Enlightened Economics

Economics for an Enlightened Age

Archive for the ‘Spiritual’ Category

• Free Markets Need Higher Consciousness of Participants

Posted by Ron Robins on October 20, 2012

By Ron Robins. Re-published October 20, 2012. First published March 3, 2011, in his weekly economics and finance column at alrroya.com

Governments are repeatedly asked to create laws and regulations to restrain ‘free’ markets. Of course the failure of free markets is not usually the markets themselves, but it is often the character, or lack of it, of the individuals participating in those markets.

Some individuals or companies having gained powerful monopolistic or oligopolistic market positions make unseemly profits by exploiting their market power. Sometimes using abhorrent methods, they drive out other market participants and/or create major obstacles to bar new market entrants. Looking to recent US experience concerning its financial markets is insightful. But what is revealed about the character of the market participants there is found to a lesser or greater degree in markets everywhere, and in every country.

The 2007-10 US financial crises epitomizes the fact that free markets often give rise to behaviours by individuals where, in the quest for financial gain, they lose any sense of moral direction or mental discipline. They display a disregard for ethics, honesty and integrity.

Confirming that widespread loss of ethics was at the heart of the US-based financial crises is a January 2011 report by the US government’s Financial Crisis Inquiry Commission. A central finding was that, “there was a systemic breakdown in accountability and ethics at all levels.” By ‘all levels,’ the Commission refers especially to US government regulatory oversight agencies as well as to the financial institutions.

However, for the roots of such poor ethics you need only look at the behaviour of students in the US school system. It seems that cheating by students has grown alarmingly in US schools, colleges and universities in recent decades. The highly respected US Educational Testing Service says that “while about 20 per cent of college students admitted to cheating in high school during the 1940s, today between 75 and 98 per cent of college students surveyed each year report having cheated in high school… [and the] profile of college students more likely to cheat: business or engineering majors [and] those whose future plans include business.”

Such high levels of cheating especially in US schools associated with business education appear to suggest the schools are relatively tolerant of it. Thus, the students probably infer that cheating might be worthwhile in their business careers too.

When so many people accept cheating and dishonesty as normal, problems can become huge in number. And in working out their problems Americans frequently resort to adversarial methods using lawyers to solve their issues. As a result, the US is the most litigious society on earth with one lawyer for every 265 people, compared to one lawyer for 400 to 1,400 people in most western European countries.

Thus, the full costs to US society of poor ethics and undisciplined behaviour are immense, though difficult to quantify. In particular, they include the costs of administering, policing, and complying with numberless laws and regulations at all levels that stifle economic and societal progress.

President Obama is presently campaigning to reduce the number of government regulations that impede business efficiency. Yet, while in office he has added an inordinate number of new laws and regulations, as much or more than any other US president. Consider the many, many thousands of new laws and regulations alone in the Dodd–Frank Wall Street Reform and Consumer Protection Act (to purportedly stop a repeat of the financial meltdown) and the Patient Protection and Affordable Care Act (a massive, complex restructuring of US healthcare).

However, there is a way in which the numberless laws and regulations can be reduced and thereby promotes freer markets and greater prosperity for all. It requires that the individual acts in ways that he or she knows are right and ethical first, and that the gain or loss of any action is secondary. Hence it is a matter of individual consciousness.

In most religious and cultural traditions, honesty, not wronging others, etc., are central tenets. Also, most religions proclaim that if you harm others, the harm comes back to you one away or another, thereby reducing the temptation of unethical activities. However, even people who are non-religious would generally subscribe to the ideas of honesty and not harming others. Such behavioural guideposts help form the foundation for any civilized society. Thus, individuals acting with a high degree of consciousness would make the need for many laws and regulations redundant.

Americans should realize that their systemic problems of debt, deficits, structural economic deficiencies and loss of world standing, are at least partly due to a breakdown in their own individual and collective consciousness. If the US wants to regain the promise that true free markets can offer—and with fewer laws and regulations—they must ensure that its citizens aim for a higher consciousness: one of ethics, honesty, integrity and mental discipline. Though the example depicted here is the US, similar circumstances exist in countries everywhere.

For the US and all countries, it is not that free markets are bad and must be regulated. Regulations can be much reduced or even eliminated, if the markets are populated with individuals of higher consciousness and disciplined minds. Then that ‘invisible hand’ which guides all free markets can work its magic in creating sustainable prosperity and economic equity for all.

