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From Economy in Crisis
The economy of the United States exists as a huge ponzi scheme. We spend more than we make and therefore require constant infusions of foreign cash. This will work fine for a while, but eventually the creditors begin to dry up. The U.S. has already witnessed this and sent its Secretary of State on a goodwill mission overseas to secure more loans.
5 minCouple this with a link provide by $#* A Tale of Securitized Cod, Babylonian Finance and Simple Math. Part 1
Also
A Tale of Securitized Cod, Babylonian Finance and Simple Math. Part 2
and
A Tale of Securitized Cod, Babylonian Finance and Simple Math. Part 3
The economy of the United States exists as a huge ponzi scheme. We spend more than we make and therefore require constant infusions of foreign cash. This will work fine for a while, but eventually the creditors begin to dry up. The U.S. has already witnessed this and sent its Secretary of State on a goodwill mission overseas to secure more loans.
5 min
Kingdom 1. Constant population of 1000 people. Initial wealth 1000 gold coins, equally distributed. The land is rich, people industrious and the wealth of the kingdom is growing every year at a rate of 3,7%. The rulers (only 1% of population), because they are rulers, demand of wealth growth of 10.1% year. It shouldn't make a big difference (after all there are only 10 privileged people in the whole kingdom). This is what happens if the rulers increase their wealth at a rate higher than the total increase of wealth in their kingdom:
In 78 years all the wealth in the kingdom is captured by the 1% ruling elite.
Kingdom 2. We have the same 1000 Babylonians, starting with 1 gold coin each. The land is not so fertile and the kingdom can grow only at 2.8 % a year. The rulers are greedier and more corrupt, their wealth increasing at a rate of 11% every single year.
In the second scenario the rulers acquire all the wealth of the people in only 61 years.
The Babylonian economists knew very well nobody can escape the mathematical realities of the compound interest rates or the conservation laws. Not even the kings could do it.
When the top 1% elite acquires all the wealth in the country, not only that the 99% majority is destitute, but the elite itself cannot increase anymore its wealth at the previous high levels. The system cannot continue anymore. The Babylonians knew there are only three possible outcomes after this point:
In 78 years all the wealth in the kingdom is captured by the 1% ruling elite.
Kingdom 2. We have the same 1000 Babylonians, starting with 1 gold coin each. The land is not so fertile and the kingdom can grow only at 2.8 % a year. The rulers are greedier and more corrupt, their wealth increasing at a rate of 11% every single year.
In the second scenario the rulers acquire all the wealth of the people in only 61 years.
The Babylonian economists knew very well nobody can escape the mathematical realities of the compound interest rates or the conservation laws. Not even the kings could do it.
When the top 1% elite acquires all the wealth in the country, not only that the 99% majority is destitute, but the elite itself cannot increase anymore its wealth at the previous high levels. The system cannot continue anymore. The Babylonians knew there are only three possible outcomes after this point:
a) external injection of wealth in the system by starting a war and looting another kingdom, but that is nothing else than kicking the can further down the road. After a few years, the rulers will acquire again all wealth in the system and then they will need another war and expansion by stealing wealth from the neighbors. This is why empires have to grow or collapse.
b) wealth redistribution by violent uprising. The serfs can't take it anymore and rebel. They defeat the unpaid troops (there is not enough money left for paying well the soldiers). The top 1% elite is killed or their wealth is simply 'nationalized' and redistributed to the rest of the population. The problem is that after the bloody revolution, the wealth distribution equality doesn't last for long. The most heroic group or revolutionaries and rebels, who fought for equality, becomes the new elite. This new revolutionary elite starts extracting wealth from the country at a rate, of course, higher than the total rate of economic growth. Wash, rinse, repeat. This is how an economic crisis sparked the French Revolution, and in the end King Louis XVI was replaced by Emperor Napoleon. The new French elite of imperial revolutionaries, in order to increase their own wealth extraction rates without causing another revolt, had to engage in an aggressive campaign of conquest. If Napoleon had won in Russia ...
c) wealth redistribution by jubilee-debt forgiveness. That was the favorite Babylonian way, but not because the ancient kings were really charitable and preoccupied for the well being of their subjects. The jubilee was just a partial wealth redistribution reestablishing another start for the income base of the elite. If at the beginning of our hypothetical kingdom, the rulers had only 1% of the wealth, after the jubilee the rulers with restart the process of unsustainable extraction from a 10% base of the total wealth. After the second jubilee they would restart with 20% base .. and so on. The important part is that jubilees make people happy, and they feel rich again, supporting the new king which will start again the unsustainable wealth extraction. This is nothing else than slow boiling a frog in water, in order to perpetuate the hereditary right of the elite to extract wealth from a country. The jubilee is not a charity. It's just the smart elite accepting a temporary decrease in the proportion of the kingdom's wealth they control, in order to preserve their status and being able to pass it to the next generation of rulers. One may argue that such a slow boiling of the serfs with the jubilee trick, doesn't really solve the problem, just kicks the can down the road and ensures the crown for the next generation of the monarchic line. Eventually the refresh base grows high enough the jubilee trick doesn't convince the masses they escaped the debt and poverty trap. After all the Babylonian empire collapsed like any other empire in history.
b) wealth redistribution by violent uprising. The serfs can't take it anymore and rebel. They defeat the unpaid troops (there is not enough money left for paying well the soldiers). The top 1% elite is killed or their wealth is simply 'nationalized' and redistributed to the rest of the population. The problem is that after the bloody revolution, the wealth distribution equality doesn't last for long. The most heroic group or revolutionaries and rebels, who fought for equality, becomes the new elite. This new revolutionary elite starts extracting wealth from the country at a rate, of course, higher than the total rate of economic growth. Wash, rinse, repeat. This is how an economic crisis sparked the French Revolution, and in the end King Louis XVI was replaced by Emperor Napoleon. The new French elite of imperial revolutionaries, in order to increase their own wealth extraction rates without causing another revolt, had to engage in an aggressive campaign of conquest. If Napoleon had won in Russia ...
c) wealth redistribution by jubilee-debt forgiveness. That was the favorite Babylonian way, but not because the ancient kings were really charitable and preoccupied for the well being of their subjects. The jubilee was just a partial wealth redistribution reestablishing another start for the income base of the elite. If at the beginning of our hypothetical kingdom, the rulers had only 1% of the wealth, after the jubilee the rulers with restart the process of unsustainable extraction from a 10% base of the total wealth. After the second jubilee they would restart with 20% base .. and so on. The important part is that jubilees make people happy, and they feel rich again, supporting the new king which will start again the unsustainable wealth extraction. This is nothing else than slow boiling a frog in water, in order to perpetuate the hereditary right of the elite to extract wealth from a country. The jubilee is not a charity. It's just the smart elite accepting a temporary decrease in the proportion of the kingdom's wealth they control, in order to preserve their status and being able to pass it to the next generation of rulers. One may argue that such a slow boiling of the serfs with the jubilee trick, doesn't really solve the problem, just kicks the can down the road and ensures the crown for the next generation of the monarchic line. Eventually the refresh base grows high enough the jubilee trick doesn't convince the masses they escaped the debt and poverty trap. After all the Babylonian empire collapsed like any other empire in history.
A Tale of Securitized Cod, Babylonian Finance and Simple Math. Part 2
and
A Tale of Securitized Cod, Babylonian Finance and Simple Math. Part 3
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