Resilience Economics
FNORD
Useful Resilience Economics needs more than theoretical responses to scenario sketches. Thought experiments will not be enough to get you moving towards a more secure economic status today.
The current economic collapse appears unique within the history of economic collapses because we have lost our inherent safety net that traditionally cushioned downturns. The very same so-called “Masters of The Universe” who drove the current economy into the wall have already cannibalized our ability to weather failure gracefully especially in the United States and Europe.
The decades of economic attacks upon family farms leave us vulnerable to a very hard landing in which millions will suffer death through the deprivation of essential food and shelter. During the Great Depression of the 1930s many of the urban homeless and unemployed factory workers found sanctuary on the family farm.
We may now only look back with fond nostalgia at how we lived a couple of generations ago. In hindsight the wisdom of Raw Material Economics proves itself.
As long as we have adequate food and shelter the micro-production of goods and intellectual content can provide for the rest of us. Gone are the days of relying upon those “too big to fail” for our well-being.
The current crop of academically educated economists only argue about how to best preserve the current financial system with all of its structural inequities and invitations for fraud. They are not prepared to consider an egalitarian diverse decentralized distributed economics that possesses intrinsic resilience.
Unfortunately, current administration policies continue the practice of punishing family farmers for the benefit of the financial services industry. Unless you have income from off the farm, you will have to wait until the current economic collapse deepens before re-establishing family farms becomes feasible.
Until then, it promises to be a very bumpy ride and expect to see a great deal of volatility in all markets. Still you have options over the short term and while they exist now would be a good time to explore them.
First, if you now depend upon those “too big to fail” for your income, including all branches of government, the dominant banks and the multinational corporations, now is the time to act on an exit plan. While some employers may be able to restructure their businesses to offer a measure of economic security to employees, these smaller companies will be targeted by government taxmen eager to take away profits and hostile takeovers by predatory corporations.
Second, traditional passive income from investments will become increasingly unreliable and ultimately insufficient as the current economic collapse deepens. You must find a way to become productive while maintaining control over your pricing to be able to respond to deflation, inflation, stagflation and whatever other curve balls the banksters throw.
Of course, a total collapse or even near total collapse will have us all scrambling for food and shelter while those who have stockpiled and continue to hoard will be faced with increasing physical security demands. Police and the armed forces will be the last elements of the status quo to collapse and they will be looking for stockpiled food themselves.
The issue remains of determining what to do between now and a very possible then. Without a doubt having an independent income based upon your own productive capacity will likely become necessary.
While climate change, resource depletion and unsupportable population levels will certainly complicate the issue, realistically there seems very little you or I can do about that. At least if you maintain the capability to produce at parity, that is the sale of your production not only supports your existence but also allows you enough profit to begin another round of production without debt while saving enough to survive unexpected events, then you may have a future.
Maintaining mobility ability is a bonus that could literally become lifesaving. For example, areas of the Oregon coast that once appeared desirable because of the local abundance of seafood are now adjacent to growing oceanic dead zones devoid of any sea life at all.
Expect volatility in all aspects of life. With all of this in mind, an online business seems to be a good bet to me.
If running an online business seems to be beyond your capacity then you owe it to yourself to honestly investigate it because all sorts of people have learned how to run an online business. Now would be a good time to start.
Wealth Facts
FNORD
The Source Of All Potential Wealth
All new potential wealth, the foundation of all prosperity, comes from the earth. You can either harvest something or mine something to create new potential wealth.
Human labor produces raw materials to create jobs and incomes which consolidate into the basic industries of agriculture, forestry, fishing, mining, and recycling. This consolidation of human labor producing raw materials enables the economic cycle that manifests new wealth.
The economic cycle emerges through the structure of trade that manifests sufficient new wealth to afford all finished goods and services. This structure of trade must manifest a sufficient level of wealth to afford all finished goods and services or it becomes unsustainable due to growing debt.
If it is correct, as argued by Milton Friedman and Paul Samuelson, that money is a factor of production in the same sense as labor and raw materials are, that money has the same standing as labor and raw materials with respect to production or wealth creation, then money obviously has a claim to a share in output or wealth created. But, alas, it is not so.
The End of Mainstream Economics: An Interview with Gunnar Tómasson
The Economic Cycle
The economic cycle begins when raw materials producers manifest new wealth by trading for the finished goods and services necessary to live and produce raw materials. All the finished goods and services of the economic cycle come from the processing of raw materials.
Providing services creates a drain upon manifested new wealth.
