning that the three biggest banks in Slovenia are failing and that a billion euros will be needed to bail them out.

The dominoes are starting to tumble, and the United States won’t be immune. In fact, the greatest financial problems that the United States has ever seen are on the horizon.

But you can just have faith that Ben Bernanke, Barack Obama and the U.S. Congress know exactly what they are doing and will be able to save us from the coming financial collapse if you want.

The mainstream media will provide you with all of the positive economic news that you could possibly want. They are giddy about the fact that the Dow keeps hitting all-time highs and they would have us all believe that we are in the midst of a robust economic recovery. You can listen to them if you want to.

But when you are tempted to believe that everything is going to be “okay” somehow, just go back and look at the numbers there were posted above one more time.

There is no way that the global financial pyramid scheme is going to be able to hold up for too much longer. At some point it is going to totally collapse. When that happens, will you be ready?
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Re: Why The World Economy Is Doomed?

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The present system is indeed doomed, but that doesn't have to be bad. If I could changes things with a magical wand this is what I would do:

1. Global debt pardon.
2. Mandatory trade balance for all countries, by limiting imports to the value of exports, or vice-versa for surplus countries.
3. Budget deficits to be financed exclusively in the home markets.
4. Introduction of a world currency.
5. Nationalisation of all banks and financial institutions.
6. Boards of directors of firms to include directors elected by the workers, with veto power on all decisions.
7. Creation of a World Development Bank to finance development projects in less developed countries, under the bank's supervision, at zero rate of interest.

I guess this would solve the problem for good.
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Re: Why The World Economy Is Doomed?

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If ending humanity for good solves the problem for good then we are all in agreement.
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Re: Why The World Economy Is Doomed?

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Mr. Perfect wrote:If ending humanity for good solves the problem for good then we are all in agreement.
Good grief! Why would my suggestion, if carried out, end humanity for good?...
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Re: Why The World Economy Is Doomed?

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Endovelico wrote:
Mr. Perfect wrote:If ending humanity for good solves the problem for good then we are all in agreement.
Good grief! Why would my suggestion, if carried out, end humanity for good?...
First off nationalizing all the banks is going to help exactly how? what you will get for doing that is the merger of the bankster and Political class into one entity. They almost are the same already. Which is the root of the damn problem. Making things worst will not make them better.

As for turning over the plants to the workers. That was already tried. It did not work out so well.

Mandatory trade balance. Gee so when the people in some African country are starving you steadfastly refuse to send them food?

Money lent at zero interest to developing world. Hmm So if Greece for example wants a gizillion dollars then no problem - no interest payments to make to keep the loan out of default. Therefore no reason to pay it back. But doesn't that contradict your third bullet point?
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Re: Why The World Economy Is Doomed?

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Doc wrote:
Endovelico wrote:
Mr. Perfect wrote:If ending humanity for good solves the problem for good then we are all in agreement.
Good grief! Why would my suggestion, if carried out, end humanity for good?...
First off nationalizing all the banks is going to help exactly how? what you will get for doing that is the merger of the bankster and Political class into one entity. They almost are the same already. Which is the root of the damn problem. Making things worst will not make them better.
Nationalizing banks alone wouldn't be enough. Bank policy would have to be determined by a body including representatives of firms and workers, to make sure that banks wouldn't be used for speculation.
Doc wrote:As for turning over the plants to the workers. That was already tried. It did not work out so well.
Wrong. It was never tried. When the state takes over in the name of the workers, workers are usually screwed. Besides I'm just suggesting equal participation of workers in running firms, not a straight out control by workers.
Doc wrote:Mandatory trade balance. Gee so when the people in some African country are starving you steadfastly refuse to send them food?
If they are starving give them aid. If you want to solve the problem by means of trade deficit, how do you expect to be paid?
Doc wrote:Money lent at zero interest to developing world. Hmm So if Greece for example wants a gizillion dollars then no problem - no interest payments to make to keep the loan out of default. Therefore no reason to pay it back. But doesn't that contradict your third bullet point?
Zero interest doesn't mean you don't pay back the principal. It just means you will not be ripped off.
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Re: Why The World Economy Is Doomed?

