POST-PARADOX ECONOMICS

The Catch-22 of a Yuan Revaluation

2010-04-09T08:27:00.012-05:00

The stage has been set for a play of the utmost irony, coupled to an acceleration in the decline of the fundamental U.S. economy. Members of the U.S. Congress have recently urged the Treasury Department to declare China a "currency manipulator," thus implicitly threatening China with punitive measures if it does not allow the value of its currency to rise against the dollar. Needless to say, politicians in general clearly have no understanding whatsoever of the circular dynamics of economics nor, in particular, of China's primary motivation in this regard for buying U.S. Treasury bonds in the first place; that is, as a means to absorb the flood of dollars it obtains by buying Treasuries in order to maintain some semblance of balance in its current account.

Beware of what you wish for. So what will happen if Congress & co. ultimately gets its wish? There are two immediate consequences, neither of which are subtle in their effects:

First, the price of every Chinese import (think Wal Mart) will immediately and proportionately increase, manifesting as a round of high --though not yet hyper-- inflation. This will in turn serve to further reduce whatever is left of the U.S. consumers' discretionary budget, and thus push another unknown percentage of homeowners over the edge into further mortgage defaults and late credit card payments; items which, sad to say, U.S. Banksters are still allowed to point to as the initial cause for the on-going global crisis. After all, it's not their fault: they didn't see it coming.

The second consequence is, of course, that China itself will then obtain fewer dollars from trade --not only due to the numerical revaluation of its currency, but because consumers who buy in dollars will simply not be able to afford as many Chinese products. However, fewer dollars for the Chinese thus also directly reduces any commensurate need to buy U.S. Treasuries --even aside from the fact that they have already started withdrawing from that market, and may even be net sellers already. All this merely serves to exacerbate an already extent process of negative feedback: The less the demand for Treasuries, the lower the bidding price and the higher their yields become. The government is then forced to borrow money at a higher rate of interest, which increases the risk of buying Treasuries in the first place, which lowers the demand, which increases the interest. Where does this interest payment come from? Declining tax revenues! --which is, no doubt, the very reason why certain congressional members want China to revalue the yuan relative to the dollar: i.e. in order to increase the "competitiveness" of U.S. exports! Funny, no?

Want to hear something even funnier? The greater bulk of Chinese imports are really coming from U.S. corporations, who have merely outsourced their labor pools to increase their profit margins by selling to whomever is still employed. All of this is commonly known, but corporate self-interest is a sacred cow. Here is Congress, attempting to force Chinese monetary policy in order to protect ourselves from the depredations of American corporate culture. How ironic is that!? One might hope that our politicians could connect at least two of the most obvious dots, and thus begin to suspect that real solutions might just lie much closer to home than Beijing.

So why did Tim Geithner make a sudden trip to China yesterday? Many seem to presume that it was to offer some kind of olive branch, though in truth, no details of discussions have yet been released; however, the most logical inference we can make is that he was, and is now, highly motivated to plead with the Chinese not to revalue their currency, for the very reasons just discussed. Maybe the gods just love a good comedy in which the antagonist is quickly hoisted on his own petard; because if the Chinese ever do accede to official Congressional demands, it will primarily be only because it suits their own purposes. In any event, the U.S. economy --which is already coming apart at the seams-- will continue to unravel at an increasingly accelerated pace. Besides, the Chinese already have reasons of their own to begin a controlled rise in the relative value of the yuan, since it should be apparent to all that they are attempting to position the yuan to become the global alternative to the dollar as the reserve currency of choice.

When all is said and done, the continual economic deterioration of the U.S. is now unavoidable, primarily because its guiding lights are trapped in illusory catch-22's of their own making. For the underlying physical economy of main street is entire comprised of physical energy sources and processes. One can of course, symbolically misrepresent this basic reality with all the paper one cares to print, but the paper economy --the fiat "monetary" system, which appears so wonderfully flexible to the crackpot economists of the present day-- is, in reality, rigidly tied to the underlying energy flow that comprises the physical economy, in precisely the same sense that the symbolic representations of mathematics cannot be arbitrarily divorced from the dynamics of any given physical process to which they are applied.

The alleged "recovery" is thus nothing more than an illusion generated by an official distortion of the true facts and figures. Like the financial industry itself, the economic structure of the country is already a brittle hollow shell, and currently sustained by nothing more than a highly sophisticated, but symbolically fraudulent system of arithmetical smoke and mirrors. Timmy G. is merely a mouse at the base of an avalanche of pending effects, scurrying about in pathetic desperation. But there is simply no real room left for maneuvering. The Treasury market is already showing signs of severe stress, and beneath the public radar, the forces of decline continue to accumulate. The world is gagging on the vast sums of government bonds being printed and offered up worldwide. You can therefore be absolutely certain that interest rates will continue to be forced upward by the underlying market, regardless of every effort by Government Sachs to prevent it.