Copyright alrroya.com

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• Short Term Gain, Long Term Pain

Posted by Ron Robins on April 12, 2011

By Ron Robins. First published March 31, 2011, in his weekly economics and finance column at alrroya.com

Unacknowledged as key causes of most developed countries’ growing and unsustainable debt is their citizens’ lack of happiness and well being. This induces people to seek immediate comfort in material goods, drugs, and activities and lifestyles that eventually cause them, and their societies, great harm, ill health, and massive debt!

After decades of study, Robert E. Lane, the Eugene Meyer Professor Emeritus of Political Science, at Yale University in the US, found that it is a lack of happiness and well being that is eating away the moral fibre of the populations in advanced market democracies. In Professor Lane’s seminal book, Loss of Happiness in Market Democracies, he writes, “amidst the satisfaction people feel with their material progress, there is a spirit of unhappiness and depression haunting advanced market democracies throughout the world, a spirit that mocks the idea that markets maximise well-being and the eighteenth-century promise of a right to the pursuit of happiness under benign governments of peoples choosing.”

Continuing, “the haunting spirit is manifold: a postwar decline in the United States in people who report themselves happy, a rising tide in all advanced societies of clinical depression and dysphoria [anxiety, malaise], especially among the young; increasing distrust of each other and of political and other institutions, declining belief that the lot of the average man is getting better, a tragic erosion of family solidarity and community integration together with an apparent decline in warm, intimate relations among friends.”

It is these conditions which Professor Lane observes that give rise to individuals seeking immediate comfort anyway they can. Hence, most developed countries’ populations gravitate to instant solutions that might ameliorate their lack of happiness and anxieties. This, no matter the long term monetary, psychological, or physical consequences and costs to themselves or society. Professor Lane believes it is imperative for western democracies to give the highest priority to improving the happiness and well being of its individuals. And this means their focus should be on human psychological health and relationships—not about income levels.

By looking for hedonistic joys in the present, many developed countries’ individuals seek excessive material consumption which then creates unsustainable levels of consumer debt. In the US, though to a lesser degree in other developed countries, consumer debt has grown far faster than individual earnings gains over the past several decades. Despite a respite in consumer debt growth during the past two years, signs are emerging that US consumer debt might well begin to outpace actual earnings gains again in 2011, thereby creating conditions for yet another future financial crisis.

Also, and again much ignored in the debate concerning debt, are other individual behaviours that induce it. For example, to provide a modicum of happiness and to make life more bearable, people in America (and in many developed countries) consume drugs (legally and illegally) in extraordinary amounts. These drugs—alcoholic beverages, marijuana, cocaine, cigarettes, prescribed and non-prescribed medications, etc.—often create dependencies that impair health, brain and psychological functioning. These dependencies then lead to greater crime to support drug habits, increase prison populations and criminal/legal costs, raise the number of accidents everywhere, and encourage unhealthy lifestyles that in turn produce epidemics of obesity, diabetes, heart disease and all manner of health problems.

Americans spend more on healthcare, by far, than anyone else. In 2009, according to the Centers of Medicare and Medicaid Services, Americans spent $8,086 per person on healthcare, equal to 17.6 per cent of their economic output or gross domestic product (GDP). And such expenditures continue spiralling 4 to 10 per cent a year, far faster than GDP itself. Thereby they add inexorably to future unfunded US federal government medical liabilities that Boston University’s Professor Laurence Kotlikoff believes is about $125 trillion over an infinite timeframe. To fund that liability would require every man, woman and child in America to pay about $407,000 to the US federal treasury!

And among public companies a short term focus on near term profits that potentially create longer term costs and debt has been endemic. Consider this 2001 quote by Maryann Keller on the US automobile industry. In Forbes magazine, she said, “[That] Chrysler, GM and Ford spent billions of dollars to buy their stock in the open market… It was always obvious that product spending [developing new autos] was being sacrificed to provide trading liquidity [ease of selling stock] for big investors while boosting earnings per share. GM, Ford and the Chrysler Group today [in 2001] find themselves with growing gaps in their product portfolios as they lose market share…”

Thus, the US automobile industry preferred to spend profits on supporting their near term stock prices rather than developing new products for longer term profits. By 2009 all but Ford were bankrupt. After losing tens of thousands of jobs and engaging in a massive automobile industry restructuring program, the US government bailed out the industry (for now?) at a cost of about $85 billion. (Canadian governments also supported GM and Chrysler to the tune of $13.5bn CAD.)