Producing raw materials and processing them into finished goods by manufacturing creates service jobs in transportation, utilities, finance, and trade. Manufacturing and service jobs depend upon receiving a portion of the manifested new wealth.
It is fundamental nonsense to view money as a factor of production. Money plays many roles, but we live on what we produce. We do not live on paper money that we create as a superstructure on the foundation of our production.
Gunnar Tómasson, financial consultant and former senior staff member (1966–1989) of the International Monetary Fund
Producers Permit All Manifest Wealth
When raw materials producers by their labor extract potential wealth from the earth their manifested wealth must allow them to participate in the economic cycle without borrowing against future production.
Interest paid by the production sector does not reward any contribution of money to wealth creation. It must derive from money newly created in the banking system, which means that it must be loan-financed.
Gunnar Tómasson
Trade based on underpaying producers so they must borrow to begin the next round of the economic cycle and “structure debt” to hide their lack of manifested wealth is unsustainable. Producers must manifest wealth beyond their needs and the demands of manufactoring and service jobs.
Prosperity originates with raw materials being added to the economic cycle. Financial systems based upon ever growing debt are doomed to eventually collapse.
Impoverishing raw materials producers with unpayable debt impoverishes us all.
The proper word to use is: Parity.
Parity means that farmers are guaranteed to receive a price for their production that covers their cost. This protection from the predatory practices of the financial services industry becomes required with the political power exercised by the banksters.
5 Rules Of Raw Materials Economics
FNORD
Charles Walters wrote an article for the National Organization for Raw Materials (NORM) in which he stated
The birth of raw material economics — while ancient in origin — has been credited to Benjamin Franklin, the Philadelphia philosopher, printer, and statesman, and to Thomas Jefferson, who as a historian once wrote “invented the United States.”
Although Jefferson gave a published expression to the concept of raw material economics, it was Franklin who sat down the general proposition in concise and understandable terms.
Writing in “Positions to be Examined” concerning national wealth, April 4, 1769, Franklin pointed out that there were three ways in which a nation might become wealthy:
- By war, which permits taking by force the wealth of other nations;
- By trade, which to be profitable requires cheating. For example, if we give and receive an equal amount of goods and services through trade, there’s no profit other than that obtained in our own production cycle.
- By agriculture, through which we plant the seeds and create new wealth as if by a miracle.
All human wealth must originate somewhere in the real world and the process that explains human wealth creation begins with raw materials. Understanding this process which begins with raw materials requires appreciation of the essential role of human productivity.
These 5 Rules Of Raw Materials Economics provide a basic understanding of the process of human wealth creation.
- The amount of raw materials removed from nature becomes humanity’s potential wealth. The potential wealth of the materials determine the number and value of jobs available to produce, transport, process, manufacture, distribute and retail finished products made from these materials.
- The values placed on raw materials determine the amount of money that can be paid for the tools and services used to produce raw materials and controls the price and volume of tools and services purchased by raw materials producers.
- Tools and services purchased by raw materials producers and the tools and services purchased by other people during the same economic cycle becomes the original method of job creation and manifests all the wealth necessary to purchase all finished goods.
- A fair balance between the value placed on raw materials and the value placed on finished goods automatically creates healthy markets and manifests the wealth required to purchase all finished goods.
- The act of production times the fair value of production (AoP x FVoP = wealth), or the proper relationship between production and price, manifests all the wealth necessary for the debt free consumption of all finished goods.
Charles Walters concludes his article with this appreciation of those who compiled the documentation and promoted their findings
Starting in the 1920s and going through the 1960s, several entrepreneurial gentlemen of profound knowledge and inquisitive nature about macro-economics became the “Founding Fathers of Raw Material Economics.” They re-examined the Franklin-Jefferson principles by researching and analyzing the nation’s economic records…
Those “Founding Fathers” were: Charles B. Ray, Carl H. Wilken, Dr. John Lee Coulter and J. Carson Adkerson. They were ably followed by such stalwarts as Arnold “Red” Paulson, Vince Rossiter, Merle Willard, Kermit Couch and others.
Charles Walters could certainly be included among the stalwarts. I would also add Fred Lundgren and Jerome Friemel partially because of their book, The Nature of Wealth.
The essential element of their work seems encapsulated in the concept of Parity, emerging from the analysis of hard economic data and direct observation now stretching over 90 years. Raw materials producers must be paid well enough for them to begin another round of production without acquiring debt.
Parity pricing appears required for a healthy economy.
