Topic: Dissecting the Parasitocracy - page 3. (Read 2583 times)

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BobK71

It's going to take some time to explore your ideas in this thread in detail, so I think I will explore them piecemeal.

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I will start with "Parasitocracy", that great term you brought here.  Most awake observers would agree to at least some degree that those who hold the power (or who are The Elite, those who are very rich, etc.) are always gaming the system so they can make even MOAR.  Or get moar power for themselves.  This has been going on for millennia, and I don't think it is necessary to bring further proof to this discussion, it has been proven "enough".

Without going too deep into the weeds, there are many players with many agendas.  Banksters want loose rules (no Glass-Steagal), and moar (printed or electronic) money.  [Though many banks seem to be hurting from negative rates, but, I don't want to get lost in the weeds...]  Banksters also get Bailouts (2008) and look like they will be protected by Bail-ins if/when the time comes (IMO, the time will come).

Also, again just raising the topic and not wanting to explore the weed-infested fringes, there are many types of parasitism and levels (intensities).  The Clintons, for example, provide a fascinating set of parasitical behavior: Not only do they want moar, they want moar of almost everything!  The Clinton Foundation (just today coming under an IRS investigation) has made them rich, with apparently a low 10% of all contributions going to the needy, the rest going to them and cronies...  [Weed alert], yet another facet here is why so many who are already very wealthy need moar and moar and moar.  Once someone is worth, say, $10,000,000 (net of liabilities) why does anyone need yet moar?  At least why do they want moar to a degree that they would behave in an illegal way or scandalously?  Sociopaths behave like that.  Easy-to-digest references, for those interested, would include the two recent movies ("Hillary's America" by Dinesh D'Souza and the remarkable "Clinton Cash" that I saw at Breitbart) showing very disturbing and almost completely illegal behavior by the Clintons.

Other parasites meriting investigation and probably punishment would be sleazy scumbags like Jon Corzine, a nexus of greed and political douchebaggery.  Not one significant participant in the Financial Crisis (2008 - ?) has been put in jail.  Corzine was also Governor of New Jersey...  Power and money.

Impunity.  A word we will likely see more and more.  And it will eventually anger the American people.

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I have mentioned some of my views on diversification in other threads.  I agree about not HODLING too many (net) assets in gold or Bitcoin.  My rule of thumb (and this is just me) has been perhaps 10% in gold (or even diversified into other PMs) and 1% into BTC.  Of course, this suggestion would be for someone who has enough assets to more than cover their life's expenses (etc.).

In my case, my family's holdings are about 10% in gold and some other PMs (not paper gold), and about 0.5% in BTC.  I am happy enough to HODL some BTC as I think it is potentially a great speculation.

Gold will protect the owner from .gov predations and carry wealth forward.

But that still leaves traditional assets.  As I think some kind of financial disaster is very possible, I think that every thinking person should cover the downside with a holding of gold, and if "knowledgeable enough" (and interested), then HODLING BTC is great.  But traditional assets are OK with me because of proven historical value.  Everyone should hold some traditional assets because we may not have a financial disaster...

Stocks are good, because of their traditional growth that has been higher than most other investments (so HODL of up to some 25% in stocks if you are wealthy).

Bonds are not so good now, but have been OK for those through history needing income.  There are lots of types of bonds and other income-producing investments of various kinds and qualities.  

Real estate apparently has made more Americans wealthy than any other investment (inc. technology and energy).  Real estate is priced high now...  Holding real estate via too much borrowed money is dangerous!

"Alternative investments" (which depending on definition may include gold) are OK up to (say) 5% of new wealth according to many money managers.  Other alternative investments include fine art, hedge funds, foreign investments, etc.

What balance would constitute a diversified (diversified enough) portfolio?  That depends on each person's own situation, knowledge, and comfort levels (eg with risk).

In my opinion, financial safety would include all sorts of legitimate investments, and a good balance (not too concentrated into any one investment) is most appropriate.



(Edited various times)

Thank you!  I look forward to reading it.


If a debt goes on and on, its value becomes dependent on believing that other holders of the asset also believe they can redeem the debt for liquid assets any time.  This reliance on 2nd, 3rd, and 4th, etc. guessing is a characteristic of a bubble.  Bubbles can last a long time, yes, but you never know when it pops.  A public debt bubble is especially dependent on political strength -- not the sort that got Trump nominated!  The central bank is not legally bound to rescue public debt, and a large number of factors can be problematic for the bubble.


The key issue for me is not what form money takes.  I would want the market to work it out.  Who knows, in an ideal world most 'money' might be some kind of credit or derivative.  The key problem is that, when the state issues money, the power and the inherent incentives of such a system will lead to destructiveness of all kinds.  When private parties issue financial assets, no one needs to trust them (assuming there is no direct or indirect state support of any kind,) and that's the only way to build a healthy system from the start.