Total societal US debt (private, corporate and government) is now likely to continue moving higher again as consumers are forever encouraged to spend now while saving is discouraged due to artificially mandated low rates. Increasing employment, though welcome, is not likely the answer to mounting unsustainable societal debt. In fact, it might well exacerbate it if former long term trends of debt growth outpacing income gains continue.

The US, like most other developed countries, is on a path to increased human suffering and tragic financial circumstances unless it deals with the fundamental issue: enabling individuals and families to become intrinsically happier and experience feelings of greater well being. Only then can the compulsion towards short term thinking and gratification—which builds huge unsustainable long term debt—be stopped.

Copyright alrroya.com

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• The Allure of Gold: Now and through the Ages

Posted by Ron Robins on February 10, 2010

While respected sociologist Dr. Paul Ray reveals the rise of higher consciousness in society today, we also note the rise of something else unparalleled in our modern epoch: the declining confidence in developed countries’ paper currencies. This is clearly evidenced by that eternal barometer of currency health—gold.

Having seen gold’s U.S. dollar price rise four-fold over the past decade and with substantial gains in all currencies (while outperforming every other major asset class), gold is resuming its historical monetary role.

Why is this happening? Mainly because of our gradual realization of what I call the Really Bad Three ‘Ds’ of the developed world:

1) Debt (The Global Debt Bomb, Forbes);

2) Derivatives (… the new ‘ticking bomb,’ Marketwatch); and,

3) Demographics (The 81% Tax Increase, by Bruce Bartlett, and Global Ageing Population–Financial and Economic Crisis Brewing, by Niels Jensen.

Also supporting gold’s ascent and paralleling Dr. Ray’s thesis of a rising higher consciousness globally, is the increasing appreciation of gold’s age old and alluring spiritual, cultural, and healing qualities.

Gold through the ages
Gold has enthralled people from time immemorial. In ancient Egypt, Egyptians ingested gold for spiritual, mental, and bodily purification. In India’s Vedic tradition gold is associated with the sun, light, fire, purity, life, immortality, truth, splendour—and long revered as money and wealth. In China, traditionally gold is owned for good luck. The golden dragon, the symbol of Chinese culture, stands for happiness, procreation, and immortality.

In Europe, the Greeks, Romans, Venetians, Dutch, Spanish and British, all found gold to be the ideal currency. Gold has historically been chosen as currency due to it being “durable, divisible, consistent, convenient, and have value in and of itself.”

In our modern era New Agers call gold “the Master Healer’… Gold symbolizes the purity of spirit and they attribute the power of cell regeneration, energy conductivity, communication transmission and energy purification to the metal… In the world of spiritual healing, gold has the emotional power to ease tension, feelings of inferiority, and anger as well as encouraging the realization of one’s potential and bringing comfort.” (From: jewellerysupplier.com)

Growing practical uses of gold today
Gold also has new and rapidly growing practical applications. It is used in electronics and computers as an extraordinary natural conductor of electricity which will not rust or degrade. In medicine, it is used to treat arthritis, and gold nanoparticles are central in much of biological research. In aerospace, NASA uses gold in a film to reflect infrared radiation and as a lubricant for mechanical devices operating in space.

Gold alloys are utilized in dentistry for fillings, crowns, bridges, and orthodontic appliances. Dentists find gold easy to work with, nonallergenic, and chemically inert. (See geology.com)

Perhaps the oldest and best known use of gold is for jewellery. Analysis of GFMS Ltd.’s third quarter, 2009 report, shows gold used in jewellery represented about 59% of usage and that gold for investment purposes accounted for 28% of demand; electronics 9%; other industrial demand for 2%; and dentistry 2%.

Inflation/hyperinflation/deflation fears increase gold’s attraction
However, it seems that for 2009 as a whole, something extraordinary happened: for the first time in decades investment demand for gold exceeded that of jewellery use. Gold is being purchased as a hedge against the anticipated currency chaos resulting from the Really Bad Three D time-bombs of uncontrollable Debt, explosive Derivatives, and aging population Demographics.

