Monthly Archives: September 2008

The Truth about Economics: Part 9 Mortgaging the Future

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(See Comic) Relative Price Rises General commodity prices have been rising since the beginning of the decade. Part of that rise in prices has been related to supply and demand issues (or at least the anticipation of supply and demand issues). The other aspect to the price rises has been excessive money supply growth leading to a steadily weaker dollar. Although it seems like, for example, oil has become quite expensive in recent years when denominated in dollars, it has actually remained fairly steady in price relative to gold. And that means that if you had all your money in gold (which is historically “real money”) the rise in prices would be for the most part a non issue. Each time commodities have sold off and corrected on their steady march upward, people have been calling an end to the bull market in commodities. It hasn’t happened yet, but there has been a good sized correction in recent weeks. For example, silver has seen a big decline off it’s March highs. But the lower prices have really simply increased demand for silver. So, the decline is more manipulation than anything. Go try to buy some silver bullion near spot price and you’ll see it isn’t all that easy because demand is high. For those looking to get into silver as a hedge against inflation, these lower prices are a gift. And those lower prices are also a gift for people who bought in at higher prices. Unless you are some market wizard, you’ll never be able to pick the exact top or bottom of a market. Thus, by averaging in and out of a market you assure that you won’t buy or sell everything at the exact wrong time. That is called dollar cost averaging. And the beauty of precious metals investing is that it is basically just insurance anyway. So, no matter where the price goes longer term, it is going to be where it needs to be to act as an inflation hedge. Short Term Bail Out The recent government bail out of mortgage giants Fannie Mae and Freddie Mac is merely a symptom of the excessive money supply growth the US has seen in recent years. Most dollars are made by the banking industry through fractional reserve lending. So, when lending got loose through the risk distribution afforded to lending institutions by packaging large groups of mortgages into mortgage backed securities combined with low interest rates, the recipe was in place for excessive money supply growth. Since all this new money was debt (as all new money is in our current debt based monetary system) that debt came with interest. That is a problem because the only place to get the money to pay the interest is through making more debt. It is an accelerating treadmill effect (inflate or die). If money supply growth slows, people default on their debt. People defaulting on debt makes it hard for lending institutions to maintain their required fractional reserves. Since the money they lent out never really existed except as book keeping entries, when people demand the money from the bank used as reserves for loans, a bank can quickly become insolvent. Technically, all banks are insolvent. But it usually isn’t an issue unless people start demanding their money from the bank. Most of that money doesn’t really exist and that is why the FDIC exists. The FDIC makes up the difference between actual money and money invented trough fractional reserve lending is necessary. We may be seeing a bit of disinflation right now, but inevitably we are going to try and inflate our way out of this mess. And that will just make the mess even bigger. If we don’t inflate, we’ll have a major depression. If we do inflate, we’ll still eventually have a major depression, but we’ll delay it some more. John Maynard Keynes, the economist responsible for a lot of the thinking behind our current insane economy, advocated solving economic problems sort term because in his words, “In the long run, we are all dead.” But really, we aren’t all dead, that is just an excuse for mortgaging the future.

Spacetime for Happy People

(See Comic) What model of spacetime do you live off of? Have you ever thought about it? Model 1: Spacetime is an open book and you are one of many authors. This is the most popular model of spacetime. The way most people act and think reflects a general belief in this model of spacetime. In this model, the future of the universe is the net result of a large number of forces (individual free will, physical laws, divine intervention). This model is conducive to competition and congruent with Nietzche’s concept of “Will to Power.” In this model, the more power you have, the more you get to dominate the authorship role. For those who believe in a God who intervenes with this universe, God is the main author in this model. But you can make bargains with God through prayer so he’ll maybe author the future how you think you want it. Model 2: Spacetime is a closed book and you are a mere puppet of some external author(s). This view paints a picture of a deterministic universe authored by set physical laws (and or God) in which you may think you have free will, but you are really just a preprogrammed robot. This model often borrows aspects of model 1 but without the optimism of autonomy. Model 3: Spacetime is an open book and you are the author. This is the Subjective Reality model of spacetime. In this model the universe is just like a dream. You made it all up but are identified with one little primary character that you call your self. This is the model of the universe that is most conducive to things like manifesting and the law of attraction. It assumes that the dream is open to your manipulation since it is your own dream. All you have to do is change your mind and thus change the universe. Model 4: Spacetime is a closed book. You authored it already. And you are just reading your own book right now as if you don’t know what is going to happen next. This is similar to model 3, but without the autonomy of an open book. There may be alternate versions of certain sections of the book that you can choose to read instead of others, but overall, the book is already written. Anything you think is true is only true because it was written into the story. So, stuff like your decisions to do things were written into the story. That would explain why things like manifesting seem to work for some people but not others. It is because it was already written into the story, including the success or failure. It’s all a trick. Which is The Happy Model? Open book models of spacetime sound good at first, since they seem creative. But they are really a kind of treadmill scenario. There is no discernable end to them. If you believe in death (one life to live) then that promises some kind of end. But if death isn’t real and you simply reincarnate (or something) when you seemingly die then you are potentially forever stuck, like Sisyphus, to pointlessly toil away in the up and down dualistic world. That can get pretty depressing pretty fast. Remember: The goal of all goals is to have no goal. Closed book models of spacetime sound dubious at first because we like to believe we are the one’s making our decisions right now. But what a relief it would be to just relax and stop investing in specific outcomes with the knowledge that whatever is going to happen is going to happen. It is kind of like reading a novel. The novel has already been written, and you may have even read it before (or wrote it). The lives of individual characters are simply you reading the book from the alternate character’s perspective. Once you stop trying to write a story that has already been written and stop acting like it’s real you, you tend to get less engrossed and manipulated by it. You may even want to save time and just skip to the end. Not the mini end called death, but the real end, which is the same as the beginning. The end is the end of the book and hence the end of all the stuff that was seemingly true in the book—like death. In such a universe you can either believe in the book by using models 1, 2, or 3, or you can get over it, by using model 4. Outside the book is where heaven is found. But to stop reading, you have to get over the fear that the end of the book is death (oblivion). You do that by changing who you read the book with from ego to your higher self. The ego would have the book go on forever because it doesn’t exist without the book. Your higher self though assures the book’s ending and will lead you there faster if you simply stop reading with the ego. It isn’t about what you do, because that is already prewritten. It is the experience of reading and for how long that is variable.

Note: If interested, some cool books dealing with spacetime are Mist by Miguel de Unamuno and The Strange Life of Ivan Osokin by Peter Ouspensky.