Originally Posted by ladelfina
Independent, thanks for your response. It seems larded with a pragmatic "it all works out and we don't do so badly despite some flaws at the extreme edges". I appreciate that and understand that the world moves on, that we are not likely to be living like Mad Max in our lifetimes, etc.
But you have to look at the mathematical logic of capital and growth: if being leveraged 50:1 is unstable, being leveraged 10:1 is also unstable, though at a longer interval from crash, to re-grouping, to crash. The sheep get sheared less frequently, but they still don't control a stable market for their own wool.
Also, the difficulty of parsing "speculation" from "investment" is enormous. Witness the oil runup and people wanting to "ban" speculation; well, how do you do that? A whole slew of businesses - airlines, utilities, farmers- employ commodities futures to amortize market shocks.
I am more interested in the sustainability than the morality, although cultures developed moral strictures -with some level of reasoning behind them (often valid but not always)- that they felt sustained their quality of life. That our current system requires a compounding level of borrowing is before our eyes today; I don't think that is possible to argue against. That the "bankers end up owning everything" may or may not come to pass depending on the context. During certain intervals that is quite true. If most Americans have more debt than they can repay, the banks certain do "own everything" in that context. What keeps the banks from actually owning everything are the crashes where a partial re-re-distribution happens. Crashes, or revolutions.
It would require another topic to explore the 'getting ahead' notion. I posit that we have not 'gotten ahead' due to the brilliance of our financial system, but thanks to the four basic inputs that drive all economic development and what we might term "wealth". One is human labor; the second is animal labor; the third is fossil fuels; and the fourth is solar (into which I will lump such things as crops, biofuels, wood for generating steam and residential heating, etc. .. even resources such as fisheries).
You can invent any economic system you want but the system itself cannot create something out of nothing; it can't magnify those inputs beyond what they are.. it might manipulate them in ways that are more or less efficient or destructive. While economic systems can destroy, they cannot Create at this level.
When wealth was obtained through slavery, that did not "create" wealth, but merely channeled it in a certain direction. The Renaissance was not a rich era because of banking so much as because of the 'windfall profits' of half the people in Europe having died due to the plague, leaving the survivors with twice the natural resources of before. Banking did provide for an increased concentration and expression of wealth, but not its general expansion.
The emergence of what we know as the middle class coincides exactly with the sudden increase in the exploitation of fossil fuels. We can't imagine the misery of the 19th-c. coal miners that gave us the railroads and factories of the Industrial Revolution. Now we are living in the petroleum era and expend vast resources to secure the Middle East in order to further fuel the American lifestyle. We don't know how long any of that will be sustainable. Why are we -really- willing to "nuke" Iran and why was the Iraq war waged? For the same reason that police and governments shot and killed striking coal miners. Pinkerton was the domestic Blackwater of its day. The beast must be fed.
But the beast's food is what it is: tangible resources that no purely economic system can just conjure into existence via leverage and abstractions of ones and zeros. Economic systems can only consolidate or allocate/mis-allocate, not create.
I haven't looked into this deeply, but I would even go so far as to guess that slavery would not have been abolished in the Western world had the nascent fossil-fuel potential not obviated the "need" for slave labor. If there hadn't been alternative emerging energy sources to hand, we wouldn't likely have felt we had the "luxury" of doing without slaves. The prospect of relatively cheap external sources of energy likely created the necessary room for Enlightenment philosophy to grow and fulfill itself.
I think you are correct in seeing our differences. I think the problem is politics and power, you think it's that plus an inherent (and unfixable) problem in the basic system. I don't think that capitalism requires an excessive level of borrowing, or any unchecked geometric increase in debt that's greater than the growth of the real economy. Remember that for every debtor there is a creditor - it can't be true that "we are all in debt". I'm not, and neither are you. I have concerns about the particular version of capitalism we've got in 2008, but I think the problems are fixable.
I'll agree that the important stuff in any economy is the real stuff - the economic goods. "Money" and "debt" and "capital" are just convenient ways to exchange the real stuff. I think they can all increase human efficiency, and hence result in more real stuff for the same amount of labor.
I recall that 40 years ago I heard a professor use the word "energy" in a unique sense that I had never heard before. He also wondered whether our current era is just a temporary golden age in which we exploit the fossil fuels until they are exhausted. Or, whether we will be able to find a way to replace them before they are gone. I'm somewhat optimistic on the second possibility.