First posted on the original Lobby Group blog by contributor Oldnick666-
This post is for the discussion of fundamentals.
I am convinced that many people are either bewildered or misled by much of the financial discussion.
Sometimes I think I am thick and cannot understand the world of finance. At other times I wonder why everyone else is so thick. Maybe I am the little boy who wondered about the Emperor’s New Clothes.
I will kick off with:-
1. Shelter. For many this is easy. They buy a house while they are working and with a little luck this will provide shelter in their retirement.
2. Breakfast. I eat bacon and egg for my breakfast. How can I save bacon and egg for my retirement? Unfortunately they are rather perishable. Fortunately someone has devised these abstract tokens called money. While working I am given these tokens in exchange for my work. Now I can store some of these either in the mattress or, heaven forfend, in a bank. While working I could have used these tokens to buy bacon and eggs from those people accustomed to producing then in exchange for tokens.
Years later in my retirement I hope to purchase my bacon and eggs from these producers. So I go along to the producers with a handful of tokens and say:-
“May I have some bacon and eggs?”
“No. ” they say “We have retired.”
I say, “Can I give you ten times as many tokens as I used to in exchange for bacon and eggs?”.
“No” they say “We do not produce them now as we are retired”.
So then I say “Have your children taken over the production of bacon and eggs?”
“No, we only had one child and he was very good at sums so he went to the City and would be only too glad to help you invest your tokens so they increase in number.”
What do I conclude from this?
Saving money for retirement is not very useful unless a number of conditions are satisfied:-
1. A willing productive workforce must be maintained.
2. We must have convinced the workforce that our money is still useful to them so they will produce enough bacon and eggs for us as well as themselves.
3. We need to have enough productive children.
4. We need to train children to produce things that are useful to us.
5. We should not lend our tokens to people who are going to gamble with them. We may not get them back when we want bacon and egg.
With a little thought I am sure you can extrapolate to the real world sufficiently to see the fundamental instability of our current money system.
Contact your local elected officials - for free
by John Bray
06 Feb 2009 at 00:31
Nick,
I live in a very rural area of southern Spain (see also the earlier post “the pain in Spain”). Your conditions are pretty much satisfied around here – and a couple of generations ago they were almost much entirely so. Back then – and I’m only talking about 50 years or so – just about every family depended on feeding themselves. They grew their potatoes, peppers, garlic etc. They had olive oil for cooking and almonds to make a kind bread in the cold winter months. They kept chickens, probably a pig, a sheep or a goat (even in a village house). They had wheat to make their bread and grapes to make their wine. There were no shops but breakfast could never be an issue – even in old age.
The area had survived like this for thousands of years – admittedly not in great prosperity. Then the young went off to the cities in search of more tokens. We seem to be undoing in decades what took centuries to develop.
by Spin Doctor
06 Feb 2009 at 05:13
I think there is a serious point for countries like Britain which is the demographics are changing quite significantly. The problem being that the ageing population will be the majority and the younger working population will lessen. Clearly this has quite serious implications for pensions, productivity and generally the workforce. A serious issue that needs to be addressed. I was quite surprised to learn a few days ago of a proposal by an organisation with environmental credentials which is backing the idea that we all need to restrict ourselves to 2 children to save the planet. Quite scary that this sort of proposal can even see the light of day – maybe a precursor to the state trying to take away the last bits of free choice people have?
by bobajob
06 Feb 2009 at 07:21
I think that maybe the two world wars we had in the last century eclipsed quite a high proportion of the cream of our youth. We never had their children and in turn, their grandchildren who could have helped create the needed children of today. Today we have another influence – due to our increased awareness regarding eating healthily and exercise, and advances in medicine, we are tending to live longer. The recent smoking reduction will also add to that trend. There is probably more that can be done here.
I feel that to be able to live longer is a positive for society. Some older people say they are now able to understand much more about many subjects and are able to express more enlightened opinions than when they were young. Concepts they found difficult in youth are now much easier to learn.
Due to the internet, knowledge is now much easier to access. The world is ceasing to be so much of an unknown. This will maybe allow us to spend more time looking into the philosophical issues that we will be forced to address. We can already forsee some limits to the way we live now looming on the horizon. We may need to challenge some of our habits that are starting to look as if they are unsustainable.
Do we now need to look for changed human values and relationships with our planet and its peoples that will ensure the sustainability of our existence?
by CoralBloom
06 Feb 2009 at 10:04
Spin Doctor,
I think the greenies are trying to point out an obvious fact, in global terms. The planet is over populated. Our country has an imbalance and the burdens will be heavy in years to come. What they really are saying is that we don’t need a massive family to deal with this. There are 9 million people living in Rwanda – a country the size of Wales. We keep saying we have no more room for immigrants. The whole of Rwanda is like Oxford street at Christmas. The solution is obvious. It may be a political time-bomb and not easy to stomach for many but they are trying to look at a bigger picture. Regardless of the economic disasters, this world is going to change whether we like it or not.