If you've ever listened to socialist bureaucrats, you'll have heard a lot of talk about how things 'should' be, and of course, the implication is that they should have the power to do this or that job.


There is the natural risk that comes from investment or any other activity with uncertainty, and there is also the risk that comes from state interference and distortion of the capital markets.  The latter is the only preventable factor.


Absolutely, diversify, and not put all your bets on gold and Bitcoin either!

Good question.

Certainly, none of us should be relied on to be honest at all times, and especially when a lot of money is at stake.  But the whole point of democracy, free markets, due process, and other ideals of the Enlightenment is surely to make it so we *don't* have to rely on people being honest, especially at the top, as much as possible.  I'm suggesting that we add managing money to the list of prohibitions against the state.

But it does seem you might have a deeper point as well...  If so please let me know.  There's also the 'imperialist' argument, that if one government refuses to inflate financial assets, it will be replaced by one who will, whether from inside or outside the country.  Would that fit into your view too?

I don't mean to take away from your effort, this is a great post, you've obviously put some thought into it, however your theory is fundamentally flawed. It looks great on paper but in practice the system it would give rise to wouldn't be any different from the current one.
You start with the assumption that there is something wrong with the current system and then proceed to identify the faulty element(s). The problem with this is that you're viewing the whole thing in God mode. By that I mean that you've taken yourself out of the picture, you're looking at everything with a critical eye (admittedly with good intentions). While making yourself the exception (perhaps unintentionally?).
The ones you blame are but reflections of yourself, although it is hard to see this if you're caught up in trivialities like wealth and power right from the start.
An honest 'system' is impossible to achieve simply because honesty is not a trait of human nature. It doesn't matter how much you twist and turn, how much you theorize and improve upon your theories, you will always end up at square one. Even if you decentralized power, everything would still remain the same.
But perhaps your goal is only to obtain a meatier/fairer slice of power?

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BobK71

That is a fantastic post, I will need to re-read it tomorrow.  As well as comment in more detail later.

Most of us who closely follow what government and the banks are up to would agree with your analyses.

Briefly:

Re bank accounts, both printing money and bail-ins are "solutions" that could be imposed.  My guess is that in a crunch there would be some small bail-in (say 20%) while the Fed (B of E, etc.) scrambles to print baby print.

Re government bonds and the Debt, this can go on and on (as you write).  Note also that several writers also claim (probably correctly) that the national debt was never meant to be paid of (doing so would shrink the money supply).  My *take* is that it is GROWTH of debt that is the problem.

Re money, I like to think of "money" as having three attributes: Means of Exchange (a way to pay for something), Unit of Account (so we can determine a proper price) and Store of Value (an expectation that the value of each unit of money will be worth the same for a reasonable period).  I learned from FOFOA that no single type of "money" can fill all three roles.  And so it won't.  The most likely end game (again, as you write) is hyperinflation.

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Yep, all investments are a gamble, they all have their different kinds of risk.  In my opinion, probably the best that can be done for anyone with "investable assets" would be to:

1)  Keep debt levels very low

2)  Diversify!  That includes gold and Bitcoin.

When I recently came across 'parasitocracy,' it struck me as a nice twist of wording -- instead of honest democracy or free-market meritocracy, we truly live under rule by parasites.

Trying to describe how the financial and political elites receive unearned wealth and power can get complicated very quickly.  To find a simple but rigorous theory to cover most major features of the beast requires looking at it the right way.

By and large, how it works is that:

• The elites use state power to prop up the value of money, debt, and other financial assets artificially, to benefit those who issue them, i.e. themselves.  When some over-valued asset eventually must crash, the entire economy suffers the loss of jobs, business and savings.

Example: The Bank Account

Public illusion. A commercial-bank 'deposit' is as good as money.  You will get all your money back, any time you want.

Reality. 'Deposits' are really loans to the bank which lends them to borrowers, some of whom may never pay them back.  Another danger is that savers may ask for their money at any time, while loans by the bank tend to have longer-term maturities.

How to bridge myth and reality. An honest system would communicate expectations openly.  A simple example could be having 'depositors' expect to lose money if the bank makes bad loans.  The problem with an honest system, of course, is that top politicians and bankers wouldn't benefit much.

The confidence trick.  The government supports the illusion, while it can.  Classic tools over the centuries include allowing banks to collude by rescuing each other in a crisis, bailing banks out with public money, and providing deposit insurance.  If this gives bankers the incentives to take too much risk, bankers redeem themselves by being a lender to the government.  Since both sets of elites benefit, what problem is there?  (In recent decades investment banks and money market funds have formed a shadow banking system which plays an equivalent role.  While the last US commercial-bank bust happened in the 1980s' savings-and-loan crisis, the last shadow-bank variety occurred in 2007-8.)

Analysis. While credit is indeed crucial to economic growth, to use government power to prop up the values of loans to banks, and then to rely on bureaucrats and their rules to limit risk-taking by bankers is a distortion of the credit market.  It is the driver of much human misery.  Central planning, somehow, always benefits the few at the expense of the many, even if it claims to do just the opposite.


