Problems And the (Lack of) Solutions.

Colosseum

It is hardly a matter of dispute that the general state of affairs is not desirable. Whether it’s foreign wars, violence at home, the economy, or whatever else, it’s clear that there are serious problems. That in itself is nothing new. Every generation has problems that it must overcome. We are here now because our ancestors overcame their problems. They may not have found the most optimal solution, but they found a solution. There are various problems facing the world today, but far worse than any of them is an underlying issue that exacerbates all the others, yet it is beyond the perception of many.

The underlying, far more serious issue facing our society today is not that there are problems, but that there are no effective solutions being implemented or even publically proposed. Our society has made a series of errors so grave that it may not survive. These errors have exacerbated, or in some cases outright created serious problems that have not been solved. These unsolved problems result in crises, and unsolved crises destroy civilizations.

Any number of supposed solutions to a problem or crisis may be proposed, but only a fraction of these solutions will work. Only a fraction of them will have the desired effect, hence the reference to effective solutions. The dearth of effective solutions and the abundance of false solutions boils down to one overarching factor: Disconnection from reality.
This disconnect evident in near every social and political matter one looks at, but it is hard to point this out, as no one could accept or even consider of these false solutions & false ideas if there was not an environment, a culture that nurtured and defended them and the false assumptions that give rise to them.

Let us look at a small problem that may deserve the label of “crisis”; Japan’s “Lost Score,” the 20 years where GDP fell nearly a trillion dollars, prices stagnated and wages fell provides an example. An economic bubble had formed, where prices were vastly in excess of the item’s real value thanks to Japan’s central bank pursuing poor lending policy. This bubble was then popped, which lead to a stock market crash, and falling prices. After every bubble there is a corresponding fall to match or exceed the bubble’s “rise.” The effect of this bubble was that a lot of banks and businesses ended up in unpayable debts. This was a problem, but normally an economy recovers.

What turned this problem into a crisis was that in an attempt to mitigate the effects of the bubble bursting, the Japanese government and central bank essentially allowed the now worthless banks to ignore their insolvency (inability to pay debts) and continue as though nothing had happened. Those banks, called “zombie banks” then pumped funds into equally worthless corporations that were “too big to fail.”. The result was that billions upon billions of dollars was wasted over the course of 20 years, instead of a much shorter period of loss. Why? Because the financial planners were under false assumptions, such as the idea that something can be “too big to fail,” and that the banks would pursue proper policy, when they didn’t have to pay for their mistakes, in spite of all the then recent evidence to the contrary.

The environment created there was one that was due to strange ideas about money and economics, though the strategies clearly weren’t working, they kept pursuing it. Though the answer is not exactly known, it is clear that the Japanese authorities trusted in the Keynesian model of economics, a model that was a radical break from its predecessors at the time of its inception. For those that are interested, Keynesian economics dictates that any spending is good spending, since spending drives demand and demand drives economic growth. This is, as Japan found out, completely wrong. But we can safely assume that almost everyone believed it, and thus they pursued it for over a decade. It’s clear from all sources that dissent or straying from the Keynesian like was ignored or rebuffed.

The example of Japan’s Lost Score illustrates the basic mechanism by which problems are amplified often to the point of crisis. That deadly social mechanism is at play in the West too. It is present in many spheres of life in a far more insidious, entrenched manner than one might expect. Not only are all major party politicians marching in lockstep with this insidious mechanism, as the Japanese bankers and politicians did with the thinking on their economy, but Western culture is leading them to this. They need to say culturally acceptable things to get elected, after all.
This is the crux of the matter. There is a wealth of texts explaining how and why Japan’s Keynesian style economic policy is a bad idea, but no one who mattered in Japan was reading it. There are mountains of data that would allow for more effective policy changes all over the Western world. There are examples of non-western countries putting these into practice and reaping the benefits. As with Japan, the failure of activities informed by the false ideas is plain, but nobody is talking about these topics freely.

It is clear that the social freedom to discuss topics and their relevant facts simply does not exist. The “right” answer exists and you must adjust your perception of reality accordingly.

Such insanity can only last for so long, probably until the money runs out. If someone says something you disagree with, find out why they think that way, don’t just dismiss it out of hand. A good guideline is this simple rule: If your response to a statement or argument cane boiled down to two words, then you need to stop and think, “do I really know that this person is wrong, or am I just regurgitating a canned response as I have been told?”

More posts on specific subjects that cannot be discussed openly to come.

Japan Sources:
https://mises.org/library/explaining-japans-recession
http://www.themoneyillusion.com/?p=9404
http://jshet.net/docs/conference/79th/wakatabe.pdf

4 thoughts on “Problems And the (Lack of) Solutions.”

  1. I loved this post! Someone said your blogs fairly often and you’re always releasing great stuff.
    I shared this on my facebook and my follwers loved it!
    Keep up very good work.

Leave a Reply

Your email address will not be published. Required fields are marked *