the Global Financial/Economic Crisis
by Russell G H Mathews BCom BSc(maths) LLB BA(maths) See details
The world or Global economy can be modelled as a multivariate model. That is, the World economy, [and each country's economy within it], has interrelated qualities, or factors, whose values vary over time, and to some extent with regard to each other. The world economy could be considered a 'semi-closed' system. The Global Economy does not have any interaction with other 'economies' [in the way that economies of countries, subsets of the Global economy, interact with the economies of other countries], and so in that sense is 'closed', but is 'open' in the sense that the Global Economy is the whole globe and receives input form outside, mainly in the way of sunshine, that produces growth in animals and flora. While some energy is radiated from the earth, I believe there is a net input of energy into the world and hence world economy. Global warming is part of the Global economy.
All the energy locked up in coal and oil, is 'stored' energy from long ago. It has been stored by plants and animals respectively.
I make no pretense at fully understanding the 'global economy'. However, my thesis is that no-one else does either.
No-one understands how ALL the variables in this multi-variable model inter-relate. I doubt that anyone can enumerate them all, or even count them all, let alone how they inter-relate. It is human nature to attempt, in the mind of each human, to make order out of disorder. It is easy enough to start naming variables /parameters of our economy or global economy: interest rate, unemployment rate, standard hours worked per week, exchange rate, cpi, 'inflation rate', tax rates, volume of money, debt levels, quantum of foreign debt, ... It is not then difficult to 'measure' some of these variables and then 'model' how they inter-relate; with the assumption that all other variables remain constant, regardless of whether that is the case as those other variables are not all being identified even, let alone measured. Keynes did this in the wake of the 'Great Depression' nominally beginning in 1929. These would be 'theorists' then make the unvalidated assumption, which I proffer is incapable of validation, of ceteris paribus; All else being equal.
The economy was in a state of 'Dynamic Equilibrium'.
World political leaders then pontificate that they understand the reasons for the Global Financial Crisis, [really Global Economic Crisis], and importantly how to overcome it. We have all heard all world leaders admit that they do not understand what is happening, not. So much for the TRUTH, THE WHOLE TRUTH & NOTHING BUT THE TRUTH. Clearly, they are liars. That is corruption and it is corruption, on a global scale, that has got us into this global mess. The corruption preceded 'sub-prime mortgages'.
The linchpin is 'PRODUCTION'. That is the important variable. The PRIME VARIABLE is NOT, money supply, consumption, debt level, ...
For many years now there has been a 'consumption splurge' in the western world. Consumption was too high by common agreement. Citizens were encouraged by governments to consume less, and save more. Governments were limited in what they could supply without 'overheating' the economies of the world. If governments tried to supply the items in the nature of capital goods/infrastructure that they should have been supplying, that would have created excess demand so driving up the 'inflation' rate. Citizens were not of a frame of mind to save more.
Now, those governments have their wish; consumers who are prepared to consume less, & SAVE MORE, yet the governments of the world gravitate to mass hand wringing. Governments of the world now have the opportunity to increase their spending on 'capital good' [ie other than 'single use' goods], and infrastructure, but are stuffing around instead, resembling headless chooks.
The morons in government around the world were heard to say, "How will we pay for it?" With MONEY. "Okay, but from where will we obtain this extra money?" Borrow it from the people who are saving it in the banks that the government has guaranteed, or from those banks..
Because of the 'excess-consumption' in the 'western world' over the past few decades, so much infrastructure has been permitted to fall into disrepair. Steel bridges in the US are collapsing, and Australia has had old insufficient and inefficient ports.
In time, people's saving will increase and they will be feeling wealthier and seeing that the economy is still producing at ideal levels, so they will be confident enough to increase their spending. Government expenditure on infrastructure and such long lasting goods, has to be responsive to the level of spending in the economy by consumers. Further, had the government specified that it would be doing this: monitoring the level of consumer spending and adjusting the level of government provision of infrastructure and 'capital goods' to use the 'production not consumed', that would have been an indication that the recession will nor be as dire as it will be. The 'mix' of production in the economy can be quickly changed to enable this to occur.
This recession being experienced by the world now in April, 2009 will not be over soon. The 'governments' of the world, including the UN, IMF etc are responsible for this economic mess. The basic cause is FRAUD & CORRUPTION. Even within national economies, sectors are interdependent. Hence, provision of finance affects so many other sectors. For instance, to 'favour' on sector of the economy, say the motor vehicle industry, is to necessarily disadvantage another sector or sectors of that economy, and importantly, lead to a less than ideal allocation of resources. The ones disadvantaged are the less vocal. This is the slippery slope. The extent of this 'favouring' is exacerbated, to the extent that it or aspects of it can be kept confidential/secret. The Internet can have a major impact on diminishing the extent to which FRAUD & CORRUPTION can be kept secret. The internet will also have a major effect on discussion disproving so much government 'spin'.
There is so much wrong with the economies of the world. There are at present many major structural flaws [the term 'inefficiencies' doesn't really cut it], in the basics of many economies. Investors and 'p[layers' in the various economies cannothave complete faith in any economy while these basic flaws persist. The economic 'times' are unlikely to improve while governments favour [prop-up] inefficient industries such as motor vehicle manufacture.
A major shift in the economies of the world, the effects of which are barely evident at present. That is basically due to the advent of the Internet. The Internet will change the very nature of 'work'. Air travel for intercity 'meetings' will be much curtailed due to the increasing intrusion of 'video conferencing'. Working from home is increasing quite rapidly at present. The rate is accelerating. This will continue. This will greatly reduce the amount of travel and all the consequent disadvantages of travel, and commuting.
Because of the Internet, the world will never be the same as it has been, ever again. The populations of the world will come to realize this, and will have no confidence in any politician who says to trust him, and that it, "the great recession", will soon be over.
- 21st Century World Recession
- Analysis of the 21st Century World Recession
- FULL detail of the Analysis of 21st Century World Recession
- How to SURVIVE the 21st Century World Recession, & PROSPER
- In detail: How to SURVIVE the 21st Century World Recession, & PROSPER.
- Looking for Work: Looking for a Job:
- How to FIND A JOB, & MAKE MONEY doing it!!
- FULL detail: How to FIND A JOB, & MAKE MONEY doing it!!
- FULL detail: How to FIND A JOB, & MAKE MONEY FINDING it, and REAL MONEY doing it!!
- FULL DETAIL: Looking for Work: Looking for a Job:
- Small Business Advisory FORUM
- Full Description, Small Business Advisory Forum.