Misallocation Of Resources

Misallocation of resources is a subject that gets some, though not too much, attention in most comprehensive courses on economics.

Where there is competition for something - time, energy, sex, food, shelter - and there is scarcity of those things, then the economic allocation of resources is a key concept intelligent human beings apply to get the best use of everything that is available. Having one significant thing can mean ending up with an adequate supply of the others.

Brunei Qintar box

Alan Greenspan’s infamous ‘moral hazard’ statement when he was explaining to Congress about the consequences of bailing out certain favoured banks, quite deliberately generalizes the idea that there is this, by his form of words, esoteric, philosophical risk involved. He could have said that when someone can eat as many lollies as he wishes, that person could get morbidly fat and sick. That is, If he were to remain alive in the first place. There was this other, attendant phrase tossed about at the time - do you recall the one: ‘an economy on drip-feed.’

When you succeed in actually flatlining an economy, though, but you insist that the thing is still alive, there is also such a thing as necroconomics. Well there is now anyway.

A dead economy needs nothing. It doesn’t matter if there is scarcity of something that might have been important when the economy was alive. It’s dead now and needs nothing to continue to exist as an artefact. And that is the real reason there is so much derivative trade around - the economy intrinsically does not ever require actual delivery of anything now.

And so we have succeeded in separating - or liberating, in some people’s minds - economics and finance entirely from the real world of humans.

Why ever even pay lip service to a rising stock market? Or strong bond prices as an indicator of low risk?

The misallocation of resources sees things like what just happened with Treasury Wine Estates - a global wine seller focussed on Australian masstige wines. They are going to write down $260 million in value, and you know what, they have also drained (stuck down the drain) vast quantities of wine because they really can’t sell it at the price they want! So they are just going to ‘disappear it’ all wantonly away.

Not a Treasury Wine Estates box...

Personally I find it hard to buy just one case of Penfolds Grange, but these geniuses have not only bought lakes of it but they are going to throw it all away and write off the money they spent.

Money free = crazy people gone bananas even worse still.

But then you do have to ask - especially in respect to the Fed's behaviour - what if it wasn’t accidental misallocation at all but quite deliberate misallocation designed by someone not interested in keeping the USA intact as a unique power; and certainly as a unique monetary power at that?

You do have to ask that… I mean it would be breathtaking if it were a designed scheme.

It is breathtaking enough that misallocation due to mindlessly supporting the consistently same handful of lying thieving scheming parasitic banks, is actually occurring without anyone trying to stop it.

And there is also a consistent tactic exposed by people exercising power - the creation of artificial scarcity through wanton destruction. Why isn’t there dramatic increases in employment? Substantial increases in private consumption? On the one hand you have the standard lunatic politician and his media master talking about the need for austerity and not spending more than you have, and then turning around and, being a monopoly holder of seigneuriage, issuing the greatest amount of debt money ever in the history of the whole of Mankind.

No. There is definitely madness and method.

But you see, here is where the whole thing falls apart right under everyone’s nose but the crooks won’t see it because they are themselves fatally mesmerized by the very glitzy power they have over stuff they can readily industrialize: you can only create artificial scarcity but you cannot ever ‘create’ genuine scarcity…

Yes, you can substitute and flagrantly lie about what you are proferring. But you can’t say a thing works when it doesn’t and then yourself expect it to behave according to your own lie.

And yes you can indeed mind control large swathes of the public a lot of the time too. But you can’t alter the absolute utility value of things that have genuine functional utility. Oh yes, some people will die not putting the food to their mouths. You can’t lead a horse, and anyway, not your problem.

Today’s world is about the accurate thinker discerning the difference - and accepting that he might have to make adjustments to his erstwhile cherished beliefs - when he sees authentic facts side-by-side with nonsense put up by the establishment which seeks to fudge the value of demand in the face of a real scarcity. Not everyone is going to get to this point of objective self-reflection about ideas.

It would be nice to think that come some morning very soon, all the favoured banks and all of their fictional assets will disappear, that is, become worthless and more particularly, the sway they hold over the politician will come to an end too. The latter won’t happen. At least not easily. The former has already happened. In terms of purchasing power over genuinely scarce things with real utility, it has already happened. It is a delusion practised on the uncritical, that this is not so. But people have been made to believe that the globalized industrial complex - ‘the Borg’ - is able to manufacture and produce anything at will and with lubricious ease as if it were all just any simple commodity. And this is hugely erroneous.

There is a lot of mythology spouted in the market, and people such as Bain & Co, for instance,  are very good at employing it. I mean, seriously good at it. But it is still mythology and you can’t reliably invest based on media and market myths. The world is still a competitive place. Poroshenko is finding this out in spite of his being a person of goodwill who cannot begin to fathom the duplicity of his advisors.  He is going to find out there is a problem with money alone as the guarantee of access to utility.

Orit Gadiesh from Bain would not be allowed in here

People in financial institutions buy and sell money as a way of avoiding spending money. Spending money is what people do when they see utility today and have to spend to get it. People know perfectly well on some occasions that prices are falling or that the currency is gaining exchange value, for instance, let’s say - so why don’t they just wait until whatever thing they want is cheaper before they spend money to buy it? Because of the utility it represents to them today.

Present era bankers make the too obvious presumption that ‘people want money,’ and that therefore if they give themselves a lot of it, and deprive the wider market of it generally, they will induce scarcity of money and thereby ensure their power over the whole of society at large as people scramble for scarce money. But people just want utility. Money isn’t scarce at all. Particular forms of it are scarce.