Saturday, September 28, 2013

Non Sequestitur created the concept of multiple exclusive currencies and markets last year in the midst of bitter budget debates. Now our nation finds itself in the same position once again. The arguments about the sequester, the debt ceiling, and possibly shutting down the government are complex, but at heart the issues boil down to this: Shall we favor the lenders (the rich) or the borrowers (the poor)?

Our situation is not surprising, really. Half the nation wants to get more than it can pay for and the other half wants to take ever-greater advantage of the first half. Half the nation wants their debts to be forgiven if they cannot pay them and the other half wants debt to haunt debtors forever no matter what their situation. Using Europe as a metaphor, half our nation is Greek and the other half is German. Since everyone's vote counts the same, half our politicians represent the "Greek" view and the other half represent the "German" view. There is no real consensus on much of our legislation, so the legitimacy of our very laws and the level of interest in enforcing them are now open questions. That is why it is hard to get anything done. Can a house divided stand?

Let us note also that our politicians are mostly rich people. Even the solutions provided by the "liberals" have a tint of the rich to them. Take student loans, for example, which were touted as a "liberal" policy. Yet the money comes from loans, not grants, and they are meant to be paid back. They are immune to bankruptcy, so no borrower will be forgiven of them anytime soon. Yes, the easy terms help and eventually the loans will be forgiven, but there is no getting around the fact that when students borrow from the government to go to school, they are signing up for twenty years or so of economic servitude to the government. That does not seem very "liberal."

Before we became, we struggled with the issues of borrowing and lending along with the rest of the U.S. On the one hand, it seems only right that competent adults should be required to obey the terms of the contracts that they freely commit to. On the other hand, we have also seen the rich take advantage of this system, negotiating their way out of their own obligations because they are "too big to fail." At the same time that they wiggle out of their own commitments, they speak of the "moral hazard" of letting the poor out of theirs -- and their minions lay off millions. Then the rich and their minions take the homes of the poor away because they no longer have jobs and cannot make their payments.

The military now speaks of asymmetric warfare between regular armies and terrorists. Similarly we may now be able to speak of asymmetric market competition and asymmetric enforcement of contracts and the law. In the U.S. we like to think that we are free and equal with one another before the law, but that is now and has always been an illusion. (Consider the African American experience, for example, if you doubt this.) The rich are more equal than the rest of us.

Once we realized that an asymmetric, unbalanced market like ours can never truly be competitive or "capitalist," we also realized that our economic system will never really work in the sense of providing the masses with ways to work, produce, earn, save, and retire in economic safety. The rich just have too big a competitive advantage. When we realized that, we became

Therefore, on "this" side of capitalism, the capitalism of the U.S. and the Euro Zone today, there are no solutions. We are trying to patch a fundamentally broken system. Our people and our politicians are arguing about which band aid to use on the surface when under the skin, the bone is broken. That is another and more fundamental reason for our current economic and political confusion. We are arguing about the wrong things. The pieces will never fit together and consensus is impossible.

These thoughts caused to re-frame the question. The question is not really about creating jobs or government spending or debt ceilings or gold standards or even shutting down the government. The question is how to re-balance our asymmetric, unbalanced markets. Why are we letting the sharks eat up the little fish? Why are we letting the rich take advantage of the poor? Of course we should not allow it.

Once we asked ourselves the correct question, the solution was simple and obvious. Separate the sharks from the little fish. As long as both the rich and the poor "swim" in the same pool of money, they cannot be separated. The next step in the solution, therefore, is to create separate pools of money, some for the rich and some for the poor. Create barriers so that the sharks cannot get into the pools of the little fish. That is what the concept of multiple exclusive currencies and markets is all about.

Read the other posts for more. We have been developing these ideas for more than a year now, so there is plenty of material to stimulate thought.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism

Sunday, September 22, 2013

Tosoc Update 20130922

This is one of those weeks where nothing quite came together in time, so we are falling back to a simple update.  For example, we think there are many lessons to be learned from the recent strike by Bangladesh garment workers.  (The link is to the Yahoo!  Finance report on this event.)  In fact, the problem is that short blog posts require focus, but we are having trouble picking from among the many lessons we see here.

To pick just one possible focus, the labor cost for Bangladesh's entire $20 billion garment export industry is less than 10 percent.  Where does the other $18 billion go?  Why is it so hard to pay workers more?