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Endovelico wrote:The present system is indeed doomed, but that doesn't have to be bad. If I could changes things with a magical wand this is what I would do:

1. Global debt pardon.
Thus wiping out the savings of millions of widows and orphans. Someone's debt is someone else's savings account.
2. Mandatory trade balance for all countries, by limiting imports to the value of exports, or vice-versa for surplus countries.
Thus preventing the importation of valuable technology essential for the development of poor countries.
3. Budget deficits to be financed exclusively in the home markets.
Thus preventing major infrastructural investments by countries without developed national financial markets.
4. Introduction of a world currency.
Thereby expanding the problems plaguing the euro-zone to the entire world.
5. Nationalisation of all banks and financial institutions.
Because if having only 5 banks dominate the market is dangerous, the solution is to put them all together under 1 owner and have lending practices even more subject to political interference.
6. Boards of directors of firms to include directors elected by the workers, with veto power on all decisions.
Thus ensuring permanent gridlock and zero future efficiency gains in any firms with a board of directors. The current workers have a vested interest in the status quo, a vested interest in opposing any changes that might make current workers even mildly uncomfortable, even though this might come at a cost to potential future workers and firm profitability and viability. This exact path you describe was more or less implemented at the big car manufacturers in Detroit, where unions effectively held a veto on executive decisions.

Image
7. Creation of a World Development Bank to finance development projects in less developed countries, under the bank's supervision, at zero rate of interest.
Hm, if only we had a World Bank, headquartered in Washington D.C., which financed developemnt projects in less developed countries, often at zero or negative rates of interest. Oh, wait, we do. It's called the World Bank.
I guess this would solve the problem for good.
I'm with Mr. Perfect in this one.
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Re: Why The World Economy Is Doomed?

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Taboo wrote:Thus wiping out the savings of millions of widows and orphans. Someone's debt is someone else's savings account.
Call me Romanian, but I've never met an orphan with a savings account. ;)
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Re: Why The World Economy Is Doomed?

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Taboo wrote: Thus wiping out the savings of millions of widows and orphans. Someone's debt is someone else's savings account.
I guess one could make an exception for small savers who had invested their savings in bonds. I doubt that the figure would be very significant.
Taboo wrote:Thus preventing the importation of valuable technology essential for the development of poor countries.
That's a silly argument. The price of such technology would just have to be accounted for in the total value of imports. In other words, import technology rather than Mercedes and BMW cars...
Taboo wrote:Thus preventing major infrastructural investments by countries without developed national financial markets.
Such countries - being less developed countries - could apply for international aid or try to get foreign investors interested.
Taboo wrote:Thereby expanding the problems plaguing the euro-zone to the entire world.
The euro-zone problems are not due to a common currency, they are due to unbalanced trade and related foreign debt.

Taboo wrote:Because if having only 5 banks dominate the market is dangerous, the solution is to put them all together under 1 owner and have lending practices even more subject to political interference.
The problem is not having few banks, is who owns them and what for. Besides, nationalizing banks at national level would still leave a lot of competition between different nationalized banks.

Taboo wrote:Thus ensuring permanent gridlock and zero future efficiency gains in any firms with a board of directors. The current workers have a vested interest in the status quo, a vested interest in opposing any changes that might make current workers even mildly uncomfortable, even though this might come at a cost to potential future workers and firm profitability and viability. This exact path you describe was more or less implemented at the big car manufacturers in Detroit, where unions effectively held a veto on executive decisions.
Workers are as interested in profitable firms as their owners, once they know they will also benefit from those profits. Workers aren't stupid - or they aren't any more stupid than owners - and so they would cooperate towards making their firms profitable. But not at their expense.
Taboo wrote:Hm, if only we had a World Bank, headquartered in Washington D.C., which financed developemnt projects in less developed countries, often at zero or negative rates of interest. Oh, wait, we do. It's called the World Bank.
The trouble is not the World Bank as such, it's the way it is run.
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Re: Why The World Economy Is Doomed?

