Economic Devastation

[arepo]

Central bank was invented a the end of the Middle Ages, but it wasn't ubiquitous until the 20th century. In addition to the $223 trillion debt which is 313% of global GDP,

Translation: on average, a debt takes a whopping 3.13 years to repay. A contrary argument could be that thanks to all the technology, interconnectedness, and trust between groups of people, millions of friendly IOUs are lasting longer than ever before.

that's not what this means at all. it would take 3.13 years to repay only if every profit made globally was applied to the debt for that entire period of time. which is impossible because everybody would starve and/or freeze to death in about a month...

[1713484209]

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[1713484209]

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[practicaldreamer]

Re. global debt (and its circa $150 trillion).

What is the loan secured on ? What is the debtors ability to pay ? What is the creditors ability to enforce repayment ?

A buddy of mine was recently made bankrupt - he was not on his own.

  The bank couldn't seize his assets because by the time he was made bankrupt he had none 

  He still lives and breathes and eats and walks his dog - he is happy even. In fact, he is more happy today than when he had a pile of debt hanging around his neck.

    The bank has had to write off his debt - though ultimately public money is being used to put right the banks losses, which for me is the crux of the problem today.

[CoinCube]

What is the loan secured on ? What is the debtors ability to pay ? What is the creditors ability to enforce repayment ?

Answers: 1) The taxpayer 2) None so the loans will be charged to the taxpayer 3) The police, courts, and tax authority are very good at seizing assets and making sure people pay taxes.
 

The bank has had to write off his debt - though ultimately public money is being used to put right the banks losses, which for me is the crux of the problem today.

Agreed, I would call that process socialism. It could also be called collectivism which is the same thing.  
There was a time in US history when our leaders understood the dangers.

Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!

When asked to name his greatest accomplishment Jackson replied simply "I killed the bank"
He is also the only president to ever pay off the national debt.

But you must remember, my fellow-citizens, that eternal vigilance by the people is the price of liberty, and that you must pay the price if you wish to secure the blessing.  It behooves you, therefore, to be watchful in your States as well as in the Federal Government.

Sadly we were not vigilant. It took 77 years but the bank rose from the dead. Pushback against collectivism has subsequently grown more feeble with each successive generation. The irresistible trend is towards ever greater centralization, ever greater loss of fitness, and ever greater taxation. It will continue until the system collapses. In the US we complain about these problems but the US is actually one of the healthiest countries. We will be among the last to fail. The design of our government and a strong libertarian minority have given us a degree of resistance. It is not immunity (far from it) rather we are simply succumbing at a slower rate to the disease. It is our exported "freedom" that is the most virulent.

[AnonyMint]

The debt is simply the broad money supply. A surplus on someone's accounting books, profit, makes no difference unless it causes a loan repayment that works its way back to the central bank and causes some of those trillions to be deleted from the system.

We've had this debate already and I already won it with a slam dunk:

https://bitcointalk.org/index.php?topic=455141.msg5654081#msg5654081

[AnonyMint]

Cross-posting because I think this is highly relevant to this thread...

mattboldfield, I'd like to hear your reaction to the following even if you disagree with me?

I'm obsessed because if you read my Mad Max and CoinCube's Economic Devastation threads, I believe we are going into a very severe, global economic implosion starting around 2016ish to worsen until 2020 and beyond, due to precisely $223 trillion in global total debt (not including China's huge shadow debt economy backed by copper, etc and other off balance obligations in every country that are lurking) i.e. 313% of global GDP, very roughly a $quadrillion in derivatives ("weapons of mass destruction"- Buffet), and very roughly a $quadrillion of unfunded social welfare promises made by governments. According to the IMF, this is at least a 200 year high in debt-to-GDP ratio, and I am confident it is the worst ever in recorded history since Mesopotamia when all factors mentioned above are included.

Because of the coincident and concomitant technological unemployment (predicted by the prestigious Oxford University at Cambridge, England to destroy 47% of all existing jobs before 2032), there is no way to grow GDP to pay this off. I explained that those who argue that debt is merely an accounting ledger item and thus can be quickly erased and restarted anew are ignorant. So the only choice we have is which sector of society to charge this write-down to. The governments have made it clear with their actions of austerity, increased taxes, and depositor bail-in plans, that they intend to charge the $quadrillions of write-downs to private wealth and not to the elite who own most of the wealth who run the bankster usury system (which is also the government via power vacuum capture of democracy). Imploding private wealth means the government won't have anything remaining to tax. Do you remember what Hitler did (and many other examples in history) when he couldn't raise revenues to pay for his universal health care system? Euthanasia. Y'all do know I hope that Hitler was printing his own money and doing massive public works programs such as the Autobahn.