We believe that the issue is a matter of "keeping up with the Jones's."  The rich and the bureaucrats of each nation do not compare themselves with their local workers.  They compare themselves to the rich and the bureaucrats of the Western capitalist nations.  Each of them has to control at least the equivalent of several millions of U.S. dollars just to feel that they are socially competitive with Western business men and women. The same is true of government bureaucrats who deal with Western bureaucrats.

Therefore we think that the many people around the world who hate "Western imperialism" in it military form are incorrect.  It is not Western aggression that keeps them poor, it is Western wealth and the jealousy it breeds in local leaders -- leaders who must take advantage of their local populations in order to feel that they are significant players in the international community.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism

Friday, September 13, 2013

The Personal Impact Is Huge

We want to bring your attention to this Yahoo! Finance Breakout article: Student Loans Not A Threat. John Cannally, an economic strategist at LPL Financial, says that our $1 trillion in student loans is not that big a problem. He says:

"The personal impact is huge but the systemic risk is minimal."

Roughly speaking, using the numbers in the article, 20 million people owe about $50,000 each in student loans with payments of about $500 a month. That is $6,000 a year. On average, they spend 20 years paying on these loans.

That is, 20 million college graduates will suffer under student loan debt for what would otherwise be the best 20 years of their lives. Also, we graduate more debtors every year as a result of government student loan policy. The system is a debt factory, churning out new debt at a high rate. Yet this is not considered a systemic risk. Maybe the lesson here is that only the rich count. When the rich are at risk, then the economists start to worry.

This is all very well for the rich, but are the rest of us content with our debtor-generating, loser-generating society and the direction it is headed? says no, we are not content. We also say that this system is consistent with what appears to be the planned impoverishment of the average American worker that we mentioned in our No Jam Ever Again and No Jam Ever Again II posts.

On The Other Side Of Capitalism, our major universities for the rich would move into the external markets and use the external U.S. Dollar. They are hardly "American" anymore, anyway. They could even more freely follow their calling to be world universities for world citizens, as it were. They could keep their cultures of economic anxiety (see The Other Side of Education). They would operate very much like they do today, except that their relationship with the U.S. government would change. In the allocation of U.S. resources for education, research, and projects, it seems likely that the U.S. government would prefer internal universities to external universities.

Other U.S. universities would move into the new internal markets and use the new internal currencies. Since all of their students would also use the internal markets and currencies, all of their students would have basic room, board, healthcare, education, and transportation already. The changes that the internal universities would need are not things that could be done all at once, however, because it is not clear that the classroom model of education is best for the future, or even best for all circumstances right now. The one thing that is certain is that no one would leave any of them with student loan debt.

It is clear that our higher-education system right now is a giant debtor-creation factory that leaves most of its graduates struggling under high levels of debt. It is about creating scarcity and economic anxiety, making most everyone more beholden to the U.S. government and making them beg for jobs that pay enough to cover their student loan debt as well as their other living expenses. This seems unnecessary and destructive to

In contrast, the approach from the other side of capitalism is that higher education will be an opportunity-creation factory that leaves its graduates with no debt at all. Instead of suffering under the scarcity of economic anxiety, knowing "I have no choice," they will choose from the possbilities of economic abundance, asking "What is best?" We expect that the personal impact of this would be huge, too, but in a positive way.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism

Sunday, September 8, 2013

No Jam Ever Again II

Again, "The rule is, jam to-morrow and jam yesterday – but never jam to-day." Last time we discussed the expected future of declining wages in terms of Peter D. Schiff's 2012 book The Real Crash.

Now we have another example of the "decline and fall" expectations for the future economy of the United States. The Daily Ticker reports that two economists, Richard Burkhauser of Cornell University and Jeff Larrimore, a staffer on the Congressional Joint Committee on Taxation, say that demographic factors could push incomes down for the next 30 years. See the report at this link. The study will be part of of a Russell Sage Foundation book to be published later this year.

The study draws its conclusion from three major trends. The plateauing of the influx of female workers into the economy, the aging of the workforce (retiring baby boomers), and the growing percentage of minority workers (higher proportion of lower-income workers).

