Monday, February 27, 2017

Virtue-Signaling the Decline of the Empire

Virtue-signaling doesn't signal virtue--it signals decline and collapse.
There are many reasons why Imperial Rome declined, but two primary causes that get relatively little attention are moral decay and soaring wealth inequality. The two are of course intimately connected: once the morals of the ruling Elites degrade, the status quo seeks to mask its self-serving rot behind high-minded "virtue-signaling" appeals to past glories and cost-free idealism.
Virtue signaling is defined as "the conspicuous expression of moral values by an individual done primarily with the intent of enhancing that person's standing within a social group," "the practice of publicly expressing opinions or sentiments intended to demonstrate one's good character or the moral correctness of one's position on a particular issue" and "Saying you love or hate something to show off what a virtuous person you are, instead of actually trying to fix the problem." Yes, yes and yes.
"Virtue-signaling" expresses two other key characteristics of an empire in terminal decline: complacency and intellectual sclerosis.
Michael Grant described these manifestations of decline in his excellent account The Fall of the Roman Empire, a short book I have been recommending since 2009:
There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. (The Status Quo) attitude is a complacent acceptance of things as they are, without a single new idea.
This acceptance was accompanied by greatly excessive optimism about the present and future. Even when the end was only sixty years away, and the Empire was already crumbling fast, Rutilius continued to address the spirit of Rome with the same supreme assurance.
This blind adherence to the ideas of the past ranks high among the principal causes of the downfall of Rome. If you were sufficiently lulled by these traditional fictions, there was no call to take any practical first-aid measures at all.
What are those "resisting Trump" proposing as solutions to the profound structural ills afflicting the empire? Gender-neutral bathrooms? A continuation of a dysfunctional immigration policy? Blaming Russia to mask the catastrophic failure of the past 25 years of neocon imperial over-reach? Cost-free "virtue-signaling" proclamations in support of diversity? "Safe places" on college campuses paid for by student loans crushing a vast indentured class of debt-serfs?
These status quo policies and cost-free diversions are the acme of a profound complacency and intellectual sclerosis that serve to defend a self-serving, morally corrupt political and financial elite.
Virtue-signaling pronouncements lack any recognition of the moral, political, social and financial crises facing the American empire, and are devoid of any practical, politically/financially painful first-aid measures to staunch the decline.
Glenn Stehle, commenting on 9/16/15 on a thread in the excellent website peakoilbarrel.com (operated by the estimable Ron Patterson) made a number of excellent points that I am taking the liberty of excerpting: (with thanks to correspondent Paul S.)
The set of values developed by the early Romans called mos maiorum, Peter Turchin explains in War and Peace and War: The Rise and Fall of Empires, was gradually replaced by one of personal greed and pursuit of self-interest.
“Probably the most important value was virtus (virtue), which derived from the word vir (man) and embodied all the qualities of a true man as a member of society,” explains Turchin.
“Virtus included the ability to distinguish between good and evil and to act in ways that promoted good, and especially the common good. Unlike Greeks, Romans did not stress individual prowess, as exhibited by Homeric heroes or Olympic champions. The ideal of hero was one whose courage, wisdom, and self-sacrifice saved his country in time of peril,” Turchin adds.
And as Turchin goes on to explain:
"Unlike the selfish elites of the later periods, the aristocracy of the early Republic did not spare its blood or treasure in the service of the common interest. When 50,000 Romans, a staggering one fifth of Rome’s total manpower, perished in the battle of Cannae, as mentioned previously, the senate lost almost one third of its membership. This suggests that the senatorial aristocracy was more likely to be killed in wars than the average citizen….
The wealthy classes were also the first to volunteer extra taxes when they were needed… A graduated scale was used in which the senators paid the most, followed by the knights, and then other citizens. In addition, officers and centurions (but not common soldiers!) served without pay, saving the state 20 percent of the legion’s payroll….
The richest 1 percent of the Romans during the early Republic was only 10 to 20 times as wealthy as an average Roman citizen."
Now compare that to the situation in Late Antiquity when
"an average Roman noble of senatorial class had property valued in the neighborhood of 20,000 Roman pounds of gold. There was no “middle class” comparable to the small landholders of the third century B.C.; the huge majority of the population was made up of landless peasants working land that belonged to nobles. These peasants had hardly any property at all, but if we estimate it (very generously) at one tenth of a pound of gold, the wealth differential would be 200,000! Inequality grew both as a result of the rich getting richer (late imperial senators were 100 times wealthier than their Republican predecessors) and those of the middling wealth becoming poor."
Do you see any similarities with the present-day realities depicted in these charts? A self-serving class of Technocrats and bureaucratic Nomenklatura have garnered all the gains, while the bottom 90% have lost ground in wages, wealth and financial security.
This Technocrat/Nomenklatura class controls both private and public powers(media, finance, trade, industry, governance and institutions) which serve its own interests.
What we have now is a self-serving "virtue-signaling" technocrat class that works for a self-serving political/financial elite that avoids the imperial burdens of military service and taxes while imposing what amounts to an economic military conscription on the working class. This Imperial elite sends these military conscripts around the globe to defend their Imperial interests.
Virtue-signaling doesn't signal virtue--it signals decline and collapse. Just as in 5th century Rome--an empire careening toward collapse--those reaping the gains are complacently confident in their moral superiority while their hubris-soaked intellectual sclerosis blinds them to the systemic banquet of consequences that will soon choke their precious self-serving status quo.


