Energy

Affordable dense energy powers our complex economy. As that energy exhausts itself, the laws of physics will deal with humans in the same way that it deals with a locust plague.

The new population will reflect the non-dense heat and light energy provided by just the sun.

Deny this unpleasant reality at your peril.

Economics

Affordable dense energy provides. Parasites confiscate the fruits of that energy, at their hosts expense. Today's post is about our parasitic load.

Context

You're born, and then 'they' educate you. You find out fairly early whether you're a plutocrat, a technocrat or a sheep.

School doesn't teach you much about many things that really matter. It's about shaping young plastic minds to serve their interests. It's about culling the revolutionaries. It's about rewarding worshippers.

Once you know what you are - you pretty much know what you believe, what you can aspire to, and whether you're going to be a creditor or a debtor.

Plutocrats don't mix with sheep. That's always been so.

The technocrats have been educated to lead, but privilege and power hardly ever engenders good values. They talk a lot about values, but rarely walk the talk.

They could lead the sheep to a brighter future. But, they invariably choose to feather their own nests at the expense of the sheep.

The plutocrats know that the technocrats own pitchforks. The sheep. Well they're sheep aren't they?

The technocrats are the plutocrats' fixers and enforcers. They have to mix occasionally with the sheep - to keep them stupefied and distracted, and to ensure that the economic surplus keeps flowing upwards to the plutocrats.

A very good living can be had on scraps from the plutocrats' table.

These days, the technocracy includes the accountants, lawyers, economists, bureaucrats, managers et al. They're the technically skilled elite who maintain the theories, laws, practices and policies that facilitate systematised thievery.

It's a corrupt kleptocracy of plutocrats and technocrats feasting on sheep.

The technocrats ensure that the kleptocracy's theft is legal, and that defiance and misdemeanours by sheep are illegal. Of course, if you're a black sheep, the penalties are greater.

The enforcers are a subset that's managed by the technocrats. They're the police, secret service, armed services, prison officers, security guards, nerds… They keep the plutocrats and technocrats free, and the sheep under control, and without hope.

When bullying is required somewhere else, expendable foreign sheep can be used. This provides employment for some black sheep.

Of course, the non-sheep have their own education and health systems to prevent cross-contamination. There are deep moats around the bastions of privilege and power that protect them from competition, accountability and transparency.

The sheep get high quality indoctrination, and low quality everything else.

Nobody endures austerity, and comes back for more, like a sheep.

Nobody dishes out austerity like a neoliberal technocrat.

Lastly, it doesn't matter where humans land in their power hierarchies. They're going to deny unpleasant reality, and they're going to deceive, and be deceived. These traits will bring them down.

Of course, if you're a sheep, it's going to hurt more.

Politics

Our political parties are useless. We, the sheep, invited the wolf in a long time ago.

Now we have a pentecostal parasite with his hands on the levers of power. His tiny mind is controlled by GOD, and backroom puppeteers who live in another land.

Avert your eyes. Bow your heads. Let us pray.

Let us deny that we're in deep shit.

Modern Monetary Theory

An implausible economic theory underpins an ideology called neoliberalism.

Neoliberalism "is generally associated with policies of economic liberalisation, including privatisation, deregulation, globalisation, free trade, austerity and reductions in government spending in order to increase the role of the private sector in the economy and society.¹"

It's working a treat if you're a plutocrat or technocrat.

To this end, privileged academics have been more than happy to sell their souls. Orthodox teaching of economics expounds myths as sound theory. It provides weight to anti-sheep policies. They are enforced by nasty ideologues masquerading as humans.

There's a new party called The New Liberals. It's apparently run by non-politicians. Seems too good to be true. Maybe that's their first lie.

This party is different. It's the first to adopt heterodox economic thought that goes by the name of Modern Monetary Theory (MMT).

MMT describes how modern mixed economies with floating currencies really work. And, that's not how orthodox economists and neoliberal politicians make you believe that an economy works.

MMT has one policy. It's an employment safety net called The Job Guarantee. The principal proponent of MMT in Australia, and creator of The Job Guarantee, is Bill Mitchell.

