Our world is approaching a financial tipping-point, which may be only
months away. When we do reach the tipping-point, the financial collapse will
be vast in its destructive consequences and in a matter of a few days our
world will change beyond our power of description.
The shadow of the approaching new reality is upon us and we can already
perceive its outlines; this allows us to talk of our civilization in the past
tense.
Professor Joseph A. Tainter, of the University of California, wrote a most
interesting book with the title "The Collapse of Complex
Societies". In brief, the message of the book is that all societies have
a habit of organizing themselves, and at a certain point, more and more
organization makes them increasingly less attractive to their members. People
then begin to leave their native societies and seek out other places to live;
or else they lose heart and become unable to defend themselves from
less-organized invading barbarians.
Undoubtedly, Tainter's perception is valid. Most of our world is now very
much "over-organized". Thinking people everywhere are worried and
uncomfortable and looking for places where they may find some refuge from the
unreasonable exactions of their over-organized societies. The trouble is -
where do you go? There are a lot of very peaceful islands out there,
excellent places to spend a vacation, but - who really wants to live in
"Bali Hai"?
However, there is much more than "over-organization" underlying
the present dire situation of our world. It's not only a question of too much
government. A powerful spiritual change has come over humanity. This
spiritual change began at the birth of the Age of Science, in the XVIIth
Century, when the Englishman Francis Bacon established the rules for the
successful investigation of the physical world, known as the scientific
method.
The scientific method involves controlled experimentation. When a constant
result is observed in controlled experiments, then the scientific method
proclaims a scientific truth. Thus, it is a scientific truth that a raw
chicken's egg, placed in boiling water at sea level, will be a hard-boiled
egg in 12 minutes.
The scientific method met with huge success, so much so that now humanity
has been able to send men to the Moon. Indeed, the trouble is that the
physical sciences have been so successful, that today their methodology is
being applied in fields that are completely inappropriate for such
methodology. Specifically, we refer to "Mainstream Economics" - the
"Economics" that is taught today at every single prestigious
university in the world.
"Mainstream Economics" is the child of Physics, and it looks and
walks and talks like its parent, Physics:
First of all, the central fallacious concept: "The Economy":
In Physics, when we say "The chicken's egg" we know exactly what
we are talking about. But when mainstream economists talk about "The
Economy" each economist, when pressed to do so, will give a different
version of what exactly is "The Economy". So right there, the fallacies
take their start. What these "economists" think they are talking
about, could probably be stated as "The economic activity of a group of
humans who live within the borders of X country."
But how do our mainstream economists define "economic activity"?
They say that economic activity is activity that involves an exchange of
money, or perhaps of credit, and thus by definition, economic activity has to
be denominated in a number of units of money. Thus, all human choices that do
not require the use of money escape the attention of the mainstreamers,
because the use of money involves numbers, and numbers are the essence of
mainstream economics, as they are of its parent, Physics.
What could possibly be said about an "economy"? About its humans
and their activities, in terms of numbers? The application of numbers to a
national group of humans, with any hope of arriving at any truth, is utterly
impossible.
Numbers may give us an approximation of what is going on in a country, but
certainly nothing more. As an example, Mexico is a country with a large
number of poor people - perhaps a majority of the population. The
"economists" and their buddies, the politicians, lament this
undesirable situation and are always promising to do something about it - and
that something invariably ends up lining the pockets of the politicians with
money extracted by taxation. However, notwithstanding the numerous poor
people in Mexico, international polls have shown that Mexico has one of the
happiest populations on earth. You see, mainstream economics counts numbers,
whereas the polls have registered what is in the hearts of the Mexican
people, and you can't put a price upon the satisfaction of the heart.
Here are some of the babblings of these children of Physics, mainstream
economists who apply terms appropriate in physics to human activities:
Terms of temperature, to measure physical heat:
"The economy is [warming, growing warmer, hotter, too hot]
"
"The economy is [cooling off, frozen]"
Terms of speed, to measure physical motion:
"The economy is [decelerating, accelerating, speeding up, slowing
down]"
"The velocity of money in circulation"
Terms of mass, to measure physical objects:
"The economy is in [contraction, expansion]"
Terms of physical state (gaseous, liquid or solid, in
traditional Physics):
"The demand for [Bonds, Stocks, Commodities] has evaporated."
