Retiring Socks and Violins

I’ve decided to let go of SocksAndViolins. I have too many domains, and while each one is pretty inexpensive, they add up. Especially around Christmas, which is when most of them come due.

Besides, there’s too much socks and violins in the world anyway, right?

I’ve transferred over all of the old blog entries from http://www.socksandviolins.org to here. The old blog was Nucleus-driven, and oddly, WordPress doesn’t have an import mechanism. So I had to do it all by hand, and if anything got garbled, let me know.

The Great Disruption

The new book by Paul Gilding, “The Great Disruption,” was a welcome addition to my library. He’s thought our current state of affairs through a bit more realistically than most, and he explains in detail why what we face in the next few decades is likely to be a good thing. An excellent thing, in fact.

Here’s the problem, in a nutshell: the earth is full. Our current economic system is running the earth at about 140% of its carrying capacity, and we’re planning to not only add more people, but also grow the global economy even more than the population growth. In addition, our increasing carbon footprint is changing the global climate in ways that will completely destroy the economy we have.

There are two key features to his analysis that are different from those of typical doomsayers.

The first is his analysis of the human “panic response.” Everyone who studies global warming says we have to do things right now to stave off future disaster, and their science is sound. But we aren’t doing things right now, and there’s no current indication we will ever do anything to deal with the problem, until it’s too late to avoid disaster.

Paul is one of the few who has looked this in the face and asked how it will really play out, human nature being what it is. He thinks it will probably work out, the reason being that as soon as global warming starts to seriously tip the economy over, people will panic, and then engage in a large-scale venture — a “War On Climate” — comparable to the US scale-up for WWII. His analysis says this will likely be enough to reverse carbon-footprint warming.

This panic response will be far more aggressive than anything anyone has had the temerity to even suggest, to date. What is politically unthinkable today will simply get done.

The outcome of this panic response has some very attractive features, since it will put a premium on “clean” living. Our current practice of trashing the planet for economic gain will end, not because it’s good or moral, but because it is necessary for survival. That necessity will cause governments to “level the playing field” for commerce differently than they do now, and clean practices will also become good business.

The second and (IMO) more important feature of his analysis has to do with the growth economy itself. Our global economic model is clearly wrong, demanding as it does unlimited exponential growth, which cannot be met by any physical reality. Paul doesn’t wring his hands over this: it’s simply over. The earth is full. We’ve reached a point where no one can gain wealth without taking it from someone else.

So what happens next?

Ultimately, we shift to an economy of human satisfaction. What’s interesting is that this is the end-state predicted by the founders of capitalist economics: Adam Smith, John Stuart Mill, John Maynard Keynes. Modern economists have apparently just gotten themselves enamored with the “complexity” of the giant Ponzi scam our economy has become, and forgotten the basic concept that an economy serves people, not vice versa.

Here’s what’s interesting about human satisfaction and happiness. Poverty is universally bad for human happiness. However, once a person rises out of poverty, additional increases in wealth bring virtually no additional happiness: this is the consistent finding of research from all parts of the world. What does provide a temporary increase in happiness is an increase in relative income, compared to others within our circle of family and friends — the “keeping up with the Joneses” competition. This is why getting a raise at work is an incentive, and why people get such a rush from buying a new car. Anyone who has received a raise or bought a new car, however, realizes how fleeting the pleasure is. It actually breeds anxiety in its wake as the Joneses then try to get ahead of us. It results in an addictive cycle that overall produces more anxiety than happiness.

In an economic system in which “economic growth” is no longer possible, and any increase in relative wealth is widely recognized as taking away from someone else, we will have no choice but to back off from the anxiety-producing cycle of production and consumption.

This has already been happening for quite some time in Europe, and is now becoming a feature of the United States: permanent unemployment and underemployment. The growth of the global economy is grinding to a halt, which means that all of us are simply going to work less.

What I found particularly comforting about this book was its sense of inevitability. People don’t have to become better, or smarter, or “greener” to survive the tumult and make a better world. They just have to continue being the reactive, selfish slobs they’ve proven themselves to be for thousands of years.

Money as a Barrier to Need

Shortly after the eruption of the Pacaya volcano in Guatemala, the impact of tropical storm Agatha, and the appearance of the huge sinkhole that opened in the middle of Guatemala City, one of the web-based news sources quoted President Alvaro Colom Caballero as saying that they needed food, blankets, portable shelters, “and especially money.” I can no longer find this quote anywhere on the ever-mutable web, but it struck me powerfully when I read it.

Especially money.

People do not need money. They need, air, water, food, shelter. No one needs money — they need the things money can buy. More accurately, they need the things that lack of money will deny them access to.

