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The WMail Newsletter Essays
Volume VI - Issue #51: March 2005

"The Three Economies"

        The readers of this ezine, being online & mostly living in North America & Europe or parts of Australasia, are deeply embedded in the Virtual Economy. Some white-collar and most blue-collar workers operate in both the Virtual Economy and the Cash Economy. Examples of the Barter Economy include hippie communes, folks in Alaska, and the entire Third World.

        These distinctions are important to everyone because history is nothing but change – usually unexpected and often calamitous – and reliance on the permanent stability of any economic system is absurd, as is the expectation that economic forces won't toss YOU around like a paper cup in the surf.
        Unemployment in the U.S. remains at ten percent, prices continue to skyrocket – soon a gallon of gasoline/petrol will cost as much as coffee at Starbucks – and wages steadily go down while benefits disappear overnight.

        Readers engaged in developing their Working Mind should prepare for the inevitable Bad News that inept politicians & government careerists imagine can be avoided by irrational policies & empty promises and by their commitment to ignorance & hypocrisy. Some bubble is going to burst – History likes to play that way – and the only question is who will survive. The developing Working Mind may be able to reduce harm from such inevitable events as war, pestilence, famine and economic collapse, but only if personal corrective actions are taken.

        An economy based on consumerism (not productivity) cannot survive the realities of economics. The Great Depression that began in 1929 was caused by reliance on credit-based ('on margin') profit-taking on the stock market. The only difference today is that the entire economy is based on credit margins & profit-taking, measured by the pumped-up stock market. Sudden collapse due to the stupidity of George Dubya, possibly after replacement of Alan Greenspan with someone even worse for America, will come as no surprise to anyone who is paying attention to news media not owned by the Oligarchy.
        The collapse might be avoidable, but Dubya won't implement any such solution. In fact, one of my buddies has suggested that economic collapse is the intention of Dubya's economic policies.

        The U.S. economic bubble will indeed burst, as Ayn Rand foretold in "Atlas Shrugged". Maybe worse.Will you be prepared? Or will you be standing naked and dumbfounded in the path of the economic tsunami when it occurs.
        The following three economic distinctions are followed by strongly recommended personal actions & practices for readers who are engaged in further development of their Working Mind. These alterations in behavior will reduce the impact of such historic events.

* *          * *          * *          * *

        Each charge card these days has a magnetic strip that talks to its bank, which talks to all the credit bureaus and back to the charge card company. Your employer transmits payroll data on schedule to state and federal agencies and to the bank, which may then send electronic direct deposit into your checking account. Stock brokers take orders by email or in-house software: one click and somebody makes a profit, the broker gets a fee – AND somebody else incurs a loss. State & local departments provide online services, even taking payments for parking tickets, auto license renewals, and property taxes online.
        All this happens electronically, with nothing actually on paper, and without any physical transport of goods. Some members of the Upper Class may not actually touch specie – coins & bills – for days or weeks at a time. Business expenses are paid for by credit or debit card, dinner at the club requires only a signature on a chit (gratuity included), groceries are delivered to the house 'on account', and payment is reconciled electronically as well.
        And the bulk of these transactions are credit-based. Members of the Upper Class do not keep their millions and billions in a savings account, earning a mere one-quarter percent interest. Bills of the Upper Class become due, and at the last minute funds are moved INTO the checking account and then sent as payment.
        The credit cards of the Middle Class are predictably maxxed-out, and even for prudent consumers the loss of a single paycheck will wreak personal economic havoc: the 'money' moving around at the speed of light across international boundaries does not exist.
        In the old days (not so very long ago), if the records at a bank were lost, survivors & creditors could at least go to the vault and see the paper and gold and coins to be counted and divvied up, once somebody figured out the details.
        The Virtual economy is a pretense, a house of cards based on promises and nothing else. The Virtual Economy has no physical component.

* *          * *          * *          * *

        The Elite (in economic terms) are constituted by the Oligarchy – the 1% of the population who own 60% of everything – and by the Upper Class – the 20% who now own 83% of everything. These figures are for the U.S.A., yet other countries are little different, no matter the official economic system. (Russia & China are quasi-socialist: the economic Elite have never NOT existed there.)
        The Elite are quite pleased to have you feed their empty Virtual Economy: any activity within the Virtual Economy makes a profit for the Elite.

        But the cushion of such lop-sided wealth is just that: a cushion, and not a guarantee. The gap between the nature of economics and the pretenses of the consumer-driven, credit-based Virtual Economy is an abyss, one filled with the hot air of belief that any economist has a clue what will happen tomorrow or next week, much less after more of Dubya's willful economic malfeasance.
        When the economy next crashes, the Elite may feel a jolt. But even if the worst happens – something worse than Republican President Hoover's Great Depression – the massive wealth of the Elite will let them down gently. They won't like it, but giving up some shiny new toy (priced equal to a year's pay on minimum wage) is not as hard to take as standing in the line at a soup kitchen in a pouring rain day after day after day.

        Regular folks, including the Middle Class – who lost 60% of their equity since 1980 to the rapacious Elite/Oligarchy – will be stripped of the merest access to the Virtual Economy. Employers will fold, more factories will close, jobs will disappear, credit cards will be cancelled and demand made for immediate payment – and hundreds of thousands of Americans will lose everything. (This inevitability is likely the cause of the G.O.P.'s recent disabling of personal bankruptcy protection: bye-bye primary residence, hello living in your car.)
        As in The Great Depression of the 1930s, there will be no commerce from which the Oligarchy can spoon off the cream, nowhere for small businesses to seek temporary capital, no safety net to prevent tumbling down the Ladder of Success.
        Millions of shocked individuals will say 'Ouch' (and worse) and look around and find nowhere to turn. The Elite will beef up security around their gated communities (the moat around their fiefdoms). New dustbowl 'Okies' in suits by Prada & Armani will have nowhere to migrate to. Instead of blowing away the topsoil, the winds of change will be blowing across acres of empty parking lots in every city across America. The malls will be silent, the checkout lines will be short, and customer service numbers will reach disconnected phone lines.

