Most people think that macroeconomics is a legitimate subject because its experts are employed by prestigious organizations like central banks, World Bank, International Monetary Fund, treasury departments, investment funds, and universities. They don’t know that macroeconomics is colonialism by another name. In this post, I will describe what macroeconomics is, and how it is used for exploiting weaker nations. Just as the other colonial powers ended in the past, the present macroeconomic model will too. We will talk about how powerful but immoral systems collapse due to internal conflicts.
We will also talk about elementary terms like “value”, “asset”, and “debt”, and how there are three kinds of economic systems—(a) cycles of boom and bust, (b) constant value economies, and (c) ever-expanding economies—which might seem to be different although are based on common principles of morality and spirituality. If economics is detached from morality and spirituality, then the economic system self-destructs in a boom-bust cycle. If economics is joined with morality, then the economic system stays constant. If economics is joined to spirituality, then the result is an ever-expanding economy.
Table of Contents
The Exploitative Cycle of Money
The United States is at the center of modern global macroeconomics. Therefore, to begin understanding the global macroeconomic system, we have to understand how the US cycles its money through the world economy. The following is a simplified picture of how the US cycles its currency.
This picture isn’t everything. For instance, I haven’t included the role of global institutions like the UN, World Bank, IMF, the currency exchange system called SWIFT, and so on. The goal isn’t to mislead anyone. The goal is to examine the big picture so that those who are interested in this can dive into details later on.
The Process of Printing and Lending
In the conventional understanding of international trade, a country pays money to buy goods. That money then lands in another country’s hands, which then uses that money to buy goods from the country that gave it money. The US, however, produces far fewer goods than others. So how can it buy useful goods from other countries? The answer is money printing. The US takes goods from other countries and gives them its currency. That currency is seldom (if at all) used to buy goods from the US. Instead, the cash that the US gives in exchange for goods is circulated from the US to almost every country in the global economy until it comes back to the US, creating a cycle of money.
The cash that the US gives others is generated by the US Federal Reserve (Fed for short) printing money (or digitally creating cash). The Fed also sets interest rates at which it will give this printed (or digitized) money to others—which includes US banks, financial institutions, and the US government. The trend for the last several decades has been to keep interest rates very low. After four successive interest rate hikes this year, the interest rate stands at 4% and the news media are going gaga over this “hike”. Most people in poor countries would be lucky to get such low-interest rates. But the US is accustomed to spending at such low-interest rates, so it is a pretty big deal for US consumers.
The money printed by the US Fed goes to the US banks which run on a fractional reserve system. As a crude example, if a US bank gets $100 from the US Fed, then it can lend out ten times that money to the consumer—i.e., $1000. The assumption is that when this money is lent out by a bank, not all of it would be spent immediately. What is not spent will stay with the bank. But even if it is spent, the person who receives the money will likely put that money again in the bank. Thus, most of the time, most of the money sits in the bank, which enables the bank to lend even more money because it has cash in hand.
Cash in hand is called liquidity. It means that you can withdraw cash from the bank, but hardly anybody does. When the US Fed prints money and gives it to the banks, this is also called an increase in liquidity. Money in the hands of the Fed is “solid” and in the hands of the banks or the consumer is “liquid”.
The Process of Generating Demand
Since interest on money is low, consumers are happy to borrow. This is also called credit. In many countries, this is called a “loan”. If you have collateral against a loan—e.g., if you take a house loan—then it is called a “mortgage”. Credit, mortgage, and loan may have different terms of lending, interest rates and penalties on non-payment or late payment, but they are all loans.
With these loans, the consumers spend on goods and services, invest in businesses, buy a house or a car, and so on. Low-interest loans increase borrowing, and thereby increase spending. An economy flourishes if it has a lot of cash to spend. Low-interest rates increase consumer demand.
The Process of Ensuring Supply
Most of the supply in the US economy, however, comes from other countries. The US has moved most of its production that it consumes to other countries because it reduces the cost of these products. Other countries are poorer and ready to work harder. Poor people work longer hours for lower wages. When production is moved to a poorer place, the cost of production declines. The US buys products from other countries cheaper than if it had to produce everything in the US. The US consumer thus gets low-interest loans and then low-cost products. To pay for these goods, the US gives its $ to others.
However, by this process, the US $ moves from the US to the low-cost country. Ideally, if the US was producing useful things, then the receiver of US $ would return it back to the US in exchange for goods. However, the US doesn’t produce anything useful that the poor country needs. Whatever the US produces is priced so high that the poor country doesn’t want to buy anything from the US. Effectively, when the US gives $ to its suppliers, the US $ cannot be given back to the US for valuable goods. They can only be passed on to other producers (if they want US $ in return for goods) to get something useful in return.
The suppliers take the US $, and give it to their central banks, in exchange for their local currency. A currency exchange rate is involved in this process, which we will discuss shortly. The central bank then lends US $ to their government or consumers in that country who want to buy things from other countries. Thus, the money that went from the US consumer to the poor country’s supplier then landed with the poor country’s central bank, then goes from one country to another if that country will take the US $ in return for some goods. Thereby, the US $ isn’t just involved in bilateral trades between the US and the other trading partners. Instead, the US $ circulates throughout the world.
This is contrary to conventional bilateral trade, where if country A gives money to country B, country B will use that money to buy something from country A. If this bilateral system of exchange was accepted, then the US could not buy goods from poor countries unless it had something equally valuable to give to the poor country. To avoid that problem, the US has established its currency as a medium of global trade exchanges and is hence called the “global reserve currency”. This means that US $ can be exchanged between countries as if it were gold or silver. We will shortly discuss how the US establishes the global reserve currency.
Recycling Money Back to the Treasury
Despite this money circulation from country to country, the US $ eventually lands in a country which (a) doesn’t need to buy anything from another country in exchange for US $, or (b) they have more US $ than the goods they need. This is typically the case with large economies such as China, Japan, Russia, India, and so on. All these countries end up with a net surplus of US $ because they are giving more to the US than the US is giving to them, and they have more US $ than they need goods. All these countries “hoard” US $ under the hope and belief that they might need it for something in the future.