"Market for [Bonds, Stocks, Commodities] is in liquidation."
"The dollar is a solid currency."
Where the babbling becomes utterly disconnected from any human reality is
when the variables are assigned quantities, just as variables are quantified
in Physics, and are then combined in mathematical functions to produce
indecipherable equations.
Mainstream economists love equations, they adore the simplicity of E=mc2.
But human activity does not operate on the basis of equating one thing with
another, it operates by choosing between what is preferable and less
preferable, in other words, not by equating things, but by differentiation in
power of satisfaction.
The mainstream economists wave equations and their derivatives, graphs,
before the eyes of the uninitiated; they claim superior knowledge and become
candidates for ascent into the realms of high finance and Central Banking.
The graphs become so important to mainstream economists, that the big
economists in Europe have come to regard graphs as reflecting a reality, and
if a graph shows that interest rates have declined to zero - well, why not
sub-zero interest rates? After all, in Physics, we have temperatures above zero
and below zero, so why not have interest rates below zero, as well as what is
customary, above zero? Mainstream economists think of their craft as branch
of Physics, and are thus dedicated to the control of Society for its own good
as good engineers. And so we have the total madness of "Negative
Interest Rate Policy" (NIRP).
One of the fundamental elements of mainstream economics is the numerical
calculation of a nation's activity. This preposterous attempt at quantifying,
or putting a number on the total human activity of a nation is called the
"Determination of GDP, or Gross Domestic Product".
The silliness of the pseudo-concept of "GDP" becomes quite clear
when we see that recently, English mainstream economists arbitrarily decided
to improve the numbers they provide to the politicians, and increased GDP by
including previously excluded activities, such as incomes from pushing drugs
or from prostitution. Next thing you know, they will be assigning prices to
the work of housewives in cooking meals, in doing housework and making love
with their husbands, by using the average prices for meals (whatever that
means) and the wages of housemaids, and the price for hiring a prostitute,
and putting all that together to find a numerical price for the activity of a
housewife. Multiply by the number of housewives, and you get a number that
can be added to GDP. Why not?
The error of displacing Quality, and the preferences
which quality of comparative satisfaction gives rise to, and introducing Quantity
into human affairs, when it belongs to the realm of Physics, is born of the
spiritual decline of humanity. In essence, the flight from Quality is the
denial of the existence of Spirit in human beings, whence is born the
capacity of each human to value. The mainstream economists, as such, consider
humans as simple machines which consume or produce, and treat us as such, in
their specious formulas. The valuations or preferences of flesh and blood
humans are disregarded because numbers cannot be assigned to them.
Since "Mainstream Economics" is only a sham science that
imitates the methodology of Physics, it turns out that "economists"
- at the Fed, at the ECB, and at every Central Bank in the world - in fact do
nothing "scientific" at all; they do nothing more than impose upon
whole nations their own personal value judgments while they destroy
the free markets, that are truly impersonal.
The "New Austrian School of Economics", as presented by
Professor Antal E. Fekete on his website, www.professorfekete.com, is true
Economics. Based on the original thinking of Carl Menger, the founder of
Austrian Economics, this school rigorously avoids the error of following the
methodology of the Physical Sciences. Our present "mainstream
economics", like Physics, uses Numbers, as opposed to the
"New Austrian Economics" which is based on Principles of Logic.
Unfortunately, both the "Austrian Economics" of Ludwig von Mises
and the improved "New Austrian Economics" of Fekete are quite out
of favor in academic circles today.
"Mainstream Economics" imitates the methodology of Physics
because of the enormous prestige that has accrued to Physics over the past
four centuries, and is thus leading the world to an economic, political and
social collapse which will mark the end of an Age.