The New Liberals have secured heterodox economist, Steve Keen to run for the Senate. Keen and Mitchell have differences, but they are mostly on the same page in regard to MMT.

Most voters are sheep. How could SCOMO and Albo be the best on offer if that wasn't the case?

Both parties are neoliberal. Most academic economists are neoliberal. They've fitted the theory to suit the ideology. Shame on them.

Vote New Liberals. They couldn't possibly be worse than what we've got.

Understanding economic systems

Economics is best understood in accounting terms, and in terms of system dynamics. That's for another day but, if you want to know more, read Steve Keen.

Orthodox economists know very little about accounting, and even less about system dynamics.

Sheep know very little about anything. What most economists know is incorrect. That's a close win to the sheep.

It's all about the aggregate spend

In the simplest terms possible, spending causes employment of available labour.

Optimal employment depends on how much is being spent per time period, who is spending, and where it's being directed.

Values

Spending is directed by values.

My values prioritise honesty, transparency, full employment and a healthy biosphere that leaves a place at the table for all life.

But, other values prevail. It's very hard to be a 'good man' if you're a technocrat. Even harder if you're a plutocrat.

Those that talk most about values are too often involved in racketeering.

Asset owners are paranoid about inflation. They're more than happy to throw people out of work in order to manage inflation. There's no empirical evidence that this works, and no reason to punish the unemployed.

They're happy to avoid tax, and to criticise government spending when government doesn't need their taxes in order to spend.

They're happy to destroy our life giving biosphere for profit. They're happy to blame public deficits for ruining their children's lives (a lie), but they don't mind damaging their childrens futures by trashing the planet.

Inflation

In the simplest terms possible, too much spending relative to available resources causes inflation.

It can also be caused by cost push, such as energy price increases denominated in another currency (us dollars).

Currency issuing government is all powerful

In the nation state, government is by far the most powerful institution. It's why some find it necessary to corrupt it for their own ends.

Government has the power to manage the overall spend of all sectors of the economy, and in a democracy, it should do so in accordance with its mandate.

Who spends?

All numbers are made up for illustrative purposes only.

External Sector

The external sector is about trade (exports + net income transfers - imports). It's where currencies are exchanged. Government creates its own currency out of thin air, but it's a user of other currencies.

For the purpose of simplifying instruction, let's assume that forthwith, the external sector has a net spend of zero.

Non-Government Sector

The other non-government spenders are households, businesses, banks, local governments, and state governments.

They use the currency because the Federal government only accepts payment of its taxes in its currency. Take a wheelbarrow of US dollars to the ATO, and you'll be shown the door.

You're working for Australian dollars so you can pay your taxes. It started with someone in the non-government sector working for government and then using some of that money created out of thin air to pay their taxes.

As users of the currency, households, businesses, banks, local governments, and state governments are constrained by their incomes. If they overspend, they have to borrow, sell assets, tighten their belts etc. If they're local or state governments they could, in addition, raise taxes and levies as well as apply for grants from the currency issuing government.

Lastly, banks. Banks do not lend out saver deposits or central bank reserves. Banks create money out of thin air when they lend. It's debit loan (a bank asset), credit borrowers deposit account (that's new money).

When the loan is repaid, it's credit loan, debit borrowers deposit account (that's money destroyed).

When the loan is written off, it's credit loan, debit capital (that's money destroyed).

Banks are required to deposit moneys with their central bank. It's debit reserves (asset), credit cash (asset).

Government could prescribe prudent bank investment and lending, but neoliberal governments do not. As the political representative of asset owners, their main concern is that banks keep lending, and that central banks keep interest rates low.

Banking is a business that maximises profits, and socialises losses when it fails. As such, a bank does almost what it likes to maximise profits. It can't be made to lend.

Bonds are an alternative to risky lending.

Bonds are an alternative to risky investment.

Government Sector

The Federal government is a different beast. It issues its currency. It can spend whatever it likes regardless of its income (tax) or borrowing (bonds). It's spend is constrained by considerations of inflation and its mandate.

One of the many myths is that government has to live within its income (tax) just like say, a household. It doesn't.

