Let us revise a simple piece of economics: floating exchange rates. To explain: let us greatly simplify the world economy to 2 countries, the US and the UK and suppose they each export only one commodity; the US exports computers and the UK exports cars. No other international trade or country exists. The exchange rate between the dollar and the pound is 1-1: $1 exchanges for £1. Each computer is priced at $1 and each car at £1. Therefore one computer exchanges for one car. Let us ignore transaction costs of currency exchange for the moment also. Let us suppose these prices remain steady within each country. However the exchange rate changes or floats according the laws of demand and supply. Should the demand for dollars exceed the demand for pounds then the dollar rises in price in relation to the pound. For example, it changes to $1 = £2 instead of its old rate $1 = £1. It has doubled in value, appreciated by 100%. It buys twice as many cars as before. Conversely £1 instead of exchanging for $1 now exchanges for 50c. It has halved in value and now it would require £2 to import the US computer. The pound has depreciated by 50%.
Let us return to the original situation $1=£1. Trade takes place between the two counties based on this exchange rate and flows of foreign exchange are in balance. Let us now suppose that there is a rise in the demand for the US computers and a fall in demand for the UK cars. The demand for dollars now rises as more pounds are seeking to be exchanged for dollars to buy the computers. Conversely the demand for pounds now falls as less dollars are seeking to be exchanged for pounds. This leads to an imbalance in the flows of dollars and pounds and a new equilibrium is established in which the price of the dollar rises and the pound falls, for example, in our rather extreme example the new exchange rate become $1 = £2. What happens next to trade? For the UK the price of the imported US computers has doubled, thus provoking a fall in demand for them and the emergence of a home-produced alternative computer in the UK. At any rate the demand drops and this tends to correct the outflow of pounds exchanged for dollars in order to purchase computers. The increased demand for US computers diminishes. However, in the US, whereas the demand for UK cars had been falling it now increases because the exchange rate has changed from $1 = £1 to $1= £2. The British car has become 50% cheaper and this will lead to an increase in demand for this product. Thus, the result of the floating exchange rate and the consequent appreciating dollar and depreciating pound tend to correct trade deficits and surpluses.
Although this example is greatly simplified let us extract the central principle that in the case of imbalances in trade and currency flows between counties, floating exchange rates tend to correct for them. The natural differences between countries and their economies will get ironed out. Now this correction principle is eliminated in currency unions simply because all countries share the same currency so there cannot be floating exchange rates between them. This has enormous consequences for the currency union. The only impediments to buying goods and services from other counties in the European union is the amount of euros a country possesses and the prices of those goods and services. Thus, in the currency union for a weaker country to attract more demand for its products, e.g. its tourism, its price structure needs to fall (as well as its quality improve) and this requires that wages reduce and labour markets become more productive. These are not easy tasks since there is great pressure for price differences within the union to become less and there is usually great resistance to a reduction in wages. After all as price differences become less between countries of the Union, the price structure of the weaker counties will rise and this puts enormous pressure on wages to rise also. Given these difficulties the weaker countries expand their national and corporate, and financial sector debts, thus obtaining either more euros from banks across the union or borrowing foreign exchange on the world capital markets and converting it to euros. These countries become more indebted especially when there is little to stop them so doing and especially if they and their lenders believe their debts will eventually be guaranteed bythe European Union itself.
The task of the floating exchange rate is to reflect and even out the differences between countries and help government to manage its finances. A currency union takes this away while the differences remain. Instead of the European hope that the less developed economies would raise their productivity, weaker countries actually lose their competitiveness and productivity with respect to stronger countries and productive capital moves to stronger nations. The interest rate in the weaker country is lower than it otherwise would be because of the back stop of the currency union. So the weaker are bailed out. So they become less productive but more highly indebted. But when a shock hits, capital flees the weaker states and a debt crisis emerges such as in the EU in 2008-10.
References: S2 Ep 38. The Crisis of our Times. The EU: Between a Rock and Hard Place. Part A
1.The Bitcoin Standard (2018) by Saifdean Ammous. especially chapters 4-7;
2. The blog of Tuomas Malinen on the www.gnseconomics.com website; also youtube videos;
3. Fredrick Hayek’s classic 1944 book: The Road to Serfdom.
This documents the emerging philosophy and metaphysics of the podcast series
Archetype and Historical Juncture
At the centre of the material the Quest Podcasts are exploring there is, as it were, a spectrum which has two poles: At one end is the archetypal core. At the other is the historical juncture.
The archetypal core will become the subject of deeper exploration in future podcasts but for the moment think of it as an underlying infinitely powerful and complex template that births both the material world and that of psyche (in the past this has been called a god of some sort). Psyche refers both to the conscious and the unconscious. Humans have emerged, out of nature, billions of years of evolution on this planet alone, first as unconscious creatures, immersed in nature and dominated by instincts but with the extraordinary development of our brains. We developed a conscious centre which we call ego, and a complex psyche which includes not only instincts and ego but higher consciousness. Individual archetypes are the further elaboration of instincts out of nature as we become human, in Jung’s acute formulations: archetypes are the images, the spiritualization, the self-portraits of instincts. As instincts evolve through the human self they take on a far more complex form than those in animals.
Archetypes, a very broad category with great variation between authors, they are templates or pre-existing potentialities in the human psyche and may be thought of in three categories:
1. Transpersonal: light and dark, masculine and feminine, good and evil, consciousness shadow, trickster, hero, the divine child, great mother, God, the saviour.
2. Personal: e.g. Mars, Aphrodite, Shiva, Shakti, Dionysius, Saturn, Prometheus, Wotan, Isis, Sophia, Isis. Jesus.
3. Abstract: number, underlying form, harmony of the spheres, cross, circle, mandala.
Myths are narratives, filled with archetypal material, which reflect the nature of consciousness, its origins, development and sometimes its destiny. Myths are the symbolic manner by which consciousness reflects on itself.
