Jon Ronnquist: Economic Freefall — A Blessing in Disguise

Economic Freefall 

A Blessing in Disguise

 By Jon Ronnquist

February 23, 2009 “Information Clearing House” — — One thing we should not overlook when taking in the impact of the current economic situation is that it is both inevitable and invaluable in equal measure. That there was no escaping the consequences we are now facing has been a well known fact among those in the know for many years. If anything, it is amazing that we have staved it off for so long. For this we have the hard working men and women of the real world to thank, who toiled on in the name of pride, dignity and responsibility until the burden of debt simply became to great to bear. A cursory understanding of the “pre-collapse” financial system and the inescapable debt trap it lays in the path of the majority who seek to survive within it, points clearly to the end we have now met. And while it is indeed tragic on an individual level, for the world at large this may well be a blessing of unprecedented proportions.  

As economies stagnate and the production level of superfluous commodities shrinks, so too does the havoc that this reeks on the environment through unsustainable consumption of natural resources and heavy pollution. Whether we like to admit it to ourselves or not, prior to this forced deceleration there was no real hope of any timely or significant solution to the problem. Nothing short of a decrease in demand was going to interfere with the reckless consumer frenzy and the deadly impact it was having on the planet we call home. We were borrowing the earth into oblivion and neither conscience nor understanding looked likely to force an end to it. To say that a million unemployed Chinese is a tragedy when their entire activity consisted of flooding the world with cheap useless toys, is exactly the kind of short sighted and blinkered view that got us into this mess in the first place.  

I suppose we could have waited for the oil to run out, and judging by the way we were prepared for the money to run out, it really would have been a case of oil one day and none the next. Luckily money, unlike oil, is relatively easy to replace or replenish. A savvy economist, of which there are sadly still none at the reigns, could reconstruct the monetary system in such a way as to make it more useful and user friendly than that which we are burdened with today.  

The real tragedies which loom on the horizon are the artificial cost this economic situation will have on the lives of real people and the dangerous possibility that we will not take advantage of this opportunity to restructure not only the monetary system, but the entire economy, its infrastructure, energy needs and sustainability.  

The plague has effectively run its course, run out of steam if you like. What we are faced with now is a genuine opportunity for convalescence. Even in this age of extensive corruption of government, this chance is surely not entirely lost. We can clearly see the old school fighting to hold on despite the impotency of their efforts to borrow the economy out of debt. This idea is so fundamentally flawed that it is hard to see how the effected populations stand by and watch as the new US administration sells their children and grandchildren to the Federal Reserve.  

The idea of printing more money has merits if done prudently and for the right reasons, but printing it as debt will of course only exacerbate the already hopeless situation. The fact that such a small percentage of the vast sums of money being printed into the US economy are pledged to creation and improvement of infrastructure is worrying.  

Taking the US as the example, the following course of action would seem prudent: 

1. Pass legislation to safeguard all home owners against foreclosure and eviction on the grounds that human rights take precedence over all other concerns.

2. Introduce a “new” US dollar as a strictly national currency, not tied to any exchange rate mechanism other than to the “old” US dollar, with limitations.

3. Issue it from the Treasury, ignoring the Fed and existing banks, which can fend for themselves with the currency they have rendered worthless. Issue the new currency through state and local banks all under the direction of the US Treasury in the form of long-term interest free loans.

4. Issue loans to individuals and institutions producing essential goods and services (food, medicine, energy, etc) as a priority to stave of any humanitarian crisis. Where needed allow repayment in the forms of goods and services under federal and state programs for food, energy and medical aid.

5. Extend loans to individuals and institutions investing in green technology and to existing enterprises which are seeking to modernize and shift to the production of essential commodities.

6. Use the currency to invest directly into large scale infrastructure projects across the country on a scale sufficient to begin job creation on a level that will visibly turn around and then increase employment figures.

7. Make the new currency legal tender for the payment of debts and mortgages held in old currency at an exchange rate that realistically reflects fair value. This will force a transition and shift in property value without creating negative equity. Say for arguments sake one new to ten old. Private banks will clamour for new currency as it is the only one worth anything.

8. Legislate to ensure private banks in possession of new currency are barred from lending it under a fractional reserve system and cap interest rates on it’s lending to the public.

9. In proportion to an increase in domestic production, allow foreign holders of old dollar reserves to exchange them for new at the fixed rates of exchange and in limited quantities to guard against a resurrection of the US dollar becoming an instrument of international finance. Limit the amount of currency allowed to exist outside the US, ensuring the national economy can match the value existing with production capacity.

It may sound over simplistic and overoptimistic, but the basic idea is sound and I don’t see any other way of turning this crisis into a golden opportunity. There will be poverty and on a huge scale. That cannot now be avoided. But the question we must consider is whether or not we will allow that poverty to become a permanent fixture or a temporary inconvenience.