However, just like you will deposit all the surplus cash into a bank, all these countries hoarding US $ give it back to a “bank” called the US Treasury at an interest rate. The US Treasury gives the depositor country a “treasury bond” which is a high-denomination paper that promises to give a certain rate of interest to the person who “buys” treasury bonds. These interest rates are correlated with the US Fed interest rates. Hence, if the Fed raises the interest rates, the treasury bond interest yields rise and a lot of money flows into the US treasury because the US government is promising to give a high yield.
Thus, the money that the US Fed had originally lent to US banks, which then lent that money to US consumers, who then spent the money to buy goods, the goods sellers then paid the money to suppliers in other countries, who then exchanged it for local currencies with their central banks, which was then given by the central bank to their local government to buy goods from the governments or sellers of other countries, which then ended up in a central bank of a country that had a surplus US $ and wanted to hoard them for future, eventually comes back to the US Treasury in the form of treasury bonds.
The US government finances its departments with the money received from treasury bonds. If there is a shortfall, the US government either tries to raise more money by selling treasury bonds or borrows from the Fed. It is better to borrow money from the Fed (because in case of a borrower’s default, the Fed is still internal to the US as opposed to external lenders), but if the US government did that, then the countries with the surplus of US $ will stall their hoarding of US $, stop selling goods in return for US $, and the $ would cease to be the global reserve currency. Eventually, the US will stop receiving goods because nobody is willing to accept US $ in exchange for goods. This will hit the US consumer in the form of price hikes and a short supply of goods. To maintain its status as the global reserve currency, the US government has to recirculate the surplus US $ into the treasury. Hence, the US government doesn’t borrow money from the US Fed as long as it can raise that money through treasury bonds, unlike what almost every other country is doing at present.
The Military-Industrial Complex
One of the large departments of the US government is the military. The primary job of the US military is to ensure that poor countries keep selling valuable goods cheaply to the US. If some country refuses to sell goods to the US government, then the US brings “democracy” and “freedom” to their doorstep—i.e., kills their rulers, topples their government, takes control of their resources, and appoints puppet rulers who will then do exactly as the US government wants—i.e., sell valuable goods to the US cheaply.
The things that the US can give to others are overpriced military equipment. The US military-industrial complex prices its products at roughly 20-50 times their true cost. For instance, if something costs $100 to produce, it will be sold at a price of $2000-$5000. To maintain this cost-price differential, the US government exerts “sanctions” on anyone trying to produce cheaper military gear. The US politicians fall to their knees to receive campaign finance funds from the military-industrial complex. In return, the elected politicians do everything that the military-industrial complex needs to maintain its cost-price differential—e.g., sanctioning, bullying, and destroying other countries.
The US military is a department of attacks rather than the department of defense. It exists to ensure (a) that the US gets everything at a low price and sells everything at a high price, (b) that the US will get the things that it needs from others before anyone else can get them, and (c) to ensure that its currency isn’t replaced by any other country’s as the global reserve currency.
Spending the Money Multiple Times
The more the Fed prints the money, the more the US consumers consume, and the more US $ the poor countries receive, and because they cannot do anything with it, they give it back to the US in the hope that they will someday receive something in return—which happens only if the poor country buys overpriced military equipment from the US. The best-case scenario for a poor country is to underprice its goods while selling to the US and receive overpriced goods while buying from the US. The worst-case scenario is to give goods to the US, receive $, and then reinvest $ back into the US Treasury to strengthen its exploiters.
The cycle of money from the US Fed to the US Treasury allows the US to spend the same money multiple times. The situation is akin to a customer who goes to a shop to buy something. He takes the goods and gives the shopkeeper some monopoly money. The shopkeeper cannot use the monopoly money, so he gives it back to the consumer and says: Why don’t you keep it? You give me something in return when you have it. Since the customer has no intention of giving anything back, he takes that monopoly money to another shopkeeper, takes goods from his shop, and gives him the same monopoly money. The shopkeeper returns it to the customer hoping to receive something in the future.
In this way, the same monopoly money is spent many times to get more and more goods. Only a number in a ledger—called the US debt to others—increases. It can be wiped out in a day if the US Fed just printed tons of monopoly money to give back to whoever wants to have it. The problem is that nobody wants monopoly money and they cannot get anything from the US. The day they stop cycling the money back to the US Treasury, the US military will topple their government. So, they keep giving cheap goods to the US, receiving worthless pieces of monopoly money from the US, and keep reinvesting that paper back into the US Treasury to enable the US to spend it multiple times.
The Fiction Called Macroeconomics
The Need for Pegging Currencies
When money is printed, then there is no way to benchmark the value of goods against money. After all, the work involved in printing money is much less than in producing goods. Paper money is not valuable like gold or silver, and when more of it is printed, its value depreciates. Since a country can print more money, therefore, anyone can demand more of it in exchange for goods.
To extend the previous monopoly example, assume that there are two customers—A and B—with their respective currencies to buy goods. Customer A goes to the shopkeeper and asks for goods, but the shopkeeper says—I have run out of goods, but if you give me extra cash, then I could arrange it. So, customer A pays the shopkeeper extra cash because it is just worthless monopoly paper, and he can print more of that paper in his home. Then, when customer B arrives at the same shop and asks for goods, the shopkeeper tells him the same thing—I have run out of goods, but if you give me extra cash, then I could arrange it. Now, customer B is forced to give more money for the same goods.
This system is prone to manipulation because the shopkeeper can exploit B by demanding an even higher price for goods than the prices that he charged A for. This is why countries set a “maximum retail price” on every product sold within their country so that different customers are not charged different prices for the same thing. The same thing must be implemented for trade between countries.