The lesson in all this is really quite simple. Ignorance with respect to the underlying physical nature of economic systems is utterly incapable of formulating any appropriate response to states of economic decline. To the clueless clutch of congressmen, modern economists and financial 'geniuses' currently in charge, it thus seems entirely reasonable to expect that an economic crisis can thus be addressed with methods of accounting. These people are neither capable of independent thought nor of understanding the very events in which they are immersed in terms of physics. They haven't the slightest notion that their economic "theory" is simply a futile attempt to exempt themselves --with nothing more in hand than a symbolic currency system-- from the inescapable grasp of E= MC2. Thus, every action they now take will simply boomerang around to strike them on the back of the head with a force in direct proportion to the depth of decline. We may in fact, expect them to continue until they simply pound their faces (and us with them) into the ground. Not, of course, that the little bottom-feeders would ever notice.

How to Prevent A Self-Amplifying Chaos

2008-07-17T13:19:00.001-05:00

There is now growing concern that in a relatively short time we may be looking down the barrel of an inflationary depression. As anyone who has read my theory knows, this is merely an extreme example of an illusory core paradox in which both horns of the stagflation dilemma --unemployment and inflation-- grow wildly out of hand at the same time. The pundits of the day currently believe that this is an unavoidable feature of economics per se. This is sustained to a large degree by the universal misperception that modern economics is based on money, when in fact, this is not the true foundation at all.

From a superficial perspective, energy is just another increasingly expensive product among a wide range of other, equally important products, and just happens to play a widespread central role. Consequently, everything done by the authorities in order to manipulate and prop up the money system merely serves to exacerbate the prevailing state of decline. Every conventional remedy simply maintains the same vicious circle of reason that produced the problem of decline in the first place.

We can therefore rest assured that a hyper-inflationary scenario, similar to that of the infamous Wiemar Republic, is now in the making. While this possibility is widely believed to be no longer possible, that was before the U.S. began to secretly export its inflation (that is, its excessive printing of currency) overseas with the strategy of "globalization." Unfortunately, there is now simply no place left to export the economic incompetence of the U.S. government and chickens are coming home to roost.

As I've said repeatedly, and will continue to restate in as many ways as I can think of, the only way up and out of this mess without a full scale collapse is to collectively grasp in what way any and every given economic system is nothing more nor less than an energy system in the purest and most fundamental sense, and not just an arbitrary process of multiple components and loosely associated factors held together by an abstract system of currency. Energy is the fundamental essence behind the entire spectrum of goods and services that comprise any given economic system. Thus in order to produce a truly stable and prosperous system of economics, it is absolutely necessary to fully integrate the value of currency with the only, underlying reality; thus my advocacy for a 'Joule Standard.'

But the adoption of a Joule Standard has multifaceted consequences. It's adoption implies more than merely equating the denominations of a currency with some arbitrary quantity of energy. It also implies the adoption of an altogether different function and role of government itself, while simultaneously expunging the concept of taxation altogether from the equation of its existence. In brief, one of the first practical steps towards resolving the paradox of economic decline is to systematically replace the practice of taxation with the production of energy as a governmental service to society at large. In this manner, governmental services may be funded without the government becoming an ever-expanding, parasitical burden on the very population it was intended to serve.

Everyone today actually believes that taxes are as inevitable as death, when in reality, it's merely an artifact of muddled economic concepts. Every vestige of taxation can be entirely removed from the phenomenon of government, and the cost of government from the cost of every product; unlike today, in which the cost of taxes accumulate to an extraordinary degree before any stage of final consumption. The only way to literally energize an economy is to implement a two-fold approach that addresses (1) the cost of raw energy in every form in terms of energy, and (2) increases the quantities available. The goal is of course, to flood the system with energy.

One-Pig Certificates

2008-04-17T13:21:00.000-05:00

A religious organization once effectively ruled Europe for over a thousand years, but in the aftermath of the "Enlightenment" we have come to refer to that period as The Dark Ages. And yet, we still have a long way to go before we have completely removed the layers of unquestioned assumptions that still insulate our ignorance. For example, the whole of civilization is ruled today by the convoluted reasoning of so-called Modern Monetary Theory(s), and in spite of mankind's daily experience that something is deeply awry, no one questions why economists are still unable to provide a fully consistent explanation for the economic phenomenon. That something is profoundly wrong is particularly self-evident at the level of macroeconomic events, whereat every authority and institution has nothing more than a system of educated guesses and dubious statistics to guide them through the apparent maze of events. The field of economics is unable to provide a consistent definition for "prosperity" --a challenge that one would otherwise expect to be fairly simple and straightforward.

So in spite of every indication that the field of economics is simply unable to explain the nature of economics --especially in terms of currency alone-- the field as a whole nevertheless continues to cling to the bizarre notion that a mere medium of exchange can be so "fundamental" to events that it can be effectively utilized as the very essence of the economic process itself.

And therein lies a fatal flaw with global consequences that manifest in terms of perennial widespread political and economic instability. For in reality, money is merely a tool for the underlying reality, and as a tool shares the same fundamental meaning common to every tool: as a device to effectively amplify the energy of the economic continuum. How? --by reducing the total quantity of energy that would otherwise have to be expended (consumed) for a given number of trades... In other words, it has a direct bearing on the underlying physics of the "economic" continuum. Unfortunately, this result is already presupposed by the present system, and no further vitality can be injected into a given system simply by manipulating the quantitative flow of the prevailing currency.