The fears are that the governments and central banks of the U.S., E.U., U.K., and Japan, may of necessity create high inflation to alleviate the burden of their unsustainable debts and obligations. Unfortunately, inflation can get out of control, increase rapidly, and result in hyperinflation causing huge loss of confidence in the affected currency.

Central banks can generate inflation by printing money. Put simply, they flood the economy with almost free, ‘excess’ money, which forces a decline in value of each monetary unit, thus producing inflation. Countries (or anyone in debt) can then pay off their debts with money that buys a lot less—thus cheating their lenders. This has been common practice of indebted governments throughout time and is what ignites the lust for gold as the safe haven from the ensuing monetary and economic maelstrom.

However, renowned economics’ professors Carmen M. Reinhart and Kenneth S. Rogoff, as well as Dr. Lacy H. Hunt, and others, believe that deflation will rule. In deflationary periods, as in the 1930s, the money supply contracts, prices fall, debt deleveraging occurs, major financial system defaults occur, the economy shrinks, and government deficits and debts explode upwards. Even in deflationary episodes, investors fearing losses or government failure buy gold for protection. (See The Long Wave Analyst.)

Therefore, central banks in the developing world possessing the world’s largest reserves of developed countries’ currencies and debt are fearful of losses arising from any of the above potential conditions. So, to protect the value of their assets they do what central banks have always done—they buy that ancient metal of kings—gold. The central banks of China, India, and Russia, are among the biggest buyers of gold today.

Furthermore, as these developing nations grow they are investing increasingly in their own locales where investment returns are higher than in developed countries. Thus, their reduced buying or outright selling of developed countries’ debt and currencies is further lowering the value of those currencies and debt.

Gold’s new role
These developments are creating mounting instabilities in the world’s financial system and are encouraging discussions of a new global currency that might compete with or replace the U.S. dollar. Already, Brazil, Russia, India and China (the so-called BRIC nations) as well as developed countries such as France, are demanding the establishment of a new world currency order.

To accommodate these demands the International Monetary Fund’s (IMF) Special Drawing Rights (SDRs—a ‘basket’ of currencies used as money between central banks) may well be re-formulated to include new currencies and commodities. Theoretically, the re-formulated SDRs could even become the world currency.

Top gold analysts like Jim Sinclair see the linking of gold to both the SDRs and to the U.S. dollar money supply. By anchoring the dollar to a rising gold price the U.S. could likely stem the dollars declining value.

The downside of gold production
If proper safety and environmental rules are not followed the mining and production of gold can mean ill health for miners and mining communities, and environmental degradation. Mining and processing of gold ore usually requires the use of the highly toxic chemicals such as arsenic and mercury.

The ore after processing is left in tailings ponds, and if the ponds are not carefully designed, built, and maintained, the water from these ponds can contaminate water sheds, rivers, and farm fields. If not properly managed, there are real downside risks in the mining of gold.

However, there are two reasons why I feel more optimistic about gold mining in the future. Firstly, non-governmental organizations (NGOs) around the world are bringing to light those gold mining activities that are doing harm. In some cases NGOs have caused abusive mining operations to shut-down or to make major changes in their operations. Secondly, governments are implementing ever tighter health and environmental controls concerning mining.

These factors are slowing the amount of gold mined, as well as making the mining itself more expensive. Hence, as gold demand increases and the above factors help to restrain its supply, gold prices are likely to receive even further support. Incidentally, since the 1990s, global gold demand has substantially exceeded what is mined, while the amount of new gold found is unable to replace that mined.

To summarize, gold is re-incarnated
In the next few years the probability of currency and economic turmoil due to the Really Bad Three Ds—Debt, Derivatives, and Demographics of the developed world—will be greater than at any time since the 1930s. Similar turmoil has occurred innumerable times over countless millennia, and can be seen from the ancient civilizations of Egypt, India, China—to modern Europe. As turmoil occurs, gold becomes the store of wealth and assumes its role as the currency of choice.

However, gold is not only rising due to currency and economic instabilities. It is also rising because of its many fast growing commercial applications and particularly because of the allure of its age-old spiritual, cultural, and healing characteristics. In the era of higher consciousness where Enlightened Economics reigns, gold serves many key functions. The future is indeed golden!

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© Ron Robins, 2010.

Posted in Consciousness/Psychology, Economics, Finance & Investing, Gold & Precious Metals, Personal Finance, Spiritual | Tagged: , , , , , , , , , , , , , , , , | 1 Comment »

 
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