Note that if all currencies were pegged against gold, then everything would be priced against gold. A country need not give gold to someone else, as long as its currency was correctly pegged against gold. In principle, the receiver of the currency could exchange the paper for gold. This would ensure that no country is required to pay more money because the goods are valued against gold. In this situation, if customer A printed money without acquiring more gold, then he would devalue his currency and would have to pay a higher currency price for the same goods than customer B who doesn’t print money. Currency pegging is necessary if currencies are not pegged against a common standard like gold.
To ensure that B is not charged more than A, B has to peg its currency against A’s currency. Then, if A’s currency devalues, B’s currency also devalues, but not faster than A’s currency devaluation. Countries B, C, D, etc., rely on the fact that A’s currency will not devalue so their currency is not automatically devalued. If that turned out to be false, then they would peg their currency against something that is not devaluing. The US $ is country A currency.
At present, these currencies are pegged in value relative to each other through a currency exchange market, in which the US $ is treated as the “gold standard” and everyone else is pegged against it. If I want to buy US $ by giving Indian Rupee, then I would have to go to a currency exchanger and ask him to convert Indian Rupee into US $. That conversion depends on a currency exchange rate which changes with every currency exchange in the wholesale currency exchange market, although in the retail market the rates are fixed for a day (to a value lower than the previous day’s currency exchange rate).
The basic principle for currency exchange is supply and demand. If there is high demand for US $, and the supply is constrained, then the US $ gains value relative to the currency in less demand and high supply. This has nothing to do with the real value of the currency. Just as sand could be priced high in the middle of the ocean, and water priced high in the middle of a desert, similarly, anything can be priced high or low just by changing the supply and demand. The thing that is most in demand rises in value compared to the thing in less demand, if we keep the supply just a little short of demand.
Role of the Global Reserve Currency
When the US $ is a global reserve currency, it is always in higher demand relative to every other currency because all other currencies are relatively less in demand. Therefore, if every currency was a little less in supply than its demand, then the US $ will always rise in value because as the global reserve currency it has the greatest demand compared to every other national currency.
If the demand for the US $ falls, thereby devaluing the US $, the US Fed raises interest rates and the US Treasury opens up short-term bonds set at the Fed-defined rate to suck the US $ from the currency exchange markets into the US Treasury, thereby creating an artificial short supply of US $, which then naturally raises its value in the currency market. This is currently happening as the largest hoarders of US $ (i.e., Japan and China) are selling US treasury bonds. When the US $ is “dumped” in this way, the $ falls in its value because everyone suspects that a US $ currency crash is around the corner. To prevent the market from panicking and further devaluing the $, the US Fed raises interest rates, sucking the surplus $ from currency markets into the treasuries, creating an artificial short supply of the $ in the currency market, which automatically increases the value of the $ relative to other currencies.
When the US Fed increases interest rates, the consequences are catastrophic for other countries because the US $ rises in value compared to other currencies, forcing everyone else to pay more for the same goods that were earlier cheaper for them. For instance, if oil is pegged at $100 a barrel, and the Rupee is pegged at 80 Rupee against the US $, then India has to pay Rs. 8000 per barrel. But if the US Fed raises interest rates, then every other currency devalues in comparison. For instance, one $ could equal 85 Rupees. Now, the US still pays $100 per barrel for oil, but India has to pay Rs. 8500 per barrel. Every rich or poor person in India has to pay more for oil because the US Fed increased the $ value by creating an artificial short supply of $ by raising bond interest rates.
The result of interest rate changes is the rise and fall of currency and goods markets. For instance, if the Indian Rupee falls relative to the US $, and oil is still priced in $, then to avoid paying more for oil, India will reduce its oil consumption. With reducing demands, the price of oil will drop somewhat—to let’s say $95. This oil price drop will restore it to what it was before the Fed rate hike for India, but it is now cheaper for the US. The US will buy oil to create a stockpile, just to create a shortfall in the market and bring it back to $100. Then it will also drop its interest hike. The net result of the Fed rate hike, oil price drop, oil price hike, and Fed rate drop, is that for some time, India paid more for oil, and the US paid less for oil. The premise of currency pegging—namely, that everyone will pay the same price for the goods—fails when the US Fed manipulates the interest rates to make things cheaper for the US to buy.
The money that India paid extra for oil is a gain for the US. It moves wealth from India to the US. The oil producer also loses wealth when the oil price drops. Meanwhile, the US gains when the US $ gains in value, and then when the oil price drops in value. Thereby, the US steals wealth from many countries, without seeming to, just by manipulating the Fed interest rates. This is the power that the US wields when its currency is the global reserve.
The poor country is doomed if it doesn’t peg its currency against the $—because then it can be charged higher by the supplier as opposed to the price at which the same commodity is sold to the US. The poor country is doomed if pegs the currency against the $—because now the money flows from that country to the US. The poor country is doomed if it pegs its currency against gold—because now the US will bomb it out of existence. Of the three forms of doom, the US just has to ensure that the poor country is doomed a little less if it pegs the currency against US $. This is achieved when the US uses its power to tell the oil supplier to (a) charge the poor country lower if it pays in $, and (b) charge the poor country higher if it pays in its own currency. The US bombs a country if it tries to peg goods against gold or buys them from a supplier that does so.
This process started in 1971 when the US removed the gold standard for the US $ by striking a deal with Saudi Arabia to price their oil in $. This meant—(a) if someone buys oil in US $, then they get a slightly lower price for oil than if they buy it in their country’s currency, (b) it ensures that everyone needs to acquire US $ to buy oil, (c) the increased demand for $ raises its value relative to all other currencies, (d) which means that the US now pays less $ for the same oil while everyone else pays more, (e) the US constantly sucks wealth from other countries to itself by pricing its currency higher than others, and (f) a part of the wealth sucked from other nations is used to build US military bases, extend reach and power across the globe, and threaten all outliers.