The only exception to this rule would be if energy was the currency of the day...; that is, if the money system was fully integrated with energy as the source of all "value."

But this explains why every attempt to prevent or mitigate the ravages of economic decline simply by manipulating the Money System has never proved to be very effective; because if you wish to truly control the system at hand, increasing the flow of energy through the system is the only effective means. After all, this has been natures' way since time began.

Since all this still very problematic to a great many people, I will therefore offer a simple parable to illustrate the distinction between the Money System and the underlying Energy System of physical reality: This is the parable of One Pig Certificates:

Let's say that I have a small herd of pigs. This herd is the essential substance of my personal "economic" system. In order to maintain this economy, I must of course provide a source of energy (food) for these pigs to consume, or else they will neither grow nor even remain alive. In short, each pig is an organic energy system that, in turn, requires an organic energy source.

This is a circular, feedback energy system.

Pigs eat in order to continue eating; just as I continue feeding pigs in order to feed myself. The pigs themselves are an organic source of energy for me; otherwise, I would not have the energy to continue raising and feeding pigs. It's a system: I, the pigs, the food that the pigs eat, and the energy I expend to insure that the pigs are fed, comprise an economic continuum of events. Moreover, the more pigs I have (more potential energy in my possession) the wealthier I am, because the energy they represent is absolutely equivalent to the total "value" with which I make my living.

But now, let's say that I need to paint my house and the front door is hanging off its hinges. I'm too busy maintaining my pig system, so I don't have the time (i.e. energy) to repair these things myself, and therefore must find someone else, but the only thing I have to offer this person in fair exchange for their (labor) --the energy they must expend in order to complete these tasks-- is a pig.

However, for whatever reason, while they are willing to expend the energy, they cannot immediately take possession of the pig itself, so they are willing to accept a title to a pig instead and perhaps come back at a later date to collect it --although they do mention in passing that they might also trade this title to their Uncle Sam on their fathers' side in exchange for a small plot of land-- so! on a piece of paper I write: "Good for One Pig. This Certificate May Be Redeemed by Any Bearer for One Pig." After the worker has completed the job, I then give him this Certificate and off he goes, and we are both pleased with the transaction.

But what if the pig to which he now has title dies? What if I run out of food (the fuel source for my pig economy) and they all die? What would be the "value" of the One Pig Certificate I gave him? Absolutely nothing, of course! Why? Because the "value" of the Certificate I gave him is based entirely on the essence of a purely physical reality. It is in fact a concrete energy system --not a Certificate System that can be manipulated to produce prosperity.

The real principles of the "pig" economy are thus the energy principles of the "value" of food. For example, the idea of deferring payment by means of a written promise on paper is itself surely an abstract concept, and it can be exchanged over and over again by others in a long chain of deferred payments. However, at some point, the economic process itself will spontaneously require a final accounting: --in that the essence of the "value" that backs all these transactions is truly supported by some form of accessible energy (labor, food, fuel, tools, etc).

Otherwise, I would be able to merely feed my pigs One Pig Certificates instead of their favorite energy sources, and all would be well. But naturally, only a government would think that it could do that with impunity...

For instance, what if the worker who received title for his potential pig also decided to simply print copies of his One Pig Certificate, and then offered these as redeemable One Pig notes in exchange for, say, bushels of corn, stacks of lumber or perhaps, a very, very long vacation out of town? If the pig he was given title to gave birth to a litter, then there might be enough pigs to go around, but if not, all of his One Pig Certificates in total would still only be backed by one pig in reality --and the realizable value of each Certificate would depreciate in direct proportion to the ratio of Certificates to Pigs. In other words, each Certificate would potentially retain its stated value only if the energy system that it stood for also expanded in direct proportion.

The point of all this is to merely underscore a fact that seems to defy the perceptive power of conventional intelligence: that the dominant principles of the economy are not based on the nature of currency or the principles of money management, but are based only on the physical energy resources of the underlying system! In brief, "economics" is not a sociological field at all: it's a field whose principles are ultimately derived from, and dependent upon, the principles of pure physics.

As even as the U.S. economy continues to spiral downward therefore, the quasi-public control center of the money system --otherwise known as the 'Fed'-- is actually oblivious to the most fundamental principles of economics, and has little power to do more than merely normalize the rate of descent.

So naturally, when one is unaware that "value" is just an unrecognized synonym for energy, then ones' interpretation of the system one thinks one perceives is axiomatically disassociated from reality. The Money System thereby becomes nothing more than a highly relativistic, schizophrenic power tool without any firm foundation, and our authorities , who devise macroeconomic policies based on monetary principles alone, cannot even make sense of the dynamics of money. And how bizarre is that?

In the final analysis, the public is much like a hostage victim, trussed up in the back seat of a speeding car, with a four-year old in charge of the steering wheel.

The Post-Paradox JOULE STANDARD

2008-04-07T08:10:00.000-05:00

"Energy is also measured in joules. In many ways it resembles money: it is a currency in which all processes in nature must be paid for. Just as money can come in dollars, pesos, yen, rubles or liras, so energy can come in many forms--electricity, heat, light, sound, chemical, nuclear. The expression for the total energy of a system of objects can be written

E = (potential) + (kinetic) + (electric) + (heat) + . . .

where "kinetic" for instance stands for the sum of mv²/2 for all the component parts. And it is still true that if the system does not interact with the outside, the total value of E is conserved."