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YMix wrote:
Taboo wrote:Thus wiping out the savings of millions of widows and orphans. Someone's debt is someone else's savings account.
Call me Romanian, but I've never met an orphan with a savings account. ;)
You are Romanian :D

Orphans often inherit estates, receive legal settlements and are beneficiaries of insurance policies. In the U.S. it is expected that parents buy insurance or set aside a trust sufficient to carry children through college in case of untimely death.
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Re: Why The World Economy Is Doomed?

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Nonc Hilaire wrote:You are Romanian :D

Orphans often inherit estates, receive legal settlements and are beneficiaries of insurance policies. In the U.S. it is expected that parents buy insurance or set aside a trust sufficient to carry children through college in case of untimely death.
I know, NC, I know. Still, being what I am, the first people who came to mind when I read "orphan" were children in the care of the state or Orthodox Church. I'd be surprised if any of them has seen the inside of a bank.
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Re: Why The World Economy Is Doomed?

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YMix wrote:
Nonc Hilaire wrote:You are Romanian :D

Orphans often inherit estates, receive legal settlements and are beneficiaries of insurance policies. In the U.S. it is expected that parents buy insurance or set aside a trust sufficient to carry children through college in case of untimely death.
I know, NC, I know. Still, being what I am, the first people who came to mind when I read "orphan" were children in the care of the state or Orthodox Church. I'd be surprised if any of them has seen the inside of a bank.
Really? I thought Romanian ATM's were low tech and operated by poor Romanian orphans stuffed inside. :lol:
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Re: Why The World Economy Is Doomed?

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Nah, we have enough half-educated, unemployed college graduates to staff the entire network of ATMs.
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Re: Why The World Economy Is Doomed?

Post by noddy »

got to love centralists, its always because the wrong people have the power and everything would be just roses if we killed everyone who disagreed.

personally, i still cant even start getting my head around competent humans, its all just different flavours of limited and its a game of instinct, smarts, experience and luck to be make the right choices with the right group at any point in time.. life is chaos, we do our best to make it less so and good luck to ya.

more chaotic variations in finances please, more choices not less... you cant get rid of human cockups but you can make them non compulsory and have alternatives.
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Re: Why The World Economy Is Doomed?

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noddy wrote:got to love centralists, its always because the wrong people have the power and everything would be just roses if we killed everyone who disagreed.

personally, i still cant even start getting my head around competent humans, its all just different flavours of limited and its a game of instinct, smarts, experience and luck to be make the right choices with the right group at any point in time.. life is chaos, we do our best to make it less so and good luck to ya.

more chaotic variations in finances please, more choices not less... you cant get rid of human cockups but you can make them non compulsory and have alternatives.
The name of the game is survival. A species which can't find a way to survive, disappears. If it survives it will tend to find the most adequate way to survive, given the circumstances. At any given moment we make the choices which will guarantee our survival, but because we aren't passive components on the path to the future, we can always influence the way we will survive. But only adequate choices will prevail. At any given moment the choices we make may not be the best possible, but if they aren't, we will eventually introduce corrections. And so we go on... Presently, capitalism starts looking as if it isn't adequate to our survival needs, and so we will change it or adopt a different system. Which one? That which will allow us to overcome capitalism's shortcomings. Whatever that will be. Our next stage will result from the clash of many alternatives, but it will have to conform with our nature. Any attempt at creating paradise on earth will fail. Any ideology based on a "new man" will fail. On the long run the prevailing system will have to be freer, more democratic and more ethical, because that's what we will want it to be, and thus will be the most adequate to our survival. But don't expect it to happen overnight or without some fall back to less pleasant situations. And the more passive we are, the longer it will take to move forward.
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Re: Why The World Economy Is Doomed?

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Nationalizing banks is silly. We used to have a Postal bank which provided banking services for those without them. We could reinstitute that, revitalize the post office and everyone would have a branch nearby where they live. You don't need to nationalize a bank, just create an alternative.
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Re: Why The World Economy Is Doomed?