This looks like it can downward spiral into a Dark Age. That affects all of us.

The only solution I see is for there to be a way for the entrepreneurs who make the world prosperous to have a way to hide their wealth from government so they can continue generating prosperity. Gold won't work, because gold can't be transacted very anonymously over distance nor without being snooped on by those you are transacting with, and this is why every move away from fractional reserves to gold always implodes the economy as the velocity of money plummets (it is down by 50% since 2007). Even the 1800s gold standard was based on fractional reserves at the private unregulated banks (and no Andrew Jackson didn't stop this and concomitant frequent bank runs which is why we ended up with a central bank later), we were not using physical gold as money.

So I devised a (as of yet unimplemented, unpublished) solution for crypto-currency that is reliably anonymous and fixes many of the other problems that I mentioned about Bitcoin.

I believe this solution might save us. And so thus I am obsessed with surviving. I hope you are too.

That makes me a troll?

P.S. On the more conspiratorial perspective, I also see that Bitcoin's design takes us directly to a world government digital fiat which is the 666 tracking system. Not that I necessary believe the Bible's Revelation, but I don't want to live in a world where we are slaves to a top-down control from Brussels.

[LostDutchman]

That people actually have faith and belief in the "prophecies" of a mouldy old tome written by self-hating mysoginists, most of whom lived in caves hiding from the Romans because the Romans knew they were nuts,  never stops amazing me.

My $.02.

[AnonyMint]

Must read.

[AnonyMint]

http://blog.mpettis.com/2014/03/will-emerging-markets-come-back/#comment-22623

I can dream about a solution to eliminate the ability of government to tax virtual knowledge. They would still be able to tax tangible commerce which is being replaced any way by virtual knowledge production.

We are moving towards maximum division-of-labor wherein the individual is his own company and call sell his knowledge production anonymously. This requires a different implementation than Bitcoin's design.

The government won't be able to tax that (if it comes to fruition and works as envisioned), thus the backstop for public debt won't be possible. The tangible commerce world is orders-of-magnitude less productive than the intangible knowledge work, e.g. look what the laser printer did for decentralized publishing, then the internet did to decentralized publishing, and now the 3D printer will do to decentralized manufacturing.

The key is the anonymous money has to become a unit-of-account via decentralized exchange and mining. This requires certain technical feats, which have yet to be demonstrated.

P.S. I would have preferred to have written "one of the more prolific and astute". There is no way to edit posts here and I'm in a rush and don't proof read.

[CoinCube]

The debt is simply the broad money supply. A surplus on someone's accounting books, profit, makes no difference unless it causes a loan repayment that works its way back to the central bank and causes some of those trillions to be deleted from the system.

We've had this debate already and I already won it with a slam dunk:

https://bitcointalk.org/index.php?topic=455141.msg5654081#msg5654081

a) Your link does not show you debating definitions of debt.
b) I wasn't even in that part of the conversation, so don't make shit up.
c) Your bluff has been called. Either refute what I said by typing new words here, not link-farming, or lose gracefully for once.

AnonyMint is not arguing with you that overall debt = broad money supply that is simple fact.
What he is challenging is your claim that the current structure makes no difference unless it cause a loan repayment to work its way back up to the central bank as well as your implication that that the current debt = broad money system is fundamentally sound if properly regulated.

He is correct. The current system is unsound, unstable, and guaranteed to eventually collapse regardless of regulation. However, understanding why is not at all easy. In essence there are two overlapping cycles which I call the microparasitic and macroparasitic cycle. Banks via fractional reserve banking cause boom and bust cycles on a local level siphoning wealth in an unstable process that eventually collapses and leads to bank runs. Later on a macro level banks capture government to backstop each of these local collapses. Subsequent collapse then cause a run on government finances. Government debt grows ever larger with each micro cycle until the debt burden of government becomes unsustainable. At this point the we get asset confiscations, governmental collapse, and perhaps war.

This is just a summary not a satisfactory explanation. A full explanation requires us to wade into the swamp that is central banking, expose the common lies that are taught in many economic textbooks, and fully explore their implications. This debate has inspired me to write said explanation but it is going to be several pages long as the system is complex. Due to work obligations it may take me 2-3 weeks to get this done. Please check back.      