Blueprint for a National Consumer Organism:

1) THE GOVERNMENT DECLARES ITS INTENTION TO BECOME A NET ENERGY SUPPLIER (AS OPPOSED TO A NET ENERGY CONSUMER.

2) The government then first declares that it intends to support the value of its currency in terms of energy, such as a given quantity of joules/kilowatts (in lieu of gold or a basket of commodities, etc.)

3) Concurrently –recognizing that both taxes and the cost of energy are sequentially accumulated to produce the final cost of EVERY product and service, the government then announces that it will begin to implement this policy by first establishing what begins, at first, as a closely regulated National Energy Preserve (NEP). The NEP is initially comprised of every entire direct supply chain that eventually results in the final production of some form of renewable energy technology or energy production (i.e. from mining to transportation to final assembly and to the point of purchase)

4) Within every direct supply chain, every form of tax, inclusive of all Local, State and Federal taxes, is then selectively and retroactively eliminated (i.e. from the mining of ores to final product output, etc.) –and specifically, all income taxes—while simultaneously limiting the profit margins (calculable in terms of the Joule Standard) of every entity within the NEP to some predetermined maximum. The total effect of this step is thus an immediate reduction in the final cost of each and every technology involved, and therefore ultimately also the cost of energy production as well.

5) The government then immediately begins to purchase these technologies in terms of its new currency, while simultaneously obtaining the means to support its stated value (the number of joules per krona, dollar, ruble etc.)

6) As the final cost of technologies within the NEP consequently decline --and thus the cost of energy itself-- the potential cost of energy for the industries themselves is also reduced. This of course, compounds the reduction in cost obtained through the elimination of taxes, so the government now has an increasingly cheaper source for energy producing technologies.

7) Since the government is highly motivated to remain a permanent customer, as the cost of energy declines (now measured in terms of energy) declines, the effective value of the currency increases at the same time as the level of employment.

8) A powerful feedback loop (economic continuum) is now begins to be established, within which, the production cost of energy and renewable energy technologies is dramatically reduced (relative to the extreme inefficiency of the traditional capitalism). Moreover, as the energy supply expands, the cost efficiency of production increases, this is synonymous to an expansion in the “money supply,” as well as a continuously declining need for taxes.

9) As an expanding source of energy in its own right, the government thus has two ways to increase its effective revenues: First, by paying the salaries of its own employees in terms of energy (either directly in terms of energy via the power grid, or in term of currency backed by this self-same energy) --but also by selling energy to the private sector. The potential to do either is therefore expanded merely by increasing its potential as a net energy source.

10) Now, in order to further reduce its expenses while simultaneously expanding its ‘monetary’ base, it then selectively begins to expand the elimination of taxes it began within the Energy Preserve, as it simultaneously begins to serve as an inexpensive energy source for industries that provide more traditional goods and services –specifically, all those goods and services that the government also need in order to function.

11) At some point, the amount of energy the government consumes is exceeded by its potential production. From this point on, the same process begins to accelerate throughout the remainder of the economic continuum –a continuum that is now completely premised on the production of renewable energy.

12) In other words, every individual consumer becomes a potential source of “money” (excess energy production.) The cost of production continues to decline at every level –and yet the “value” of the money remains utterly constant. Why? Because it represents the very essence of the “economic” process.

A summary of consequences…
Finally, in stark contrast to the fundamentally parasitic system of fiat currencies, as the Post Paradox Joule Standard economy approaches saturation:

A) The conventional practice of ubiquitous taxation is ultimately eliminated.

B) The concept of a Central Bank is rendered obsolete –being replaced by a widespread, decentralized process of energy production that “funds” itself.

C) The fundamental problem of economic decline is permanently resolved. For instance, the primary source for ‘stagflation’ (high levels of inflation and unemployment as the twin consequences of reduced energy flow) is simply contradicted by the Joule Standard itself. Employment and currency values increase simultaneously for the same reason: i.e. Energy costs decline as the energy supply rises, which amplifies the potentials for human endeavor.

D) In short, while the present system is maintained by an elite corporatocracy dependent on a system of “cheap” labor (encoded as “free” trade), controlled shortages (OPEC, Big Pharma, etc.) and maximized profits in the context of continuously inflated currencies --the Post Paradox Joule Standard automatically re-structures the very logic of the system itself to produce the opposite result: the elimination of poverty.

