Tuesday, November 18, 2008

ECONOMICS IS EASY, FINANCE IS COMPLICATED

Economics is always and only about life support. It starts with the pre-existing cosmic or natural materials, energy and processes of the universe and solar system and includes all human life support activities. The ingredients of the human developed part of the economic system are materials, time, labor, energy and know-how. These are relatively easy to come to grips with. It does not take any great smarts or lengthy education to understand the basics. It’s because the economic system has a simplicity about it. There is common sense to it. Placing seeds in the ground, in springtime and keeping them watered is one example. Mixing certain metal ores together and heating them to a specific melting temperature to make steel for car bodies is another.

On the other hand, all financial systems become ridiculously complex. The rules keep changing. They require lots of study and effort. They lead to things like: making money with money; credit scoring; insurance and reinsurance companies; hedge funds; derivatives; stock values and profits going up when people lose their jobs through increased efficiency, but those people lose rather than share in the benefits; and the contamination of the air, land and seas. Financial systems become arbitrary, increasingly dysfunctional and irrational. They produce situations wherein we can build lots of cars and homes for people who need transportation and shelter, then within a few years they get repo’d, or foreclosed and evicted. People who raise and teach children are not well compensated. It is common for people to do anything they can to “make money” and “pay the bills” and never find what they really love to do and are really good at. These are clear failures of the financial system. All the “economist’s” supercomputer analyses have not and will not solve these problems. It’s telling that we don’t know for sure if we’re in a recession until after the fact.

How is the economy doing? This is the ever-present question. The economy is a rich source of material for all of us, for politicians, analysts, scholars, writers, TV shows, and talks at the water cooler and the kitchen table. It’s a question that could only be asked after we’ve confused a financial system with economics. It’s a question that could only be asked in a condition where people serve the system instead of the system serving the people.

How are the people doing? Does Everyone have food, shelter and health care, and to the highest standard? Is education available freely, and to Anyone? Is world around communication technology available to All? Are there fewer restrictions on moving around the planet today than there were last year? Is Everyone getting all the recreation they desire? How are All living beings doing? How is the environment doing? These are the questions that economics actually and appropriately addresses. The answers are usually straightforward and obvious. They are easy to comprehend.

William Daniels...... Copyright. Please distribute this freely for non-commercial purposes.

503-314-6902 ......I am available to speak, write on specific topics, etc.

wdinpdx@yahoo.com......See: BillionsofBillionaires.blogspot.com; BFI.org; “Critical Path” by
R. Buckminster Fuller