[arepo]

Central bank was invented a the end of the Middle Ages, but it wasn't ubiquitous until the 20th century. In addition to the $223 trillion debt which is 313% of global GDP,

Translation: on average, a debt takes a whopping 3.13 years to repay. A contrary argument could be that thanks to all the technology, interconnectedness, and trust between groups of people, millions of friendly IOUs are lasting longer than ever before.

that's not what this means at all. it would take 3.13 years to repay only if every profit made globally was applied to the debt for that entire period of time. which is impossible because everybody would starve and/or freeze to death in about a month...

[snip]

As for the amount of money vs global GDP, since when does an anarchist care about aggregate government statistics? It's like being enthralled by the World Weather Report despite not planning to do any travelling. Its relevance is minuscule at worst.

this is an obvious deflection after i pointed out that the bolded statement is not only decidedly false, but also completely absurd. i'm not sure if you were simply trying to downplay the point, but if you actually believe what you said then that alone shows a lack of understanding of the situation.

[CoinCube]

Please show your calculations for a different amount of time, then.

The answer is infinity as the debt can never be paid off. It is mathamatically impossible under the current system.The debt in agregate can only grow. I will show why this is the case and why the hotel room example you cited above is wrong when I have more time.

yet Anonymint makes it sound as if the debt is akin to an expensive water leak in Fukushima Daiichi, and so requires constant work to maintain: "a heavy burden on society to maintain the status quo". But that's simply not the case. However, instead of developing a super-secret non-evolving proof-of-work crypto-coin for the elites, why not filter some of that water?

This analogy actually understates the problem. If the debt problem required only constant work to maintain society could bear it easily as society is very productive. In truth the debt problem requires an ever increasing burden on society to maintain the status quo.  

[CoinCube]

Finance Part I: Understanding the Parasite

Modern finance leads inevitably to decimation of the middle class and eventual systemic collapse. Understanding how and why is critical to securing a future in a dangerous era. This post is the first in a four part series designed to open your eyes and show you the dark machinery behind the glossy curtain of propaganda. Let’s take a moment to look past the lies. You may not like what you find.  

The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not reveal it. The process by which banks create money is so simple the mind is repelled.

To understand finance we must first understand the process of money creation. Economic textbooks cover this topic in great depth. They spoon-feed inquiring minds false conceptions of money multipliers and reserve requirements. This "official" version of money creation is clean, comforting, and concise. It is also  grossly and provably false.

Banks create money by making loans, but this process is not in any way constrained by reserves, deposits or a money multiplier. Banks do not need deposits to make loans. The idea that banks somehow lend out grandma’s savings is propaganda. Instead banks simply create money via accounting wizardry. When a bank approves a loan they simultaneously create a deposit in the borrower’s bank account and voilà new money is created. Banks do not function by lending out deposits. Instead the act of lending creates more deposits. This is the reverse of the sequence taught in almost all economic textbooks.  Banks create deposits at will.

Economic texts often state that banks are constrained by reserve requirements. This is another lie. There does exist a number called reserve requirements. However, if a bank needs more reserves these reserves are simply supplied to meet this demand. Depending on the country this is done either directly by the central bank or via interbank lending at interest rates that are suppressed by the central bank. The theory of the money multiplier is false. In reality there is a reserve multiplier. Central bank reserves are increased by a percentage of the amount money banks choose to create.

In no way does the aggregate quantity of reserves directly constrain the amount of bank lending or deposit creation.

So what does limit money creation by the banking system? Primarily the banks themselves do. Individual banks have to find someone to lend to who is capable of paying them back or at least someone who has valuable assets they can seize if the loan is not paid.

The Banking Tragedy of the Commons

Modern banks are not limited by reserves. Instead, they decide how much to lend based on the profitable lending opportunities available to them. As banks have no real restraint on the printing of new money, they are prone to print excessively. Left to their own devices banks will steal too much in a banking tragedy of the commons. Banks function by harvesting the wealth and productivity of society. The wealth of individual families is the main course. Banks looking to maximize profits risk creating too much new money. This can trigger a cycle of hyperinflation where the increased supply of dollars drops the values of the currency to such an extent that people spend them as quickly as possible. This supply-velocity feedback cycle left unchecked severely undermines the value of fiat currency. The logical conclusion of such excess is abandonment of the fiat currency for an alternative like gold or perhaps someday cryptocurrency. Hyperinflation is thus banking Armageddon. It represents the destruction of their food supply and must be avoided at all cost. Banks rely on a central bank to prevent this outcome.