VII. Primordial Principles (a work in progress)

2008-03-29T14:33:00.000-05:00

Sensory feedback (a circular continuum of energy values) defines the internal economy of every consumer organism. This is the primordial template of the economic process.
The feedback energy loop between every consumer organism and its quest for food is the seamless extension of the internal economic process as it projects (expends) its energies into the external economic environment.
In both form and function, the seemingly “objective” economic process is therefore always an inseparable “externalization” –a projection in principle-- of the internal economics of the generic "consumer organism."
As a projection, the externalized system is instinctively guided into forming an ever more accurate structural approximation in principle of a consumer organism –as the model and template of economics.
The more the economy comes to mirror the structure of the internal economic process in principle, the greater its capacity to generate wealth.
Therefore: the more closely the external economy mirrors the form and function of the internal economy, the more powerfully it approaches a state of “health” –i.e. ever-more effective states of “prosperity.”
An economic system –being sole the projection of the single reiterative principle of energy feedback – is thus also a primary example of a dynamic fractal in motion; that is, a structure that appears almost infinitely complex from one perspective, but is also nevertheless sublimely simple to its very core.
The fundamental “cost” of any and every product or service is an intuitive measure of the total energy expended to produce it.
The basic value of every tool lies in its capacity to effectively amplify the internal energy of the consumer organism as it is projected into the environment at large.
Money is a tool. Its fundamental value is therefore not “abstract.”
The “physics” of money, with respect to the underlying energy system, is two-fold (1) to generate greater efficiency for each transactions and (2) to provide a numerical representation for the total energy expenditure required to produce any given product or service (actual or assumed).
Within the sensory economy of any consumer organism, “information” and “energy” are flip sides of the same coin. Information is energy applied to increase the efficiency of any given consumer organism. Its fundamental value is therefore not “abstract.”

VI. The Myth of Economic "Complexity"

2008-03-18T10:23:00.000-05:00

"Our new economic approach is rooted in ideas which stress the importance of macro-economics, post neo-classical endogenous growth theory and the symbiotic relationships between growth and investment, and people and infrastructure." ~Gordon Brown

On Sunday, March 16, the Minneapolis Star Tribune ran an article titled, "With no rules for crisis, Fed must improvise." No rules? How is it even possible that after more than two centuries of formal economic study, the field still has no "rules for crises"? Obviously, something deeply fundamental is awry; but if pressed for an answer, economists will respond virtually to the last man that the economic process is simply 'too complex;' that it is a system comprised of a vast number of different components with different functions, and that these are all inseparably bound up in an interlocking tangle of circular relationships.

However, there are very strong reasons to suspect that this may just possibly be an illusion. For the great failure of modern economics is in that it has been unable to identify a common denominator in order to pull it all together, for common denominators are absolutely irreplaceable as the sole means to integrate any seemingly disparate set of components into a cohesive, comprehensive and unified point of view.

Without a common center, the relationship of any given part to the whole must otherwise be analyzed as a basically independent factor; but at best --particularly since economics is permeated throughout by the nonlinear dynamics of feedback-- this approach merely creates an expanding web of unspeakably complex relationships. And this of course, is the modern experience. But a common denominator makes it possible to describe every facet of the economic process in terms of a common language, and the result is a completely unified point of view.

Now, the argument I've been advocating in each post --and which is actually very simple to prove-- is that this common denominator is energy --thus, "economics" is fundamentally a branch of applied physics. From this perspective it then becomes increasingly clear that study of economics simply made a bad beginning and became muddled very early on by mankind's almost universal fascination with money. Economic theorizing thus began with a small set of unquestioned assumptions surrounding money, trade and the nature of "value" as givens --when in reality, the dynamic nature and flow of energy in states of feedback has always been far more fundamental to the principles of the economic process.

Instead, given that money had value, and this value was designated in numerical terms, the study of economics did not really begin with any truly objective analysis, nor with any attempt to delineate its most fundamental nature by first simply tracing it back to its earliest possible point of origin. It began somewhere in the middle, already weighted with a syntax that was poorly adapted to the purpose of describing events in more fundamental and energetic terms, and it never recovered. Today however, we can make a fresh start simply by tracing the origin of the economic process back to the dawn of life itself; and in doing so, we come to clearly realize that the most fundamental source of economic "value" that ultimately maintains the value of our monetary system is, in and of itself, neither abstract nor subjective.

It has become a matter of faith for economists that money comprises the most fundamental essence of the modern economic process, even though in practice this simply doesn't really work. To understand why, imagine that physics was as widely studied as it is today, but no one had any concept for energy; that it had calculus, but without any underlying thread with which to balance and ground its equations. Under these circumstances, it could only describe phenomena in the most indirect, metaphorical and complex terms. Its descriptions of physical events would be inevitably disjointed and filled with inexplicable mysteries, unaccountable attributes, and paradoxes. Indeed, the more one tried to describe the whole, the more one would wander into a maze of complexity.

This is precisely what happened to the study of economics: it is a physics without roots.

So today, we have no choice but to hear Douglas Elmendorf, former Fed economist say: "Modern monetary policymaking puts a lot of weight on rules, but there is no rule book for an economic crises."

This is surely a completely absurd state of affairs, when all anyone really needs to do is to begin at the beginning --first, by observing the universal relationship of every consumer to food (a reiterative energy loop), and then recognizing just when this process must have begun. It then almost immediately pops into focus that the so-called "economics" of life is --and always has been-- nothing other than a circular, feedback energy process that has comprised the sole, unadorned essence of the economic process for eons; a cyclical phenomenon in which every consumer organism --from single-celled creatures to office workers-- is kept in a state of constant search for that which represents the essence of greatest "value": i.e. the energy in food.