When Iran tried to price oil outside of US $, it meant that the US $ would not be a global reserve currency, its value will drop to its true worth, and the US will have to pay more for everything while everyone else will have to pay less for it. Then the US would not be able to steal wealth from other nations to expand its military. Therefore, to preserve its status as the global thief-in-chief, the US placed “sanctions” on Iran, which were really sanctions on its customers—to stop them from buying Iranian oil. The reason was never the non-proliferation of nuclear weapons. The real reason is that to maintain its power, the US has to keep stealing from other countries, which is possible only when the US $ has a high demand, which happens when commodities are priced in US $.
How the US Steals Every Day
The following is the summary of the points that we have discussed thus far:
- The US buys products cheaply from others at gunpoint
- The US doesn’t give them anything useful or valuable in return
- The sellers are forced to invest their earnings in US treasuries
- The US coercively ensures that global goods are priced in US $
- Demand for $ makes it rise in value relative to other currencies
- Then, the US has to pay less $ while everyone else has to pay more
- The US steals wealth by having others pay for its consumption
- The US economy and military grow while others remain weak
The total amount of fictitious money that the US generates—(a) by the Fed printing money, (b) by the US banks’ lending out more money than they have due to fractional reserve banking, and (c) by the US Treasury that spends the same money multiple times to increase debt on its balance sheets—has a direct effect on inflation. However, because every other currency is pegged against the US $, hence, even if the US currency deflates as a result of generating fictitious money, every other currency deflates along with the US $. The US just has to keep the demand for the $ high in the currency markets to ensure that it is always valued higher than the other currencies because, by that mechanism, it has to pay less for everything compared to everyone else, while everyone else works harder and pays more to compensate for what the US is not paying.
If the US alone had to bear the inflationary pressures of generating fictitious money, then nobody would want to reinvest the US $ back into the US Treasury because the interest they get in return would be puny compared to the rate of inflation. By investing money in the US Treasury while the US $ loses value due to inflation, the investors would lose value. Without the US $ being reinvested into the US Treasury, the US would have to produce goods at prices competitive with the rest of the world. That would entail a dramatic reduction in wages in the US, a decrease in its consumption, and economic deflation.
To keep this whole cycle running smoothly, the US needs to spread the inflation to the rest of the world such that it is not a problem unique to the US. This is achieved by making the US $ the global trading currency, and pegging every other currency against the US $. When the US creates fictitious money, the higher supply of money compared to the lower supply of goods causes every commodity price to rise—against the US $. But since every other currency is pegged against the US $, therefore, when even when the US $ deflates, every other currency deflates along with the US $. Even a country that is not printing money—when pegged against the US—has to pay more for everything.
The Coercive System of Exploitation
The process is called “exporting inflation”. It means that when the US prints money, all commodities are inflated, and everyone has to pay more. However, the US is paying more by printing money while everyone else is paying more by working harder. The fictitious money that the US creates is backed not by US citizens working harder, but by everyone else working harder. Thus, the US is consuming more while working less, and everyone else is working more while consuming less. If anyone wants to peg their currency against gold, or try to price their goods against their currency (instead of US $), then the US military topples that government that dares to do exactly what the US is doing.
The dictum of international finance is “do as I say, not as I do”. By spreading inflation to every part of the world, the US uses an economic equivalent of slavery—the US works less to consume more while everyone else works more to consume less. The idea that slavery was abolished in the US is a myth. Instead, slavery grew from those confined to US farmlands to those spread all over the world. People think that they are working for themselves, or their country. They don’t know that the US is stealing wealth from everyone, everywhere, every day.
All poor countries are hapless victims in this process of exploitation because they have no choice but to reinvest the fiat US $ they get from the US consumers back into US treasuries, to finance the US military which furthers their own oppression. This system of exploitation is the magnification of colonialism.
For instance, during the colonial rule in India, cheap cotton was bought from Indian farmers and expensive cloth was sold back to India. The British fixed the price at which they would buy cotton and the price at which they would sell the cloth. Anyone who could produce cheaper cloth or would not sell cotton to the British was killed or their hands were cut off. The margins earned from this exploitation were used to strengthen the British military, enrich factory owners in Britain, finance the British government to improve the health and education of their population and use these strengths to further exploit India.
Post-WWII History of the US
Colonialism did not end at the end of WWII. Rather, the bankrupted colonial powers—e.g., the UK, France, Spain, Portugal, Netherlands, and Belgium—were replaced by a rich colonial power: the US. The same system of exploitative imperial regimes continues under the pretentious US democracy.
The US is at the center of modern macroeconomics because the militaries of the erstwhile colonial powers were destroyed by the end of WWII, and their socio-economic-political structures were so weak that they could not wage war. Meanwhile, the US had stayed away from both world wars and had strengthened its military, society, economy, and political institutions. It stood among the WWII victors because it ended WWII by dropping two nuclear bombs on Japan. Being the strongest country post-WWII, the US reversed its non-interventionist policies and inserted itself into everyone’s economic, social, and political affairs—just as the colonial powers had done to others previously.
To keep meddling in everyone’s social, economic, and political affairs, the US maintains military bases in almost all vassal countries making them occupied territories rather than free nations. The places where the US doesn’t have military bases are either too weak to pose a threat or they are under economic sanctions to force them to open themselves to US military occupation.
Macroeconomics plays a key role in this process because no country could afford such an expansive military without an endless supply of money. US military and macroeconomics are simply two sides of the same coin—the military enables the US to get the money which is then used to fund and expand the military. The entire system of murder, theft, and deceit is so exploitative and inhumane that terms like “super-colonialism” and “super-imperialism” are sometimes used to describe what the US has been doing since WWII.
The demise of the USSR was a boost to the US because the economic woes of Eastern European countries meant that they did not have the capacity to wage war. The US expanded its military bases all over Europe to gain control over countries in the erstwhile Soviet bloc. The media worked overtime to tell people how democracy and capitalism had defeated autocracy and socialism.