If a bank ever finds it needs more reserves it simply gets them from another bank. This rate of interbank lending is set by the central bank. In the US this is interbank rate is called the federal funds rate. The FED sets a target for this rate and creates or destroys money via open market operations to make sure the actual interbank rate is what they want.  It is the spread between the interbank rate and the rate a bank can loan money for that limits lending. Central banks thus raise and lower the interbank rate to maximize bank profits. If banks start to siphon too much wealth from society inflation rises. The central bank will then raise the cost of reserves to slow the rate of over-harvesting.

The newly created money travels through the system helping the early acquirers first. The purchasing power of money falls in response to an increase in the quantity of money. In the real world a hypothetical increases in the money supply by 100% does not as neoclassical economics assumes simply lead to an equal across-the-board increase of 100% in prices. The banks do not descend overnight and double everyone’s cash balance.

The banks create new money to be spent on specific goods and services. The demand for these goods rises, raising these specific prices. Gradually, the new money ripples through the economy, raising demand and prices as it goes. Income and wealth are redistributed to those who receive the new money early in the process, at the expense of those who receive the new money late in the day and those on fixed incomes who receive no new money at all.

This results in redistribution from the late receivers to the early receivers of the new money. This occurs both during the inflation process as new money finishes working its way through the system and leads to permanent shifts in income and wealth that continue even after the money has reached a new equilibrium. The simplest example of this is fixed income groups who receive no new money in this process.

Finance Part I: Understanding the Parasite
Finance Part II: The Parasitic Cycle
Finance Part III: Divide, Conquer, Enslave
Finance Part IV: The Rise of Cryptocurrency (Coming Soon)

References:
McLeay M, Radia A, Thomas R. Money creation in the modern economy. Bank of England Monetary Analysis Directorate Quarterly Bulletin 2014 Q1
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
Rothbard MN. The Foundations of Modern Austrian Economics, Edwin Dolan, ed. (Kansas City: Sheed Andrews and McMeel, 1976), pp. 160-184
http://mises.org/rothbard/money.pdf

[bobdutica]

"'Communism' is not a movement of the downtrodden masses but is a movement created, manipulated and used by power-seeking billionaires in order to gain control over the world...first by establishing socialist governments in the various nations and then consolidating them all through a 'Great Merger,' into an all-powerful world socialist super-state probably under the auspices of the United Nations."  - Gary Allen in None Dare Call It Conspiracy page 34.

All those who have sought dictatorial control over modern nations have understood the necessity of a central bank. When the League of Just Men hired a hack revolutionary named Karl Marx to write a blueprint for conquest called The Communist Manefesto, the fifth plank read: 'Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.' Lenin later said that the establishment of a central bank was ninety percent of communizing a country. Such conspirators knew that you cannot take control of a nation without military force unless that nation has a central bank through which you can control its economy. - None Dare Call It Conspiracy page 40.

"Radical movements are never successful unless they attract big money and/or outside support. The great historian of the Twentieth Century, Oswald Spengler, was one of those who saw what American Liberals refuse to see--that the Left is controlled by its alleged enemy, the malefactors of great wealth. - None Dare Call It Conspiracy page 57.

Very worthwhile reading.

[am]

Please show your calculations for a different amount of time, then.

The answer is infinity as the debt can never be paid off. It is mathamatically impossible under the current system.The debt in agregate can only grow. I will show why this is the case and why the hotel room example you cited above is wrong when I have more time.

Yet real world debts are paid off every day, and even loans that go into default must somehow be satisfied. Therefore, there must be an average loan repayment time, like I said in the first place. Sure, all it takes is one outstanding loan and mean repayment time becomes indefinite, but that's not the same as infinite. And a mean is just one type of average statistic.

Despite your correct analysis of finite/infinite and mean, the problem with the economic debt is we're not dealing "real world".

[CoinCube]

Please show your calculations for a different amount of time, then.

The answer is infinity as the debt can never be paid off. It is mathamatically impossible under the current system.The debt in agregate can only grow. I will show why this is the case and why the hotel room example you cited above is wrong when I have more time.

Yet real world debts are paid off every day, and even loans that go into default must somehow be satisfied. Therefore, there must be an average loan repayment time, like I said in the first place. Sure, all it takes is one outstanding loan and mean repayment time becomes indefinite, but that's not the same as infinite. And a mean is just one type of average statistic.