It is a revealing thought experiment to just hypothetically subtract all of the potential energy from any given food source, because it then also becomes apparent that one is thereby also subtracting all of its "value." In other words, we see that "energy" and "value" --particularly in this instance, but also in a more universal sense as well-- are fundamentally interchangeable concepts. We can thus legitimately refer to economics as a "physics of value."

This same basic equation thus holds true for every other component of the economic process. Just look again at the underlying identity and common meaning hidden within such elements as work, fuel, tools (all based on the physics of energy forces), systems of tools (factories) in conjunction with labor, and last, but not least, money. Money, as we intuitively express it, is power.

But what is the energetic "value" of money? Money shares the same basic definition of any tool --in that it introduces a quantitatively higher level of efficiency into the economic process. By means of money, we don't have to carry lumber, corn or machine parts around on our backs in order to make a transaction. Its use thus effectively introduces the equivalent of more energy into the process, for here as everywhere, efficiency means less energy consumption.

Every aspect of the economic process, every product and service and transaction thus ultimately represents an energy value --even in the case of the (supposedly) completely abstract value of modern currencies. Every given component is either an energy source or an energy process or, as in the case of money, equivalent to an energy source, for the quite simple reason that "economics" is just an example of the messy physics of life.

This is why "economics" is really just an unrecognized field of applied physics. It's an Energy System blanketed by a Money System. So by virtue of a now recognizable common denominator, we can proceed to integrate our explanations for economic events in terms of a common language, which then leads to the matter of engineering a completely unified and comprehensive economic system

In the process, we can now clearly see for the first time that the phenomenon of economic decline is basically nothing more mysterious than a decline in energy flow. It signifies that energy output, in terms of labor and/or food and/or fuel and/or energy generating technologies, is in decline due to an insufficient input. But this cannot be corrected by manipulating the money system, because varying the flow of capital by any means has no positive net effect on the economy at large, for the simple reason that its effective contribution --in terms of efficiency-- is already built into the system.

In other words, since the principles of monetary theory are based on a purely abstract concept of value --and not on any concrete physical essence-- today we find ourselves with an unstable economic system built on stilts. That is, on a purely psychological "trust standard," on "consumer confidence." In brief, on a very, very shaky foundation indeed.

Thus modern economics is deemed "complex" --and arguably schizophrenic-- but only as a consequence of the very perspective that maintains it in the first place, for its underlying reality is sublimely simple.

For the moment, the future is therefore a hairy prospect, but in spite of the looming potential abyss, it does not mean that we have to slide down the same slippery slope that ate the Soviet Union. For because our economy is a system --because it is an energy system; and because it is an energy system that is both represented by a tool and built upon the use of tools --the economy is, in and of itself an unrecognized and untapped technology.

This means that, as a technology for the production of energy --and as a process subject to clear and obvious engineering principles-- its potential for producing prosperity lies far beyond our accustomed norm. We merely need to start paying attention and rethink everything from scratch.

V. The Foam and Froth of the "Trust Standard"

2008-03-15T11:50:00.000-05:00

Beneath the roiling foam of the currency universe, the value of every economic transaction is ultimately grounded in an unrecognized energy standard; and of course, effectively all nations once adhered to the now antiquated Gold Standard. But when monetary theories gained ascendancy, modern systems were deliberately detached in practice from physical reality in favor of a system of "floating" currencies dependent on trust and confidence. Since this 'trust standard' is purely psychological in nature, it is inherently unstable.

A monetary system divorced from the underlying energy system of physical reality is at best a shell game run by the powers that be as a means to manipulate the economy in its favor --and in favor of any subsystem that supports this status quo. For the essential economic core will always remain an energy system, no matter how much our money-centric authorities may strive to resuscitate the illusion that the value of money is just an "abstract concept" and, thus, "consumer confidence" --all, to wit, to avoid a global mood swing.

In the final analysis, the Law of Conservation of Energy will always spontaneously and automatically re-assert itself to restore the balance of economic forces as it exists in reality.

This is why any volume of a currency, whose representative value has attained levels above and beyond the value of the total energy flow of the underlying economy, is no more substantial in reality than a bank of sea foam, and can always potentially evaporate at a moments notice for purely psychological reasons.

IV. The Template of Origin

2008-03-14T09:51:00.000-05:00

Contemporary economists have failed to grasp that the fundamental economic process itself did not originate with trade or money, but is inseparable from the fundamental dynamics of life itself. Earths' earliest single-celled creature, for example, was a consumer organism; an organism continuously employed in the quest for that very thing which represented the essence of greatest "value" --energy.

This process is an energy feedback loop: Life expends energy in the endless quest for food in order to obtain the energy required to continue the quest. This is pure physics.

For hundreds of millions of years this single dynamic loop comprised the very essence of the economic continuum, and it necessarily remains in force to his very day: a circular energy process that in turn, comprises the very essence of age-old search for "value."