A deficit (spending greater than tax since record keeping started) is an accounting balance. It's nothing more. It's not a debt to be repaid, like a bond. It's not a burden on future generations.

A household may end up owing the bank if it doesn't live within its income. A currency issuing government owing itself makes no sense.

Government spending is not funded by tax. It's debit government, credit bank account. It's created out of thin air. Tax heroes can shut up. You're not needed.

When tax is paid, it's immediately destroyed. It's credit government, debit bank account.

Tax has many uses. One is to manage overall expenditure, so that it's directed in accordance with government policies, and to ensure that inflation doesn't get out control.

There's no evidence that tax cuts generate business investment. Businesses generally want to invest when household expenditure is strong creating profitable investment opportunities. It seems that some voters choose the Liberals because they apparently have a better grasp of business and economics. Both parties are economically incompetent and or have suspect values.

Government spending in its own currency is not funded by it borrowing in its own currency from the non-government sector. Why would a currency issuing government that, creates money out of thin air, borrow its own monopoly currency (issue bonds)?

Government=NonGovernment

A government deficit is necessary for the non-government currency users, in aggregate, to save. It's accounting. It's debits and credits.

When a currency issuing government runs a deficit, the non-government sector, in aggregate, saves an equivalent amount.

Conversely, when a currency issuing government runs a surplus, the non-government sector, in aggregate, dis-saves an equivalent amount.

Someone's spending is another's income, and vice versa.

Why would neoliberals want to run a surplus? It means that government taxes are higher than it's spending, that is, income is flowing to the government sector.

However there are circumstances when that might make sense to a neoliberal.

NonGovernment is a Zero Sum Game

If the government surplus for a given time period is $20, then the non-government dis-saving, in aggregate, is $20, assuming the external sector is zero.

Neoliberals, no matter what they say, will favour their own, that is, banks, businesses and like minded local and state governments.

It might look like this.

banks ↑$20, businesses ↑30, favoured governments ↑$10 + households ↓$60 and opposition governments ↓$20 = a dis-saving of ↓$20.

Under neoliberalism, banks, businesses and like minded governments win ↑$60. Households, and governments, not of their persuasion, are left carrying the can ↓$80.

It's always a zero sum game. In our example:

Government surplus (↑$20) = banks, businesses etc (↑$60) - households etc (↓$80) + external sector (↑$0).

Reserves

Banks are privileged institutions with numerous functions. They lend, and they run the payments system. There's no reason why banks run the payments. It's another monopoly inheritance.

Reserves aren't used to make loans. They do not constrain bank lending. When a bank lends (creating an asset), it creates an equivalent deposit (incurring a liability). Deposits create the need for reserves to be deposited with the government (central bank).

Currency issuing governments always provide the banks with sufficient funds at a penalty rate to ensure that the payments system functions.

The penalty rate impacts bank lending rates making it more or less difficult to obtain new loans. Since loan proceeds are spent into the economy, government policy around reserves influences household and business spending in the economy.

Bonds

Bonds have many uses.

Bonds are business welfare. They allow businesses to park money that's not invested. They're a safe haven from imperfect, volatile markets.

In this country, government borrows its deficit spend, promoting the myth that irresponsible government is beholding to the bond holders.

So, like tax, bond issues take money out of circulation, that might otherwise be spent. It's credit government (liability), debit business (asset).

Conversely, when a government buys back issued bonds, it increases liquidity in the business sector promoting investment spending.

Spending

These are the variables that make up the overall spend that determines how much labour and capital items are employed per given time period.

Government sector

Currency issuing government ↓↑ Reserves ↓↑ Bonds ↓↑ Tax ↓↑

NonGovernment sector

Household income, saving ↓↑ Household borrowing ↓↑ Business income, saving ↓↑ Business borrowing ↓↑ Local government income, saving ↓↑ Local government borrowing ↓↑ State government income, saving ↓↑ State government borrowing ↓↑ Bank income, saving ↓↑ External sector ↓↑

Any spending combination is possible for a given time period subject to, in aggregate:

a government deficit being equivalent to non-government saving; a government surplus being equivalent to non-government dis-saving; and the nongovernment sector being a zero sum game.

