How we're all messed up

by admin on February 3, 2009

in General,Tax and Ethics

screwed

The Guardian’s Dan Roberts does a brilliant job explaining the current financial crisis in ‘where did all the money go‘ and what it means.

It’s a truly disturbing picture and one for which conventional economic wisdom doesn’t appear to have ready answers.

In one slide, Roberts implies the whole edifice looks like a Ponzi scheme. If he’s right then that is even scarier.

How do you advise clients in these conditions?

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Tagged as: Dan Roberts, Fraud, Ponzi scheme, The Guardian

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Ed Kless

Dennis, this is well done. For further insight I suggest the first few chapters of Money Mischief by Milton Friedman. (The later chapters require an advanced degree.)

One problem with mv=pq is that it does not explain how value (wealth) is created, as a result the Ponzi scheme idea emerges. The reality is that it is ALL basis on subjectivity. Even gold has value only because we agree it has value.

Value is created by mostly small businesses creating new things that we never knew we needed, i.e., the entrepreneur. When we emerge from this problem it will be because of the entrepreneur, not because of governments or big businesses.

For more on this I suggest the 1981 edition of George Gilder's Wealth and Poverty. mv=pq suggests demand creates supply (demand and you will be given unto). Gilder explains how this is hopelessly inverted thinking. The exact opposite is true and is know as Say's Law - supply creates demand or as he puts it, create and you will be given unto.

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