Our Economic System – Doomed to Face a Crisis from the Start?

Note: all economic terms marked with an asterix* are explained at the end of this blog.

At the heart of economic theory and activity lies the dilemma of human ‘unlimited wants and needs’ and ‘scarcity of resources’. Within this, the economist concludes that decisions require to be made in terms of what resources will be allocated to what unlimited wants and needs.

From this, the supply* and demand* model is derived whereby the price of a good or services ‘decides’ whether one will be able to acquire these goods and services or not. (Whereby demand is defined within the context of having a want or need while having the financial means to back up one’s want/need – i.e. whether you have sufficient the money to purchase the particular good or service you want/need). This way, the economy can limit and control the amount of people who can have access to a particular good or service according to the ‘scarcity’ of what it is they want.

Let me illustrate with a diagram how the ‘forces’ of supply and demand interact with each other, which in turn determines the affordability (which in essence is the same as accessibility) to particular goods and services:

 On the vertical Axis we can read the possible prices at which bread can be sold, at $ per unit.

On the horizontal Axis we can read the amount of bread which can be demanded at any particular price.
The red line/curve represents the ‘Supply’, whereby one can distinguish at which price a particular amount of bread will be supplied: At $1.00, the supplier is willing to supply only 1 bread (The self-interest of the supplier lies within the price of a particular product as the supplier wants to be able to reap as much profit from selling a single unit – thus when something is considered to be ‘cheap’, the supplier is not motivated to produce/sell a great quantity of this product/service, as it is considered to be non-profitable, and he could be doing/selling something else which will reap more profit – this is known as ‘opportunity cost*’ within the world of economics), at $2.00, the supplier is willing to supply 2 Breads -- at $3.00, the supplier is willing to provide 3 Breads – and at $4.00, the supplier is willing to supply 4 Breads.
The blue line/curve represents the ‘Demand’, whereby one can distinguish how many breads the consumer will buy at a particular price: When a bread costs $4.00, only 1 bread is demanded (the self-interest of the demander/consumer also lies within the price, but at the opposite pole of the supplier – the consumer wants to be able to get as many possible products/services per unit of money he owns – thus the ‘cheaper’ something is, the more will be demanded (and also the more people who will be able to afford it), and the more ‘expensive’ things get, lesser quantity will be demanded.), at $3.00, 2 breads are demanded – at $2.00, 3 breads are demanded – and at $1.00, 4 breads are demanded.
Where the demand and supply curve meet (the cross in the centre, indicated with the light blue dot) – is what is referred as the ‘equilibrium*’.  At this particular price (in this case $2.50) all the goods/services in question will be met with an equal amount of quantity demanded (in this case 2.5 breads) which implies that all the goods will be sold – there is no ‘excess supply*’, there is no ‘shortage in supply*’, there is no ‘excess demand*’ and also no ‘shortage in demand*’). This ‘equilibrium’ point will then be the point to which prices will be set.

From my perspective however, this is an unacceptable model to lead one’s economy by. Using the ‘Demand and Supply’ model – there will always be winners, and thus there will always be losers. There will always be people without access to resources, simply because they don’t have the money to do so. If we go back to the diagram, we indicate it as following:

Anyone with the a financial capacity which is unable to reach $2.50 for 2.5 loaves of bread (indicated by the grey area in the diagram) simply gets ‘eliminated’ and ‘removed’ from the Supply and Demand framework as their want/need now no longer falls within the category of ‘demand’. The system will not provide for these people – and this is how the economy manages and distributes its resources as a solution to everyone’s ‘unlimited wants and needs’ in the face of ‘limited resources’.

You see, the problem lies within the premise itself (people have unlimited wants and needs, but there are only so many available resources – what goes where/who gets what?). The economist immediately jumps to making a plan in alignment with this premise, where the only possible outcome is to satisfy ‘some’ beings their wants and needs, while keeping others from getting the same resources to satisfy their wants and needs -- whilst providing a ‘mathematical system’ to justify why resources are distributed in this particular manner (Supply and Demand).

Instead of just ‘going along’ with the statement and ‘trying to make it work’, they should have looked at the implications of the statement itself, and decide whether this statement in itself is an acceptable basis to build an economic system upon.