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Sunday, February 26, 2017

Those Systems That Aren't Busy Being Born Are Busy Dying

What we have is a bunch of sclerotic, dying institutions and systems resisting anything and everything that threatens to disrupt the status quo.
One way to understand the rising sense of disintegration and discord around the globe is to realize that those systems that aren't busy being born are busy dying--and virtually none of our primary systems are busy being born.
The line is from Bob Dylan's song It’s Alright, Ma (I’m Only Bleeding): "he not busy being born is busy dying."
What does busy being born mean? For both individuals and systems, it means adapting by advancing understanding, flexibility and capabilities.
Systems that are dying are rigid, mal-adapted, resistant to change, obsessed with obscuring their failure and retaining their grip on cronyist privilege and power. Big Pharma: dying. Banking: dying. Governance, a.k.a. political processes: dying. Enforced consensus: dying.
Those slices of the economy that are exposed to competition and innovation have a choice: adapt or die. Everything that is protected by monopoly--private-sector cartels, government, government-managed sectors such as Big Ag, Big Pharma, Military-Industrial Complex, Higher Education and the entire intelligence agency alphabet soup--are focused on maintaining their grip on power.
"Adaptation" for those systems busy dying has been reduced to limiting transparency, PR campaigns aimed at diverting attention from their rackets, devoting resources to protecting their cronyist skims, desperately clinging to the status quo and fighting off innovation that threatens to disrupt their rackets.
What we have is a bunch of sclerotic, dying institutions and systems resisting anything and everything that threatens to disrupt the status quo, and a much smaller, agile ecosystem that is busy being born: crypto-currencies, peer-to-peer networks, automation, software that's eating the world, decentralized governance processes, localized production and more.
Here's what happens when the mode of production is dominated by static, self-serving cartels, monopolies and bureaucracies: productivity tanks as adaptation and innovation are limited to narrow bands that exclude the central institutions of governance and the economy.
And here's how a dying status quo maintains the illusion of legitimacy and solvency: it borrows and blows trillions of dollars to prop up its dying institutions and systems.



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Thursday, February 23, 2017

How Do We Design a DeGrowth Economy?

