Reads 836, 7:11am, Apr 21,2023. 3669-1,Jan. 3995-10, July 2024 The speculators are destroying the survival foundation of humans Frank June 14, 2015 in Waterloo, Ontario, Canada. Updated in Aug. 19, 2015, July 21, 2015 In the Era of agricultural economy, the geographic space is the living space. In the Era of market economy, the market space is the living space. High housing and land prices will make enterprises cannot survive, without competitive product, a country will be doomed to lose living space. It is burying own nationals, if the government allows speculators free speculation on real economy by wildly developing greedy financial economy. --- Frank（Hongde）Li Aug. 19, 2015 in Waterloo, Ontario, Canada.
Contents 1. The financial economy is over plundering the real economy 2. Monetary easing policy causes inflation 3. The Government of Canada is rational In controlling inflation 4. The international capital is passing foreign inflation into Canada 5. The speculators are killing the real economy of Canada 6. Select and invite excellent foreign manufacturers to root in Canada 7. The government of Canada should purchase own natural resources and properties 8. Canada should adopt flexible fiscal and monetary policies 9. The greatest economist of 20th century Keynes is crying in heaven 10. A remedy for the confusion of ideology and philosophy 11. Material Wealth Standard is rational than that of Gold Standard The most Governments in the world are facing financial shortfalls. As my view, it is not a problem of short in money at all, but in thought, in philosophy. The currencies in circulation is not too little, but too much. However, it is used in wrong way that is not in real economy, but in plundering Real Economy world widely. As same as that of issuing money, foreign investments can also trigger inflation. The greedy-driven international hot money is passing inflation world widely. If we allow foreign speculators to buy our properties and natural resources, it will not only make us suffer inflation, but, more deadly is that make us lose the foundation for survival. The domestic profit-driven speculators speculate on properties and natural resources are playing similar role of destroying the foundation of Canadians survival. The foundation for survival is not just the material wealth that meets survival, but the appropriate environment for the development of real economy - the businesses that are actually producing goods and related services. For example, high housing prices in Vancouver are squeezing real economy - business and labour out. Greedy speculators are destroying the foundation of the survival of Vancouver. A country's economy can not rely on the support of speculation. Manufacturer is the basic cell of the real economy by integrating the Intelligence, Capital, Knowledge, Technology, and Market together to play the role as protagonists of scientific and technological innovation to promote prosperity of economy and progress of civilization. Therefore, the best investment is the manufacturers, with their technical team, mature technology, the best-selling products, funds and markets to form satisfied scale in employment and tax revenue quickly. In optimization and attracting inward investment, the government of Canada in all levels have done a lot of work. However, in terms of attracting manufacturers, it seems have room for improvement. Mr. Cologne, the Mayor of Lyon city France said that: they provide comprehensive services for foreign businesses, from enterprise location, find housing for their employees, looking schools for their children, and to help complementary enterprises to build links, and so on. --- Frank June 16, 2015 in Waterloo, Ontario, Canada People appreciate John Maynard Keynes due to his The General Theory of Employment, Interest and Money to have saved Capitalism, but, there rare people are able to insight into his moral purpose of maintaining capitalism. When he proposing economic instruments for saving immoral capitalism, at the same time, for the efforts that he had to do, he also pointed out his helpless due to that without alternative available for properly dealing with human inborn animal nature: “Dangerous human proclivities can be canalised into comparatively harmless channels by the existence of opportunities for money making and private wealth, which, if they cannot be satisfied in this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandisement. It is better that a man should tyrannise over his bank balance than over his fellow citizens.” Maybe was that he has completely seen through the ignorance of human beings, which is that the most of people are just physical mature with intellectual immature to take foolish as smart in social activities. Or maybe is that Keynes was too sane to feel happiness from the confused world that fills with mindless and mind-dazed people to have made him despaired and wrote Epitaph for himself in advance, I translated it from a Mandarin version as follow. Do not mourn for me, my friends, do not cry for me. Because, in the future I will never have to toil. The heaven will resound with the Hymns and sweet music. But, I even do not go to sing any more. Today, I added this section is to illustrate that when the government has the opportunity and ability to control the destruction of the evil of the Capitalism, it should prevent the destruction occurrence. --- Frank July 21, 2015 in Waterloo, Ontario, Canada 1. The financial economy is over plundering the real economy
Bluntly say, the financial economy is that makes money by money for pursuing unearned interests. And the real economy is that creates life necessities by hard work for meeting human survival. Historically, in the process of human civilization, financial economy has been playing the essential role. Whether the boom of Maritime Trade in Holland, or the construction of Erie Canal in the United States, were all financial economy contributed. Even in modern economy, it has been playing a key positive role. However, anything over-development are inevitable to extremes meet, in the current world, that over-developed financial economy is also playing a increasingly negative role. Currently, for the world economic downturn, people have ignored an important reason that is the over developed financial economy over looting the real economy by almost all-pervasive, to have greatly reduced the profit margins of the real economy, thereby badly harmed real economy and made people's lives increasingly difficult. This is the main reason for various social conflicts. For the overdeveloped financial economy, the professor of History of Harvard University Niall Ferguson made a introduction. In the start of the documentary The Ascent of Money: A Financial History of The World that written and presented by the professor introduces with that: "In our time, we've witnessed the zenith of global finance. 