Example: Government Bonds

Public illusion. The 'full faith and credit' of the government stands behind the IOU it issues to you.  Your IOU is as good as money.

Reality. Since much public debt is almost as trusted as money, incurring this debt is almost as good as printing money.  Politicians thus have an incentive to maximize the issuance of debt to receive free political capital, and destabilize their very system in the long run.  Even though powerful governments can keep their debt bubbles going for a century or more, those incentives mean that their IOUs will eventually lose value, one way or another.

How to bridge myth and reality. Even aside from the moral problems of 'money' creation and putting burden on people who can't yet vote, public debt should at least be allowed to sink or swim in the capital markets.  If a government incurs too much debt, savers would be incentivized to punish it by demanding a higher yield, and politicians would in turn be incentivized to cut back borrowing.

The confidence trick. When savers get wary of public debt, the central bank steps in to buy it with freshly printed money, thus propping up the value of these IOUs.  This is done in the name of 'monetary policy,' either by buying public debt directly as 'open market' operations, or, more frequently, by supplying banks with cheap new money so they will buy it.  Most of the time, savers can't fight city hall, and will thus tend to buy and hold IOUs, further limiting the downside risk of their values.  This entire system thus amounts to a bubble.

Analysis. It doesn't matter how powerful a government is -- Public debt always crashes eventually.  The dominant global empires of Spain, the Netherlands, and  Britain were destroyed by this crash in their days.  (In the case of Britain the relevant 'public debt' took the form of paper pound sterling that was officially backed by gold at a fixed price.)  No one believes US debt really payable with anything close to the purchasing power savers and foreign central banks used to buy it, although by the time its value can no longer be propped up, most politicians and voters who have benefited from issuing it will have been gone.


Example: Money

Public illusion. Central banks issue and destroy currency to manage economic output for the benefit of the public.  At least in the West, proper management has resulted in low and constant inflation that has justified the public's evident trust in currency's value.

Reality. The real job description of the central bank is to safeguard the state-bank alliance.  It holds power over the most central asset, money, in order to discourage both politicians and bankers from issuing assets too fast and thus endangering the system.  The goal is well-paced harvesting of the fruits of real work.  Over the decades, prices only move in one direction: up.

How to bridge myth and reality. Unfortunately, there is no way to remove the incentives to abuse the issuance of money while the state has any role in the issuance.

The confidence trick. The problem of holding up the public's trust in currency was solved in a simple fashion by the classical gold and silver standards in their day, while the authorities had enough precious metals to back their paper.  Today, the central bank needs to keep the return on 'safe' assets (e.g. short-term Treasuries, insured deposits) above the return on non-state-issued assets, i.e. gold, silver and Bitcoin.  (Recent books like 'Gold Wars' and 'The Gold Cartel' have come up with good evidence of central-bank suppression of precious metal prices by trading derivatives.)  In this it has succeeded most of the time.  It also needs to keep the return on 'safe' assets below the return on risky assets like stocks, over the long term.  The goal of both mandates is to use state power to force savers to take risks.  (Ever wonder why financial crisis always seems to come back?)  When you hear of 'tightening' or 'loosening' the money supply, this is what's really going on.  So, it's not that the public trusts currency; most feel they have no choice.

Analysis. It's not, as most mainstream ecnomists claim, that state-controlled money is required for modern economic growth.  The Italian Renaissance and Scottish 'free-banking' era were the counter-examples.  It's really the other way round.  The real productivity of the modern world gives value to the financial assets issued by the elites, and thus help sustain their financial inflation, at least until the perverse incentives destabilizes the system anyway.  In the Middle Ages, money was physical gold and silver -- when there was no wealth to extract, the state couldn't create its financial inflation.


Final Thoughts

A key feature of this system is that it doesn't matter if you understand it.  You still must gamble, or risk your savings being eaten away by inflation.  The gamble by the public as a whole is certain to end in loss, since the elites will always destabilize asset values to the point of collapse.  The lose-lose proposition works the same way as literal highway robbery -- you can certainly hold on to your money; you just can't keep your life at the same time.

That said, there are times when the elites are likely to be forced to devalue their money, and with it all other conventional assets, against gold, silver and Bitcoin, in order to hold on to power.  This makes it statistically profitable to hold non-state-issued assets at those times.  (An extreme example would be standing at the front of the line to redeem deposits for cash during a bank run, or to redeem pound sterling for gold at the Bank of England just before Britain was forced off the gold standard.)  Necessarily, only a minority will profit from this bet, but its existence is a healthy incentive that pushes the elites to minimize financial inflation.

The system is an 'open conspiracy.'  Instead of secrecy, it relies on a combination of state power and ignorance by the public.  The only sustainable way to a healthy and just system is for the public to wake up.