re: The market appears DRUNK!!!
I don't agree with everything I found here, but he has an interesting perspective on the importance of education.
they have gone virtually insane with a "lunatic faith in the magic of the marketplace." Americans have gone into a state of mass hysteria, in which the reality of economic
collapse, including the collapse in their own living standard, has become submerged in fantasies about endless gambling profits on the stock market.
larouchecampaign.com
Basic summary would be he believes today's profit is phantom in that it fails to account for the deline in the infrastructure, and that we are really *ucked as a nation, and possibly as a world.
larouchecampaign.com
One way that you can think of the Dow Jones: Think of the Titanic, and the people in the stern of the boat as it goes under. That's the real economy. If you have ever watched a boat go under, the bow goes up. That's the Dow Jones. But you soon realize where the Dow Jones must go, if the stern goes under.
Heavily edited:
The question is: Since neither financial market indexes, nor "Gross National Product" are any longer even approximately meaningful measures of performance of the national economy, what measurements should be used instead? This Special Feature defines and explains those needed measurements.
larouchecampaign.com
The saying goes: "Keep your eye on the ball!" That means that you should not allow yourself to be fooled by the fact that purchases and sales of much of the nation's
physical-economic output are measured in money-prices.
Just as in eating purchased food, it is not the money-price of that food which determines the effect of eating the food upon the person who eats. Never be fooled, as all too many ill-educated economists and members of Congress are, into assuming that the physical relations between production and consumption are determined by the relations among the prices paid for these physical products. Apples and nuts-and-bolts often have money-prices tagged to such objects; but, never assume, as most present-day economists do, that the mere price of nuts-and-bolts causes apples to grow.
If the U.S. were still a well-managed economy, which, admittedly, it has not been for more than a quarter-century, then, if General Motors is a profitable, well-managed firm, what conservative stockholder-"in for the long haul"-would be shaken by a drop in the price of the stock on secondary markets for financial paper? In saner times, serious investors bought into a medium- to long-term enterprise, or a long-term U.S. government bond; in a sane financial market, investors do not trade company stocks like baseball cards.
1.2 The bubble economy
Joe contracts with loan-shark Bill, to pay Bill $100 a week in perpetuity. For what amount can Bill sell that contract on some Wall Street or like-minded market? Allowing for expenses which Bill incurs, such as sending thugs to beat up Joe occasionally, how much is Bill "netting" out of the $5,200 a year?
Someone asks,"How much did Bill pay to Joe to create Joe's debt to Bill?" The question is irrelevant. Assume he paid him nothing, but either broke Joe's arm, or threatened Joe's children at the schoolyard: typical of the spirit of the tricks Wall Street has played upon the nations of Central and South America, or George Soros has played in
Southeast Asia, for example. Whether Bill paid anything, or nothing, to Joe for the contract, is virtually irrelevant to assessment of the market-value of the contract on the relevant Wall Street market. Meyer Lansky's mobsters called it "vigorish;" Wall Street calls it "financial leverage."
If the going rate for discounting such vigorish contracts were based on currently demanded yield of 20% per year, then Joe's contract to pay Bill would seek a market-price "worth" five times the expected perpetual annual income to be paid to the holder of the contract: as much as $26,000. In short, the "price-earnings" ratio at work. That would represent an amount approaching $26,000 of nominal financial capital, generated out of the "hot air" expansion of the indicated $5,200 annual yield.
The same "price-earnings ratio" magic applies to the case of gambling debts, or, the same thing, those exotic futures contracts called "financial derivatives." You don't believe it? Study the Black-Scholes formula which was used by the investors in Long Term Capital Management (LTCM) to dig an estimated $3 trillions hole in the accounts of the bankers investing in LTCM. The same magic applies to the case of the purely fictitious capital assets associated with the "junk bond" swindle. Virtually the entirety of the recent rise of the Dow-Jones index, especially since mid-October 1998, has been purely fictitious financial-capital gains, obtained as the result of exactly this sort of "price-earnings ratio" swindle.
In the case of the current Dow-Jones stock-market swindle, there are three driving factors generating that so-called "economic recovery"-"recovery" in the sense of the day the man on LSD sees "the dead rise to walk again." The first, and most important, is pure and simple insanity, sometimes also called "irrational exuberance" or "mass
hysteria." The second factor is hyperinflationary monetary pumping-up of the financial bubble by culpable agencies such as Alan Greenspan's Federal Reserve System. The third is the counting of purely fictitious financial capital gains-so-called "bookkeeping profits" on today's market-index upswing-as an income-flow.