The Rwandans are making a real go at brith control without resorting to laws. But that is another story for another day.
by John Bray
06 Feb 2009 at 10:45
On the BBC blogs I appears a “vegetable_grower” which some people interpreted as vegetarian and (by inference) a tree-hugger. I can assure you all that I am neither
)
I don’t believe in global warming and think it’s arrogance to believe that humans can seriously affect the Earth. It was here before we showed up and it will be here long after we’ve gone. A lot of the “green” industry seems to be a job-creation scheme. And now that global-warming is in doubt they’ve now re-branded as “climate-change” experts.
But it does seem to me that humans are using up what humans need faster than the earth can create it: oil, gas, silicon, uranium, bauxite (for aluminium), coal, iron ore, topsoil (to name but a few things). Most of this has happened in the last century or so. Millions of years to make the stuff and squandered in a century. Most of it is now in landfill or scattered around/dispersed back into the atmosphere. They can print/borrow money as much as they like but it won’t help.
by Spin Doctor
06 Feb 2009 at 10:47
CoralBloom,
I understand what they are saying. I reject the thesis entirely on the basis of personal freedoms especially on something so basic as choosing the size of your family.
How is this going to be done – education or if the situation becomes grave enough through economic sanctions on anyone who has more than 2 children or is the eventual path going to be forcible sterilisation after 2 children? While they are at it why dont the environmental lobby suggest that all people over a certain age be euthanased in the greater interests of the world. I am dragging the argument to an extreme – but it is an extreme that is eventually possible . This sort of proposal really is the thin end of the wedge where the state takes over every aspect of peoples lives.
The Population density of Rwanda is 345 roughly about 100 more than Britain. I would argue that while population is clearly a problem the bigger problems for Rwanda have been civil war and ethnic tensions. See the link if you are interested in exact figures.
http://en.wikipedia.org/wiki/List_of_countries_by_population_density
I think it is interesting that ever since Malthus we have seen predictions of impending doom owing to the population crisis. They have always turned out to be false alarms due to various reasons – cultural shifts (Malthus thought that as people got richer they would have more children – the reverse was he case) and of course technology has meant that productivity gains etc always help.
Don’t get me wrong – I am not for one minute saying that we have no problem whatsoever with regards to population – we do and education is the best way forward. The real issue is the scarcity of resources and we need to be more aware of that – in developed nations we consume so much that is surplus to our needs – a lot of what we consume could be termed merely luxury goods. Being more careful in how and what we consume is a step that we must take before thinking about telling people what size their families should be.
Would be interesting to further this debate when the forum is up and running and get more views.
BTW I say this as a person who has no children and has made the decision to not have any.
by asymetric
06 Feb 2009 at 11:49
Referring back to OldNicks’ Theory of Breakfasts, as children look for jobs after leaving school or higher education they are looking for money and lifestyle (which the money can buy). Why are we knee deep in would be film makers? – because of the media. It’s not ‘cool’ to be an engineer, farmer etc. My father, who was a skilled manual worker also taught English literature in evening classes at his local college as well as nurturing apprentices in his daytime job. He noticed and commented on the lack of enthusiasm for knowledge as an end in itself and the decline in quality of the work produced. His own attitude was that he wasn’t producing top quality for his employer – it was for himself.
How do we make those jobs and ‘industries’ (as a general term – not specific to manufacturing) interesting and appealing to young people when they are not seen as ‘cool’? Major employers will pay big money for salesmen but designers, production engineers? – two-a-penny – we’ll manufacture abroad!
I don’t know the answer but we won’t get it right via large companies.
by CoralBloom
06 Feb 2009 at 13:23
John
TH planet has always changed in terms of environment and always will. No matter what we do. The global warming issue isn’t about whether it is happening or not. That has been pretty much accepted by the scientific community as fact for rather a long time. The important point we need to understand is the rate of change and how we are, as a species, as a global collection of economies, going to survive as best we can and avoid the wars that just may well result. Wars do have a tendency to be about resources; land, food. The masses of homeless that will result, the surviors will have to go somewhere as the deserts expand and the seas rise.
Spin Doctor
What those numbers don’t demonstrate is the reality of a small country full of people scratching for a living on the land. Everywhere, there are farms and people. Go and have a look. I have. I’ve spent quite a lot of time learning as much as I can about the Genocide causes and impacts. No one is suggesting the Chinese method of controlling population growth. So let’s not wander off topic.
Aren’t we here to try and focus on fixing the mess of this economy. Of finding a more honest way of running the economy and this country.
We need to find a better way of listening to the scientific researchers, particularly those who do not belong to multi-nationals, by listening, looking at the evidence and taking it from there.
