The difference between strategies and policy for microeconomic projects
compared to
strategies for macroeconomic systems where structural integrity is involved.
Written by Cricket Diane C Phillips, 09-24-08
In a macroeconomic sense – a nation and its underlying economic fundamentals are not like the structure of any business organization. It is because in an economy of scale, its components are nonlinear, progressive and intertwined whereas one shift in any part affects all other parts.
Such as when an increase in the cost or availability of gasoline, petroleum-based products and diesel fuel influenced all other elements in the system, barring none. Tangible shifts, however minute, expand across wide and varied elements within the structure and ultimately affect the whole as a self-driven, sustaining mechanism.
When de-regulation made it possible to create complex and faulty financial products, it essentially counterfeited secure and healthy currency forms, secured insurance products and other tangible assets. Consequently, just as huge amounts of counterfeit dollars will tear apart the foundation of the macroeconomic structure, so have these.
It is as if the market has been flooded with currency of no value which, unknown to the customer was traded for assets that had real value, such as real money, physical properties, and tangible assets, including stocks and facilities of actual companies.
The same damage has happened in both cases which involves systemic risk to the structural integrity of the system and its underlying fundamentals. As everyone has traded in these counterfeit currencies of unsecured and unwarranted value, the elements of our economy founded on relative international valuations of our real currency, the US dollar, and profit-driven dynamics of tangible assets have been undermined.
What happens when someone passes a counterfeit $20 bill? Whoever took it in trade for real products is out the twenty dollars and its use to purchase something of value.
What happens when that is in trillions of dollars? This is what has happened in a macroeconomic sense. It is not enough to throw some money at it to make up the difference in damage scenarios when it is this sizable and extraordinary.
What happens when one person gets taken in an insurance scam which either refuses a policy paid in good faith or is incapable of paying a return for premiums given? That can result in losses of several million dollars in actual fact, because of the insolvency it creates, missed opportunities to have sought secured insurance elsewhere and long-term impacts with no ability for restorations and immediate recovery.
Magnitude and multiply that out over the entire system of financial instruments in the US and International economies. Can it be resurrected with a few strokes of a pen or bail out measures hastily enacted? It isn’t a company on simply a larger scale.
The US economy is vibrant and dynamic. It is multi-dimensional. Financial institutions do not rest on a lateral one-dimensional level within the system. The stock market, as absurd a place as it is, does not constitute real value nor does it hold an inherent capacity to destroy the US and International economies. It was unnaturally given this power through a scheme to defraud with intent, perpetuated by those qualified and educated to know better.
This is impacting values by being allowed to underwrite debt as a tangible security with no actual validity or substance. Without real collateral to insure, they served as insurance illegally tendered and traded across massive arenas. Without tangible assets to back them up, counterfeit currency types and currency surrogates in the form of complex financial products were sold in trade for tangible assets of value.
The speculations of value were unregulated and corrupt. The arm of Congress determining legislation that would by statute, allow the counterfeit and fraud to be stopped were corrupt and the banking industry self-policing watchdogs were greed-driven and corrupt. Given the education level and expertise of all in these positions, they had every reason to know what it would cause ultimately.
In a multi-dimensional, dynamic system such as our macroeconomic system with its capitalist, free market model, systemic structural components must be addressed in their entirety to effect correction. This doesn’t mean, “fix the whole thing at once.” It does mean that it cannot be viewed in the manner of, “fix the costs in the mailroom and it will resolve our bottomline.” That basis of thought will not yield the same results in a larger context that isn’t a business nor is a giant conglomerate entity. The US economy isn’t simply some big umbrella corporation with everything housed within its confines doing business to make a little money and cover its costs. That is not the model of a macroeconomic system.
It’s easier to look at like this:
1. Everybody plays by the same rules.
2. Fraud and corruption isn’t tolerated.
3. The system is interactive, multi-dimensional and dynamic ( as in, ever fluctuating and moving.)
4. All parts do, in fact, influence all other parts at an integral level.
5. When the supply and demand model doesn’t naturally prevail, something is artificially hindering that process by intent or design and can cause failure in the system.
6. Un-secured, non-collateralized debt securitization instruments are capable of nothing, in and of themselves. The actions by which they are passed off as tangible liquid assets when they are not, has been made illegal because those actions are inherently fraudulent, criminal and destructive.
7. Market dynamics are a valuable tool to understand some of the underlying machinations in the overall oscillations of an integrated system. However, they are poor tools to use for the determination of policy and policy choices available.
8. Since without jobs, people don’t pay for houses, without financing houses – banks don’t have moneys to loan and then businesses can’t borrow to make jobs, etc. ad nauseum, it may seem that it is simply a big circle or loop. But in fact, it is not. Because , if everyone had a job and paid for their house and banks were able to lend for businesses to grow, there still wouldn’t exist a thriving and dynamic economy. It would be flat.
9. Healthy macro economies are not flat. They cannot be served successfully in a single-dimension mentality because they are not flat, nor round, nor circular, not linear and definitely not status-based by integrity and fundamentals.
10. However, macroeconomic models in free market capitalism can be and, healthy ones usually are status-driven. Other types of economic systems whether nationalism or socialism, can have defining factors that are not constrained by the principles of the free market systems. In a fair market, competitive advantage is gained by distinction, by value (real value), by service models of advantage and competency, not be defusion, fraud, lobby, corrupt uses of influence, criminal abuses of the systems and unnaturally-gained competitive advantage.
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