In the wild orgy of today's "economic boom on Wall Street," a huge mass of purely fictitious income-flows-"indexed bookkeeping profits on trading"-is capitalized in the same general way Joe's hypothetical contract is parlayed from a $5,200 annual payments item, into a $26,000 fictitious capitalization. However, for this scheme to be kept in play, an additional factor must be supplied: a highly-leveraged flow of central-banking and related monetary aggregate into the market.
1.1 Ordinary financial profit
However, the U.S. economy as a whole has not generated a net ordinary financial profit during the past twenty-five years, or slightly longer. If we take into account long-term operating costs of the real economy, such as maintaining improvements in basic economic infrastructure, and the costs of supporting a population with the same, or better demographic characteristics than when John F. Kennedy was President increase of the money-supply is not naturally inflationary. It all depends how the credit flows. If the combination of expanded currency and credit flows into increase of the productivity of the physical-economy, per capita and per square kilometer, the credit expansion must continue or even be expanded in rate. In that case, the result will tend to be deflationary, not inflationary. Better quality of products and increased productivity are inherently deflationary, in the real-economy sense of deflationary. Credit-expansion is inflationary, when the result is the increase of rates of financial turnover exceeding the rate of combined real physical-economic output
2.0 Real economy: man's mastery of nature
The primary task which the lessons of physical economy demand of society, is the protection and the cultivation of the developed cognitive powers of each individual personality. That is to say, the task of society is not only to foster the productive activity upon which the society's existence depends, but to develop the individual's cognitive and related powers in such a way that high levels of productivity are maintained, and that further progress in this direction is ensured. Thus, on these accounts, and with that qualification, educational policies become the central determinant of the success or failure of an economy. It is from this vantage-point, that the curve of physical-economic aggregates is best understood.
2.1 The function of education [ teaching a child to think, rather than memorize ]
The object of a Classical Humanist or kindred form of educational policy, is the production of what might be termed "the cultivated mind." Look at this now from the vantage-point of physical science.
All of our knowledge of our effectively willful relations to the physical universe, rests upon an aggregation of validated universal physical principles. These principles
occurred originally in the form of creative cognitive acts by individual minds. In many cases, although not in all, the names of those discoverers are known to pupils and others, as the personal name attached to the discovered principle in question. The proper object of education, is to create the circumstances, as in the classroom, in
which the student replicates the actual original act of discovery.
In other words, a poor kind of school teaches a pupil to learn the name of the principle together with explanations and illustrations of its application. That latter kind of education, called "learning," tends to deaden the cognitive powers of the pupil's mind. Only by exception, could pupils abused by such mere "how to" learning, manifest later the qualities of a truly cultivated mind.
By "cultivated mind," we should agree to signify a mind which has been shaped by the process of accumulating a store of experiences of original cognitive generation of
validated universal physical principles. Our job is to provide the environment, the teachers, and the opportunities, by aid of which each child and adolescent may reach adulthood with a good approximation of the qualities of a cultivated mind.
Such an educational policy costs. It is a major element of governmental and related budgetary outlays. Nonetheless, whatever a quality education costs-unlike that being
provided currently-in the final analysis, it represents one of the most essential costs of doing business. Since about 1963, there has been a cumulatively catastrophic decline
in the competence of teachers, the general quality of education, and the competence for life of the graduates of our public schools and universities.
Some of the bleaker comments;
"of ruinous cultural decay best suited to Sodom and Gomorrah, or some other culture which has lost the moral fitness to survive."
many of the people having these sense-perceptions, speak of the "growth of the U.S. economy." Such people are like the shopper who says, "I don't worry about the farmer; I get my milk from the supermarket." They have literally left their senses behind. For them, the important thing is money.
One is thus reminded of those Germans of the early 1920s, the so-called "middle class," people who owned no workshop, no farm, or other means of producing real wealth, but who
had entrusted their wealth to bank savings and financial investments. Then, the 1923 Weimar hyperinflation wiped out their savings and their financial investments. Speaking
of today's terrible U.S. public schools, one might say, as was said in times past, that those who do not study history, obviously will learn nothing from it. |