Money may have been at one time a convenience to extend trade beyond barter. Whatever its innocent origins, it is now a barrier to meeting human needs. That is its purpose and function: to regulate access to resources. The rich get — the poor do not.

It says something profoundly ugly about the nature of the human community in our money-driven global marketplace, that people could die by the hundreds, the thousands or the millions for lack of money. It is one thing when they die because of lack of food or water, of exposure or disease, of suffocation under a cloud of volcanic ash. That is a natural disaster.

But if they died because of lack of money, it means that all of their needs could have been met — there was sufficient food, and water, and air, and shelter for them, had they possessed enough money to pay for them. But they didn’t, so those who controlled the things they needed — those who demanded money in exchange for them — sat back with hard eyes and watched them die.
That is not a natural disaster. That is murder. Cold-blooded murder.

El Gato

The other night, I had to get up to relieve myself. I did not want to disturb Marta, so I left the lights out. I’ve been doing this for over five decades — it’s pretty routine.

So imagine my surprise to feel something soft and furry between my legs. Something other than what I usually expected there, at any rate. A moment later, the sound of water falling into the bowl — stopped. Silence where there should not have been silence.

I reached down in alarm and discovered a wet cat between my legs. Talk about deadly curiosity….

When I finished, he got the quickest cat-bath in all of history, in the sink, in the dark.

He is now informally known as “Piss-Head.”

Money

I’ve been reading about a set of interlocked issues that are going to dominate our lives and our conversations over the next decade.

One of these is money. If anyone has been wondering why the economy is a mess and when it might actually recover, perhaps the following information will be helpful in understanding what is going on.

In 1913 our current “federal reserve” system was formed. The “Fed” (as it is called) is not part of the government — it is “Fed” as in “FedEx.” It’s a consortium of private banks and extremely wealthy financiers. The Fed was formed in response to the problems that kept plaguing the banks of the late 1800’s, which functioned on a “fractional reserve” system. I’ll give a simple explanation of all that in a moment, but what I want to point out is that our entire economy is only a century old. Prior to 1900, money was an entirely different beast.

Here’s how fractional reserve banking works: if you deposit $100 in your bank, the bank is allowed to loan out $90 of that money — it is only required to keep a “fraction” of your money in “reserve,” typically about 10%. If you were the only customer, this would be a huge problem, because when you came to withdraw your money, the bank would only have $10 on hand. The rest of your money might not show up for six months — and might not come back at all if the debtors default on their loans. Of course, you aren’t the only customer, so when you take out your $100, the bank takes your $10, and nine other customers’ $10, and gives you your $100. If they only have ten customers, they are now in deep trouble, because they have absolutely no money left in the bank. The next customer who comes in and asks for even $10 will get nothing.

This is where the federal reserve comes in. They are the “lender of last resort,” and they make short term loans to any bank in this situation. So the question becomes, where does the federal reserve get its money?

The answer, as John Kenneth Galbraith once put it, is “repellently” simple. They create it. Out of absolutely nothing.

Technically, they loan the money out of nothing. When the borrowing bank gets a little excess cash, they pay back the loan, and the money that was created out of nothing vanishes back into nothing.

Almost.

The “almost” is the part that is breaking the economy. The “almost” is the interest that the bank is required to pay on the short-term loan that it took out. This interest rate is closely related to the “prime rate” you hear about in the news. The bank must pay back more than it borrowed. So where does this extra money come from?

In principle, it comes out of a growing economy — higher wages, more industry, increasing general wealth: more banking customers with more money making bigger deposits.

It’s pretty obvious that the whole system is in deep trouble when the economy isn’t growing. But that is not the worst of it.

Interest is based on the amount of money borrowed. Everyone who has kept a savings account or borrowed money knows how this works. If the bank is paying 5% on a savings account, then if you save $10, you earn fifty cents on your savings. If you save $1,000,000, you earn $50,000.

This kind of growth, where the increase is a percentage of the amount already there, is called “geometric” growth. It is equivalently called “exponential” growth. But there’s an even simpler way to understand it: it is doubling growth. For any given interest rate, your money will double in a fixed amount of time. For 1% growth, it takes about eighty years to double. For 5% growth, it takes about fifteen years. For 10% growth, it takes only eight years.

To keep up with a 1% prime rate, the economy must double every eighty years.
To keep up with a 5% prime rate, the economy must double every fifteen years.
To keep up with a 10% prime rate, the economy must double every eight years.

No matter what the prime rate (if it is above zero), the economy must keep doubling.

This is, of course, physically impossible in the long term. We can only sustain that kind of growth for very short periods, and only during especially prosperous times. So the problem here is not simply that the economy is not keeping up with the growth of the money supply, but that the economy cannot possibly, under any imaginable circumstances, keep up with the money supply. It’s flatly impossible. It has always been impossible.