The historical juncture, the other end of the spectrum, is the complex forces of history - economic, political, technological, military, social - of any society or civilization through which instinctual and archetypal forces are expressed. God is an archetype which expresses the practically universal conviction – up to the present age – that an extraordinary intelligence - call it divine for the moment - has created this universe, this world, this life, this consciousness, and each one of us. Think of this God archetype as a light source refracted or bent through different mediums, as it passes through different cultures. And it also has different expressions on being developed through a culture in the course of its history. So, the God archetype is distinct in different civilizations and tends to change and develop throughout history; it can also stagnate, or decline and become extinct. Thus, the god archetype changes from a polytheistic religion to a monotheistic one - obviously; and even the single God image may change over time, for example from the start of the Old Testament compared to the end. Certainly as far as Christians are concerned there is a radical change in this imago or archetype, since Christ is a distinct development out of Judaism. As we shortly see, the Christ image also goes through many developments and changes. Indeed some feel it is due an urgent update at the moment.
The archetype in itself, the core, the essence, the source, is ultimately un-knowable, beyond the limited consciousness it created or evolved, and can be portrayed as eternal, omnipresent, omniscient, ineffable on the one hand, and on the other its manifestation moves through history as our consciousness develops historically through time.
Model of the Economic and Financial Crisis
Currently we have systemic crises on many fronts which interact with one another – for example a pandemic plus an economic and financial crisis. Other variables, other horsemen, will interact with the emerging crises. Nevertheless our first task is to understand the individual components of this system. Our focus today is the evolving economic and financial global crisis for which I now give a
simplified model as follows:
1 Approaching storm
2 The Storm hits
3 Policy response
4 Economic contraction/depression and financial chaos/collapse
5 Great Global Depression 2
6 Civil disturbance. Political radicalism. Dangers of war.
7 Fallout and emergence in a radically changed world.
The fault lines in the world economy have been increasing since Great Financial Crash (2008)
# Increase of unpayable debt- state, corporate -financial, non-financial, and private.
# The creation of vast amounts of money offered at almost zero interest rates in so called Quantitative Easing programmes has been a major feature since 2008. Over the decades following 2008 $10 trillion of new money was injected into the global financial system. That is equivalent to 1/8 of the World annual output.
# Long term artificially low interest rates (government policy ) are a fundamental distortion to the economy and prevent proper functioning of markets and encourage wrong decisions.
# Signs of inflated bubble:
Stocks markets – inflated and disconnected from economic reality
Rising volatility and excess valuations of global stocks
Shadow system: parasitic gambling of enormous proportion
# Stagnant productivity growth – worldwide.
# China’s engine of growth has slowed down and its bubble is in danger of collapse.
# Exploding gap in the concentration of wealth and economic power.
# Growing protectionism – resembling the 1930s.
# Increased political division between counties and within them.
# Governments have exhausted their policy resources – except more debt.
Propongo un modelo simplificado, una suerte de mapa de ruta.
1 El acercamiento de la tormenta
2 La tormenta llega
3 la respuesta política
4 Depresión económica y caos financiero
5 Gran depresión global
6 Disturbios civiles. Radicalismo político. Peligros de guerra
7 Un mundo radicalmente cambiado.
Las fallas en la economía mundial son las siguientes:
# El crecimiento de una deuda inmanejable y fuera de control a escala mundial liderada por gobiernos e instituciones financieras, es una de las características más distintivas e inquietantes de la era económica moderna. Esta manía de la deuda se ha extendido de países a corporaciones y a millones de individuos y es la base de la próxima crisis financiera.
# La creación de grandes cantidades de dinero ofrecidas a casi cero la tasa de interés en los así llamados programas de flexibilización cuantitativa, ha sido una característica importante desde 2008. Durante la década posterior al 2008, se inyectaron en dólares, diez miles de billones de dinero nuevo en el sistema financiero global mediante la compra de bonos del gobierno.
# Las tasas de interés a largo plazo, artificialmente bajas y mantenidas así por el gobierno son una distorsión fundamental de la economía e impiden el funcionamiento adecuado de los mercados y alientan decisiones equivocadas.
# El aumento de la fractura de la Eurozona. Las deudas excesivas de la Eurozona, más el probable colapso de un sistema bancario europeo, no reformado y sumamente frágil, pueden provocar fácilmente una crisis financiera sistémica global.
# Los mercados de acciones globales están inflados, cada vez más volátiles y desconectados de la realidad económica y sólo crecen impulsados por dinero que el gobierno ha abaratado de manera absurda.
# Un Estancamiento de la productividad. En contraste brutal con los mercados bursátiles, el período de 2012 a 2020 para la economía mundial ha sido un estancamiento de productividad que indicaba claramente el límite de las oportunidades para inversión real y el final del boom o auge.
# El motor de crecimiento de China ya se había desacelerado considerablemente en 2019 antes del brote del virus.
# La Desigualdad y pobreza absoluta - una brecha creciente entre ricos y pobres. También está aumentando la pobreza absoluta en muchas partes del mundo con condiciones cada vez más precarias e inestables. Un gran colapso global y una depresión llevarán a miles de millones a condiciones desesperadas.
# Proteccionismo y aislamiento -parecido a la década de los treinta. Ha habido una creciente guerra comercial fría entre China y Estados Unidos.
May 16 2020
Images for Podcast S2 Ep31
The god Nun raises the barque of the sun (consciousness) out of the primeval waters of the unconscious. The barque carries the scarab rolling the new life for its rebirth.
Illustration for the The Sower and the Seed done by Lindsey C.Harris