* *          * *          * *          * *

        The Cash Economy is tactile, and operates human to human. The Fed-haters have a (weak) point that greenbacks are supported only by a government promise, manipulated by Greenspan and the M1 and the M2 and all that financial horse-pucky. But the exchange of cash for services or goods is a discreet event, that enables both [all] parties to experience satisfaction and-or completion.
        My recent auto trip from Los Angeles to Chicago & back [see next issue of WMail] included every variation of the Virtual & Cash Economies – even including interference from the ChoicePoint databanks security debacle. Reaching for my wallet and extracting folding money to pay for a meal, receiving change in return, patting my tummy and expressing thanks for the grub – all this was human interaction: both the owner-proprietor-employee behind the counter and myself were left with no economic concerns. The simple cash transaction was complete.
        In contrast, paying by credit card left everything incomplete, especially when credit card processing was not real-time online. The business person was left with uncertainty (of my card's validity) as well as with the expectation of paperwork and hassles: the bank subtracts their 3% to 5% fee out of every transaction, then holds payment of the principal for weeks, making a significant profit from the 'float', while I am left with expectation of interest charges of as much as 25% A.P.R. on my next credit card statement.

        The Virtual Economy involves unseen databanks and snooty executives in air-conditioned office towers and whirring computers subtracting automatic levies to the Oligarchy. The Cash Economy takes place in person, face-to-face, and your pleasure [or not] is communicated directly to the seller. [This is where Paleo-Capitalism operates; see WMail Issue #40 – http://www.working-minds.com/WMessay40.htm ]

* *          * *          * *          * *

        Few readers of this ezine participate in any version of the Barter Economy, which is direct trade of services or goods for equivalent value in some other labor or commodity. Perhaps some students pay rent or tuition by trading labor, some hobbyists deliver backyard crops in trade for non-specie rewards – such venues exist in 'modern' societies, though they are rare.
        But in the Third World, barter is life. Labor provides crops or craftwork, which is traded for an equivalent. Small villages far from 'civilization' remain co-ops, where all labor is divided and sustenance (as well as defense and healthcare) are assigned and allotted according to tradition. Representational 'money' is absent within the Barter Economy, even with the outside world: aborigines still trade baskets or pelts or medicinal bark for a shiny new steel knife or machete.
        This Barter Economy is foreign to most readers, and we have no skills for participation in it. A cataclysmic economic collapse will leave programmers and advertising execs and pro athletes with no means to survive inside a Barter Economy. The idea is simply too scary to contemplate. You do not want to go there.

* *          * *          * *          * *

        The primary recommendation regarding the Three Economies defined above is to get OUT of the Virtual Economy. The looming economic collapse will wreak havoc in varying degrees on every human on the planet – except 'uncivilized' aboriginal tribes embedded in Barter Economics.
        Such collapse, whether restricted to isolated countries or a contagion spread across every hectare of the globe, will reach you for certain. The only question is how well-prepared you might be for the economic devastation to yourself and your neighbors, and whether you can hang on without dying of starvation in a cardboard hovel up against an empty skyscraper.
        Staying an active member of the Virtual Economy has you beholden to the Oligarchy for survival, and failure to continue the charade will get you stripped of all resources and banished to the Barter Economy.

        So pay off all your credit cards and other debt. Buy only if you have cash in hand.
        Make double payments on your car and don't shop for a new one until the old one breaks. Then make double payments on your mortgage.
        Keep an active checking account – but when things start going bad and you still have a paycheck, ask for cash. Keep one credit card for true emergencies – flat tire, emergency room, burst plumbing, etc. – but keep it paid off each month.

        You can cash your paycheck where you buy groceries – no fee is charged.
        Walk inside at the gas station and pay cash for each fillup. (And definitely find and patronize the cheapest pump price in your area.)
        Go to the movies at the 'early bird' show and skip the $5 popcorn: carry in a granola bar in your pocket or purse.
        Shift your small business to the Cash Economy and pay very close attention to both payables and receivables. (Many large & small companies offer a discount for immediate – i.e. cash – payment.)
        Teach your kids that they have no need for the hot! fad-product of the moment.

        As an example of making such changes, my move to New Mexico is designed so that the end result of the sale of my trailer-home in California and the purchase of a new home south of Albuquerque will leave me with full equity in the new house – NO mortgage for the villainous banks to foreclose on, no monthly payments to feed the Oligarchy. I have paid ahead on the three domain names that I own, and will pay for my new DSL-or-dialup ISP for a year in advance (glad for the slight discount). My Chevy Blazer is paid in full, all I need concern myself with there is insurance and license fees for New Mexico.

        When the U.S. economy collapses, I will manage better than my neighbors still clinging to the lies of the media and the government, for they will be confronted with any number of emergencies: typically loss of job, followed by repossession of the car, and foreclosure on the house. You had better hope your relationship with your parents is bright & shiny, for you may have no alternative but to move back home, and the grandkids could make the situation entirely too confining.

        Do not think that it can't happen. Do not think that it won't happen. History is replete with cycles of economic piracy, burst bubbles, and widespread economic devastation.
        Get ready. Get strong. Spread the warning.

[copyright 2005 by Gary Edward Nordell, all rights reserved]

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