When a bank makes a loan it must be paid back with interest. This interest must be drawn from the larger economy.  Every time a bank creates a loan it creates more debt than money and the overall debt burden relative to money grows. How is this debt paid? It can only be paid via two mechanisms. Someone somewhere in the economy must take out even more debt to pay the initial loan (delay), or debt must go into default and the underlying collateral seized (eventual guaranteed outcome).

Selling assets to pay debt does not change this. A specific individual debt may be satisfied, but that money is then removed from circulation resulting in even less money to pay other debts. Banks create a false boom via sustained periods of money printing. This results in an unstable and volatile imbalance between saving and investment. Low interest rates by a central bank stimulate the creation of money by the banking system. This leads to increased capital spending funded by newly issued bank credit. This debt induced boom results in widespread malinvestment. When credit is cut off there is a massive bust as assets are liquidated at fire sale prices in an attempt to service an ultimately unserviceable debt burden. Rinse wash and repeat and you have a parasitic cycle. I will explore this cycle in depth in part II of my analysis of the banking system ETA 2 weeks.  

You are correct that the there is an average loan repayment time and that this average loan repayment time does not go to infinity. However, average loan repayment time can only be kept constant if the loan default rate gradually and cyclically climbs towards 100%.

[Bit_Happy]

Too many long words. Any chance of a summary?

Sadly the links above are a summary. That's why we are so screwed. The problem is sufficiently complex and subtle that society as a whole and most individuals will never understand it.  

Essentially society is trapped in a cycle of ever increasing economic inefficiency. Our collective lack of understanding of the fundamental cause will result in attempted "fixes" that will worsen the underlying problem. The end result is economic collapse. The world will not end but we are facing something that is likely to exceed the Great Depression.

To understand why, and why society cannot avoid it (although individuals can) you have to understand the linked works. It's not an easy read.

Can we just blame the Gov and talk about basic libertarian solutions?

[LostDutchman]

Too many long words. Any chance of a summary?

Sadly the links above are a summary. That's why we are so screwed. The problem is sufficiently complex and subtle that society as a whole and most individuals will never understand it.  

Essentially society is trapped in a cycle of ever increasing economic inefficiency. Our collective lack of understanding of the fundamental cause will result in attempted "fixes" that will worsen the underlying problem. The end result is economic collapse. The world will not end but we are facing something that is likely to exceed the Great Depression.

To understand why, and why society cannot avoid it (although individuals can) you have to understand the linked works. It's not an easy read.

Can we just blame the Gov and talk about basic libertarian solutions?

Blame is not required but Libertarian solutions work well.

My $.02.

[CoinCube]

Can we just blame the Gov and talk about basic libertarian solutions?

The Libertarian platform advocates for:
Minimally regulated markets
A less powerful federal government Strong civil liberties
Separation of church and state
Open immigration
Non-interventionism

We had a government like this at one point (the US government circa 1800). Unfortunately it spontaneously degenerated into what we have today. The problem with the Libertarian party is not that they are wrong, but that they have no realistic strategy to accomplish their goals.

The libertarian typically believes the current system can be reformed from within. In reality the system is terminally ill. It is slowly dying and likely too far gone to save itself through gradual reform. The probable future is systemic collapse followed by massive social change. As individuals we should plan and prepare so we are not crushed in the death throws of the dying order.

In the wake of the Great Depression the leading economists of the day recommended a transition to full reserve banking. It was called the Chicago Plan. Sadly the power of finance was far too strong and the Chicago Plan was never seriously considered. We now live in a world without a single country city or state that mandates full reserve banking. In a world with vastly different cultures, traditions, and religions that seems odd doesn't it?

Theft via fractional reserve is the single greatest force driving us into collective systemic failure. Any platform that does not address this root cause will not succeed.

[thaaanos]

This universal trend towards maximum independent possibilities (i.e. degrees-of-freedom, independent individuals, and maximum free market) is why Coase's theorem holds that any cost barrier (i.e. resisting force or inefficiency) that obstructs the optimum fitness will eventually fail. This is why decentralized small phenomena grow faster, because they have less dependencies and can adapt faster with less energy. Whereas, large phenomena reduce the number of independent configurations and thus require exponentially more power to grow, and eventually stagnate, rot, collapse, die, and disappear

That trend is not universal take a look at the insides of corporations. Free market is not optimal in efficiency simply more adaptable
And in the end everything dies, But Large Bodies tend to be more efficient and live longer.