The conventional objections to DeGrowth boil down to: it isn't the status quo, so it can't work. Actually, it's the status quo that isn't working.
I've written about DeGrowth for many years, including Degrowth, Anti-Consumerism and Peak Consumption (May 9, 2013), Degrowth Solutions: Half-Farmer, Half-X (July 19, 2014) and And the Next Big Thing Is ... Degrowth? (April 7, 2014)
These are the basic concepts of Degrowth:
1. Consumerism is psychological/ spiritual junk food (French: malbouffe) that actively reduces well-being (bien-etre) rather than increases it.
2. Better rather than more: well-being is increased by everything that cannot be commoditized by a market economy or financialized by a cartel-state financial machine-- friendship, family, community, self-cultivation. The goal of economic and social growth should be better, not more. On a national scale, the cancerous-growth measured by gross domestic product (GDP) should be replaced with gross domestic happiness/ gross national happiness (GNH).
3. A recognition that resources are not infinite, despite claims to the contrary. For one example of many: China Is Plundering the Planet's Seas (The Atlantic). Indeed, all the evidence suggests that access to cheap energy only speeds up the depletion and despoliation of every other resource.
4. The unsustainability of consumerist "growth" that's dependent on resource depletion funded by financialization (i.e. the endless expansion of credit and phantom collateral). (This is covered in greater depth in my short book Why Our Status Quo Failed and Is Beyond Reform.)
5. The diminishing returns on private consumption and "bridges to nowhere" (crony-capitalist public consumption).
6. The failure of neoliberal capitalism and communism alike in their pursuit of growth at any cost.
Degrowth is heresy in what John Michael Greer calls the religion of progress (i.e. growth). The faith that growth equals progress is akin to the Cargo Cult of Keynesianism, the notion that expanding debt exponentially to drive diminishing returns of growth is not only necessary but a moral imperative.
Both the religion of growth and its Cargo Cult are narratives used to justify the expansion of global finance via financialization. Expanding capital, profits and power is the key driver, and the religion of growth is merely the public-relations narrative that mesmerizes the debt-serfs, political toadies and media sycophants.
Does this look like a world with plenty of room for everything to expand?
Does this look like a world ripe for limitless expansion of debt to fuel limitless growth of consumption?
This leads to a fundamental question: how do we design a system that enables us to do more with less of everythingHow do we design a system that incentivizes doing more with less rather than squandering resources via optimizing human greed?
A DeGrowth economy must fulfill two requirements:
1. The DeGrowth economy must provide paid-work livelihoods and opportunities for everyone who wants them.
2. The DeGrowth economy must institutionalize a decentralized, democratic, self-organizing process to allocate human, social, resource and financial capital as an alternative to centralized states/banks and profit-maximizing corporations.
These arise from three key insights:
2. Not everything that is valuable is profitable, and so maximizing profit is not the sole arbiter of "value," nor is it a sound process for allocating labor and capital for everything that has value but isn't profitable.
3. Centralization undermines democracy and generates privilege, inequality, insecurity, conflict and waste by its very nature. (I discuss this further in my short book Inequality and the Collapse of Privilege.)
DeGrowth requires two intertwined systems: a decentralized, localized, globally connected network of self-organizing productive "tribes" whose labor generates a global labor-backed crypto-currency.
DeGrowth is coming whether we like it or not or plan for it or not. Our choice is to blind ourselves to the implosion of the "growth" status quo and squander the opportunity to create an economic system that thrives in DeGrowth, or accept the end-game of financialized "growth" and embrace the technological tools that enable decentralized, localized, globally connected networks funded by a labor-backed crypto-currency.
The conventional objections to DeGrowth boil down to: it isn't the status quo, so it can't possibly work. Actually, it's the status quo that isn't working, and DeGrowth is the result of that simple yet profound reality.
For more on these topics:
A Radically Beneficial World: Automation, Technology and Creating Jobs for All (free 35-page excerpt)


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Wednesday, February 22, 2017