2006，the world total economic output was worth around $47 trillion, that's 47 followed by 12 zeroes, the total value of stock and bound markets was roughly $110 trillion, more than twice the size. and the amount outstanding of the strange new financial life form known as derivatives was $473 trillion, 10 times larger." We can intuitively understand that, in 2006 world, each people created material wealth to be plundered by more than 10 people. 2. Monetary easing policy causes inflation The easiest way to increase government revenue is to run money printing machine, however, due to the fear of causing inflation, government do not dare to excessively print currency. The lesson of German Hyperinflation Crisis after WWI may help to understand the nature of the currency and the inflation. In order to repay its huge war debts, German took a quick way of printing money in large amount, which caused the Hyperinflation. It said that “people even burned Papiermark notes in their stoves because it was then more economical than using them to buy firewood.” Since the financial crisis 2008, many countries have adopted monetary easing policy, to print money with the hope to boost the real economy, but, the practical result is contrary to the initial beautiful idea. It said that over-issued money rarely enters the real economy, but to be profit-driven into the financial economy and to be used for unearned speculation on looting real economy and pushed up inflation. In the over-developed financial economy today, the free flow of large sums of international capital is passing the inflation world widely. 3. The Government of Canada is rational In controlling inflation In controlling inflation, I deeply believed, the Government of Canada is one of the few rational government.
In recent years, the government of Canada has been taking all possible steps to cut budget deficit by reducing public expenditure. in Jan. 2015, the Government of Canada has finally achieved a fiscal surplus. However, for the another channel that also can cause inflation - the free flow of international capital, it seems no effective measures in controlling. This may be due to the lagging perception or cognitive for the negative effect of international hot money. 4. The international capital is passing foreign inflation into Canada The foreign investments also can directly contribute to pass the foreign inflation into Canada. The terrible is that such inflation input is by the obscure actions under the reasonable name or the beautiful cover of promoting the development of the economy of Canada. It has a powerful hallucinogenic ability to cause people unresponsive, as if the fish that only can see the tasty bait, but, cannot see the invisible sharp hooks under the bait. The best example for this regard is real estate market. Aug. 24, 2014, in the article Over-heated real estate market is ruining Canadian economy from Japan mirroring Canada, I have discussed this issue, I excerpt some as follow. “The real estate is a part of the real economy. However, it is a wand with opposite magic that either can benefit or harm to the economy. In the financial economy over developed today, in most cases, it harm to the economy.” “On one hand, due to the common sense of the real estate has a hedge against inflation with a better appreciation expectation, so people prefer real estate as a measure against currency devaluation. Therefore, it possesses the potential of attracting investment to drive the development of related industries to play a positive role in promoting economic development, even being taken as the indicator of the economic development.” “On other hand, the overheated investment on the real estate easily push up the land prices, and thus raise the operating cost of the industrial and commercial businesses, as well as the cost of people's daily life. Therefore, it possesses the potential of deteriorating economic environment to play a negative role of hindering economic development.” “As the result, in some extent, real estate has been used as a kind predatory means to plunder on the real economy.” “If, we allow speculative real estate developing freely, in particular, the involvement of a large number of foreign hot money, is bound to damage the real economy as that of the hurricane to destroy living environment for the industrial and commercial enterprises and the life of the most of the locals.” In fact, my worries above have been the reality in Canada. The foreign investors purchase real estate and natural resources have pushed up related prices in playing the role of passing the foreign inflation into Canada, thereby causing the difficulties of life of the local community builders, while increasing the cost of manufacturing and agricultural production, reducing the competitiveness of industrial products and agricultural products. In Canada, the worst affected is Vancouver. Due to the suitable living climate, political and economical stability of the Canadian-based, Vancouver City is favored by the real estate players. The negative impact of overheated real estate on the local economy is more and more prominent. 5. The speculators are killing the real economy of Canada Aug. 24, 2014, in the article Over-heated real estate market is ruining Canadian economy from Japan mirroring Canada, I have discussed this issue, I excerpt some as follow. In the morning, Apr. 14, 2014, I read the article Foreign property buyers restrictions needed and was moved by the rational views of Mr. Peter Ladner on the overheated Real Estate in Vancouver. In Apr. 2011, he once told CBC News: "If our prices are being driven up by people who are simply investing in our community and not living here, there are a whole lot of problems that result." He worries that prices are forcing people raised in Metro Vancouver to move elsewhere and preventing others from moving to the area. In the interview with David Berner on Shaw cable television, 25 May 2011, Peter Ladner said that: "I think about my own home that I bought in 2000, it's worth about four times what I paid for it now. … I have four kids, three in their twenties and one in their thirties, and they're never going to be able to afford to live in Vancouver