If we have a closer look at the statement (here it is again:)

“people have unlimited wants and needs, but there are only so many available resources – what goes where/who gets what?”

we are able to translate this statement into an equation, whereby we are trying to satisfy infinity (∞) with something which is finite (x) – this in itself is simply impossible. So why even try and make it work if you know that it is never going to be able to. Instead of conjuring up a ‘Supply and Demand’ system to manage this equation which is inherently out of balance, they should have changed the very equation itself before constructing a system of distribution based on something unmanageable.

What they ought to have done, is look at the variable of ‘unlimited wants and needs’ and firstly separate them into two separate components (instead of giving both equal value).
Once we distinguish between wants and needs, we can recognize that needs (unlike wants) are actually quite limited and defined. Needs include things we can name such as: housing, food, clothing, security, – etc. There is a limit to what can be defined as a ‘need’ whereby everything placed under the heading of ‘need’ is directly related to the achievability of a life of sustenance. In essence, the first system of distribution that should have been designed should have pertained to the satisfaction of everyone’s basic needs. Once the needs are sorted out, can one look at designing a system pertaining people’s wants.

Currently the system of Supply and Demand is the embodiment of ‘irresponsibility’ – because it decides to spent precious resources on people’s wants, knowing that this cannot be sustained, knowing that needs are not considered if it is not a ‘demand’.

It is fundamentally a system of discrimination between those who have money and those who have not (or very little). In my next blog I will be going deeper into this discrimination point and on what principles it was found, and how it currently is still being justified.

Glossary:

Supply: The supply of a product is the amount of the product that producers are willing and able to offer for sale at a certain price.

Law of Supply:
The law of supply states that if nothing else changes, suppliers will supply more goods and services to the market when these goods and services have higher prices, and will supply less if these goods and services have lower prices.

Demand:
A demand for a product or service exists when people want to buy it and also can buy it, in other words if they have the financial means for it (can afford it).

Law of Demand:
The law of demand states that, if nothing else changes, people will buy more of a product when the price of the product decreases, and will buy less of the product when the price of the product increases.

Excess Demand / Shortage of Supply:
This occurs when the quantity demanded of a good is greater than the quantity supplied of a good at that particular price.

Shortage of Demand / Excess Supply:

This occurs when the quantity supplied of a good is greater than the quantity demanded of a good at that particular price.

Opportunity Cost:
This is the cost of something you have to give up to get something else, that is, the value of alternative opportunities that have been given up.

Equilibrium:
The price at which the quantity demanded equals the quantity supplied.

Our Economic System, a Recipe for Disaster & The Real Bad Effects of ‘Good Intention’ Government Interventions

Profit and Self-Interest is that which lies at the very core of our Current Economic System.
It is the very baseline of any equation from which economical mechanisms are derived from.
It is the venom that seeps through every inch of our society of which no-one remains unaffected.

It’s a venom that kills.

*Beep*                                   * Beep*              uuuugh..................

Our Economy falls back on two basic ‘powers’ / ‘laws’ interacting with each other:
               
                1. I want to sell stuff expensive so I can get lots of money
                2. I want to buy stuff cheap cause I want to have lots of money

(These two are the trademark of Capitalism and Free Market)

But now – just looking at these two points together, it is obvious that you cannot have both happening at the same time. For example: You want cheap milk, but they only want to sell you expensive milk – both parties want to score.
 So even though this is not practically possible – these are the rules the Economy lives by.

Now, these two essentially self-interested laws, make up ‘Supply’ and ‘Demand’ (first one being supply [giving], second one demand [receiving]).

And even though these ‘laws’ have no practical consideration whatsoever - but the one for profit – it is accepted and enforced as status quo.

So we have established that both two ‘laws’ are drenched in self-interest  - and ‘combat’ each other.  But the combat between these forces creates a ‘vacuum’ – as both of these points are just eating up all the money – and these vacuums are then represented by manifestations such as poverty and scarcity.

Now – people start complaining and when the moaning starts getting to the Government they feel that maybe they should do something about it.

The Government will then implement some rules to try and create some sort of balance so that the poor people don’t get too angry and get it in their heads to maybe revolt against the government.