Since the principles of physics remain invariable by their very nature, they therefore also remain the granite foundation of "modern" economic systems. But why is this not recognized nor taught by academia? Perhaps because the history of economic theorizing itself simply began somewhere in the middle, as it were. Men such as Adam Smith --and largely all those that followed-- simply accepted such secondary, foreground concepts as "trade" or "money" as "fundamental" to the essence of modern economics. Ever since that time however, the concept of value has remained as muddled in the minds of men as rootless, metaphysically subjective abstraction that economists today would really rather not talk about at all if they can avoid it. After all, their background is in sociology --not in the concrete principles of the real world.

This is why the function of money remains problematical to this very day and the economy at large is permeated with head-scratching conundrums and other inexplicable market phenomena, because the money system is simply not rooted in reality. Thus once again a storm of global instability and economic decline is looming on the horizon, but no one is at the helm to guide us through--because the principles of modern monetary systems have never been fully integrated with the far more fundamental energy principles of the underlying process.

Yes, the world is increasingly aware that energy is an issue. However, until the world also realizes that energy is not only not just another product or service among a host of products and services --but comprises the essence of the value of every product and service-- then everyone will forever miss the point, and no one realize the importance in understanding that every economic system is itself an energy generating technology.

III. How to hit a nutshell...

2008-03-11T08:55:00.000-05:00

Someone whom I once whacked on the head with a hammer back in the '50s when he was still in the cradle --no doubt just to show him who was boss-- recently remarked that I should concentrate on cold fusion instead, because he was pretty sure that the things I was saying were already being taught in the classroom. hmmm. ...now just where did I put that hammer?...

I had to smile, but I realized that I obviously hadn't made myself clear enough to hook the attention of any casual reader in the first crucial seconds of perusal --especially since so many people discuss economics so frequently, and we are so inundated by the opinions of pundits every day, that no one really believes there can possibly be anything new of significance to say about the typically bore-me-to-tears topic of "economics." Naturally, this doesn't provide much motivation to ponder that perhaps not everything may appear to be as it seems on the surface...

In fact, most people are not even aware that the field of economics in its present state is unable to provide even a consistent definition for something as intuitively self-evident as "prosperity" --much less explain why macroeconomics is such a slippery phenomenon that its global experts are truly forced to admit that they cannot "understand ...the role and importance of money."

Thus anyone who might feel they can second-guess what I'm talking about after overhearing just a few, easily-misunderstood remarks referring to value and energy-- is, understandably, highly unlikely to spend much time thinking about it any further --unless perhaps, if I manage to compose a summation so brief and pithy that it expresses precisely why it leads to an explanation far more powerful and comprehensive than any conventionally devised theory today.

This has naturally been a never-ending quest for me, but let's try this one on for size:

The economy is comprised (under present conditions) of two different systems: a Money System and an Energy System. The Money System represents value entirely in abstract, numerical terms; and yet, in the underlying physical system the meaning of "value" is fundamentally synonymous with energy. This means that the "economy" is essentially a manifestation of applied physics. Consequently, the numerical principles of the Money System are fundamentally different from those of the Energy System. This is why economic polices based on the manipulation of the money system have so little affect on the actual dynamics of the economy such as, in particular, states of economic decline. However, when we begin to describe the economy as an energy system, we have access to a common denominator that finally allows us to completely integrate --and thus explain-- every aspect of the economic process including the currently mysterious nature of money.

Is this sufficient? I can't tell yet, but I'm absolutely certain they are not teaching anything even remotely like this in todays' classrooms. So if you're interested in a more comprehensive outline of the reality, please request a pdf copy of "POST-PARADOX ECONOMICS: The First Definitive Solution to the Problem of Economic Decline and the Underlying Reality of the Economic Process" --and I'll email it to you. If you're in no particular hurry however, I'll also be providing a download link to this same document in the near future --just as soon as I can figure out how to use Fetch...

II. Interest Rate Teeter-Totter: The Core Conundrum to the Monetary Mind

2008-03-08T11:24:00.000-06:00

In spite of appearances, and as crazy as the following proposal may sound the first time around, money --which is merely a medium of exchange-- is not actually fundamental to the essence of the economic process. It is just a symbol for a deeper reality. We can, for example, viably describe modern economies as being actually comprised of two different systems: (1) a money system and (2) the underlying energy system that it merely represents. However, the recognized principles of the former are quite different from the principles of the energy system, and this is why governments --in spite of all rhetoric-- are virtually helpless in the face of deteriorating economic conditions: their economic theories and systems have no recognizable center and thus remain un-integrated. So they attempt to manipulate the underlying energy system indirectly with the money system, but it is badly misaligned with the underlying reality.

Money, in and of itself, is just a generic contractual device; a generic promise-to-pay that is not far removed from the dubious significance of a personal check. Its primary advantage lies only in that it allows one to reach into the common pool of "goods and services" at any time and place on the continuum of "value," and obtain some item or service that took approximately as much energy to produce as the consumer contributed in turn, in terms of work (energy input to the flow). This is its only intrinsic value: i.e. as a tool.