The Problem with Gold-Backed Currencies

Any currency is only truly "backed by gold" if it is convertible to gold.
There is something intuitively appealing about the idea of a gold-backed currency --money backed by the tangible value of gold, i.e. "the gold standard."
Instead of intrinsically worthless paper money (fiat currency), gold-backed money would have real, enduring value--it would be "hard currency", i.e. sound money, because it would be convertible to gold itself.
Many proponents of sound money identify President Nixon's ending of the U.S. dollar's gold standard in 1971 as the cause of the nation's financial decline. If our currency was still convertible to gold, the thinking goes, the system would never have allowed the vast pile of debt to accumulate.
The problem with this line of thinking is that it is disconnected from the real-world mechanisms of capital flows and the way money is created in our financial system.
This article explains why Nixon took the USD off the gold standard: since the U.S. was running trade deficits, all of America's gold would have been transferred to the exporting nations. America's gold reserves would have disappeared, leaving nothing to back the dollar. The U.S. Empire Would Have Collapsed Decades Ago If It Didn’t Abandon The Gold Standard.
The problem to sound-money proponents is trade deficits: if the U.S. only had trade surpluses, then the gold would not drain away.
But Triffin's Paradox explains why this doesn't work for a reserve currency: a reserve currency has two distinct sets of users: domestic users and global users. Each has different needs, so there is a built-in conflict between the two sets of users.
Global users of the USD need enormous quantities of dollars to use as reserves, to pay debts denominated in USD and to facilitate international trade.
The only way the issuing nation can provide enough currency to meet this global demand is to run large, permanent trade deficits--in effect, "exporting" dollars in exchange for goods and services.
This is the paradox: to maintain the "exorbitant privilege" of a reserve currency, a nation must "export" its currency in size; a nation that runs trade surpluses cannot supply the world with enough of its currency to act as a reserve currency.
And any nation running large trade deficits will soon empty its gold reserves as international holders of the currency choose to convert their currency into gold, which is exactly what happened in the late 1960s in the U.S.
OK, so a nation can't back a reserve currency with gold. How about backing a non-reserve currency with gold? There are still problems with backing currencies with gold.
Number 1 is convertibility--without it, you don't have a gold standard, you have an illusion of a gold standard. If the gold-backed currency isn't convertible to gold, it's simply another form of fiat currency.
An example illustrates why. Let's take the fictional nation of Slobovia, which has accumulated $10 billion of gold to back its currency, the quatloo.
To protect its reserves from being drained away, the quatloo isn't convertible to gold; the Slobovian central bank simply declares the currency is "backed" by gold.
But consider what this entails. The price of gold globally is set by the market (setting aside manipulation by major players), not by the central bank of Slobovia. This means the value measured in gold of the quatloo is fluctuating as the value of gold fluctuates.
If the global value of gold plummets, so does the purchasing power of the quatloo. This peg to the price of gold becomes consequential if the quatloo loses purchasing power.
Problem 2: what happens to the purchasing power of the quatloo when the central bank issues more currency? If the central bank issues an additional $10 billion in currency, if it doesn't add $10 billion in gold reserves, the purchasing power of the quatloo measured in gold declines by 50%.
So the quatloo is supposedly "backed" by gold, but its purchasing power can drop in half as the central bank issues more fiat currency? Then what value is the supposed "backed by gold" claim?
Problem 3: consider the case of well-connected investor Mr. PM. Mr. PM has friends in high places in the government and banking sector, and so he borrows $100 million to buy choice parcels of land that have government-approved development rights.
He develops the parcels with the $100 million, and some years later sells the properties for $1.1 billion to other investors. He pays off his $100 million loan and pockets $1 billion in cash.
Note that the bank created the $100 million out of thin air when it originated the loan to Mr. PM. Did the Slobovian central bank acquire an additional $100 million in gold to back this new money? No--because in a fractional reserve banking system, this new money is lent into existence for the term of the loan, and disappears when the loan is paid off.
You see the problem: the $100 million Mr. PM borrowed to develop the land has been paid back, i.e. gone to money Heaven, but the $1 billion in cash he now has is "real money." It's as real as if he saved $100 million a year for a decade or extracted $100 million in profits from a mine for 10 years.
This expansion of quatloos wasn't the result of the central bank issuing more quatloos, or the central bank buying more gold reserves: it was created by the fractional reserve banking system.
Mr. PM transfers his $1 billion in quatloos overseas. If the quatloo is convertible to gold, Mr. PM demands the central bank of Slobovia trade his $1 billion in quatloos for $1 billion in gold. 10% of Slobovia's gold reserves are transferred to Mr. PM, and the outstanding pool of quatloos instantly loses 10% of its value measured in gold.
If the quatloo isn't convertible to gold, the existing pool of quatloos still loses 10% of its value because the pool of outstanding quatloos just expanded by 10%.
It doesn't matter if the $1 billion in quatloos was borrowed into existence or issued by the central bank: it still dilutes the purchasing power of all quatloos by 10% unless the central bank adds $1 billion gold reserves to "back" the new money.
The way out of this is to revalue the quatloo's value measured in gold. l Let's say Slobovia initially issues its currency, the quatloo, at 100 to an ounce of gold. If gold is $1200/ounce, each quatloo is worth $12. So far so good.
But then the government encounters a spot of fiscal bother, and the central bank announces, without warning, that the exchange rate is now 1000 quatloos to an ounce of gold. Oops. Now the "gold-backed" quatloo is worth only $1.20. Holders of the "gold-backed" quatloo just took a 90% haircut on the purchasing power of their "gold-backed" currency.
So either a currency is convertible into gold, or it isn't gold backed. If the conversion rate is set by the government, then it's subject to sudden revaluations, just like any other fiat currency.
If the issuing nation maintains a fractional reserve banking system, then the quatloo is constantly devalued by the issuance of new quatloos in excess of the gold the central bank adds to its reserves.
When people talk about China backing its currency the yuan with gold, what does that mean given that China has issued $30 trillion in new credit-money in the past decade?
It doesn't matter that the money is "borrowed into being"; as the example of Mr. PM illustrates, the money created is as real as money that was earned or saved or mined; the money created in China's vast credit bubble is real enough to buy homes in North America for those lucky few who can get their yuan converted into dollars.
In a true gold-backed currency, every new $1 in currency must be backed by the addition of $1 of gold to reserves. If the gold supply remains constant but the supply of currency constantly expands, the value measured in gold of the outstanding currency declines accordingly.
Any currency is only truly "backed by gold" if it is convertible to gold. Why hold a "gold-backed" currency that can be diluted 10-fold overnight by the issuing government/bank?
Any nation issuing a gold-backed currency can't control the global price of gold, and so that nation's currency is hostage to fluctuations beyond its control. If the issuing nation sets a peg to gold, that peg is subject to the whims of the central bank and state--in other words, the peg is simply another flavor of fiat currency.
Simply put, there is no way to back a reserve currency or a fractional reserve banking system with gold. It's easy to say that a world with very little credit would be a good world, but it would be a world with limited debt-based consumption, i.e. a world with little "growth." And without "growth," the system implodes.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
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