So what happens when the economy doesn’t keep up with the increasing amount of money in circulation?

Inflation. Dollar devaluation.

In 1960, my father bought a single-family brick home in the suburbs for $16,000 — in 2006, I sold that same house for $150,000. In 1960, a new sedan straight off the showroom floor cost about $2500. In 2006, a new sedan cost about $25,000. In 1960, my family of four could get out of the grocery store with a month’s supply of food for about $100. In 2006, it was about $1000, perhaps a little less.

In 46 years, the dollar lost 90% of its value, which corresponds to a steady annual inflation rate of 5.1%. Over the last 46 years, the money supply has been steadily increasing at least 5.1% faster than the economy has been growing. Every year, each dollar represents 5% less in real goods.

Under the Federal Reserve system, inflation — dollar devaluation — is unavoidable, because no real economy can continue to double endlessly.

Inflation isn’t an insurmountable problem in itself. After all, pay could also increase at 5%. Who cares if you pay $100 for a McDonald’s Happy Meal if your annual salary as a bank teller is $250,000? (This compares to a $10 Happy Meal on a salary of $25,000). There are reasons that devaluing the dollar is dangerous, having to do with international treaties and trade, but those problems could be worked out.

However, pay does not keep up with inflation. I don’t recall the last time I heard of a 5% cost-of-living increase in anyone’s pay (other than Congresscritters, of course.) So the middle and lower classes — as well as seniors on fixed-income pensions and families on welfare — have been slowly suffocating under inflation.

There is one more hidden problem. The banks aren’t the only institution that can borrow from the Fed. The government borrows from it, too. Every time the government spends money that isn’t covered by a tax increase — “deficit spending” — it borrows the money from the Fed through a convoluted process involving Treasury Bonds. The multi-trillion bank bailout program that Bush crafted? It came from the Fed. The Obama Economic Recovery Bailout? It came from the Fed. The Iraq War funding? It came from the Fed. The funding for troop increases in Afghanistan? It comes from the Fed.

All those dollars are dumped into the economy out of absolutely nowhere. If they are not met by a corresponding growth in the economy, the money will decrease in value. If the government tries to “fix” this problem by spending even more money, it actually makes the problem worse — so much so that the economy can go into a spiral of what is called “hyperinflation.” Under hyperinflation, the value of the currency drops so fast that people are forced to push around wheelbarrows of cash to buy groceries. This phase doesn’t last long — the currency quickly becomes worthless and people stop using it entirely.

It’s important to not get too distracted by the government deficit spending, however. If the government immediately stopped borrowing from the Fed and somehow paid back all its debt this afternoon, it would not solve the underlying problem. All of the money in circulation demands that the money supply grow, because every dollar in circulation was — at some point — borrowed from the Fed at interest. Under the federal reserve system, money represents debt — not wealth. It is a liability, not an asset. Every dollar you hold in your hand represents an obligation for you or your children to pay back more than you have in your hand.

The problem isn’t the government. It isn’t really even the banks. The problem is money itself.

We’ve fundamentally mis-defined money. Money isn’t wealth, it’s debt. That’s why it can continue to increase exponentially, even when the economy is stagnant or shrinking.

This is why we are now facing a deep economic crisis. Economic growth has hit a plateau (at best). With a sensible money system, this would not be a problem. In the long run, any economy should reach steady-state. That’s what “sustainable” means. We should be settling into the long term.

Instead, we have a looming and completely unavoidable currency collapse ahead. Forget the Federal deficit — we can’t keep paying the interest on our own currency.

There are a great many ways out of this monetary crisis, but all of them (so far as I’ve seen) involve completely re-inventing the dollar. Both fractional reserve banking and the federal reserve system are questionable under any circumstances, but they are completely inappropriate in a flat or shrinking economy. We need to switch to a system of money where a) money represents wealth, not debt, and b) usury (interest) is either eliminated or very tightly controlled by law.

It seems unlikely to me that our corporate-owned government is going to manage this. All of its economic guidance comes from the people who benefit the most from fractional reserve banking. Corporations would be turned inside out by any sensible change in the monetary system, and the wealthiest people would necessarily lose much of their paper wealth. The government, which preferentially represents this wealth, will actively fight the changes that are needed to preserve the dollar.

So from everything I’ve read, we’ll face both inflation and joblessness in the near-term, followed by (at some point) a federal currency collapse. At that point, what tends to happen (historically) is the creation of local currencies. Since many of these will be based on traditional economic thinking and the “expertise” of local bankers, they’ll fall right into the same trap and will collapse very quickly. But a few communities will get the right idea — that money must represent wealth rather than debt — and those currencies will allow trade to resume.

Every Two Hours

Hysterical sobbing from your wife is not the best way to greet the morning. She’d been walking the dog when she slipped on a patch of snow-covered ice and banged her head.