Europeans allowed the US to take control of their country’s policies in return for their defense. All countries in the Western bloc today—South Korea, Japan, the UK, France, Germany, Australia, Canada, etc.—are US vassals. Most of them are occupied territories with US military bases on their soil. They pretentiously fly their flags of sovereignty and periodically conduct sham democratic elections to elect leaders who have no choice but to do whatever the US tells them to.
For decades following WWII, few US citizens were even aware of how the US was looting and killing other countries to build its economy and military. Their “free media” extolled how the US is the greatest country in the history of the world, hiding from them how this greatness was built on loot and murder. The only time that the US citizens protested this carnage was when US citizens were directly impacted—e.g., US soldiers being killed in the Vietnam War.
Otherwise, everyone kept silent as they benefitted from this exploitation: Low-interest loans, cheap goods, government subsidies (such as social security payments for the unemployed, and free primary education for all children), booming stock markets (due to low-interest loans taken from banks and invested in stocks), and a good job market (which results from a booming stock market). US super-imperialism and super-colonialism enabled US citizens to live a charmed life for decades at the expense of exploited countries.
I was listening to a podcast by a US economist, who did 25 years of research at Harvard into the economic history of the West, in which he talks about how this exploitative model has been the de facto standard from the beginning of Western civilization—i.e., Greeks and Romans, 2,500 years ago. The West has always relied on stealing wealth from others rather than honesty, hard work, fair competition, open markets, inventiveness, creativity, or free trade. Initially, theft was confined to a few oligarchs lending land to poor tillers at high-interest rates. Then it spread to nearby territories to exploit them. Then it spread globally as colonialism. And it has finally engulfed the whole world through the US. The richest oligarchs in the US are now talking about colonizing other planets using space technology. In their view, it is time to expand the Western empire to other planets because this world is too small for them.
If someone is looking for solace, then they can find it in the fact that this has always been the Western model of economics. The US is not doing anything different than what the Romans or Greeks did. That also means that this model will end just as Greek and Roman civilizations did. Stupidity is doing the same thing over and over and expecting a different outcome every time.
Why Exploitation is Cyclical
The process of theft continues as long as the exploiting country remains internally united. If everyone in a society benefits from exploiting others, then they keep a strong economy, government, and military, by uniting in the exploitation of others. However, this unity ends when (a) the exploitative country has reached limits on all that it can gain by exploiting others in the world, and (b) turns its attention to exploiting its own citizens to fulfill its greed.
I have said this more than once in my posts: What a nation does to other nations, it eventually does to its own citizens. This is the nature of greed. It cannot be satisfied by any amount of wealth. As wealth grows, so does the greed for wealth. What you have seems insignificant to what you don’t.
The exploitation of its own citizens became endemic in the US toward the end of the 20th century when US enterprises started exporting all productive activities outside the US to reduce their costs while preserving their prices to magnify their profits. CEOs were rewarded for reducing costs. The US labor force lost jobs and took on debt to survive. With rising debts, tax revenues decrease. The US accumulates debt continuously due to its military spending. The current total public and private debts are about 2.5x of the GDP.
What is debt? It is the process of taking money from the future. Debt also causes inflation, which means that the value of the money that others have saved by making sacrifices in the past decreases. Thereby, debt means stealing wealth from those who are saving. The interest on debt is always kept a little higher than the rate of inflation. For instance, if the inflation caused by debt is 2.5%, then the rate of interest could be 5%. When someone pays a 5% interest on debt, they are truly paying only 2.5% real interest because the other 2.5% is stolen from those who are saving. Debt is also theft because part of the return on debt is stolen from those who save, and the payment for the other part is postponed until later. In an economy as a whole, taking debt means taking money from the past and the future to make the present comfortable.
The problem is that people who take debt think that by investing the borrowed money in the present, they will make the future better. They don’t realize that if this was always true, then why would a money lender not make the same investment instead of giving money to someone else to invest? Money lending is the process of replacing the risks in investment with a guaranteed return on lending. That is, when we borrow, the return on investment is not guaranteed, but the interest payment is guaranteed. The money lender cuts his risks and passes them to the borrower. The net result of taking risks is that, on average, the borrowers keep losing wealth and lenders keep gaining wealth.
Interest can be quantified but risks are indefinite. What isn’t quantifiable is treated as non-existent. Greed blinds people to their risks, they take on higher risks, lose the money they borrowed, and become indebted. The compound interest on debt means that what they cannot repay grows much faster than inflation, slowly driving a person toward poverty, and eventually bankruptcy. Despite stealing wealth through inflation from those who are sacrificing and saving, the debtor encounters the darkness of compound interest.
All debt-inflated economies get into serious trouble because (a) interest on debt goes into the hands of a few people controlling the lending banks and other financial institutions, (b) interest on debt is counted in the GDP of a country, (c) but interest on debt reduces the investment in the true assets of a country—i.e., the people. Basically, debt shifts wealth from the poor to the rich. This looks harmless for a while until a time comes when indebted people can no longer pay the interest on debt, and the economy enters debt defaults.
The US can wipe out its debt because it is just paper money, and most of it is digitized. Turning a bunch of negative numbers into zero doesn’t take much. The problem is that if this debt is wiped out, then the balance sheets of the lending institutions will become negative. Due to the fractional reserve system, the banks have lent out 10x the wealth than their deposits. So, if the debt is canceled, then the banks will have -9x balance sheet. To recoup it, banks will sell their stock holdings, causing a stock market collapse. Then as depositors flock to the banks to withdraw cash, the banks will be forced to sell the US treasuries to get cash. As the treasury runs out of cash, it cannot pay the interest on its existing debt. The fear of treasury defaults will push people to convert US $ into other currencies, causing US $ to crash in value and cease to be the global reserve currency. The oligarchs who have invested in debt instruments, stocks, and treasuries will lose their wealth overnight. This is the nature of the debt-inflated economy—if you try to remove debt from the economy, it crashes.