So lets not go off topic before we are focussed of the lobby group and the alternative G20 meeting in April.
by CoralBloom
06 Feb 2009 at 13:41
asymetric
I get grumpy at the state of education too. Good rant, and I hope you at least feel a little better. I’m not much of a conspiracy theory person but I do wonder at how convenient it is to be lazy about education. As a teenager I remember hearing a politically active student saying there would never be a revolution in this country – people were too busy watching Coronation Street to even notice let alone join in.
I don’t know the answer to the point you raised about enjoybale jobs. I do remember reading about the Clydebank ship builders before the war and from conversations with various people about their parents and grandparents, it seemed to fit with my reading.
Long before I was born, it seemed the communities who supplied the workforce to the shipbuilders didn’t look to their work for enjoyment. What they did was look outside of work. There were amateur theatre groups, orchetras, writers, a lot of night school,all sorts of community activites. One guy I heard off taught himself ancient Greek as a result of his interest in ancient history. This guy was living in the slums and had a penpal – on Oxford Classics Professor who encouraged him with his learning.
I worked in a factory a long time ago – my first job after leaving school. That venture lasted 7 months until redundancy came and bit me! That was min-numbing. No one went there looking for pleasure, they went there to make money to pay the bills and feed their kids. Whatever the answer is, there is a huge problem in this country with our attitude towards learning and doing well at school. It seems to be perfectly acceptable to know all about the world of celebrities and not a lot else even among graduates these days.
Maybe we expect too much from work now? I don’t know. I certainly expect so much more from graduates and their limited interests and curiosity.
by John Bray
06 Feb 2009 at 13:45
Coral,
Apologies, my comments were meant merely as background and it wasn’t a subject I wanted to wander off onto. Nevertheless, I really could not let the following go unchallenged:
“The global warming issue isn’t about whether it is happening or not. That has been pretty much accepted by the scientific community as fact for rather a long time.”
I thought you started off as a scientist. Surely the scientific community should not accept ANYTHING as a fact? A more accurate statement might be “some (influential) scientists believe that global warming is happening.”
In any case, it is irrelevant to this discussion so maybe we should leave it until another day
)
BTW: don’t forget that, as an author, you can start your own topics is you want.
by OldNick666
07 Feb 2009 at 02:51
As the comments illustrate, my little story highlights an number of problems in society which need discussion and thought. However I would like to expound further on the particular problem that motivated me to write it.
A very large proportion of the monetary wealth of this country is stored in pension funds. We have all been brainwashed into thinking that we should save for our retirement. In most cases we are forced into this saving by statute or employment contract.
Whereas for an individual who has managed to save more tokens than another and thus outbid others for the now rare bacon and eggs, this saving is good thing. However we should, if we believe in any sort of fairness, consider the person who has not managed to save enough tokens or who has run out of them by the effects of inflation and longer than expected retirement.
It would therefore seem that, when viewed on a society wide basis, what is good for an individual is not good for society as a whole. In our reconstructed world we do really need to address this problem as the present system is fundamentally flawed.
The fact that the majority of our wealth is stored on the basis of a false premise is to me very worrying. Do others find it as scary as I do?
I do see an obvious solution. I hope that this group may produce some constructive ideas
by Spin Doctor
07 Feb 2009 at 04:15
CoralBloom,
I have to take issue with your comment that my discussion was somehow off topic. My initial commment was about a green think tank that had made comments about the number of children people should have.
I am not sure exactly what the point you are trying to make is.
by CoralBloom
07 Feb 2009 at 12:25
SpinDoctor
OldNick666 started this post off as a discussion of the fundamentals of why we have a financial system and the purpose of it. You brought up a green think thank, populatation control and liberty issues.
Feel free to create a post of the topics you believe or want to propose as part of this lobbygroup. Just think it would be more polite to do so and leave OldNick666 and the others to develop his topic here.
by OldNick666
07 Feb 2009 at 14:14
Yep. I can see why we need a tree structure. My original post introduced too many ideas so we need to be able to branch a topic. I will leave this tree structure to other people to sort out. I just hope that existing non-administrative posts can be moved into the new system.
by asymetric
09 Feb 2009 at 05:37
The basis of the financial system is the concept of asset value. However, any value of an asset is based merely upon supply and demand. However, due to the fact that there are industries devoted to manipulating that demand (advertising, shorting – you name it) we have an ever increasing gap between “need” and “want”.
The “want” is supply lead – i.e. we can provide it so you must “need” it so we can sell it to you.
The current plan to drop interest rates so you must spend what’s left of your ‘tokens’ on something which is of no importance to you so we can keep the shareholders happy is just one of the grotesque results of this shambles.
by OldNick666
09 Feb 2009 at 09:19
asymetric
You have touched on a very important point. Years ago we were promised a utopia resulting from computers and automation providing our needs thus allowing much greater leisure. What went wrong?
