Sunday, June 2, 2013

TOO BIG TO FAIL!  TOO BIG TO PROSECUTE!  TOO BIG TO MANAGER! TOO  BIG TO FIX?

The major problem in our economy today regardless of blame or fault is an imbalamce of currency (the medium of exchange) in the Macro Economy.  A huge amount of currency lies in the hands of the Investors in the Atificial Economy created by law and there isn't enough currency in the consumner (demand) side of the Macro Economy to purchase the current production of the supply side.

The medium of exchange is the most useful "nothing" in the economy,  It has no intrinsic value but the economy couldn't function without it.  The Federal Reserve appears to be loosing the currency adjustment fight with the Artifical Economy in the Micro Economy.  (The Artificial Economy is the stock market with inflated market value stock as their medium of exchange)   The problem becomes visible when inflated stock gains are exchanged dollar for dollar for "real" currency and the investors horde stock and currency like art treasure.

Quantitative Easing is the government's attempt to manage curency circulation, but too much infusion increases debt and/or causes inflation.  HOWEVER, IF THE CURRENCY WERE EXTENDED TO THE CONSUMERS,  IT COULD HELP RESTORE A FUNCTIONING CURRENCY BALANCE AND MAKE NECESSARY IMPROVEMENTS IN THE GOVERNMENT'S ECONOMIC ENVIRONMENT THAT THE MICRO ECONOMY NEEDS TO EXIST.  HENCE, INVESTMENT IN THE INFRASTRUCTURE GIVES DOUBLE BENEFITS.  (IMPROVE ECONOMIC ENVIRONMENT AND ADD CURRENCY TO THE CONSUMER SIDE)

Perhaps the kindest explanation for the "evolvement" of the artificial currency produced by the Artificial  Economy and its effect on the Macro Economy would be "Unintentional Consequences."  The basis for the Artificial Economy is the artifical person created by law, the Corporation.  (Considered by many to be an inmaculate conception)

The Macro Economy is fueled by the Micro Economy that was originally made up of  Small Business Enterprises operating in the  Free Market Business Enterprise System.  This system was compatible with a democratic  society, theoretically giving everyone the freedom to participate in the economy and to receive a share of the economy in proportion to their efforts and contributions to the economy.  To fully appreciate the functioning economy, one must appreciate both the Macro and Micro Economic systems.

The Macro Economic System is the National or Government Economy.  It is simply the management of Supply and Demand (Production and Consumption).   A successful Macro Economy is a balanced economy with the production equal to the consumption which includes the costs of the Government that manages the economic environment.  The key for the practical free funtioning of this economy from producer to consumer is the medium of exchange (currency).  Theoretically everyone is a consumer and everone is a producer or "assistant producer." (Businesses, both real and artificial, their workers, and the government workers that  provide the economic environment  are  all producers in the Macro  Economy.)

Basically, the cost for the management of the Macro Economy  is a percentage of the Profit of the production (income tax) charged to business owners, employees, and goverment workers.

The Macro Economy is the "people's economy", with everyone a producer and everyone a consumer.  The Government is responsible for maintaining the Economic Environment as well as protecting the rights and welfare of all citizens.

The Micro Economy is the "business and individual" economy.  For the business owner, a successful operation would be a balance between income and cost plus profit.  For the individual, a successful operation would be a balance between income and costs plus a gain.

The Micro Economy embraces the Free Market Business Enterprise system and Consumer Economics (Personal Business Management).  Volumes have been written on these topics.  From  the balance perseptive, the business owner invests currency to operate a business.  they receive income (currency) and pay (give out) currency to workers and to other business for services or goods received.  The income received minus payments made is the business person's income (profit) or loss.  The business persons and the workers pay a tax on their income and use the balance for their own
personal affairs putting currency back into the system.  When everyone receives income to equal their expenditures, they are in balance, and if the taxes paid equals the expenditures of the government, the system is in balance.  The more income one receives, the more goods and services one
can buy.

The competitive free market provides a challenge for the business person to predict income and if liabilities exceed income and personal assets of the business person, and the business person is forced into bankruptcy, the business person looses his business and the workers loose their jobs.  Obviously  income will not balance consumption in this case and all of these people will be out of balance.  If enough businesses in an industry go bankrupt and  enough workers loose their jobs, the government will have less income than expenses  and the Macro Economy will be out of balance.

Freedom comes at a price.  In  the free market system there is a risk; there are winners and there are loosers.  Insurance plans in both the private and public sectors of the economy have helped to ease some losses, but even insurance plans can become loosers if they are not managed properly.

Investors have found that higher risks yield higher gains (but also higher losses).  They have also found that the bigger the volume the greater the
profit.  To increase income, a giant industry (advertising) evolved to stimulate demand.  Credit was used to compensate for the lack of currency and a huge debt accumulated that became the credit crisis.

The Artificial Economy came into existence when the Corporation was founded and became an artifical person created by law.  The Corporation had limited liability for investment and became the major part of the Micro Economy, Operating as the New York Stock Exchange.  

The Artificial Economy is the investor's or financial economy.  The medium of exchange is corporate stock valued at the varying current market price.  This is an artificial price varying as much as 20-30 times the cost or
book value price.  This price when exchanged dollar for dollar with the standard medium of exchange creates an artifical decrease in the total standard medium of exchange resulting in an imbalance of currency into the  Financial or Artificial Economy.  This, plus extensive credit, causes a credit crisis  resulting in enormous debt and/or inflation.

Both parties agree that the fix is a balance of the Macro Economy which means that production must equal consumption which includes the cost of Government that provides the Economic Environment for a balance Macro Economy.

Republicans want to decrease the size of the Government which decreaces the amount of the medium of exchange in the consumer side of the economy, and add to the production side of the economy by tax reductions and grants to the production side of the Micro Economy  and the Artificial Economy, which will produce more goods and services that the consumer side cannot afford.  The senario could then be more businesses on the production side of the Micro economy failing or being bailed out by an imbalanced Macro Economy.

The Democrats want to add to the the production side of the Micro economy by investing in the economic environment (infrastructure, etc) while maintaining a fully functioning Government, thus increasing the medium of exchange in the consumer side of the Macro Economy as well as supplement the production side of the Micro economy.