Therefore, what is technically feasible will not be done. Instead, the US Fed, Treasury, banks, stock markets, and oligarchy will keep inflating the debt bubble, knowing fully well that when it bursts it will wipe out everything. Every new financial crisis will simply inflate the bubble a little more than before. In that process, the poor tend to get poorer, and the rich tend to get richer.
The rich prepare for the day when the bubble will burst by converting their wealth (taken from the poor by lending) into hard assets (taken from the poor due to debt). When the bubble bursts, they restart the exploitation based on their hard assets. Exploitation based on hard assets is called feudalism. A landowner lends out the land for farming and charges interest on the land.
As feudalism ended in Europe in the 1500s, Europe replaced it with colonialism. As colonialism reached its peak in the 1700s, the US replaced it with slavery. As slavery ended by the late 1800s, communist-fascist regimes were created in the 1900s. When these were defeated, the US exploited the defeated countries during the 1950s. When that reached its limits, then the US spread globalization to exploit the rest of the world in the 1980s. As that reached its limits, it started exploiting its own people by creating debt inflation in the 2000s. By the time the debt bubble bursts, the US oligarchy would have taken control of the hard assets (land, minerals, water, oil, etc.) to revive feudalism. Exploitation cyclically shifts from one modality to another. Within that, there are periods when it has shifted from one race to another, or from one country to another, which the exploiters call “progress”. But it will shift again to return to the state it had started.
Most people impacted by this progression from external to internal exploitation don’t find it amusing. They don’t want to acknowledge that they were advancing and cheerleading the external exploitation earlier. They did not complain when it was being done to others. Of course, they don’t like it when it is done to them. They can’t believe that their “own people” will do such things to them.
As exploitation shifts from external to internal, an erstwhile strong society is weakened and destroyed by inner conflict. People fight each other and the ruling elites. The ruling elites then use military and police force to subdue the protestors. The ruling elites then reward those who oppress others by appointing them to important positions in society. This leads to internal revolts, which are then violently suppressed. Slowly, people get disengaged from society. For example, the ruling elites find it very hard to recruit people to fight their wars for them. Then an external crisis precipitates a collapse because the societal factions want their ruling elites to be destroyed. Survival drives betrayal, as the means of self-protection. It is hard to predict the precise manner in which society collapses, but we can predict that it will collapse.
Real and Delusional Economics
Why Nobody Knows Economics
The rise and fall of empires result from immorality, and its byproduct, namely, karma. The West has not understood economics because it has not understood karma. Karma is about assets and liabilities. It is just like money. If you have money in your pocket, then you can buy goods with it. If you are in debt, then you have to sacrifice goods and toil to repay the debt. The moral prescription for human life is that when you spend your assets of karma, then you must also create new assets of karma so that you can enjoy these assets in the future. This means that when you take something of value, then you must give something of value to others in return so that your stockpile of karma is not depleted.
But you can empty your stockpile of good karma without creating any additional good karma—which is what happens when you steal from others. When you get things by theft, you consume your stockpile of good karma. Factually, you are entitled to that stockpile. Those from whom you are stealing are also destined to suffer due to their bad karma. But by stealing, you are also emptying your stockpile of good karma. When that stockpile ends, you would be bankrupt and then you get nothing. Nature allows theft because you have the choice of emptying out your stockpile of karma. However, this process of emptying your stockpile of karma is not endless. You eventually bankrupt yourself.
Economics is not a separate subject from the subject of possibility, choice, and responsibility. Monetary value is one of the six values—wealth—among the six qualities of knowledge, beauty, renunciation, wealth, power, and fame ascribed to God. God is the repository of value; He is the most valuable. Hence, He is called Bhagavān, or the complete repository of value. Everyone wants that value in them, which is why we say that they just want to be God because God is the repository of value. But if they disregard God, and try to accumulate value independently, then they are subject to the process of possibility, choice, and responsibility, in which you have to make the choices of giving value to others to get value from them in return. This fair-value transaction is called karma.
While people are printing money, and manipulating the global macroeconomic system of currency exchange, commodity pricing, interest rates, lending, and borrowing, all this is just the visible or “gross” reality. What lies behind this visible reality is something invisible or “subtle” reality, comprising chitta, guna, and karma. If someone cheats, then they get better at cheating; this is the effect of an action on the chitta. If someone cheats, they develop the habit of cheating; this is the effect of an action on guna. If someone cheats, they deplete their repository of good consequences of previous actions without producing additional good consequences; this is the effect of an action on karma.
Those who don’t understand subtle reality, and just focus on the gross reality, think that they can get away with cheating. That’s because they don’t know that their life is controlled by subtle reality. If you cheat, then you get better at cheating, and develop a habit of cheating, but you don’t get an opportunity to cheat. That is because opportunities are given to people based on their previously created karma. Instead, you will remain subjugated, conquered, exploited, abused, and defeated because you have emptied your bank account by your actions and you have to stockpile it again to get a good life.
What is Economic Debt?
Economic debt is in one sense a fiction, because money is just a number, and it can be wiped out easily by zeroing out the negative numbers. However, in a deeper sense, economic debt is a reality, because the person who accumulates debt will be coerced into a system where he cannot zero out the negative numbers. The reality is that poor citizens are caught in a social-economic-political system controlled by oligarchs who will not allow the wiping of debt. The oligarchy will ensure that many people will die to ensure its survival.
The real question is not why I cannot wipe my debt. The real question is why I am in a social-political-economic system that will not allow me to wipe out my debt. People ask the wrong question when they ask their government to wipe out their debt; they think that they can get away with overspending which relied on stealing from poor people while theft was obscured by macroeconomics. People ask the right question when they ask: Why am I born into a society that pied-pipered me into this situation? Why was I born to parents who were in debt, could not get me educated, or support me financially, such that I had to take on debt to survive, and be caught for my lifetime in the debt trap?
Economic debt is just karmic debt. But because economists do not understand morality and karma, therefore, they have created numerous fictitious theories of value and economics, all rooted in the exploitation of others, not realizing that they will have to pay the price for it when their good karma runs out.
