Fred,
As a systems engineer, you could well appreciate that systems work best at what they are designed to do and not just keep creating reasons to sustain them in their existing form, as conditions change?
It does seem the Western military establishment didn’t get the message the Soviets called it quits and rather than using it as an oppotunity to move on, as the American and Russian space programs joined forces, but to simply grow at every available opportunity. Such that to those of us on the outside, it appears metastatically cancerous.
One of the points I tend to make is that the secret sauce of Capitalism is that public debt backs private wealth. The Federal Debt really got started with the New Deal, so not only was Roosevelt putting unemployed labor back to work, but unemployed capital, as well.
Then the stagflation of the 70’s was not logically cured by Volcker raising rates, as that mostly served to restrict money to those willing to borrow and grow the economy, not to those already sitting on more than they knew what to do with. It was Reaganomics that sucked up that surplus and spent much of it on the military.
So ask yourself, could Wall St function, without the government siphoning off so much apparently surplus capital? Where would it go, otherwise? Derivatives? Apple stock?
The problem is that we associate free markets with Capitalism, but they are actually opposed. Free markets require the circulation of money to function, while Capitalism is the creation and accumulation of money, as an end in itself. Generally by siphoning it out of the economy, rather than feeding it back where it would be most productive.
This money then requires some method of storing it, but since it functions as a contract, with one side and asset and the other a debt, then sufficient debt has to be created, to store the asset.
Government doesn’t really budget, which is to list priorities and spend according to ability. Instead they write up these enormous spending bills, add sufficient goodies to get the votes and then the President can only pass, or veto the whole thing.
The only proposal to actually curb this was the line item veto, which had an ice cube’s shot in hell of passing congress, as it would have gutted their authority over spending.
To use it as a template, to actually budget, they could break these bills into all their various items, have every legislator assign a percentage value to each item, put them back together in order of preference and then the president would draw the line. “The buck stops here.”
That would give the legislature control over priorities, while the president would have responsibility for overall spending. Since those items below the line would have limited backing and the president wouldn’t want a reputation as a spendthrift, it would likely work to considerably constrain spending.
Yet, as noted, Wall St would cease to function.
Finance functions as the circulation mechanism of society, like the heart and arteries are of the body. As government, as executive and regulatory, is the central nervous system. There was a time when government was private, but when monarchs lost sight of the fact they served a function to society, in order to be served by it, they were deposed. Finance is having its, ‘let them eat cake’ moment.
After the debt bubble holding this culture together pops and we hopefully learn a few lessons, when society starts to grow again, then maybe we will learn to put our surplus value into things with a long term pay-off, than just building ever more powerful ways to blow ourselves up.