because they're not already in the market." "I heard a story, a company wants to expand, they need workers, they can not find them here, because all the young people here in somewhere else, because they can not afford for living here. They hire people, recruit people from Toronto and other area, the people take one look at house price and they say that I can not move here, so now the company in thinking about moving to Waterloo." "We are declining the number of the companies in head offices in Vancouver. A survey on 60 CEOs about what keeps you from expanding and building the business here, the number one thing is the price of property, which is related. Number two is the shortage of skilled labors, which is also because of the housing cost." "We also got the widening the Rich and Poor things, to disablize the society. And got cases were who move here, new immigrants, they want to move here work hard, make the way to get whole economic security, can not happen." The facts are clear, that allows foreigners free speculation is extremely wrong, because, in nature, it is to introduce the inflation into own country to harm the real economy and the life of own national. For the development of the economy, such practice acts as that of drug addicts pursuit of drug-induced short-term pleasure, with regardless of long-term deadly poison. Or may say that is punishing oneself by the mindless brutality of other countries of over issuing currencies. We should not forget the painful lessons that Japan's bubble economy in 1980s and the financial crisis 2008 are both speculative real estate related. 6. Select and invite excellent foreign manufacturers to root in Canada We should not indiscriminately attract foreign investment, but, carefully chosen to introduce healthy one. For current Canada, manufacturers should be the most preferred. April 29, 2015, in the article Canada's economy is faced at vital crossroads, I said with that: "Manufacturer (Company or Enterprise) is the basic cell and main driving force of the economy by integrating the intelligence, Capital, Knowledge, Technology, and Market together to play the role as protagonists of scientific and technological innovation." "Manufacturer is the organizer of large-scale socialized production, it organizing and training social members to create material wealth with providing jobs for social members make living and tax revenue for social governing, thus to create a stable community, by which that people can work and live to enjoy a prosperous life." "Manufacturer is the cornerstone of social stability and sustained progress." "Start ups and innovations are too slow to achieve a basic scale, so that helps existing Canadian manufacturers growing up and attracts foreign manufacturers coming in is the money-time-saving shortcut for boosting economy." "With forged good business environment, to select and invite manufacturers world widely with their mature technology, the best-selling products, technical personnel, funds and markets to root in Canada, by which way to rapidly form satisfied scale of employment and tax revenue." "As one of the important markets in the world, the North American free trade market, for any entrepreneur, is a great temptation, which is Canada's natural geographical advantage, the key is that how do we use it wisely."
"By face to face discussion with foreign manufacturers to learn the worries of them for setting branches in Canada, and then we can find inadequacies of our work, which will help to improve and refine. With good services make up for the disadvantages of excessive operation cost in Canada." 7. The government of Canada should print money to purchase own natural resources and properties Above we have to see the harm of foreign investment, we should take a sensible response strategies. Therewith that allows International speculators freely purchase own valuable natural resources or hard work created valuable properties with their devaluated currencies to pass their inflation crisie into Canada, it is not as good as that canada makes inflation by own printing money to purchase own natural resources and properties, with the benefit of protecting the living resources for own survival. We should not ignore the domestic speculators also, their profit-driven speculations are also in killing real economy. People may laugh at my idea that government of Canada should print money to purchase own natural resources and properties. I solemnly declare that this is not a joke. I am writing an article that Canada Pension Plan should develop as high-quality foods supplier by controlling Canadian farmland, I excerpt some as follow. Please analyze the necessity and feasibility together. Nov. 11, 2013, the article Soaring farmland prices a crisis in the making: Don Pittis reported that: The latest survey by Farm Credit Canada shows the price of farmland in Quebec rose by a staggering 19.4 per cent last year. Nationally, Canadian farmland from coast to coast has risen by an average of 12 per cent a year since 2008. That's more than five times the rate of inflation. Unreasonably high land prices are the result of over rampant speculation of unearned profit-driving behavior. It will increase the cost of farming operations, and reducing the competitiveness of agricultural products. At the same time, it will greatly increase the cost of national infrastructure construction projects in acquiring the necessary building land. In nature, the most of speculation on natural resources or other properties are plundering the wealth of Canadians, which produce a large negative effect, a small positive effect in the development of real economy. The enviable resource-rich Canada with an oil price dragging economy proves that privatized economy is not a panacea also; the key is to advance social governance philosophically. State-owned farmland can avoid such speculation and greatly reduce the costs in both of farming operations and construction of public infrastructure. The generation of post-war baby boomer is at their ages for retiring in Canada, this is a unique opportunity for the improvement of social governance, in particular, the ownership of social resources restructuring from benefit some individual to benefit majority of Canadians. Canada's natural resources of arable land must be reverted to the hand of state, or we may say that all land resources must be owned by all Canadians, so that we can avoid the repeat of the money - huge profit from oil - the main natural resources that originally belongs to all Canadians to be out-flowing into the private wallet of foreign investors. We must make sure that the profit of land-related businesses can be shared by all Canadians and can be used to improve the living related public utilities. Such as, to be used for Canada Pension Plan to ensure that every Canadian has an ideal retirement to be able to enjoy a worry-free old age, to be used for improving public health care system, especially to shorten the long waiting times for medical treatment, as well as other social infrastructure. In order to reduce unnecessary social resistance, while also able to forcefully overcome such resistance, we must find a way, a way that will not touch or depend on the existing regime - Democracy, but also can function as the Government, which is able to effective use of the power as a part of the state apparatus. As the agency of federal government, Canada Pension Plan (CPP) is the best candidate. The CPP holds the responsibility of pension funds and the investment for profit, as Canadian citizen over 18 years of age, the part of working income is stored here to prepare for the life of retirement, which is directly related to the vital interests of Canadians. With the deterioration of the economic environment, inflation and other factors, the pensions may inevitably shrink, and people's concern for the retirement life is increasingly severe. So that any measures that can help CPP to make money or may say that make money to ensure a better retirement life for all Canadians, will be warm welcomed by most of Canadians, such as, that run CPP-owned farmland and launch some CPP-owned enterprises with be with fewer objections. For Canada Pension Plan (CPP) controlling the farmland, the difficulty is not the fund or social resistance but the successful management for state-owned businesses. More than 70 years of socialist practice that involved the states nearly half of the world, with public ownership economy, has failed more than 20 years. Moreover, Britain, the mother country of the famous economists Adam Smith and John Maynard Keynes who have been at the helm of the world economy by their invisible and visible hands nearly three centuries, has suffered the processes from original private ownership to be nationalized, and then from state-ownership to have to be privatized again in 40 years ago. As a veteran of the capitalist countries, the Great Britain also could not play state-ownership well. The facts have clearly shown that public ownership economy is not working in both Socialism and Capitalism. However, people may not realize that the experiences of the failures have precisely provided the possibility. For this regard, my Feb. 09, 2014 article Management is the Art of Playing Human Nature may provide a good reference with practical feasible steps. Human behaviors are determined by dual natures: The culture nature of those acquired qualities, and the animal nature of those inborn instincts. The Management is to finish purposeful tasks with the culture nature driven by meeting the animal nature with payment under the enforcement of regulations. The failure of the socialist practice was not fully due to the Autocracy Governance and the Planned Economy, but essentially was due to that it over relied on the human culture nature by madly suppressing the exertion of human animal nature under the enforcement of State Apparatus. Whether socialism or capitalism is merely a social model of social organization for large-scale social production. The work performance linked incentive and defined accountability is the key for productivity rather than that of social model. 8. Canada should adopt flexible fiscal and monetary policies As same as that of most countries in the world, the Government of Canada is also facing the thorny of funding shortage. As my view, the problem of funding shortage is not a problem of money at all, but the thought, the puilosophy. In the case of today that historically and internationally already provides enough financial and fiscal experiences for referencing, the government is still emphasizing the fiscal balance, it seems undesirable. Moreover, that makes earnings by state-owned bank seems more undesirable. The essential role of the state-owned bank should be well promotion of economic development with well control of the inflation by adjusting the issue of currency and its circulation. Government revenue should and must come from social prosperity through prmoting the creation of material wealth. For this end, that the government of Canada should adopt flexible fiscal and monetary policies. Usually, government takes no difference lending interest rate, while for controlling the overheated real estate market, it also has serious side effects that inhibits the development of the manufacturing sector of the real economy. This unreasonable practice must be strictly avoided by adopting flexible fiscal and monetary policies to effectively develop economy and improve the life of Canadians. For example, for the development of manufacturing, we should take the zero lending rates, plus the appropriate government subsidies. For young buying a house to self-live, the government should provide loans that interest rates based on bank operating costs without profit. 9. A remedy for the confusion of ideology and philosophy Mar. 1. 2008, I talked about Keynes in the article To Make Possible from Impossible by Breaking the Shackles of Dogmatic may take as a remedy for the confusion of ideology and philosophy. I excerpt some as follow. In past 154 years before New Deal, the market was controlled by Invisible Hand that advocated by Adam Smith in his famous book The Wealth of Nations published in 1776 firstly. This doctrine has been strongly advocated by some interest groups under greedy purpose, the government had to have abandoned the effective regulation on market. Laissez-faire market has led to many insurmountable economical problems. In this context, Keynes wrote The end of laissez-faire. Keynes was the pioneer in the field of economy to have broken the ingrained superstition and worship of people for the outdated doctrines that hinders the progress of human civilization. Talking about Keynes, most people respect his The General Theory of Employment, Interest and Money 1936. For instance, in 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century with commenting that; "His radical idea that governments should spend money they don't have may have saved capitalism.” But, I prefer The end of laissez-faire 1926, by which Keynes tries to reverse the ideological confusion. “These many elements have contributed to the current intellectual bias, the mental make-up, the orthodoxy of the day. The compelling force of many of the original reasons has disappeared but, as usual, the vitality of the conclusions outlasts them. To suggest social action for the public good to the City of London is like discussing the Origin of Species with a bishop sixty years ago. The first reaction is not intellectual, but moral. An orthodoxy is in question, and the more persuasive the arguments the graver the offence. Nevertheless, venturing into the den of the lethargic monster, at any rate I have traced his claims and pedigree so as to show that he has ruled over us rather by hereditary right than by personal merit.” “The average man averts his attention from the problem, and has no clear idea what he really thinks and feels about the whole confounded matter.” “Confusion of thought and feeling leads to confusion of speech.” Above, Keynes pointed out the absurd phenomena in 80 years ago, the public were being impacted by something without reasonable ground or something that legitimacy have been lost long time ago. Clearly, the intention of Keynes was toward broad scope beyond economics. In fact, it still is the common phenomenon even more severe in today, in the 80 years later. Please look around, there are many things have lost the real reasons of existence, the reasons have solemnly entered their graves after completed their missions in long time ago, but they are still alive and still a strong influence on our daily life, or even determine our destiny. For example, today, the original motivations of some constitutions’ establishing were gone away for a long time, and the objective circumstances for making those constitutions have entirely changed already, however, those constitutions have still been used to suppress public will and even harm public interest without any modification. We should question that whether we are too ignorant or stupid, so that we honestly accepts the control of something died already. Why do those dead doctrines not rot and still alive triumphantly? How do their vitality being well maintained? The only reason is that some people need them and continue to make them in fancy-dressing to deceive us believing those doctrines still alive. All in all, although the lives of those doctrines had long been ended, but they cannot sleep in their grave as they should be. They are being used to control public, both spiritual and material with achieving the conspiring objectives of the small group people. Although the General Theory has been guiding our economic life and to have greatly contributed to human material civilization since it was born, however, some of economic problems we are facing today seem to be out of Keynes’ foreseen, so that we cannot find pre-designed formula for solving all of today’s economical problems, which is being expected by the people who could only follow in a old rut rigidly because they are neither the talent nor the courage to deviate from a road that is increasingly narrowing, such as, an economic formula that could help us to control the fiscal deficit into a reasonable level in the process of stimulating the economic growth by increasing the budget deficit endlessly. It has reached terrible level in many countries not only in U.S... Facing the Financial Crisis of 2008, it said that it was only next to Great Depression in severity, the economic tools that Keynes left to us seem to have all been used, but the effect seems less obvious than that of in solving the Great Depression. So, some people may ask that, is the brilliant of Keynes’ thought fading? It is absolutely not. Today, the development of economy has far exceeded the expectations of Keynes. Compared with that of in 1930, the volume of world economy and stock market has increased great many times with many uncontrollable and although are controllable but not well controlled factors are acting as terrible specter in harming with the economy. On the other hand, the instruments of Government intervention in the economy proposed by Keynes was mainly by guidance and stimulus without the restrictions, it is not enough for the unreasonable components in nowadays market, such as, huge amount of international hot money that was considered to have triggered 1997 Asian financial crisis, and the newly developed irrational financial instruments – derivatives that was considered to be an important trigger of the Financial Crisis of 2007–2010. They are the terrible threats to trigger more economic disaster and are what we must properly regulate but hardly strive in today. Although Keynes did not left formulas that are suitable for solving the problems in today’s economy, but he left us with a universal formula that is his most shining part of his thought – the shining core, a core that implied but clearly being indicated in The End, that is to play to the score by boldly questioning the old orthodoxy and doctrines to explore new effective solution. Therefore, the most precious legacy he left to us is The End rather than the General Theory or any of others, because that in the The End he presented us a most significant thought with the potential of Golden touch, or the Midas touch. Keynes’ spirit of doubt and question against old doctrines possesses universal significance. Only after breaking the shackles of traditional, the wings of imagination could be expanded to fly freely in the expanse of the sky. Only after breaking the constraint of dogmatism, the gate of free thinking could be opened; the effective solutions would be produced and any thorny problems could be solved at present and in future. The progress of human civilization in the wealth of ideological and spiritual is important than that of in the wealth of material. Without the guidance of the correct philosophy, human being would never be able to enjoy true material civilization. Human would never get rid of the fatuity or the nature of the beast, looting and killing, endlessly making the disasters with advanced skill to do these indirectly in bloodless but more powerful. Therefore, in Keynes is very different with us ordinary people. He is sober and methodical when most of us are drowsy or panic. He has seemed to stand on the height of three-dimensional with the eyes as eagle’s to observe us who like ants to strive for essential daily livings, even fighting each other in a two-dimensional world. His main concern was how to protect us to be able to long-term enjoy life without disturbing. Compared with Keynes, we would be aware the reason, the reasons that we are just blindly being believed rather than brainy self-convinced, the reason that we always blindly follow others and being manipulated, the reason that we cannot control self destiny, and always act as a victim exposed to the front of any disasters that most of them were man-made. Keynes might have foreseen that the market running under entirely free does not work, sooner or later would make trouble. When people are still scheming, with a variety of sounds reasonable grounds to maintain the free market economy, Keynes had prepared ahead. He was doing preparation in public ideology. Perhaps because of his early thoughts on the government intervention of the economy was not being ideally implemented, or there are necessary to intensify. Because he was clearly aware that, in the most of cases, for doing some things, the greatest resistance comes from the public conservative consciousness, from the shackles of traditional, blind faith, blind worship, blind superstition and some dogmatic bias. The most difficult task firstly is to break down those bondages. Therefore, it is the choice that should do or should not do? Dared do or dared not do? It is the why rather than the how. It is just like Keynes indicated in the last paragraph, “The next step forward must come, not from political agitation or premature experiments, but from thought.” He knew that people accustomed to conservative in ideological is the major resistance for impacting on the progress of human society, so he continued: "The next step forward must come, not from political agitation or premature experiments, but from thought. We need by an effort of the mind to elucidate our own feelings. At present our sympathy and our judgment are liable to be on different sides, which is a painful and paralyzing state of mind. In the field of action reformers will not be successful until they can steadily pursue a clear and definite object with their intellects and their feelings in tune." The way of his bold but sensible questioning about orthodoxy with advancing ideological could help us to advance the way of our thinking, and avoid to fall into the trap of dogmatism, it is the prerequisite to do anything correctly. The world is in constantly developing, the objective conditions are constantly to be changed, and the nature of the problems will be changed, too. Only boldly breaking the restraints of old ideological frame, the horizons of vision is able to be expanded, the new innovative ideas can be find, the innovation is able coming true, so that, when facing particular new problems, we can quickly identify specific new solutions. 10. The greatest economist of 20th century John Maynard Keynes is crying in heaven It said that Keynes once wrote Epitaph for himself in advance, I translated it from a Mandarin version as follow. Do not mourn for me, my friends, do not cry for me. Because, in the future I will never have to toil. The heaven will resound with the Hymns and sweet music. But, I even do not go to sing any more. The sad words showed his disappointment for the world, may be for that the world is in full of ignorance and dull people. Those people are always blindly following outdated doctrine without ability to make adjustments based on objective realities wisely, and always walking on the road in extremely wrong to drink the bitter soup made by some mindless greed believers. Today, if we Google John Maynard Keynes, will find many articles talking about his achievements, most people agree that he was the greatest economist of the 20th century. The Hymns for Keynes is resounding in the human world. However, If Keynes sees that what happens in the world, he will not happy for being respected, but cry for his ideas and achievements are wrongly used in harming human survival. "His radical idea that governments should spend money they don't have” has been encouraging governments boldly print money with the purpose of boosting the development of real economy, but with a result of boosting the speculation in destruction of real economy. For fostering global economy and economic stability, he suggested to have established the World Bank and International Monetary Fund. However, in the Trans-Pacific Partnership -TPP negotiations, the United States has determined to take the World Bank as an arbitration institution to help multinational corporations to protect themselves by depriving related country's sovereignty to make more injustice by the name of making justice in free trade. The TPP originally initiated by the Asian countries, and now is dominated by the United States, as the tools for balancing Asia as that of successful balanced in Iraq and Afghanistan to trigger there's people killing each other. 11. Material wealth standard is rational than that of Gold Standard The famous British physicist Isaac Newton was not only discovered the Three Laws of Motion, but also created a monetary system - Gold standard in which the standard economic unit of account is based on a fixed quantity of gold. It ensured the long-term price stability. Since that governments can not inflate prices through expanding the money supply with the growth at the rate that the gold supply increases. However, the Gold is not able to eat, it can not be used as daily life needs for maintaining human survival. The more or less of the gold reserves of a country can not represent a country's more or less of the material wealth that can maintain its nationals needs to survive. Or rather, it can not represent the creativity of material wealth of a country. Therefore, the more rational realistic approach for the supply of the currency is to link with the availability or the growth at the increasing rate of the material wealth of the life necessities. We may call it as Material wealth standard. By the new monetary system - Material Wealth Standard, we may reduce the potential that financial economy plunders real economy. How to define the material wealth for the Material Wealth Standard needs careful study. Notes: The relations between currency, inflation, international investment and economic development is complex, which is difficult to make clear. It is a matter that both economists and politicians have been trying to study and debug, however, the effect seems not been apparent. My comments above, there is certainly insufficient or even some irrational, however, there is certainly a reasonable ingredients. I dare to say it, just want to play a role as enlightening. End. Nov 23rd 2000 | From the print edition This week sees the publication of the third and final volume of Robert Skidelsky’s biography of John Maynard Keynes, one of the greatest and most influential thinkers that Britain has ever produced. We asked Lord Skidelsky to tell us about his biographical adventure and, now that the labour is done, to say what he thinks of the man. THE two most persistent questions I have been asked about Keynes are: Do you like him? And what, if anything, has he to offer the world today? Written by Mikko I Arevuo | Tuesday, April 3rd, 2012 http://www.adamsmith.org/research/think-pieces/review-keynes-hayek-the-clash-that-defined-modern-economics/ The confrontation between John Maynard Keynes, and his Austrian born free market adversary and friend, Friedrich August von Hayek, is one of the most famous in the history of contemporary economic thought. The debate took place during the Great Depression of the 1930s about the causes and remedies of business cycle downturns in market economies. The origins of this debate can be traced back to the book ‘Treatise on Money’ (1930) written by Keynes, a rather obscure book, that was superseded by his masterpiece ‘The General Theory of Employment, Interest, and Money’ (1936). ‘Treatise on Money’ was a difficult book to read, and this probably caused Hayek and Keynes to misunderstand each other. As Keynes and Hayek were building their economic models at the same time, their debate was very much dominated by terminological definitions. One of the main topics that Keynes and Hayek corresponded about was the definition of savings and investment, and Hayek wrote three extensive systematic reviews of ‘Treatise of Money’. (1 - footnotes below) In turn, Keynes wrote only one article in response accusing Hayek of misrepresentation. (2) The debate on ‘Treatise of Money’ was rather one sided, and in 1932 Keynes withdrew from the debate to reshape and improve his central argument, which was to become ‘The General Theory’. This work became probably one of the most influential economic treatises immortalizing Keynes as one of the greatest 20th century economists. His lasting legacy, that was to become known as Keynesianism, is an economic perspective that argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes. The theory, therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank, and fiscal policy interventions by the government, to stabilize economic output over a business cycle. Many Keynesian economists have not regarded Hayek as their man’s equal. However, there is an increasing agreement today that Hayek, although controversial, was one of the most influential 20th century economists. He made fundamental contributions to economics in the theory of business cycles, capital theory, and monetary theory. He was also awarded the Nobel Prize for economics in 1974, jointly with Gunnar Myrdal, “for their pioneering work in the theory of money and economic fluctuations”. Most of Hayek’s work in the 1930s and the 1940s focused on the Austrian theory of business cycles. He believed that the price system of a free market was an efficient mechanism to coordinate people’s actions, and that markets were a result of spontaneous order that had evolved slowly over a long period of time, as a result of economic exchanges between people. Contrary to the statement in Wapshott’s book, that the Austrian School economists were more theoretical and mechanistic in their approach to economics, Hayek believed that markets were highly organic, and any interference with the spontaneous order of free markets would distort their efficient operation. In fact, it can be argued that Keynes’ economic theory was more mechanistic, as economies could be manipulated in a machine-like fashion to behave according to the wishes of economic planners. A true Renaissance man, Hayek also made intellectual contributions in political theory, psychology, and methodology. It is perhaps because of his work in political theory that some economists, especially those with a Keynesian orientation, have wrongly dismissed his core economic research as ideologically motivated. This is the trap that Wapshott seems to walk in, either intentionally, or because of Hayek’s criticism of the Keynesian model, that had become de facto orthodoxy for the most part of the 20th century, extends many decades, and to some extent, has remained unnoticed, or ignored, by many economists and policy-makers. Wapshott’s book ‘Keynes Hayek: The clash that defined modern economics’ is a commendable effort to bring economic thought to the attention of the general reading public. It is written in an engaging ‘human interest’ style, and I am certain it will sell well. Its publication is also well timed, because there has been a marked increase in public interest about economics and economic policy, as a consequence of the ‘Great Recession’, and sovereign debt crisis that currently grips the world. And this is where the book fails to deliver. A reader should not expect any great insight into how Keynesian or Hayekian economics could be applied in today’s economic situation beyond ‘truly Keynesian’, e.g. political, government policy interventions, as outlined in Wapshott’s book. Nevertheless, the book provides a delightful insight into the personalities of Keynes and Hayek. Keynes is portrayed as a privileged and bright economist at the top of his game effortlessly moving between academia, political elites, and his bohemian ‘Bloomsbury group’ of friends. Hayek, however, is painted as a stiff, humorless, theoretical, and linguistically challenged, central European scholar, brought to London School of Economics (LSE) by Lionel Robbins to provide an alternative to the theories of Keynes and his ‘Cambridge circus’ of almost evangelical followers. (3) Robbins, and the dons of the LSE, considered Keynes’ view that when free markets were left to their own devices, this sometimes caused economic slumps, and that decisive government action was needed to pull the economy back to an equilibrium state of full employment, as heresy. In contrast to Keynes, the Austrian economists thought that free markets, driven by people’s choices tended to adjust to equilibrium if left alone, and free from government intervention. Concerned with the increasing intellectual and policy influence by the new generation of Keynesian economists at Cambridge, Hayek was appointed to LSE to counterbalance Keynesian interventionist doctrine. Much of Wapshott’s book is about the political philosophy that divided Keynes and Hayek in terms of the role of the government in the running of an economy. Much less is spent on understanding the economics upon which the big-picture conflict was based. Indeed, Wapshott overemphasizes Hayek’s 1944 book ‘The Road to Serfdom’, on the dangers of socialism. This book was written after Hayek moved to Britain where he observed that many British socialists were advocating some of the same policies of government control that had been advocated in Germany in the 1920s. His basic argument was that government control of people’s economic lives was a form of totalitarianism: “Economic control is not merely control of a sector of human life which can be separated from the rest…. it is the control of the means for all our ends” (1944). The book became a best seller in the USA and it established Hayek as a leading classical liberal, or ‘libertarian’, as he would be called today. However, the success of the book, which was serialized in ’Reader’s Digest’, typecast Hayek as a free market ideologue, detracting attention away from his scientific contribution in economics. Wapshott provides a ‘workmanlike’ description of Keynes’ theory, but his treatment of Hayek’s economics and the critique of ‘The General Theory’, is woefully inadequate. The fundamental tenet of ‘The General Theory’ is that there is a direct and positive relationship between employment and the aggregate expenditure in an economy. Therefore, according to Keynes, total demand determines the employment level in the economy, and the existence of unemployment indicates that aggregate demand is insufficient to employ all factors of production. Keynes considered that the capitalist system was volatile, and there were times when the level of demand would be insufficient to maintain full employment. Therefore, Keynes recommended that the public sector should address this by controlling the level of aggregate spending in the economy. His recommendations to reduce unemployment can be categorized as follows: ? Interest rates should be reduced as far as possible to encourage private investment; ? A progressive tax system should be used to divert income from the wealthy to the lower paid, as their propensity to consume is higher; (4) ? The government should actively participate in public investment activity to supplement private investment, should this prove insufficient to maintain a level of aggregate expenditure that corresponds with full employment. After the publication of ‘The General Theory’, Hayek did not critique Keynes’ work as was expected; this he regretted ever after (Hayek in Sanz-Bas, 2011). However, Hayek’s critique of Keynes is incorporated into many of his works including ‘Monetary Nationalism and International Stability’ (1937), ‘Profit, Interest, and Investment’ (1939), ‘The Pure Theory of Capital’ (1941), ‘The Campaign Against Keynesian Inflation’ (1974), ‘The Fatal Conceit’ (1988). (5) It is perhaps because of the extended period of Hayek’s writing that Wapshott fails to provide a full account of Hayek’s economic thinking in general, and the critique of Keynesian theory in particular. It is beyond the scope of this review to discuss Hayek’s critique in detail. However, one of Hayek’s main criticisms of ‘The General Theory’ was about Keynes’ assumption that unemployment could be solved through increases in aggregate spending. Keynes linked aggregate spending with employment; if spending in the economy was increased sufficiently, this would result in workers getting their old jobs back, and the economic crisis would be averted. In contrast to Keynes, Hayek argued that the crisis was a direct result of the misallocation of resources during the previous economic booms. Hence, Keynes’ solution to reestablish the same distribution of resources would not provide a sustainable solution to unemployment. The only solution to systemic unemployment, according to Hayek, required a liquidation of wrong investments and reallocation of productive resources. To quote Hayek: “If the real cause of unemployment is that the distribution of labour does not correspond with the distribution of demand, the only way to create stable conditions of high employment which is not dependent on continued inflation (or physical controls) is to bring about a distribution of labour which matches the manner in which in which a stable money income will be spent” (1950). What we can infer is that Keynes’ solution to economic crises was a short-term panacea, while Hayek advocated a market driven solution that would result in a more sustainable productive economic structure. Such a structure would be consistent with consumer preferences. Trade cycles, according to Hayek, were a result of the government interference with the spontaneous order of the markets. Hence, the only way to avoid booms and busts, trade cycles, is to prevent them form occurring in the first place. Wapshott concludes his book by crediting Keynes for “saving capitalism a second time”. He makes a reference to Keynesian doctrine for solving the Great Depression, and the applicability of the same dogmatic panacea for the Great Recession from the 2008 onwards. He conjures the ghost of the Keynesian high priest, John Kenneth Galbraith, who scolds conservatives in the English-speaking countries for embracing Hayekian economics: “better to accept the unemployment, idled plants, and mass despair of the Great Depression, with all the resulting damage to the reputation of the capitalist system, than to retreat on true principle….”. What Wapshott misses in his argument is Hayek’s central proposition: booms and busts are a result of malinvestment created by the government interference in the operation of free market, a result of the very policies advocated by the dogmatic Keynesians of today. In contrast to Wapshott’s conclusion, I leave the reader with Hayek’s comment, that is particularly appropriate to this review: “I find myself in an unpleasant situation. I had preached for forty years that the time to prevent the coming of a depression is during the boom. During the boom nobody listened to me. Now people again turn to me and ask how we can avoid the consequences of a policy about which I had constantly warned. I must witness the heads of governments of all Western industrial countries promising their people that they will stop the inflation and preserve full employment. But I know that they cannot do this. I even fear that attempts to postpone the inevitable crises by new inflationary path may temporarily succeed and make the eventual breakdown even worse” (1979).
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