The Cycle of Good and Bad Times
There is a famous saying—Bad times create good people, good people create good times, good times create bad people, and bad people create bad times. Bad times have the potential for reforming people, such as giving up their addictions to cheating. But it is entirely possible that you can preserve or enhance your skills and habits of cheating even while going through bad times. You will still be exploited and abused, but you wait for your turn to exploit and abuse others. When good times arise, you use your skills in cheating and the habit of cheating to cheat others. You get by for a long enough time that the good times last. In these good times, people are getting worse, which then leads to bad times.
Civilizations, societies, nations, and states rise and fall due to this cycle of good and bad people and times. It is not a difficult cycle to understand, because the above saying is rather well-known. The underlying mechanisms of this cycle are somewhat more obscure to those who haven’t studied Vedic philosophy. And due to that obscurity and ignorance, economists construct theories of cheating.
Modern macroeconomics is the science of cheating, theft, murder, slavery, and deceit. It is not a legitimate science but the illusion that perpetual prosperity can be obtained through immorality. People don’t know the real science by which this illusory macroeconomic science can be falsified. But since it will be falsified, therefore, they will be forced to ask: Where did we go wrong in the past? Most people will blame someone else—e.g., their government, oligarchy, or consumeristic culture. Very few people will introspect and find the true reasons within themselves—namely, their cheating propensities.
Thereby, bad times only reform a few people who truly introspect. The others just bide their time, honing their skills in deception and becoming habituated to cheating, to find the good time when they can use their previously mastered skills of deception and vent their habits of lies and deception.
The Intricate Science of Value
Vedic philosophy teaches us that there are six kinds of values—knowledge, beauty, renunciation, wealth, power, and fame. Everyone wants to be valuable, but God is the most valuable. Since we are all attracted to value, and God is the repository of all value, hence He is called Kṛṣṇa or all-attractive.
You might say: Well, I’m not attracted to Kṛṣṇa; I don’t believe in the existence of God. That is not a fact. Your non-attraction to Kṛṣṇa is ignorance of who Kṛṣṇa is—namely, the repository of all value. You are still attracted to one or more of the six definitions of value, and hence you are searching for Kṛṣṇa, even when you think you are not. “God” has been defined poorly in many religions which is why people don’t understand why they need God, why they are always searching for nothing except God. That illusion of atheism will exist until “God” is properly defined as six kinds of values as in Vedic philosophy.
The science of God is simply that the repository of value produces a value that should then enhance the repository of value—i.e., make it more valuable. This science of God is called yajñá in which there is a source of value, value is taken from the source, enhanced by one who takes it, and then put back into the source to make it more valuable. A simple example of yajñá is a man standing in a river, taking water out of the river in his palm, chanting a mantra to enhance the value of the water in his palms, and then pouring that water from the palm back into the river. The river is the repository of value, we take that value from the river, enhance it through our actions, and then return it to the source to enhance its value. Value can be enhanced because there is a soul with the capacity to produce infinite value by its will. In that process, the soul that enhances the value of the preexisting value also becomes valuable.
But there is a type of evil soul that doesn’t want to become more valuable by producing value through its will and returning it back to the original repository of value. Instead, the evil soul wants to become valuable by taking value constantly from the source, and everyone else, without giving anything back. Such an evil soul is controlled by the laws of possibility, choice, and responsibility. If he returns greater value to the source and the others than what he has taken, then he receives the difference in value. If he simply takes the value and does not return it to anyone, then he is starved for value in the future.
Since value has six forms, therefore, fulfillment and hunger are also of six forms. When the soul is starved as a result of previous actions, then he is starved of knowledge, beauty, renunciation, fame, wealth, and power. It means that he will be born into ignorance, ugliness, poverty, weakness, and ignominy, along with a deep attachment to whatever little he has. He will be unprepared to part with whatever little he has unless it is forcibly and painfully taken away from him. He will never do anything for anyone else, be unprepared to make any sacrifices for God, and only want to accumulate for himself. The only way he can produce value is when the little value he has created for himself is stolen from him by someone else. Thereby, whatever a hungry person produces is taken away from him by nature—by putting him into a situation where someone or the other will steal from him in the way he has stolen before.
The science of value is not just objective. It is also subjective and intersubjective. For instance, food is more valuable to a hungry man, and a car is more valuable to a satiated man. Accordingly, someone who has accumulated karmic debt will first have his house, car, and bank balance stolen from him before food is stolen from him. The theft of food is a loss of value for a poor man, equivalent to the theft of a house, car, and bank balance for a rich man. Therefore, value has to be progressively taken away in the order that we consider it valuable. The science of value includes what we consider valuable in which situation to which extent. Therefore, there are objectively valuable things. But because we tend to devalue and revalue the same thing in some situations more than others, therefore, value must also be contextualized and individualized.
Enjoyment and Renunciation
The Iśopaniśad states: īśāvāsyam idaḿ sarvaṁ yat kiñca jagatyāṁ jagat tena tyaktena bhuñjīthā mā gṛdhaḥ kasya svid dhanam. It means “everything that you can see in this world is pervaded by the Supreme Lord. Therefore, enjoy with renunciation. Don’t be greedy. After all, who owns all this wealth that you consider your property?” The phrase “īśāvāsyam idaḿ sarvaṁ” means that “God is residing in everything”. This property that you consider valuable is actually the property of God because it has some of the six qualities that originally were present in God and manifested out from Him. Similarly, “kasya svid dhanam” means “who owns this thing that you consider to be your private property?”
Enjoyment with renunciation means yajñá. Pour the water of the river back into the river after you have enhanced its value through your actions. You can have the enjoyment of taking the water from the river. But you have to also do the renunciation of enhancing its value and putting it back into the river. This process applies to everything. Take the food grains, prepare a delicious meal, and offer it to the Lord. Once the Lord has eaten, then you eat it and add value to the eating by doing something constructive by which the Lord will be enhanced. For example, if you spread the knowledge of the Lord, then you have added value to eating by doing something constructive. This is real economic growth. Take the value, enhance the value, and give away the value, so that others can take it and enhance it more, and recirculate it back to you.
