Ludwig wrote:I agree about the insanity of the system, but the process is the opposite of what you suggest.
Where does OUR money come from? Our pay packets.
We have to work so that the people who have most of the money - our employers - will give us some of it. That is capitalism's method of wealth redistribution.
And the people with most of the money won't give us some of it unless the end result is them getting more of it. In other words, they make a profit.
And that is why capitalism requires growth. Otherwise, the people with most of the money are basically giving away money to the people with less of it.
When people talk about there being "lots of money in the economy", what's really meant is that there's lots of money moving around.
In a recession or a slump, there's no reduction in the amount of money in the economy, it's just that those who have money aren't sharing it because they can't make a profit from doing so.
The problem is that the rich are getting more greedy. They are taking a larger proportion of the cake for themselves. "The rich are getting richer and the poor are getting poorer" is very true at the moment.
With the advent of Globalisation the rich threaten to take themselves and the jobs they produce to a lower taxed country unless their tax rates are lowered. So we get the situation where a cleaner pays more tax than the person s/he cleans for.
That's not to say that the 90% tax rates for the rich that were imposed by previous Labour governments are to be applauded. But a situation where remuneration at the top has increased as tax rates have lowered is not good.
We don't always have to work for wages. A peasant economy can work well. A peasant provides his own shelter and food and sometimes does a bit of work off the holding to get a bit of spending money or barters for things he can't produce himself. The problem with this is, he isn't contributing to the GDP so his work can't be taxed and the rich don't get a cut of his earnings. (I'm beginning to sound like a bloody socialist here) Globalisation is primarily a way of getting people out of peasant agriculture and into the wage earning, GDP boosting economy.
Growth is necessary to run the banking system and its requirement for the payment of interest ( See "Money as Debt" on YouTube or, even better, do the Crash Course at
http://www.chrismartenson.com/crashcourse).
In a recession money gets short because people tend to hang onto it but also because people stop, or are stopped from, taking out loans. Because the banks are lending less money, as people pay off their loans or default on them, the money supply gets shorter.
People with money don't give it away in wages. They invest it in our productivity. They couldn't make money without our input and we need their business to earn our wages. If they don't invest they don't make money: if we don't work they don't make money. It's often complicated by the fact that if huge amounts of energy aren't expended no money is made either. What is more important the labour expenditure or the energy?
If we contribute to the capital of the country by making, or contributing to the making of, durable goods we are contributing to the overall wealth of the country. If we work in the service industries we contribute to inflation because there is no lasting thing of worth contributed.
It's part of the argument about "are service sectors jobs as valuable as manufacturing jobs?". There is a growing school of thought that they are not and the recent banking crisis tends to reinforce that. We still have to find the true value of all the bits of paper floating around the "city's" of the world. Although a lot of people have made a fortune out of all that paper, more people are likely to have made a loss and that is likely to include all us taxpayers when the final account is drawn up.
perhaps we could go a bit further. This is from John Seymour’s The Self-Sufficient Gardner (also quoted by Richard Heinberg):