[AnonyMint]

I am quite flabbergast that Eric S. Raymond (self-professed to have 150 - 170IQ, the creator of the "open source" movement) could get the logic so wrong on the coming Knowledge Age.

In his critique of Jeremy Rifkin's book, The Zero Marginal Cost Society, he misses the key generative model of open source, which is that the source is always changing. The enslavement of knowledge by capital is due to the transactional cost of the propagation of creations. As we lower that friction, knowledge takes over.

And he apparently fails to comprehend capital can't buy knowledge because thought isn't fungible, and this becomes more evident as the diversity of innovation becomes more fine-grained.

The claim that the material input costs will be significant relative to the marginal cost of distributing more copies of intellectual property is wrong because the only costs in material production that can't be reduced asymptotically to 0 at economy-of-scale and automation are the knowledge inputs. Thus knowledge is infinitely more valuable than material production at the asymptote. The only reason that capital has been able to enslave the knowledge portion of the cost in the material cost is due to inability of fine-grain, autonomous knowledge to control the creative outputs of material production. The 3D printer changes this because the printer will be in every person's home. The commodity value relative to knowledge value of raw material inputs will fall asymptotically to 0.

What Eric misses is that many types of intellectual creations and creative processes can be incrementally fluid and shared, including music, video production, medical processes, etc.. People can take the designs of others and refine them. This is precisely open source. It is not that we won't possibly use fungible money (micro payments perhaps) to pay each other for creations, but that money won't be in control of the startup costs. Individuals will choose what they want to work spontaneously. This destroys the power of stored capital to enslave knowledge.

We will still use this money to buy those non-creative things that drop near to 0 in price, such as raw materials and food.

This is what I was trying to explain to Eric a long time ago, but it just flew right over his (and his readers') cuckoo head(s) so he banned me.

Note this doesn't mean I am agreeing with Rifkin's Marxist conclusions about the end of private property rights.

All the indicia of cod-Marxism are present. False identification of capitalism with vertical integration and industrial centralization: check.

Vertical integration enslaves knowledge and will fall away. Capital will increasingly become knowledge instead of stored fungible claims on labor.

Writing about human supercooperative behavior as though it falsifies classical and neoclassical economics

Supercooperative doesn't have to mean Communism. It can mean more finely-grained, autonomy of work. Eric is conflating here, even though Rifkin was also apparently erroneously introducing Marxism. They both got it wrong.

the concept of “the commons” is not a magic wand that banishes questions about self-determination, power relationships, and the perils of majoritarianism. Nor is it a universal solvent against actual scarcity problems

Wrong! The commons means knowledge takes control. For example, physics assures us that energy is neither created nor destroyed, so it is only the lack of knowledge production that makes energy finite or scarce. And I am not referring to perpetual motion machines, rather to more efficiency and automation of extraction of energy through greater innovation due to faster propagation of knowledge.

Nobody ever says that “the commons” requires behavior that individuals themselves would not freely choose, and if anyone ever tried to do so they would be driven out with scorn.

Correct. Rifkin doesn't understand fine-grained, autonomy is the key element of the commons.

>So @esr, how do you align the long tail of maintenance into the sunk v marginal cost framework?

Er, simply by observing that it is neither of those things and can’t be jammed into that framework.

He makes it clear that he didn't even consider that the lower transactional propagation cost of digital distribution of editable creations increases the frequency, granularity, and autonomy of those maintenance edits. He apparently doesn't remember that Metcalfe's or Reed's Law says that as the number of those editing nodes increases, then the value of the knowledge network increases squared.

When people speak of “capitalism” and “free markets” as being separable ideas, and I inquire into that, I generally find that they’re identifying capitalism with the way free-market economies behave in the presence of high communication and transaction costs – big firms with lots of vertical integration, deskilled employees treated like cogs in Taylorized processes, and elaborate hierarchical management structures designed to manage the largest possible lumps of capital to collect economies of scale.

Economies mostly stop looking like that as the costs of transaction and communication drop and technological leverage increases revenue per employee. But it’s still capitalism because specialists in capital accumulation drive most of the productive activity.

Ah he was so close to getting the point, then he screwed it up on the last sentence. Yes Eric, but what capital are they accumulating? Stored capital or knowledge capital. He just hasn't quite had the epiphany yet on how the relative value of stored capital can plummet.