It's clear which is the most powerful institution. It's the currency issuing government, and the banks it regulates. That's the institution that's in the control of the plutocrats and technocrats.

In a democracy, the sheeps have votes which they allocate between neoliberal parties. That's what sheeps do. Vote for a worse life for themselves.

In Australia, voting is compulsory. It's the only way to get our sheeps to vote.

Regulating Spending

The principal drivers of spending are those entities that have a monopoly over the creation of money. They are:

the currency issuing government; and the lightly regulated banks.

Spending is determined in accordance with the aims of the spenders. To better understand this process, spending could be restated in terms of asset value, asset protection, and productivity.

Asset Value

Bank lending for existing property Bank lending for share buybacks Bank lending for shares Government swapping of bonds for crappy assets Government incentives for property

Asset Protection

Government defence spending

Productivity

Bank lending for plant, equipment etc Bank lending for new ventures Bank lending for new housing Bank lending for household consumption Bank lending for business consumption Government spending on health, welfare, education etc Government spending on new public housing Government lending for education Household consumption Business consumption

Ideology at Work

Neoliberalism is about free markets and small government.

It's code for taking away regulation of markets so the bad guys can control them.

It's code for privatising government monopolies and essential services so the bad guys can increase profits and better control the sheep.

It's code for austerity which increases the misery of sheep in order to reduce taxes, and balance books, that don't need balancing.

It's code for using unemployment to regulate inflation even though there's no empirical evidence that supports this cruel policy stance.

It's code for restricting supply of housing in order to increase prices, and debt.

It's code for placing the sheep in debt to them, for housing, cars, education and dis-saving.

It's clear that the asset owning plutocrats and technocrats have a vested interest in the value and protection of mostly non-productive assets.

They are the parasites. The sheep are the host.

I'll leave it to the reader to work out where the spending is being directed.

Tax Heroes

Listen to the tax heroes sometime.

They're funding wasteful government spending on dole bludgers, welfare cheats et al.

They're funding programs they don't use, like government health and education systems.

The reality is that government spending is not funded by taxes or bonds.

The Real Economy

Money created out of thin air:

is wasted immediately; is wasted later, when asset values collapse; lubricates the economy; and may improve productivity.

Asset values won't be maintained because there's no real productivity to support them.

Increasing the debt burden of households and businesses means that more and more of their declining real incomes are going to servicing debt.

Importantly, their spending in the real economy of goods and services is reducing, and that's seriously impacting employment and investment.

There is now household and business debt that can never be repaid under any circumstances.

There has to be a reset. Debt has to be written off, and bank lending policies and practices changed to prevent it happening again.

Debt Jubilee

Religious edifices are increasingly subject to scrutiny.

One that's relevant at the moment is whether the word 'sin' in the Lord's Prayer is a substitution for 'debt'.

In the preceding Gospel of Matthew, it reads "and forgive us our debts, as we also have forgiven our debtors."

In the Gospel of Luke, it reads "and forgive us our sins, for we ourselves forgive everyone indebted to us."

Certainly, Matthew is referring to the then practice of rulers writing off debts that couldn't be repaid (a debt jubilee).

Energy and Debt

The modern complex economy supporting nearly 8 billion people runs on affordable dense energy.

It has to be dense. It has to be fossil or nuclear. It has to be affordable.

The only useful dense energy is an energy surplus produced after using energy to obtain that surplus. The energy cost of energy keeps increasing, reducing the energy surpluses available to the economy.

We're overdrawing the energy bank, and now the day of reckoning awaits. There just isn't enough affordable dense energy left to support the billions of humans and domestic animals that account for most of the biomass on the planet.

As households and businesses are increasingly trapped in a debt mire, they are less able to afford the increasing price of dense energy.

Producers can't produce below a certain price, and consumers can't buy above a certain price. Current prices are in between, but increasing.

The only action in our control to break this impasse is to write off household and business debt.

That highly improbable action would only defer the economic collapse that awaits us. There's no solution to a lack of affordable dense energy.

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1. A lift from Wikipedia.↩