Marta is the kind of woman who, when she bangs her head against the open cupboard door, slams it shut and yells “Puta mierda!” at the door. If this happens before she’s had breakfast, her tone can leave scorch marks. I’ve seen butter melt.

For her to be sobbing after an injury was one of those personality aberrations they tell you to worry about in cases of blunt head trauma. So I took her to the emergency room. Two hours and most of this year’s income later, they sent her home with a clean bill of health: nothing worse than a goose egg on her head, a sprained thumb, and a killer headache.

Then the nurse took me aside and said, “There’s something we need to ask you to do.” She showed me the section on the discharge form labeled, “Activities for Spouses.” Large sections were crossed out — I assume they contained all the fun items, like “Tantric Sex.” I’m not really sure, because I got stuck on the item they had NOT crossed out. It said, “Wake patient every two hours for the next twenty-four hours; if patient exhibits unusual behavior, return to the emergency room.”

I had problems with this. First, I’ve never wakened my wife more than once in a night, and I wasn’t enthusiastic about dealing with her normal behavior, much less any kind of unusual behavior. Second, I had no idea what behavior should be considered normal after the third time I woke her up. Finally, I wondered who was going to wake me up every two hours, and what my normal behavior would be.

I decided to minimize my pain by staying up all night playing video games — it wouldn’t be the first time — and call in sick and sleep the next day.

The midnight waking went well. She screamed when I woke her up, and yelled “Who died?” She quickly got over her fright and shouted, “It’s midnight, this headache is killing me, and I had just gotten to sleep!” She pounded her pillow into submission and closed her eyes. I felt relieved, and went back to assassinating fifteenth-century Venetian nobles.

At the next waking, she growled. “Puta mierda, mal parido, culo feo on a Saltine cracker, what the Hell do you want? LET ME SLEEP!” I slipped back out of the room. Two a.m. and all’s well.

At four a.m., I shook her awake, and she smiled up at me. “I love you, sweetheart!” she said in a dreamy voice.

I grabbed the phone.

“What’s wrong, honey?” she said.

I dialed 9-1-1. “This is dispatch, what is your emergency?”

“My wife just called me sweetheart.” My voice sounded small and frightened.

“I beg your pardon?”

“My wife called me sweetheart. Something is wrong. I just woke her up at four a.m. for the third time tonight, AND SHE CALLED ME SWEETHEART! Don’t you understand? We need an ambulance!”

“Sir, please give me an address and I will dispatch a unit immediately.”

“Yes, 123 Elm Street. Please hurry.”

I held my wife’s hand anxiously as I waited. I saw the flashing lights of the ambulance through the bedroom window. Suddenly, she started.

“What? What? What?” she said. “What’s going on?”

“Don’t worry, honey. I came up to check on you, and you called me ‘sweetheart’.”

“I always call you sweetheart!”

“Yes, but not at four a.m. after I’ve just woken you up for the third time.”

“You called the ambulance because I called you SWEETHEART?” Her voice was rising. “Madre de Dios! I was having this fantastic dream about you and you called the ambulance!?”

“A dream?” My voice was very small. I heard heavy steps on the porch.

In the end, we got it all sorted out. We had to pay for the ambulance, but the city dropped charges against me for making a prank 9-1-1 call. And Marta is fine. That’s the important part.

Cheney and Torture

I don’t understand why we are having this conversation as a nation.

Although I’m not given to quoting Scripture, it seems appropriate to ask the rhetorical question that Christ asked the Devil during his temptation in the wilderness: “What does it profit a man to gain the world, if he loses his soul?”

It’s the only question worth asking in this entire debate over torture.

Mr. Cheney wants to talk about efficacy – does torture work? We know that it doesn’t, or they would never have banned its use after the Inquisitions and civil trials in the sixteenth century. Those folk had plenty of experience with torture, even a semi-professional class of expert torturers, as well as a view of the world that made torture in this life an acceptable cost of salvation in the next. In the end these experts concluded that the only thing torture reliably produces is confessions – confessions to anything and everything: black masses, witchcraft, sodomy, plots against the Pope, plots against one’s own mother.

But even if torture were effective at eliciting “useful intelligence,” we still have Christ’s question to the Devil.

What does it mean to safeguard a United States of America that enshrines in its law the worst, most inhuman crimes of the last century? What does it mean to defend a nation that has thrown away its soul?

If we accept torture as policy, we become Nazis. It’s really that simple.

When we are told that the only defense against terrorism is to cease to be a nation under constitution and law, and instead become torturers of anyone we suspect is an enemy of the state, the proper response is to fire the problem solvers and hire new ones. Come to think of it, that’s exactly what we did in 2008.

So why are we still having this conversation?