Don’t be greedy means don’t just go on accumulating value, even if you have earned it morally. Your stockpiling of value is economic death because whatever you are stockpiling has an opportunity cost compared to when the value is circulated through many hands and gets enhanced by their actions. You may think that by stockpiling value I own the value because you don’t realize the opportunity cost of that value. The money held in your hands is losing value compared to when it is given away and used correctly by others to enhance its value and then circulated to even more people. That value you give away to the right people will be enhanced by others and come back to you as greater value.
The Science of Economic Growth
This is also the science of value circulation and enhancement. Everyone can take from God, enhance its value, and then give it back to God or His devotees. Those devotees will further enhance the value and distribute the value to others who can enhance it even more. Through this continuous enhancement of value, the value grows. This is why it is said that the spiritual world always grows. It is neither stagnant nor decreasing. Eternity doesn’t mean constancy. Eternity is also not fixed. Eternity means constantly increasing, and that continuous increase is achieved by circulation. Everyone takes something from others, increases its value, and gives it to others for them to increase its value.
This process of taking value, enhancing value, and giving away value is enjoyment with renunciation. This is how the economic system can grow perpetually. This is also how the spiritual world grows because everyone takes, enhances, and redistributes. To understand all these things, we have to model everything in terms of value in its six forms. This value is the fundamental reality. It is perceived by the mind. However, to take the value, enhance it, and redistribute it, we also have the senses of knowledge and action.
This is why the “internal instrument” is divided into four parts—mind, intellect, ego, and moral sense. The mind perceives the six values. But whether they are truly valuable is judged by intellect, ego, and moral sense. The intellect judges if this thing that I consider valuable, is truly valuable. The ego judges if this thing that I consider valuable is pleasing. And the moral sense judges if this thing that I consider valuable is righteous. So, there is the perception of value assisted by the judgment of truth, righteousness, and goodness. If something is not true, right, and good, then the value judgment is false. So, we need the mind to perceive what it is, and then the other three to judge if it is true, right, and good.
Then to enhance and redistribute this value, we need the senses. For example, we can write a book about the truly valuable Lord using our eyes and hands. The eyes are senses of knowledge and the hands are senses of action. Similarly, we publish the book and distribute the book using the senses. If there is no value, then there is no question of adding value and distributing value. Thus, value is the fundamental reality, and the processes by which we acquire value, enhance value, and distribute value are relatively less fundamental.
When there is value beneath the sense perceived reality, then by consuming that sense perception, the mind is enriched. For example, there is a kind of food, which if eaten, will make us more perceptive, intelligent, visionary, generous, creative, and peaceful. There is another kind of food, which if eaten, will make us imperceptive, stupid, visionless, egotistic, monotonous, and aggressive. Food is not just for the body. It is also for the mind. That is because there is a sense perception reality and beneath it is a reality of six-fold values. The six-fold subtle reality of values is the fundamental reality. The sense perceived reality is produced by the combinations of the fundamental reality.
Based on this fundamental and emergent reality distinction, there are three kinds of economic models, namely, immoral, moral, and spiritual economics. The first is the cycle of cheaters and cheated. They think that matter has no meaning, so there can be no judgment of true, right, or good meaning. Truth simply means something exists and false means it doesn’t exist. So, where there is truth, there must be abundance. They try to increase quantities of things and consider it the signifier of truth. The second is the cycle of preservation continuously renewed by effort. They think that there is meaning in the world, so there is truth, right, and good meaning. But their mind is also conditioned by duality, which means that when something is accepted as truth, right, and good, then its opposite is rejected as false, wrong, and bad. This type of mind cannot capture the non-dual truth, right, and good. The third is based on the principles of non-duality, which means true and false, right and wrong, good and bad are integrated in a way that is better than just true, right, and good. This means that you can cheat to avoid being cheated, but do not steal without giving something valuable in return. This “cheating” to avoid being cheated is the combination of good and bad, right and wrong, true and false. By integrating true and false, right and wrong, good and bad, we obtain continuous expansion.
Indians had lost this understanding of non-duality, and just had a dualistic idea of truth, right, and good. Hence, when they met cheaters in the form of foreign invaders, they did not know what to do. They thought that if we cheat like the invaders, then we will become as reprehensible as them. But if we don’t cheat like them, then we are always cheated by them. Some Indians decided to become cheaters and others decided to remain cheated. This is why morality doesn’t always work. It works if moral people live with moral people. But when they are mixed, everything collapses due to confusion. Non-duality always works. This is the nature of spirituality and of continuous expansion.
We can also describe three economic models as—(a) boom and bust economies, (b) stable but constant value economies, and (c) eternally expanding economies. The first is ignorance, the second is dharma and karma, and the third is the spiritual truth. They are all entailed by the same essential science.
Continuous expansion of the spiritual truth doesn’t mean a quantitative increase in production and consumption; it means qualitative betterment. Spiritual economic growth doesn’t mean that while I eat 1 kg of food today, I will eat 1 ton of food tomorrow. It means that I eat tasty food today and I will eat tastier food tomorrow. It means that I read poetry with one meaning today, and I will read poetry with multiple meanings tomorrow. It means that I might laugh at some jokes today, and I will laugh louder at even better jokes tomorrow.
Immoral economics means that I overeat by stealing today and I will be forced to starve by thieves tomorrow. Moral economics means that I get some tasty and nourishing food every day by engaging in fair-value exchange with others involved in the fair-value exchange. Spiritual economics means that my food will get tastier every day. So, there is a difference between immoral, moral, and spiritual economics. Of course, if we just rise to moral economics, then society will stop the cycle of overeating and starvation. Then we can learn the science of spiritual economics by which everything gets better every day.