The answer to my mind is quite simple. No-one could work out how to distribute the work and leisure fairly.
Instead, as the real need for work diminished, new work was invented so as to keep people working. Maybe the work ethic dictated the need for work. Maybe it was some form of puritanism. Maybe the only way to give out money was in reward for work even for non-job jobs. We can all look around and see plenty of these jobs starting with Quangos. The proper distribution of money in the face of diminishing real work is a subject in itself. Maybe this should be discussed as a new topic.
by John Bray
09 Feb 2009 at 10:37
Nick,
>Instead, as the real need for work diminished, new work was invented
This is not a recent development – the court jester being one of the earliest examples. As communities became more efficient (above subsistence levels) they had spare resources and so not everyone had to contribute to the essentials of life.
Over the years it's got completely out of hand and now the jesters are in the majority.
by CoralBloom
09 Feb 2009 at 11:57
Some thoughts.
I have many tokens and want wheat.
You have no tokens and much wheat.
The wheat in the city is worth 2 tokens.
I know you have no means of taking your wheat to the city.
I buy your wheat for 1 token and sell it on for two tokens.
Now I have 6 tokens.
Soon, I have many tokens.
Your son, says I want to have have many tokens and be powerful like to wheat buyer. Not less powerful like father.
I am good at dancing.
I convince the wheat dealer to learn to dance (he has much spare time, not having to farm the fields) for two tokens.
The dancer has provided a service. He has helped the powerful give away some of his tokens.
1. Tokens are become a means to power.
2. The service industry is born.
3. Envy is rewarded.
by OldNick666
09 Feb 2009 at 13:58
CoralBloom
Questions on “Some thoughts”
The wheat buyer does two sorts of work. Firstly by transporting the wheat and secondly by selling it. He takes risks in hoping someone will buy the wheat just as the farmer takes the risk that the weather will be good enough for the seed he has planted to grow. I see this as a co-destiny partnership. All else being equal both should become equally rich. How does one become more powerful than the other?
Both are poor without the other. As each are dependant on the other they are in a position to realise that they must agree on a reasonable token exchange.
You have put me on one of my hobby horses. The need for a cooperative rather than an adversarial approach to the negotiation of contracts – the aim for win/win rather that win/loose.
The dancer seems to prove the “trickle down effect”. Which brings me back to breakfasts. Even the rich only eat one per day – usually.
Where does the envy come from?
by OldNick666
09 Feb 2009 at 14:06
John Bray
Did the court jester have to spend two hours a day travelling and twelve hours working? I’m sure his life was much easier.
Maybe the jesters do not have enough real work to do so they spend all day working out how they might increase their bonuses whereas those doing real work are too busy and thus receive less.
by CoralBloom
09 Feb 2009 at 14:14
Cooperatives were in my thoughts.
Cooperatives work where people belong and are in need. Floods bring people together in the UK. Suddenly people talk to their neighbours. We are so spoiled, most of the time, we have no immediate need for neighbours. At least that is how it looks to me. Is this really true?
The rich man is richer maybe because he came from a more fertile farm to begin with? His father gave him a mule when he became a man and said ‘Go forth and survive on your own’. This farm will not support my eldest son and you.
Is the relationship mutual when the wheat buyer is unique with many farmers in competition.
Seems the Maasai have no envy.
They are pleased that someone has a beautiful necklace. They have no need to copy/steal etc that necklace.
I look at twin babies growing up together. They compete with each other from being very very young.
Does the Maasai community frown on competition and therefore envy?
I’ve no idea.
by CoralBloom
10 Feb 2009 at 17:20
Question
I need some help to understand this.
If I have a company selling fresh orange juice, I am unable to compete and beat a company selling sugary juice with a chemical orange flavour.
Why?
Is this because chemical production is a more reliable process than growing oranges?
Or is it because the fake juice seller has more money to begin with and can therefore purchase more and better marketing?
I’m trying to figure out why our economy is pretty poor at providing the good things in life but much better at providing the second-rate goods.
Any advice?
by OldNick666
11 Feb 2009 at 02:29
CoralBloom
Human frailty is the answer. We are all susceptible to brainwashing. Those that deny it are usually, in my experience, the most susceptible.
I would take you to task on the difference between marketing and advertising. Advertising has become very sophisticated and uses well honed brainwashing techniques. Brainwashing overcomes rationality thus blinding people to the difference between good and second-rate.
Education can play a part in reducing the frailty but I am afraid that the populace has been brainwashed into thinking that training is education. The assumption is that the educated may become disruptive. Much better to train them to conform and pay back their student grants peaceably.
by CoralBloom
11 Feb 2009 at 02:55
Sublime!