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To: LLCF who wrote (58594)	9/21/2000 2:50:59 PM
From: long-gone	Respond to of 116764

All, Very worthy of a read & thought: The Economy Is Naked by Glen Hameroff Back in the 1950s, America achieved recognition as the world's leading economic power. Our vast industrial base had emerged unscarred by the Second World War and our ability to produce real products was without peer in the world community. A hard working, blue-collar worker could expect to own a home and a car. This could be accomplished while his wife stayed home and raised the children. Dreams were fulfilled, cars were made of steel, and Robert Young's weekly television show declared that "Father Knows Best." Today our world is continually changing and families are being redefined. Cars are no longer made of steel; many families are headed by a single parent and we have achieved the medieval Alchemist's dream—we create wealth from nothing. If you watch the television coverage of the day's activity on Wall Street, you begin to realize that investments are made on rumors of expected mergers, in options to buy or sell products that do not exist yet, in mutual funds that track stock indexes, in hedge funds and derivative funds. People invest in a company for two months and sell not when the company has achieved a new level of efficiency in output, but, rather, they unload a stock because of an anticipated change in interest rates. Instead of investing in the growth of companies that produce products, some of our society's finest minds are consumed by creating novel ways of re-packaging and re-selling the same wealth. If the system were not already sufficiently confusing, it additionally relies on several paradoxes to guide its waves of buying and selling. In the old days, a low level of unemployment was considered a social good and a sign that the economy was prospering. Today the interpretation is more convoluted. If the economy is working at full employment, employers will be forced to compete for new workers, thereby driving up wages and releasing the evil genie of inflation. So it is good to see the jobless rate increase so that upward pressure on interest rates will not be necessary. Since many large consumer purchases (homes and cars) are funded by loans, the direction of interest rates is crucial. We are living through a consumption driven prosperity—we do not want consumer spending to drop precipitously. . But consumers spend more than they earn in their jobs that used to produce something and now may (arguably) produce nothing. If the public perceives that the economy is producing a healthy abundance of nothing, they will compete to buy shares in the companies that excel in producing nothing. Share prices will rise and investor portfolio values will increase. The public will feel wealthier and this "Wealth Effect" will produce more conspicuous consumption. This increase in spending will multiply through the economy and economic growth will occur. The investing public and the corporate leadership linked to the companies most efficiently producing nothing will reap most of the benefit. It takes less than three percent of our population (aided by the judicious use of chemicals, radiation and heavy capital investment) to feed the rest of us. The majority of the American workforce does things such as process information or sell sounds and pictures. We assign almost mythic qualities to higher and higher transmission speed. The people who still seem to produce something appear to be the losers in this economic revolution. Their well paying production jobs have been shipped overseas where employers may hope to get something for nothing. Traditional American workers can choose the shame of "workfare" or accept jobs that allow a bare existence at the edge of nothing. If they chose to do nothing, the people who profit from nothing will accuse them of being something less than nothing. Competition from nothing irks. An economic system built upon the expansion of wealth by means of producing nothing has a shaky foundation to buttress the edifice against a storm. What if our faith in the alchemy of wealth was shattered? In 1929 the factories closed, banks called in loans on real property, and a negative spiral dominated the public's thinking. Franklin Roosevelt knew that investment in capital goods would have to be the ultimate savior. But for capital goods he substituted—nothing. His flirtation with the use of nothing had begun to fail around 1938. But World War II's insatiable demand for goods and services reversed our economic doldrums. In October of 1987, some economists say, we barely missed another great crash. By 1987 we were still in the process of conversion to a post-industrial society. The crash was avoided by a loosening of credit that allowed people to borrow to pay their debts. Today, in the year 2000, what would be the consequences of a realization that the "economy is naked." If a major hedge fund or some other machination of alchemy were allowed to go belly up, what would we do? Does our society have the sense of family or connection to reality that allowed it to survive the Great Depression? If the dust bowl strikes again will we eat our seed corn? Will we be able to survive on nothing? zolatimes.com