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Enki wrote:Nationalizing banks is silly. We used to have a Postal bank which provided banking services for those without them. We could reinstitute that, revitalize the post office and everyone would have a branch nearby where they live. You don't need to nationalize a bank, just create an alternative.
I don't think that nationalizing banks is silly. But, as you pointed out, there may be other better ways to solve the problem.
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Re: Why The World Economy Is Doomed?

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Endovelico wrote:
Taboo wrote: Thus wiping out the savings of millions of widows and orphans. Someone's debt is someone else's savings account.
I guess one could make an exception for small savers who had invested their savings in bonds. I doubt that the figure would be very significant.
45% of the Cyprus deposits amount was in accounts with less than 100,000 euros (non-business owning normal people). And that's in a fabled tax haven. Perhaps that figure is not significant. Especially when it's not your money getting confiscated.

The BANKS that invested in BONDS took their MONEY from the savings accounts of widows and orphans and small businessmen (I'm just using widows and orphans for dramatic effect).

How about private pension funds?
Life insurance funds?
Owners of small family farms?
Car insurers?
How about the small business on the corner, where you get you milk from?
How about Marcela's coffee shop and family restaurant, into which the poor woman has put 20 years and $200,000?
That's a silly argument. The price of such technology would just have to be accounted for in the total value of imports. In other words, import technology rather than Mercedes and BMW cars...
Most countries already have 60%-100% taxes on luxury cars and the like. All sorts of bans like this only encourage smuggling.
Such countries - being less developed countries - could apply for international aid or try to get foreign investors interested.
I thought the whole point was to be LESS dependent on the fickle whims of foreigners.
The euro-zone problems are not due to a common currency, they are due to unbalanced trade and related foreign debt.
Even if that were remotely correct (it isn't) why do you think neither of those would happen just as well on a global scale, either legitimately or via smuggling.
The problem is not having few banks, is who owns them and what for. Besides, nationalizing banks at national level would still leave a lot of competition between different nationalized banks.
Yes, I remember how competitive socialist banks were. To this day in Russia, if you open a bank account with Bank X, at branch A, you can't do transfers at Bank X, Branch B, unless you open another account. That's glorious state-directed banking policy for you.
Workers are as interested in profitable firms as their owners, once they know they will also benefit from those profits. Workers aren't stupid - or they aren't any more stupid than owners - and so they would cooperate towards making their firms profitable. But not at their expense.
As the miserable bankruptcy of the Big Carmakers amply demonstrates, you are absolutely right. The workers are full of foresight and not greedy, small-minded, short-term gains kinda people. Who just happen to be unemployed now.
The trouble is not the World Bank as such, it's the way it is run.
Is it the negative interest rate loans to poor countries you object to? Their focus on poor countries and poverty minimization? Their health-promotion campaigns? Their agricultural productivity investments? What are they doing that's evil?
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Re: Why The World Economy Is Doomed?

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Endovelico wrote:
Doc wrote:As for turning over the plants to the workers. That was already tried. It did not work out so well.
Wrong. It was never tried. When the state takes over in the name of the workers, workers are usually screwed. Besides I'm just suggesting equal participation of workers in running firms, not a straight out control by workers.
In fact, it has been tried and has tended to work very well. The World famous Mondragon Cooperative in Spain has been very successful.

>> Cooperatives seem on average to last longer and be more responsive to the needs of customers and the communities in which they operate, because their shared ownership and participative management generally makes labor more flexible while reducing the incentives of upper management to maximize short term performance at the expense of the long term. << Capital and the Debt Trap: Learning from Cooperatives in the Global Crisis
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Re: Why The World Economy Is Doomed?

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Enki wrote:Nationalizing banks is silly. We used to have a Postal bank which provided banking services for those without them. We could re-institute that, revitalize the post office and everyone would have a branch nearby where they live. You don't need to nationalize a bank, just create an alternative.
Very good idea. It would great a much better alternative to the usurious check cashing services used by many poor people.
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Re: Why The World Economy Is Doomed?