We bring this study up to point out that a future of declining U.S. wages is exactly what employers want to hear. As always, they want to lower their personnel costs. This study tells them that the longer they wait before hiring anyone new, the lower wages will go and the lower their costs will be. Just as monetary deflation encourages people to defer spending (you can buy what you need later for less), wage deflation encourages employers to defer hiring (you can hire the same person later for less).

Do these books and studies predicting lower wages for Americans really mean very much? Are employers really delaying hiring and offering less? Our slow recovery and wage stagnation are certainly consistent with these ideas. At, we think it is likely that the rich are expecting lower U.S. wages in the future and are acting in ways that will bring it about – as a sort of self-fulfilling prophecy.

This is not a conspiracy, in which the rich secretly get together and plot to lower wages. They just tend to react in the same ways to the books and studies they see. They make the same moves because they are all subject to the same economic pressures. In a similar way, the members of animal herds move in the same direction not because the members discuss it among themselves in giant committee meetings, but because individuals see what others are doing and none of them wants to be left behind.

Another point we want to make is that a future of declining average wages at this time is consistent with the view that U.S. economic history has been a series of cycles of wage inflation followed by wage deflation. The idea is that the rich increase the money supply and hire more people when they are anxioius (especially during times of war). They do the opposite when they are confident. General wage stagnation and relative decline right now indicates that the rich are becoming increasingly confident.

Therefore maybe the long-lasting World War II wage inflation period is finally, really, coming to an end. Maybe the wage deflation part of the cycle is taking over. (Reasons for the extension of the WWII wage inflation period are fairly obvious, we think, including the Cold War and its offshoots, plus the rise of international terrorism, which kept the rich anxious for an extended period.)

If the rich no longer feel that they need armies of Americans to defend their wealth ("armies" meant here both figuratively and literally), then we can expect more of what we are already seeing. Downsizing the U.S. military, persistent high unemployment, wage stagnation in a period of inflation, if not a literal fall in wages, and a future of declining economic prospects for the average American.

We do not expect to see this happen suddenly, however, for at least two reasons. First, a sudden decline in U.S. trade due to rapidly falling wages could easily put billions out of work around the world and starve many of them. The decline must be gradual to give other socieities time to adjust their internal demand to take up the slack. Second, a rapid decline would be a bit too obvious and raw to Americans, and could lead to political instability in the U.S. asks, however, why we allow these wage inflation/wage deflation cycles at all. Why have we allowed a system to arise that imposes the highest income volatility on those who are least able to protect themselves against it?

Even now, despite our previous posts, some of our readers might believe that we will blame the rich and say that they are evil-minded, dehumanized people who only want to squeeze the most that they can out of everyone else. That is NOT what we believe. The rich are neither saints nor devils. They are just people who are doing the best they can with what they have. They can appear to be monsters, however, because quantity has a quality all its own. The are just doing the best they can with what they have, yes, but they have so much. They unbalance markets simply by participating in them.

Even so, instead of the rich being the source of our problems, we believe that the our problems arise from the single currency and the fact that our markets have become competitively unbalanced. A single currency means that there is only one conduit through which we can attempt to handle a multitude of different problems. The single currency hobbles our policy efforts. It is "too narrow a pipeline." We can only really address one problem at a time, leaving the other problems to fester, if we have not actually made them worse. How can we have a set of monetary and fiscal policies for the U.S. dollar that satisfies, all at the same time, the Chinese, the Japanese, Warren Buffett, George Soros, small business owners of every type in every state, professionals, retirees, white-collar workers, and blue-collar workers? It cannot be done because all these market participants have different needs. One size does not fit all.

This statement of the problem suggests the solution. We need multiple sets of policies where each set is tailored to help a particular group of market participants. That can only really work if each group of market participants has its own currency, and its markets are relatively independent of the markets for the other groups. That way a policy tailored for one group cannot easily "bleed over" into and damage the markets for another group.

Therefore thinks that there really is something we can do to avert the expected impoverishment of the American people. Collectively, with control over our own currencies and markets via officials whose economic fates are entwined with ours, we can make better deals with the economic "800 pound gorillas" of the world. No longer would they be able to whip large segments of the population into submission with the lash of the U.S. dollar. No longer would they be able to divide us against one another and conquer us one-by-one.  Multiple exclusive currencies and markets are the answer.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism