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Back in 1976 The Economist invited Entrepreneurial Revolutionaries to search and protect the world from the world's biggest maths error -the one that Keynes life work had been designed to prevent but which the rush to integrate communities into globalisation had been forecast since einstein as man's final examination in how nature values species' sustainability.
This has 3 vicious components which mass media (why) dumb you down with in propagating inconvenient truth instead of reality making
  • short-term economics isnt economical for over 99% of people and none of our children
  • top-down economics isnt economical wherever we live in service or knowledge multipyinhg economies
  • closed biudaries are not economical wherever the first net generation's lives/sustainability/heroic goals are becoming more and more interconnected
Mathematical;y it is possible to resolve the world's greatest mathematical error by asking anyone in charge of resource allocation - what exponential are you governing - are you exponentially growing or exponentially collapsing the futures that you are connecting people to - be they owners, consumers, employees, societies in which you work, the world's ecology. If you come across a decision-maker who doesnt know its possible to audit what exponential trajectory she or he is compounding, and who wants to find out - contact us immediately chris.macrae@yahoo.co.uk washington dc hotline 301 881 1655  skype chrismacraedc
The two most joyful economist I have ever met are dad (Norman Macrae The Economist's Unacknowledged Giant) and Muhammad Yunus. So to the limited extent that the Norman Macrae Family Foundation can help Yunus family celebrate turning the greatest dreams of youth economics into realities, we will
Latst news from The Economist in Bangladesh's Year of Living Dangeroussly: May 2012 Politics in Bangladesh: Banged about

not everyone enjoys maths- so tell us  - chris.macrae@yahoo.co.uk - what is your practical passion, and what one bookmark best makes the case for preventing world's greatest maths error

if you love nature, clean water food energy - then try http://archive.org/details/OnTheEdgeOfTheForest give it a chance for 5 minutes

which of muhammad yunus' 50 greatest wishes can youth around the world help him sustain? - due to vicious politics (at home and fanned by wikileaks) his wishes to do good with banking by investing in 8 million poorest vilages mothers wishes may have been stolen irreparably - but how about his green wishes:

in bangladesh he was on a moores law doubing installation of solar units each year - by end 2011 having reached 1 million units - a pathway that could during 2010s have created 100000 green jobs for vilagers as well as electrified most of the country currently without light other than that (uneconomic and unhealthy) practice of burning kerosene; he was also on a moores law installing biogas ovens that like solar have no carbon footprint and whose use saves mothers and childrens lives from appaling lung diseases that having to cook with kerosene causes - when you look at energy/climate crises, arguably bangladesh and japan share the most urgent needs in asia- bangladesh is prediected to be the first 100+ million nation to be washed awy if oceans rise, and japan has twice in 70 years suffered from man's dismal use of nuclear- fortunatly bottom up billanthropy is organising the botto-up green enregy awards at http://ashden.org with a few interesting partners including European Royalty and BBC nature correwspondents - help us journalise more good new of solar and biogas at http://grameengreen.com

one of dr yunus' greatest wishes is social forrestry - if he is banned from doing this in bangladesh, he has earmarked haiti as a country in greatest need of accelerating this social business- can you help him; other exciting national wishes- the former president of ecuador has asked Gunter Pauli (leader of the 100 million jobs of the blue green economy) to come and surey how many of his 100 million blue-green jobs ecuador can produce- fitting as this is the country where darwin was most inspired

for more on yunus 50 greatest collabortaion wishes , join us here

in 1984 my father's survey in The Economist asked why dont we start making healthcare 8 times less costly instead of ever more costly - failure of politicians to address this question has put Europe's most brilliant social systems -and total Euro-economy - at the verge of breakdown

 
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dear editors of journal of social business - can you try and get permission from soros to republish this piece in the special issue of the journal on what youth need to know so that student entrepreneur competitions start to create 3 billion jobs; mostofa please give to japan embassy and ask whether japan wants to take back win-win-win economics across asia as much as scots want to across europe; also please send on to gandhi family for any actions they want to join in taking
the piece could have a footnote on help prepare an issue of the journal on the future of capitalism which is where yunus was heading when we first met in scotland in nov 2008 but where he was then misadvsed that his brand could nly camapign on smaller issues; you could also start showing the iece round to scots like Tom Hunter who want tge Future of Capitalism to come to scotland as an economics leade of the future all europen youth needt to link in
As you know Keynes General Theory is tbig media's most abused book in the world because he predicted a segmentation of economists between those intent on destroying the future of youth through fatal conceit and hiring themselves out to sponsors of the loss of human sustainability, and the entrepreneurial school that aimed to design/free market purposes around improving the human lot and prodictiviy of all peoples.
Do we really need to be ruled by mathematically illiterate people while rome, athens, madrid ... burns? Following the ideas of conscious capitalism, aluimni of porter value chain theory, and the new book of the editor of harvard business review, Wwhy not use milliion times more collaboration technolgy to invest in celbrating 3 billion job creation by empowering ractice communities everywhere to launch microeconomies going way above zeros sum games of trading floors of big banks?
thanks chris
George Soros Remarks
Festival of Economics
June 2, 2012
Trento, Italy
Ever since the Crash of 2008 there has been a widespread recognition, both among economists and the general public, that economic theory has failed. But there is no consensus on the causes and the extent of that failure.
I believe that the failure is more profound than generally recognized. It goes back to the foundations of economic theory. Economics tried to model itself on Newtonian physics. It sought to establish universally and timelessly valid laws governing reality. But economics is a social science and there is a fundamental difference between the natural and social sciences. Social phenomena have thinking participants who base their decisions on imperfect knowledge. That is what economic theory has tried to ignore.
Scientific method needs an independent criterion, by which the truth or validity of its theories can be judged. Natural phenomena constitute such a criterion; social phenomena do not. That is because natural phenomena consist of facts that unfold independently of any statements that relate to them. The facts then serve as objective evidence by which the validity of scientific theories can be judged. That has enabled natural science to produce amazing results.
Social events, by contrast, have thinking participants who have a will of their own. They are not detached observers but engaged decision makers whose decisions greatly influence the course of events. Therefore the events do not constitute an independent criterion by which participants can decide whether their views are valid. In the absence of an independent criterion people have to base their decisions not on knowledge but on an inherently biased and to greater or lesser extent distorted interpretation of reality. Their lack of perfect knowledge or fallibility introduces an element of indeterminacy into the course of events that is absent when the events relate to the behavior of inanimate objects. The resulting uncertainty hinders the social sciences in producing laws similar to Newton’s physics.
Economics, which became the most influential of the social sciences, sought to remove this handicap by taking an axiomatic approach similar to Euclid’s geometry. But Euclid’s axioms closely resembled reality while the theory of rational expectations and the efficient market hypothesis became far removed from it. Up to a point the axiomatic approach worked. For instance, the theory of perfect competition postulated perfect knowledge. But the postulate worked only as long as it was applied to the exchange of physical goods. When it came to production, as distinct from exchange, or to the use of money and credit, the postulate became untenable because the participants’ decisions involved the future and the future cannot be known until it has actually occurred.
I am not well qualified to criticize the theory of rational expectations and the efficient market hypothesis because as a market participant I considered them so unrealistic that I never bothered to study them. That is an indictment in itself but I shall leave a detailed critique of these theories to others.
Instead, I should like to put before you a radically different approach to financial markets. It was inspired by Karl Popper who taught me that people’s interpretation of reality never quite corresponds to reality itself. This led me to study the relationship between the two. I found a two-way connection between the participants’ thinking and the situations in which they participate. On the one hand people seek to understand the situation; that is the cognitive function. On the other, they seek to make an impact on the situation; I call that the causative or manipulative function. The two functions connect the thinking agents and the situations in which they participate in opposite directions. In the cognitive function the situation is supposed to determine the participants’ views; in the causative function the participants’ views are supposed to determine the outcome. When both functions are at work at the same time they interfere with each other. The two functions form a circular relationship or feedback loop. I call that feedback loop reflexivity. In a reflexive situation the participants’ views cannot correspond to reality because reality is not something independently given; it is contingent on the participants’ views and decisions. The decisions, in turn, cannot be based on knowledge alone; they must contain some bias or guess work about the future because the future is contingent on the participants’ decisions.
Fallibility and reflexivity are tied together like Siamese twins. Without fallibility there would be no reflexivity – although the opposite is not the case: people’s understanding would be imperfect even in the absence of reflexivity. Of the two twins, fallibility is the first born. Together, they ensure both a divergence between the participants’ view of reality and the actual state of affairs and a divergence between the participants’ expectations and the actual outcome.
Obviously, I did not discover reflexivity. Others had recognized it before me, often under a different name. Robert Merton wrote about self-fulfilling prophecies and the bandwagon effect, Keynes compared financial markets to a beauty contest where the participants had to guess who would be the most popular choice. But starting from fallibility and reflexivity I focused on a problem area, namely the role of misconceptions and misunderstandings in shaping the course of events that mainstream economics tried to ignore. This has made my interpretation of reality more realistic than the prevailing paradigm.
Among other things, I developed a model of a boom-bust process or bubble which is endogenous to financial markets, not the result of external shocks. According to my theory, financial bubbles are not a purely psychological phenomenon. They have two components: a trend that prevails in reality and a misinterpretation of that trend. A bubble can develop when the feedback is initially positive in the sense that both the trend and its biased interpretation are mutually reinforced. Eventually the gap between the trend and its biased interpretation grows so wide that it becomes unsustainable. After a twilight period both the bias and the trend are reversed and reinforce each other in the opposite direction. Bubbles are usually asymmetric in shape: booms develop slowly but the bust tends to be sudden and devastating. That is due to the use of leverage: price declines precipitate the forced liquidation of leveraged positions.
Well-formed financial bubbles always follow this pattern but the magnitude and duration of each phase is unpredictable. Moreover the process can be aborted at any stage so that well-formed financial bubbles occur rather infrequently.
At any moment of time there are myriads of feedback loops at work, some of which are positive, others negative. They interact with each other, producing the irregular price patterns that prevail most of the time; but on the rare occasions that bubbles develop to their full potential they tend to overshadow all other influences.
According to my theory financial markets may just as soon produce bubbles as tend toward equilibrium. Since bubbles disrupt financial markets, history has been punctuated by financial crises. Each crisis provoked a regulatory response. That is how central banking and financial regulations have evolved, in step with the markets themselves. Bubbles occur only intermittently but the interplay between markets and regulators is ongoing. Since both market participants and regulators act on the basis of imperfect knowledge the interplay between them is reflexive. Moreover reflexivity and fallibility are not confined to the financial markets; they also characterize other spheres of social life, particularly politics. Indeed, in light of the ongoing interaction between markets and regulators it is quite misleading to study financial markets in isolation. Behind the invisible hand of the market lies the visible hand of politics. Instead of pursuing timeless laws and models we ought to study events in their time bound context.
My interpretation of financial markets differs from the prevailing paradigm in many ways. I emphasize the role of misunderstandings and misconceptions in shaping the course of history. And I treat bubbles as largely unpredictable. The direction and its eventual reversal are predictable; the magnitude and duration of the various phases is not. I contend that taking fallibility as the starting point makes my conceptual framework more realistic. But at a price: the idea that laws or models of universal validity can predict the future must be abandoned.
Until recently, my interpretation of financial markets was either ignored or dismissed by academic economists. All this has changed since the crash of 2008. Reflexivity became recognized but, with the exception of Imperfect Knowledge Economics, the foundations of economic theory have not been subjected to the profound rethinking that I consider necessary. Reflexivity has been accommodated by speaking of multiple equilibria instead of a single one. But that is not enough. The fallibility of market participants, regulators, and economists must also be recognized. A truly dynamic situation cannot be understood by studying multiple equilibria. We need to study the process of change.
The euro crisis is particularly instructive in this regard. It demonstrates the role of misconceptions and a lack of understanding in shaping the course of history. The authorities didn’t understand the nature of the euro crisis; they thought it is a fiscal problem while it is more of a banking problem and a problem of competitiveness. And they applied the wrong remedy: you cannot reduce the debt burden by shrinking the economy, only by growing your way out of it. The crisis is still growing because of a failure to understand the dynamics of social change; policy measures that could have worked at one point in time were no longer sufficient by the time they were applied.
Since the euro crisis is currently exerting an overwhelming influence on the global economy I shall devote the rest of my talk to it. I must start with a warning: the discussion will take us beyond the confines of economic theory into politics and the dynamics of social change. But my conceptual framework based on the twin pillars of fallibility and reflexivity still applies. Reflexivity doesn’t always manifest itself in the form of bubbles. The reflexive interplay between imperfect markets and imperfect authorities goes on all the time while bubbles occur only infrequently. This is a rare occasion when the interaction exerts such a large influence that it casts its shadow on the global economy. How could this happen? My answer is that there is a bubble involved, after all, but it is not a financial but a political one. It relates to the political evolution of the European Union and it has led me to the conclusion that the euro crisis threatens to destroy the European Union. Let me explain.
I contend that the European Union itself is like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a “fantastic object” – unreal but immensely attractive. The EU was the embodiment of an open society –an association of nations founded on the principles of democracy, human rights, and rule of law in which no nation or nationality would have a dominant position.
The process of integration was spearheaded by a small group of far sighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognized that perfection is unattainable; so they set limited objectives and firm timelines and then mobilized the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.
Germany used to be in the forefront of the effort. When the Soviet empire started to disintegrate, Germany’s leaders realized that reunification was possible only in the context of a more united Europe and they were willing to make considerable sacrifices to achieve it. When it came to bargaining they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement. At that time, German statesmen used to assert that Germany has no independent foreign policy, only a European one.
The process culminated with the Maastricht Treaty and the introduction of the euro. It was followed by a period of stagnation which, after the crash of 2008, turned into a process of disintegration. The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. It took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect.
The Maastricht Treaty was fundamentally flawed, demonstrating the fallibility of the authorities. Its main weakness was well known to its architects: it established a monetary union without a political union. The architects believed however, that when the need arose the political will could be generated to take the necessary steps towards a political union.
But the euro also had some other defects of which the architects were unaware and which are not fully understood even today. In retrospect it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank their rights to create fiat money. They did not realize what that entails – and neither did the European authorities. When the euro was introduced the regulators allowed banks to buy unlimited amounts of government bonds without setting aside any equity capital; and the central bank accepted all government bonds at its discount window on equal terms. Commercial banks found it advantageous to accumulate the bonds of the weaker euro members in order to earn a few extra basis points. That is what caused interest rates to converge which in turn caused competitiveness to diverge. Germany, struggling with the burdens of reunification, undertook structural reforms and became more competitive. Other countries enjoyed housing and consumption booms on the back of cheap credit, making them less competitive. Then came the crash of 2008 which created conditions that were far removed from those prescribed by the Maastricht Treaty. Many governments had to shift bank liabilities on to their own balance sheets and engage in massive deficit spending. These countries found themselves in the position of a third world country that had become heavily indebted in a currency that it did not control. Due to the divergence in economic performance Europe became divided between creditor and debtor countries. This is having far reaching political implications to which I will revert.
It took some time for the financial markets to discover that government bonds which had been considered riskless are subject to speculative attack and may actually default; but when they did, risk premiums rose dramatically. This rendered commercial banks whose balance sheets were loaded with those bonds potentially insolvent. And that constituted the two main components of the problem confronting us today: a sovereign debt crisis and a banking crisis which are closely interlinked.
The eurozone is now repeating what had often happened in the global financial system. There is a close parallel between the euro crisis and the international banking crisis that erupted in 1982. Then the international financial authorities did whatever was necessary to protect the banking system: they inflicted hardship on the periphery in order to protect the center. Now Germany and the other creditor countries are unknowingly playing the same role. The details differ but the idea is the same: the creditors are in effect shifting the burden of adjustment on to the debtor countries and avoiding their own responsibility for the imbalances. Interestingly, the terms “center” and “periphery” have crept into usage almost unnoticed. Just as in the 1980’s all the blame and burden is falling on the “periphery” and the responsibility of the “center” has never been properly acknowledged. Yet in the euro crisis the responsibility of the center is even greater than it was in 1982. The “center” is responsible for designing a flawed system, enacting flawed treaties, pursuing flawed policies and always doing too little too late. In the 1980’s Latin America suffered a lost decade; a similar fate now awaits Europe. That is the responsibility that Germany and the other creditor countries need to acknowledge. But there is now sign of this happening.
The European authorities had little understanding of what was happening. They were prepared to deal with fiscal problems but only Greece qualified as a fiscal crisis; the rest of Europe suffered from a banking crisis and a divergence in competitiveness which gave rise to a balance of payments crisis. The authorities did not even understand the nature of the problem, let alone see a solution. So they tried to buy time.
Usually that works. Financial panics subside and the authorities realize a profit on their intervention. But not this time because the financial problems were reinforced by a process of political disintegration. While the European Union was being created, the leadership was in the forefront of further integration; but after the outbreak of the financial crisis the authorities became wedded to preserving the status quo. This has forced all those who consider the status quo unsustainable or intolerable into an anti-European posture. That is the political dynamic that makes the disintegration of the European Union just as self-reinforcing as its creation has been. That is the political bubble I was talking about.
At the onset of the crisis a breakup of the euro was inconceivable: the assets and liabilities denominated in a common currency were so intermingled that a breakup would have led to an uncontrollable meltdown. But as the crisis progressed the financial system has been progressively reordered along national lines. This trend has gathered momentum in recent months. The Long Term Refinancing Operation (LTRO) undertaken by the European Central Bank enabled Spanish and Italian banks to engage in a very profitable and low risk arbitrage by buying the bonds of their own countries. And other investors have been actively divesting themselves of the sovereign debt of the periphery countries.
If this continued for a few more years a break-up of the euro would become possible without a meltdown – the omelet could be unscrambled – but it would leave the central banks of the creditor countries with large claims against the central banks of the debtor countries which would be difficult to collect. This is due to an arcane problem in the euro clearing system called Target2. In contrast to the clearing system of the Federal Reserve, which is settled annually, Target2 accumulates the imbalances. This did not create a problem as long as the interbank system was functioning because the banks settled the imbalances themselves through the interbank market. But the interbank market has not functioned properly since 2007 and the banks relied increasingly on the Target system. And since the summer of 2011 there has been increasing capital flight from the weaker countries. So the imbalances grew exponentially. By the end of March this year the Bundesbank had claims of some 660 billion euros against the central banks of the periphery countries.
The Bundesbank has become aware of the potential danger. It is now engaged in a campaign against the indefinite expansion of the money supply and it has started taking measures to limit the losses it would sustain in case of a breakup. This is creating a self-fulfilling prophecy. Once the Bundesbank starts guarding against a breakup everybody will have to do the same.
This is already happening. Financial institutions are increasingly reordering their European exposure along national lines just in case the region splits apart. Banks give preference to shedding assets outside their national borders and risk managers try to match assets and liabilities within national borders rather than within the eurozone as a whole. The indirect effect of this asset-liability matching is to reinforce the deleveraging process and to reduce the availability of credit, particularly to the small and medium enterprises which are the main source of employment.
So the crisis is getting ever deeper. Tensions in financial markets have risen to new highs as shown by the historic low yield on Bunds. Even more telling is the fact that the yield on British 10 year bonds has never been lower in its 300 year history while the risk premium on Spanish bonds is at a new high.
The real economy of the eurozone is declining while Germany is still booming. This means that the divergence is getting wider. The political and social dynamics are also working toward disintegration. Public opinion as expressed in recent election results is increasingly opposed to austerity and this trend is likely to grow until the policy is reversed. So something has to give.
In my judgment the authorities have a three months’ window during which they could still correct their mistakes and reverse the current trends. By the authorities I mean mainly the German government and the Bundesbank because in a crisis the creditors are in the driver’s seat and nothing can be done without German support.
I expect that the Greek public will be sufficiently frightened by the prospect of expulsion from the European Union that it will give a narrow majority of seats to a coalition that is ready to abide by the current agreement. But no government can meet the conditions so that the Greek crisis is liable to come to a climax in the fall. By that time the German economy will also be weakening so that Chancellor Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities. That is what creates a three months’ window.
Correcting the mistakes and reversing the trend would require some extraordinary policy measures to bring conditions back closer to normal, and bring relief to the financial markets and the banking system. These measures must, however, conform to the existing treaties. The treaties could then be revised in a calmer atmosphere so that the current imbalances will not recur. It is difficult but not impossible to design some extraordinary measures that would meet these tough requirements. They would have to tackle simultaneously the banking problem and the problem of excessive government debt, because these problems are interlinked. Addressing one without the other, as in the past, will not work.
Banks need a European deposit insurance scheme in order to stem the capital flight. They also need direct financing by the European Stability Mechanism (ESM) which has to go hand-in-hand with eurozone-wide supervision and regulation. The heavily indebted countries need relief on their financing costs. There are various ways to provide it but they all need the active support of the Bundesbank and the German government.
That is where the blockage is. The authorities are working feverishly to come up with a set of proposals in time for the European summit at the end of this month. Based on the current newspaper reports the measures they will propose will cover all the bases I mentioned but they will offer only the minimum on which the various parties can agree while what is needed is a convincing commitment to reverse the trend. That means the measures will again offer some temporary relief but the trends will continue. But we are at an inflection point. After the expiration of the three months’ window the markets will continue to demand more but the authorities will not be able to meet their demands.
It is impossible to predict the eventual outcome. As mentioned before, the gradual reordering of the financial system along national lines could make an orderly breakup of the euro possible in a few years’ time and, if it were not for the social and political dynamics, one could imagine a common market without a common currency. But the trends are clearly non-linear and an earlier breakup is bound to be disorderly. It would almost certainly lead to a collapse of the Schengen Treaty, the common market, and the European Union itself. (It should be remembered that there is an exit mechanism for the European Union but not for the euro.) Unenforceable claims and unsettled grievances would leave Europe worse off than it was at the outset when the project of a united Europe was conceived.
But the likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also for Germany. It would leave Germany with large unenforceable claims against the periphery countries. The Bundesbank alone will have over a trillion euros of claims arising out of Target2 by the end of this year, in addition to all the intergovernmental obligations. And a return to the Deutschemark would likely price Germany out of its export markets – not to mention the political consequences. So Germany is likely to do what is necessary to preserve the euro – but nothing more. That would result in a eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer of payments. That would turn the European Union into something very different from what it was when it was a “fantastic object” that fired peoples imagination. It would be a German empire with the periphery as the hinterland.
I believe most of us would find that objectionable but I have a great deal of sympathy with Germany in its present predicament. The German public cannot understand why a policy of structural reforms and fiscal austerity that worked for Germany a decade ago will not work Europe today. Germany then could enjoy an export led recovery but the eurozone today is caught in a deflationary debt trap. The German public does not see any deflation at home; on the contrary, wages are rising and there are vacancies for skilled jobs which are eagerly snapped up by immigrants from other European countries. Reluctance to invest abroad and the influx of flight capital are fueling a real estate boom. Exports may be slowing but employment is still rising. In these circumstances it would require an extraordinary effort by the German government to convince the German public to embrace the extraordinary measures that would be necessary to reverse the current trend. And they have only a three months’ window in which to do it.
We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it.

previously

 

Norman Macrae, Sound Money and the IEA

Commentary — By Alex Chafuen on July 29, 2010 at 5:36 PM

The late great Cambridge educated Norman Macrae, former Deputy Editor of The Economist reflected on the first 100 “Hobart Papers” published by The Institute of Economic Affairs. Sound Money got his attention:

 

“About 40 of the first hundred Hobarts have been on macro-economic subjects. For me, the most convincing has been the most radical number 70, by the Nobel Prize -winner Professor F. A. Hayek, which advocated the Denationalization of Money. It is probably going to be recognised during the period of the second hundred Hobarts that inflation has been caused by one particular manifestation of the age of growth of government power, namely, the nationalisation during the 20th century of the production of money. Before 1914 the gold standard prevented officialdom from increasing the
money supply. Private profit-making bank s could and did create paper Credit, but the attraction of such paper money remained limited by the security of the issuing banks. Since 1918, governments have acquired the right to print money and do so when ever pressures are put on them such as (a) ‘print more money or there will be higher unemployment’, or (b) ‘print more money or trade union demands for higher wages cannot be met, and then there will be strikes’.
To many of us it once seemed ration al that governments should have the right to make such surrenders. But there have been two changes. First, the argument that it is sensible to allow inflation in order to keep down unemployment has lost its attraction as rich countries have decided that inflation is a main reason why they must continue to allow unemployment to remain high. Secondly it has become clear that, when
trade unions feel that governments will increase money supply in order to accommodate their demands, they will make higher demands. Everybody is intelligent enough to maximise his demands according to
the likelihood that those in power will give way to them. Argument s that wage demands are determined by any less logical reason (such as intensities of feeling about unfair distribution of income) are sociological guff.
Half-a-dozen of the Hobarts seem to me to have advocated the continuance of the main government monopoly over money supply, but with rules on stem targets about how much new money each central bank is permitted to create. The difficulties here are that any measures of money supply agreed as a target quickly become distorted because banks and governments then have an incentive to create money in some form just outside the reach of the target.”

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What Everybody Needs to Know First About Economics

Economics designs peoples futures but this depends on what logics are analysed- here are the logics The Economist used in the early 19080s when it discussed how the net gneration could be the most productive time for youth

  

A nation/place cannot sustain growth unless its capital is structured so that family's savings are invested in their next generation's productivity. Norman Macrae's 1954 book on The London Capital Market provides chapter and verse. Historically it was timely as London's industrial revolution had planted most of the developed world's laws and financial instruments. Futurewise this book became a source for Norman's forty years of leadership challenges including 3000 editorials. THese became branded in the 2 genres of entrepreneurial revolution and future history of the net generation genre which he focused on from 1972. They script in practical details most of the changes that economists would need to make to historic rules if globalisation is not to collapse the worldwide financial system of 2010s

Norman framed his writings on future purposes huan most wanted around the idea that The Net Generation to 2024 would face change on a scale never previously experienced by our human race. To prevent risks and celebrate job creating opportunities Norman proposed in his 1984 book (The 2024 Report) that the world should unite around youth's most exciting millennium goal. He explained why economics would design the most popular futures if the goal was chosen as racing to end poverty everywhere. Reasons included: its possible, its exciting, it creates jobs post-industrial generation will need to design around collaborative technology, it can empower youth to joyfully unite cultures as we become borderless (more connected than separated), it aligns economics principles with nature's exponentially (compounding) rules of evolutionary selection which are community-up and open.

 download more profiles of 100 collaboration leaders of 2010s = youths most productuive decade 

 

We are shocked how few people know of the main findings of the renowned economist Maynard Keynes- increasingly only economics riles the world and the greatest risk to the future working lives of our children comes from elderly macroeconomists who hire themselves out to the biggest who want to get bigger.



Historically when faulty systems of macroeconomists ruined civilisations they fell one by one. But Einstein took Keynes logic further and hypothesised that the first generation to become more connected than separated by technology would be subject to a final exam. Now if we let erroneous macroeconomists rule whole continents of nations will collapse.



By 1976 my father (Norman macrae) -probably the last student of economics mentored by Keynes-  was writing at The Economist why the next half century would see the net generation tested - he called upon the genre of Entrepreneurial Revolution (ER) networkers to sort out the greatest  innovation challenge economics - and so the human race - will ever face .

 

 

logo320.jpg.

The opportunity of 10 times more productivity for the net generation (with million times more collaboration technology than man's 1960's race to moon)

.The THREAT is preventing the threat of collapsing continent-wide system of value exchange. By 2020 the (exponential track impacting future) sustainanbilyty of every village around the globe will likely be lost or won

..logo3responsibility.jpg...How could we be experiencing record youth unemployent when we are living in a time of a million times more collaboration tech than a generation ago? According to research by Entrepreneur networks started at The Economist in 1976, we are 36 years off track in compounding 2 unustainable systems whose follies multiply each other
  • that caused by non-economic media which also distracts us with glossy images and soiundbites instead of future realities and integrated cross-cultural and inter-generational understanding - full briefing here
  • World's biggest maths error compounded by macroeconomists and all global professions with a ruling monopoly - see below
Discuss: what does everyone need to know about the way economists think and behave. Understand 2 opposite segments of E : The Unacknowledged Microeconomist and the Fatally Conceited.MacroEconomist

Keynes - because economics will incresingly rule the world, the greatest danger to the futures of youth is elderly macroeconomists where fame maks them compete to superpower over peoples  

 Boulding: ****the historic significance of capitalism is precisely a society in which exchange has become a more important source of power than threat**** in his book economics as science

Von hayek- given the fatal conceit in my profession, I really think you shouldn't be doing this - awarding me a first Nobel Prize in economics 
freedom of speech and everything about the future you want, NOW depends on enough people knowing how to play the value exchange game - and why that isnt exactly what the game of monopoly teaches - an exchange is where each side says I wants something from you so let's work out what I can do for you and purposefully improve on this over time through hi-trust communal feedback
debate difference between true capitalism and phoney capitalism
  • agree on a picture like that on the right- we have seen cases where one of the 10 coordinates shown felt the system had betrayed their greatest trust, and so zeroised the organsaition or network (even ones that accountants had been reprorting record profits ahd $100 billion equity
  •  start discussing multi-win models - see our 4 favorites from 36 years of debates with entrepreneuruial revoltionaries
  • choose say 12 markets whose future purpose is most vital to sustaining your children - and use media to agree what the greatest human purpose and corresponding mkilennium goals are that need investing in to fee each market and youth's working lives in serving the most valuable purpose
  • get those (including all parents?) who save across generations to throw out speculators from banking systems and capital markets - eg next time there is a bailout (which means taking your childrens money to refinance a bank) wipe out shareholders; let them set lawyers on old managers and any politicians their pr's lobbied; keep savings accounts safe; restructure bank so that it invests in youth productivity and sustaining communities not bubbles, and not trapping people in debt

Goodwill explains up to 90% of value impacts of any organsaition in a networked economy- yet no nation yet requires that organisations it licences to audit goodwii. 20 years of research has proved the following reciprocal relationship - the purposeful question" who would uniquely miss what if your organsaition did not exist?, has the reciprocal question why let your organisation contnue to exist if it has broken my life-crtiical trust it promised to serve

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.........................................

valuetrue capitalism maps how each side win-win-win from other sides communal purpose over time -this  goes back over 250 years to the criteria of free markets adam smith demanded freedom of speech questioned - he talked about the transparency of community markets where a rogue trader might fool some of the people but not for long and not for too big to fail! - the journal of social business edited by adam smith scholars at his alma mater Glasgow University advises people of any other tongue how to build up from adam's hi-trust ideas to such constructs as sustainable global vilage networking first mapped by schumacher (another keynes alumni) - we have a library of free articles for you to choose and translate from

phoney capitalism spins a monopoly, a non-free maket - one side rules by saying I want to take more and more from all of you- esentially this is what rules when global accountants audit only how much one side has profited/extracted withouth how much has it sustains other sides- phoney capitalism can only result in exponentai meltdown becuase so much has been extracetd from system that its unsustainable for human lives or for nature or for both
 
 

100millionjobcrisis - YouTube

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  • MORE ABOUT WHERE VALUING NETGEN CAME FROM

    - in the 1990s I was working with big 5 accountants; I argued for a missing audit they needed to do as regularly as their monetisation audit; I called this how goodwill modelling multiplies value around a gravitational purspoe ewhise gials all sides want to progress over time; it turns out that in knowlege scetors over 90% of the future is bayesian predicatbale on quality of goodwill relationships-3 yeras before andersen crashed I usd this model to warn them that if they stoped multiplying conflicts around true and fair they would be zeroised by society- I didnt succeed in getting my advice to be acted on but at that time unseen wealth publications made by brookings and georgetwon had just been banned by the incolimng bush adminsitration - who didnt like to be told that without the second aidt risks would compound unseen- every collapse USA has seen a hand in during 2000s (and viralised to other nations since 2008) can be traced to this mathenatical error

    what can be done about this mess
    -debate difference between true cpaitalism and phoney capitalsim
    choose say 12 markets hose future purpose is most vital to sustaining your children - and use media to aggree what the greatest huan purspose and corresponding mkilennium goals are that need investing in
    get thse who save across generations to throw out speculators from bankiing systems - eg next time there is a bailout (which means taking your childrens money to refinace a bank) wipe out sharehilers; let them set lawyers on old managers and any politicians their pr's lobbied; keep savings acconts safe; restructure bank so that it invests in youth productivity and sustaining communities not bubbles, and trapping people in debt
    -if you do this today's millions times more coalbration technology than a generation ago can make the next decade the most productive time and joyful for youty and everyine to be alive instead of the most dismal time where natios led by old macroecnomist put youth out of work
    DO YOU KNOW...
    Q: Original Purpose of Economics? A The Scotland of the 1750s was at the end of a first generation to have found their country taken over by England's Empire., So Adam Smith was motivated to start writing about how to design systems so that peoples could could look forward to their next generation sustaining more productive lives than they had had ... 7 quarters later keynes general theory issued humanity's greatest challenge- economics as a systems science had reached the state that only economics rules the world ... moreQ: What do the man-made systems that rule the world look like? A Purposeful value exchanges composed round 5 main flows of how productively peoples lives are used and 5 main demands human beings make as co-workers, customers, owners, stewards of the globe, stewards of society at the village level - moreQ: Why can't human race in 21st C be sustained with choice of economics made by 20th C biggest banks and govs etc? A Long Story: ER alumni are in their 37th year of offering debating scripts eg1 on wht some industrial age systems after world war 2 were designed to be too big to exist as the first net generation became more connected than separated by geographical borders ... What is known is that 2010s is most exciting decade to be an entrpreneur because our impacts define what will be possible for all our childrens' children more 

    World Class Brands are in 25th year (as a subnetwork of Norman Macrae's Entrepreneurial Revolution) of helping sustain the most purposeful organsiations or markets in the world. Core to any charter of purpose is a quiz revolving round this question
    - who would uniquely miss what if this didn't exist?. From this Q&A's list of trust-flows, economics maps how to connect producers and demanders of the exchange in multi-win models of purpose. Henceforth, potential conflicts with this goodwill model are audited and resolved at every cycle so that unique purpose is celebrated to lead the future by continuously multiplying the most value and trust. This model provides the simplest benchmark around all exponential impact metrics of sustainability investement can be calculated and the transparency of all multi-win models are webbed around pro-youth economics. Questions welcomed chris.macrae@yahoo.co.uk washington dc hotline 1 301 881 1655

     jam.jpg

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    Not youth's economics of the world Not our schools of the worldYouthandYunus.comLeadersandYunus

    Muhammad Yunus expresses faith in entrepreneurs at G20 summit

    Posted on: November 23, 2011
    Category: News

    Microfinance Focus, November 4, 2011: Professor Muhammad Yunus was invited to deliver a key note speech during the G20 Young Entrepreneurs Summit held in Nice, France. Professor Yunus addressed an audience of more than 400 entrepreneurs from all G20 countries. In his speech, he shared his personal entrepreneurship experiences, his faith in young entrepreneurs to be the pillars of society and the need to include poor countries in the discussion process in making global decisions.

    Professor Yunus being an entrepreneur himself started off creating the Grameen Bank that provides microfinance services to the poor who had little access to financial provisions. From that, he ventured into a wide number of social businesses such as Grameen Nursing College, Grameen Eyecare Hospitals, Grameen Shakti, etc.

    He has always considered young entrepreneurs to be the most effective solution for the future. He said “In my opinion, G20 YES is a fabulous initiative, gathering so much energy and momentum from all over the world. Because of their creativity and leadership, provided that they commit to share the value they create, these 400 young entrepreneurs in this room can change the world.”

    Professor Yunus is also a member of the Millennium Development Goals (MDGs) Advocacy Group, advising the Secretary General of the United Nations. Hence, he believes that the next generation of youths should be handed over the process of the MDGs as soon as possible. He believes that entrepreneurs will have a key role to play in fulfilling the MDGs, if they are committed to the social value created by their companies, and social business can be part of the solutions.

    In his speech, he added that the G20 needed to broaden its scope to deal with the current world crisis. It can no longer remain a political forum with economic agendas. The G20 needs to create a social agenda as well. Professor Yunus proposes that ‘social business’ should be brought to the agenda of G20, as one of the concrete and effective solutions to be considered for immediate implementation so as to guide capitalistic investment towards social value and jobs creation, rather than sheer profit maximization strategies. A social business is a cause-driven business where profits stay within the company for its sustainability.

    Lastly, Professor Yunus concluded that the G20 should be expanded into the G25, where poor countries from each continent should be included in the global agenda which they are part of. He added that “Their problems are inter-related with others, and their proposals of solutions should be considered by the most economically advanced countries in making global decisions. A G25 would be a big step toward ensuring that global social issues are raised, and MDGs implementation is fully shared on the global agenda. And finally, because fighting poverty together is the only way to bring long lasting peace in this world.”

    Source: http://www.microfinancefocus.com/muhammad-yunus-expresses-faith-entrepreneurs-g20-summit

    inquiries chris macrae info @worldcitizen.tv us tel 301 881 1655 ; us office 5801 nicholson lane suite 404, North Bethesda, MD 20852 USA - skype chrismacraedc
     Mapping is a process of discovery. Crucially maps are only as usable as updating correctness of bottom up information. Think of your own use of a map. You look for the "you are here arrow". You want to be directed to somewhere/someone you dont know how to get to; you want your return vist to be safe as well as a value multiplying win-win.
    Does anyone remember the simplest findings of einstein and jon von neumann. Einstein proved that to innovate more value you need to go more micro in what you model; von neumann showed that there is more value to be networked by interfacing safe flows across systems instead of ruling over separation of boundaries. There isnt a single global metrics profession that gets these mathematical -and natural - principles right. Unless we change this global markets will cycle through ever greater collapse and more and more communities will lose sustainability. Mapmaking is that critical an idea to what the net genration will achieve in 2010s; but its also one that children from primary age up can action learn. Its simple. Its just that it works the other way round from top-down people's fatal conceit.
    It explores how to make the invisible principles and practices of real wealth creation visible, and therefore useable. Our planet needs case studies underline the search for new win-wins that build ‘system integrity’
    Trust-flow is the unseen wealth to invest sustainability in. Tranpsarently mapped it develops a goodwill gravity  tyhat invites with roleplayer in a community to multiply goodwill while sustaining their own cashflow.. Trust is not some vague, mushy, abstract warm-hearted sentiment. It is an economic powerhouse – probably just as economically and socially important as oil.
    The point is, there are specific things you need to do to get trust flowing, just as there are specific things you need to do to get oil flowing. And like oil trust has a dark side. Right now, the world is awash with the carbon emissions which threaten the stability and sustainability of its ecosystems. Right now, the world is also awash with the ‘carbon emission’ of trust – mistrust. Indeed it may well be that our ability to tackle the one issue – the threat of environmental catastrophe – depends on our ability to tackle the other issue: how to generate, deepen, extend and sustain trust.>br>But what is the best way of doing this? One thing is for sure. You don’t build and sustain trust via some sentimental exercise of goodwill to all and sundry. There are three very simple principles at the heart of effective trust generation. 
    First, trust is generated via win-win relationships. It’s virtually impossible to generate or sustain trust without mutual benefit for those involved. But beneficial outcomes are not enough in themselves. For trust to be built and sustained, both sides need to signal a demonstrable commitment to finding win-win ways forward. Such a  commitment may require real changes to what we say and do. Second, real ‘win-wins’ are hardly ever purely financial or material. You don’t build trust simply by walking away with more cash in your pocket. Trust works at all the dimensions and levels of human exchange. Yes, it’s about financial and material rewards. But it’s also about purpose (what people want to achieve). It’s about politics with a small ‘p’: the use and abuse of power, the crafting and application of rules of fair play. And it’s about emotions: the sometimes overwhelmingly strong emotions, both positive and negative, that are generated when people deal with other peopleWhat’s constitutes a ‘win’ – a sense of real improvement – is therefore highly specific. It depends absolutely on the details of who the parties are, what they are trying to achieve, in what context. Building trus, therefore involves discovering these specifics. Just as oil doesn’t flow out of the ground, get refined and pump its way into motor vehicles automatically and without effort, so identifying and doing what is necessary to get trust flowing requires dedicated, skilled effort. It requires a disciplined, structured process, not a vague sentiment.

    3) Third, even if we do steps 1) and 2) there’s still a good chance it won’t succeed. Why? Because it ignores an invisible third factor. In the real world, purely two way bilateral relationships don’t exist. There is always a third party whose interests or outcomes are affected by what the other two parties do but who is not a party to the contract. The environment is a case in point. Producers and consumers may both benefit from buying and selling to each other – but what happens if, in doing so, they destroy the environment they both depend on?

    This raises a hugely important question. When two parties pursue win-wins and build mutual trust, are they doing so in a way which creates a win and builds trust for the third party at the same time? Or are they simply pushing the problems – and the mistrust – further down the line on to this third party? Building vigorous, healthy networks of trust is a different kettle of fish to ‘you scratch my back and I’ll scratch yours’ win-win conspiracies. It requires a Map of all the key relationships plus careful consideration of knock-on consequences. It requires a different perspective.

    These three simple, basic steps do not happen automatically. They need to be worked at. The territory needs to be deliberately Mapped and explored. What’s more, there are obstacles in our way – mental and practical obstacles that need to be cleared. Prevailing economic theories about ‘rational economic man’ for example, deny the need to commit to win-win outcomes. Instead, they promote supposedly ‘rational’ (i.e. narrowly selfish behaviours) which actively undermine trust The same theories insist that the only valid measure of human benefit is money, thereby excluding from consideration many of the biggest opportunities for improvement. Meanwhile many vested interests do not want to extend the circle of trust to third parties and complete networks because their positions of power depend on their ability to take advantage of the weaknesses of these third parties. That’s another job for Mapping: helping to identify and mount such obstacles.
    The potential benefits of doing so are unthinkably huge. They start with a simple negative: the relief that comes from when you stop banging your head against a brick wall. Mistrust breeds wasteful, wealth destroying conflict that tends to feed on itself. Anger and hatred engender anger and hatred. Simply easing or stopping the terrible waste of mistrust would transform prospects for many millions of people. We desperately need to find ways of doing this. Then there are the positive benefits. Understanding the real nature of human wealth – all those dimensions of purpose, ‘politics’ and emotion as well as money and material comfort – means we can start being human again; human in the way we think, and act. What’s more, many of these intangible benefits won’t cost a penny. They’re there for the taking, if only we puts our minds to it.
    But there’s more, because trust is also an economic superpower in its own right. In the pages that follow we will show conclusively that material and financial riches are also dependent on trust. In fact, we will argue the case for going one step further. We will say that material and financial riches are a by-product of trust: the visible fruits of invisible, intangible human exchange. Once you understand that sustainable cash flows are a by-product of sustainable trust flows, your understanding of what makes a successful business is transformed.
    Separately, each of these three fruits – reducing the waste of conflict, unleashing the potential intrinsic benefits of human exchange, and energising the sustainable creation of material wealth – are massive in their own right. Put them together and they represent a vast new continent of opportunity.
    As we said, this book is addressed to entrepreneurs and system  innovation revolutionaries. Wherever you happen to be, whatever the change you want to make is, the principles explored in this book apply. The wish to change and the will to change are not the same as being able to change successfully. For that you need to understand your territory. You will need new Maps

    joyofeconomics.jpg

    0.1 Has a continental or worldwide search solutions on job creation that can be replicated across communities been organised before this EU launch of Nov 2011?
    While alumni of entrepreneurial economics have always valued job creation searches- we know of no clear evidence that this has been top of mind in the way that continental-wide government has operated since 1984 even though it was scripted by The Economist's Unacknowledged Giant as the number 1 question the first net generation would need to mediate if sustainable futures and humanity's most needed millennium goals are to be served
    what's different about nov 2011 is 4 top directorates of the EU have nailed their future reputation to this search -more
    1mobamauniobamauni@obamauni bon mots hillary zero sum thinking leads to negative sum results http://www.erworld.tv/id347.html
    1hHCL TechnologiesHCL Technologies@hcltech Press Release: #HCLT listed for the fourth consecutive year in the @WorldBlu's "Most Democratic Workplaces" list. http://hclte.ch/KbzBGH Retweeted by Traci Fenton
    49mAl RobertsonAl Robertson@al_robertson About last night's British Council @time_image film collection launch, with three of my favourite BC films! http://bit.ly/IJwmsc #WhoWereWe Retweeted by Lloyd Davis

    The End of the EU part 1 http://www.pbs.org/newshour/rundown/2012/06/paul-krugman-on-europe-doing-the-unthinkable.html

    TRANSCRIPT: 'The Unthinkable'
    Video above.

    Tom Ashbrook: You're talking about, writing about the end of the EU, the end of the common currency.

    Paul Krugman: it's unthinkable except that continuing down the current path is unthinkable. Spain is actually the epicenter. The Spanish government did nothing wrong. Spain was running a budget surplus before the crisis. It had low levels of debt. But it had a monstrous housing bubble, as did a lot of places, largely financed by the way by German banks which were lending to Spanish banks, which then lent on. And when the housing bubble burst you were left with a severe, extremely severe recession, and so the answer has been government austerity which just makes the slump deeper.

    The alternatives to a breakup of the euro have to be Europe-wide solutions. And so the solution, if there is one, involves accepting a higher rate of inflation for Europe as a whole and that particularly means higher inflation in Germany.
    --Paul Krugman

    What are Spain's alternatives here? Well, if they still had their currency, their own currency, the answer would be devalue, let the peseta drop, Spanish exports would become a lot more competitive, they'd be well on their way to recovery. They don't have their own currency, so people are saying: Well, you have to do all this stuff to stay within the Euro. At some point you say: Well, you know if your answer to our problem is just ever more suffering, ever more you know... 25 percent, 50 percent youth unemployment. If that's your notion of a solution, then maybe although it would be a very terrible thing to have the Euro breakup, maybe that's better than what we're doing. So that's becoming a real possibility now.

    The alternatives to a breakup of the euro have to be Europe-wide solutions. And so the solution, if there is one, involves accepting a higher rate of inflation for Europe as a whole and that particularly means higher inflation in Germany. Talk to the Germans about this and of course they go crazy, but you have to say to them: What is your answer? What you're doing right now is just a path to the collapse of the euro with enormous damage and radicalization and a lot of things that you don't want to see happen in Europe happening.

    TA: If the Germans can't take their foot off the brakes, they're just intrinsically and against history and everything else, Weimar, if they can't do it, what happens?

    PK: Then Europe breaks up and... No, I mean I think it's that stark. It really is, it really is that extreme because you know it's one of those things, you can't be saying that, but then you say: Well, let's talk this through. You know, let's as it said in the original edition of the Godfather - Let us reason together. Right? What are the ways that this can work out? And the current path is not one that can work out.

    It's like an irresistible force hitting an immovable object. On the one hand it's unthinkable that they'll allow the euro to fail because the euro is a terribly important thing, it's not terribly important economically, it would have been better off if they'd, if they had never done it, but now that it has been done, for it to fail is a defeat for the European project, the whole project of bringing peace, democracy, integration to a continent with a terrible history. So it's unthinkable that they'll allow it to fail, but it's also unthinkable that the Germans will accept moderate inflation which is the only solution any of us have been able to come up with. So one of two impossible things is going to happen. Your bet.

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