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Azrael wrote:
Endovelico wrote:
Doc wrote:As for turning over the plants to the workers. That was already tried. It did not work out so well.
Wrong. It was never tried. When the state takes over in the name of the workers, workers are usually screwed. Besides I'm just suggesting equal participation of workers in running firms, not a straight out control by workers.
In fact, it has been tried and has tended to work very well. The World famous Mondragon Cooperative in Spain has been very successful.

>> Cooperatives seem on average to last longer and be more responsive to the needs of customers and the communities in which they operate, because their shared ownership and participative management generally makes labor more flexible while reducing the incentives of upper management to maximize short term performance at the expense of the long term. << Capital and the Debt Trap: Learning from Cooperatives in the Global Crisis
Azrael,

I'm a big fan of Mondragón, but Mondragón is not an example of a plant turned over to the workers. It's a cooperative built as such from the ground up. To me that's the way out of capitalism, but it would take time to convert all the major firms into cooperatives. A nationalized company is not the same thing as a cooperative, it's the same thing as a capitalist firm with the state taking over the capitalist's position. In other words, a nationalized company can be worse than a privately owned capitalist firm. Only exceptionally should one choose to nationalize a firm.
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Re: Why The World Economy Is Doomed?

Post by Azrael »

Endovelico wrote:Azrael,

I'm a big fan of Mondragón, but Mondragón is not an example of a plant turned over to the workers. It's a cooperative built as such from the ground up. To me that's the way out of capitalism, but it would take time to convert all the major firms into cooperatives.
Rome wasn't built in a day.
A nationalized company is not the same thing as a cooperative,
I never said that it was.
it's the same thing as a capitalist firm with the state taking over the capitalist's position. In other words, a nationalized company can be worse than a privately owned capitalist firm.
I know.
Only exceptionally should one choose to nationalize a firm.
Yes, and it happens more than it should -- see "lemon socialism".
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Re: Why The World Economy Is Doomed?

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Enki wrote:Nationalizing banks is silly. We used to have a Postal bank which provided banking services for those without them. We could reinstitute that, revitalize the post office and everyone would have a branch nearby where they live. You don't need to nationalize a bank, just create an alternative.
The largest bank on the planet in terms of personal savings is Japan Postal Savings:
Japan Post ran the world's largest postal savings system and was often said to be the largest holder of personal savings in the world: with ¥224 trillion ($2.1 trillion) of household assets in its yū-cho savings accounts and ¥126 trillion ($1.2 trillion) of household assets in its kampo life insurance services, its holdings account for 25 percent of household assets in Japan. Japan Post also held about ¥140 trillion (one fifth) of the Japanese national debt in the form of government bonds.
The last sentence is notable with regards to the previous argument. Politicians and bureaucrats have been able to dip into the funds to help out politically well-connected companies and other organizations issuing IOUs a.k.a. govt bonds in return. Only a severe financial crisis may reveal the true extent of the dipping.
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Enki
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Joined: Thu Dec 22, 2011 6:04 pm

Re: Why The World Economy Is Doomed?

Post by Enki »

Typhoon wrote:
Enki wrote:Nationalizing banks is silly. We used to have a Postal bank which provided banking services for those without them. We could reinstitute that, revitalize the post office and everyone would have a branch nearby where they live. You don't need to nationalize a bank, just create an alternative.
The largest bank on the planet in terms of personal savings is Japan Postal Savings:
Japan Post ran the world's largest postal savings system and was often said to be the largest holder of personal savings in the world: with ¥224 trillion ($2.1 trillion) of household assets in its yū-cho savings accounts and ¥126 trillion ($1.2 trillion) of household assets in its kampo life insurance services, its holdings account for 25 percent of household assets in Japan. Japan Post also held about ¥140 trillion (one fifth) of the Japanese national debt in the form of government bonds.
The last sentence is notable with regards to the previous argument. Politicians and bureaucrats have been able to dip into the funds to help out politically well-connected companies and other organizations issuing IOUs a.k.a. govt bonds in return. Only a severe financial crisis may reveal the true extent of the dipping.
Do they dip into the principal? Is it give-aways or is it loans?
Men often oppose a thing merely because they have had no agency in planning it, or because it may have been planned by those whom they dislike.
-Alexander Hamilton
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