These rules can take the form of for instance protecting moaning Farmers by setting a particular minimum price for their goods. This minimum price will be above the ‘equilibrium price’ [*the equilibrium price is where supply perfectly meets demand,  there’s no excess or shortage. For example, a farmer supplies 50 000 litres of milk at the local town market – at a particular price – and at this price all of his milk is bought. There is no excess but also no shortage of milk. ]

By setting a minimum price that is above the equilibrium price (at the price that people are willing to pay) -  an excess supply is created because people don’t want to buy the expensive stuff!

So if the Farmer now for instance sells his milk at 3 euros a litre - less milk is going to be bought, and there’s going to be many litres left unsold.

 So the higher the price – the less people will buy it (can buy it) which means = less people have food. So now okay, the farmers get some extra cash but now we’ve created a new problem as more people are without food. On top of that, we’re still sitting with all this excess of supply (the unsold milk) that’s just lying around, and now the Government’s got to get rid of it. If they give the food to the poor people then they’re not gonna buy the food on the market and then the farmer’s not going to get their money and then the whole minimum price thing was useless from the beginning. And obviously the Governments Ego cannot admit to that, so then they rather buy the food with TAX MONEY (yes that’s right, they take your money so now you’re still losing) and then destroy the excess supply.

I mean – if you look at it – it’s really pretty freaking insane right? I mean, twenty first century? Evolution?  LMAO

Then there is minimum wages / basic income!

The people’s gone moaning again and the government feels it should respond to this threat (yes threat instead of common sense responsibility – in our world literally EVERYTHING is in reverse).

So now the government goes ‘Let us implement minimum wages/basic income!’ – because they see that people are complaining because they are looking rather skinny and beaten up by their slave labour.

 Because remember:  BUY CHEAP – SELL EXPENSIVE. This translates into PAY PEOPLE CHEAP (buying labour) – SELL THE STUFF THEY MAKE EXPENSIVE – KEEP MONEY IN MY BIG FAT POCKETS. That’s how we’ve designed our system.

Back to the Government – so now they implement ‘minimum wages’ – which is really the same principle as setting a minimum price for the farmers. Corporations do not want to buy expensive labour [it is seen as ‘expensive’ because this minimum wage is above the ‘equilibrium wage’ where supply & demand meet (because people will do anything to gain some money to survive, so they are willing to work for almost nothing)]. So Corporations have to now implement this minimum wage – but they don’t want to spend that amount of money.
As a result they start firing and cutting back on their staff. Which results in more people being unemployed – but heeeey at least those few people who have a job get a minimum wage, right? Yay? No?

So the very people the government is “trying to help” are the ones that end up being off worse. As you have seen from the examples, you either end up without food and/or without a job.  And the knowledge that these type of interventions are absolutely not effective – is Economy 101, it is one of the first things you learn in studying economy, imagine what else we might encounter down the road!!

And then obviously if one tries to look at other ‘solutions’ = there are none. Each move you will do that approaches ‘care’ will be catastrophically as what the System breathes in and out is Self-Interest. It is repulsed by ‘care’ and will simply spit out anything that is not serving Profit & Self-Interest.  Thus there are no possible solutions within our current system. As long as we want to create / provide solutions within the current framework of our Economic System = it is going to fail.

Because as the very Starting Point of our System is that of Self-Interest – it will only cherish and harvest that singular point. There is simply no space for anything else. It is a Formula, an Equation which is not Equal [and for an equation to be effective there must be EQUAlity, you know EQUA-TION it is implied in the word]. So no matter what you place into the formula – it will always end up in disaster as that is the way it’s been designed.

So understand that when you read or hear things in relation to Equal Money Solutions – that we are talking about a whole new system, a whole new formula – it is beyond our current system, it’s a whole new world! Because, we cannot save our current system, it is done for.

So if you can see , just like me the absolute fucked-up-ness of our current Monetary and Economic System – Investigate Equal Money! It is the only solution !!!

I am One Vote for an Equal Money System!

Within this Blog I will be addressing issues with regards to our Current Economic System and provide Solutions within the context of an Equal Money System.
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