Like any tool, money provides energy efficiency for each potential transaction: no one needs to physically lug around corn, lumber or barrels of oil to make a trade. Although money is essentially conceptual, it saves people a great deal of energy. It therefore serves as the effective equivalent of an energy source. However, since currency cannot otherwise physically inject energy into the process beyond this function --its effect already being spontaneously accounted for-- this is why monetary strategies intended to "stimulate" the economy ( by manipulating the flow of capital) have so little real affect on states of economic decline. Increasing the flow of money may indeed energize a segment of the economic continuum (but!) --unless an injection of real physical energy is a direct result of this increase, then it will ultimately merely reduce the overall value of the currency itself.

This strategy is typically implemented by manipulating the prime interest rate. But raising or lowering the interest rate is like squeezing a balloon at one end or the other in a futile effort to make it larger: For example, if they raise interest rates to constrict the money supply in an effort to "fight" inflation, the flow of money is reduced, so it exacerbates unemployment; but if they lower them in order to increase the flow of currency and thus create more jobs, the rate of inflation is amplified. Thus again, there is no net gain with respect to the underlying reality, so if an economy is experiencing a fundamental internal decline of energy in real terms, it will continue to decline.

This represents the central economic paradox of our times. It remains an unresolved chicken-and-egg conundrum that never really fully disappears even during the best of times, because it is basically a characteristic consequence of prevailing, money-centric interpretation of the modern economic process.

It is therefore highly significant that, while this may represent an "unresolvable" problem to our monetary authorities, we can point out --and easily demonstrate-- that any significant increase in the available abundance of energy (and thus also a corresponding decrease in its relative cost in terms of money) will induce the completely opposite effect, in that it will spontaneously reduce inflation and increase employment at the same time.

The reason, as we will continue to assert, is actually quite simple and straightforward: It's because the underlying physical economy is fundamentally an energy system, not a money system.

I. The Physics of Value: Why Current Monetary Theories Fail to Reflect Reality

2008-03-07T09:58:00.000-06:00

As the International Monetary Fund website once candidly confessed:

“Although money affects all our lives and we deal with it every day, we understand very little about the role and importance of money and the international monetary system.”

Now, as a voice that is essentially speaking for the whole of the economics community, why would they say this? In the most general sense, the reason is because all economists still believe that their chosen field is a branch of sociology, when in reality, "economics" is an unrecognized branch of applied physics. In its essence, the economic process is a physical energy system. People work, they consume food, they buy fuel for the tool they use to get to work, and they work to buy food --or else the whole hamster wheel of progress quickly spins down to a halt.

Just as a quick test, for example, one merely needs to hypothetically subtract any one of, say, just three things to observe how the whole process immediately becomes unsustainable. These are: food, fuel and/or electrical power --each of which represents merely an alternative form of the same fundamental essence: energy.

For this reason, every aspect of modern economics can now be clearly defined and explained in terms of a system and process that is solely comprised of discrete energy forms and events. To food, fuel and electrical sources, for instance, we can also add human labor and the physics of mechanical industrial tools of all kinds. The Industrial Revolution --as a case in point-- was nothing more nor less than a revolution in applied physics: a revolution comprised of systems of tools (technologies) that proved to be of "economic" benefit simply because they directly magnified the effective energy of human labor. So if we slow down for just a moment to re-examine the whole continuum of events, it is not really very difficult to trace the continuous circulation of energy as it flows around the economic continuum, from one transitional state to another.

This is simply characteristic of the nature of physical reality everywhere, as a self-sustaining circle of energy processes. The laws of thermodynamics, for example, represents nothing more nor less than a set of purely economic principles: One expends energy in the hunt for food: food represents energy: the energy is incorporated by the consumer organism, etc. Energy is conserved, and the whole process manifests itself as an endlessly self-perpetuating, feedback energy system that began with the dawn of life on Earth (and of course, even arguably long before...). The relationship between any given consumer organism and its environment is therefore the prime template for the whole of economics: a reiterative process that reoccurs at every level of scale.

When the physics of tools are inserted into the process, the array of goods and services begins to proliferate, but the template remains completely unchanged in essence. For the fundamental "value" of tools --that is, any tool-- lies in the fact that it merely serves as a means to amplify the effective energy of any given consumer organism that may be utilizing them. That is, their "value" equals their applied force in every instance.

A farmer on a tractor (a tool that consumes energy in order to amplify the effective energy of the farmer) is a basic example of this very effect: the physics of "economics." But of course, if one is viewing all this from a 'sociological' perspective, economic events appear comprised of an endless, seemingly chaotic, and only loosely associated collection of "goods and services." This is a view fragmented by the absence of a common denominator.

On the surface of all this, we have a system to spontaneously account for every energy transaction: the money system. Money is a concept of representative, numerical, and thus abstract values, and this is naturally very different from the purely physical and utterly concrete nature of "value" (as in: What is the "value" of food) But because our economists have not yet glimpsed the underlying common denominator of events, the entire scope of economics has been preempted by monetary theories, and money --in and of itself-- is viewed as the heart and soul of the modern economy. But what is the true "value" of money? That it is also --and primarily-- a tool.

From a truly fundamental and completely integrative point of view, the economy is therefore not a money system at all --it's an energy system. The most fundamental principles of economics are entirely derived from the dynamics of energy --and not on the linear accounting principles of money. Appearances to the contrary, but consistent with universal experience, this is why the application of monetary theories have no net effect on states of economic decline.