Linking our future to China and larger scale enterprise
It's no secret that there is a close link between research and development and the discovery of useful knowledge, science, iinvention, and possibly innovation. R and D requires a redirection of econonomic activities towards low return activities. But, such cost is not attractive in many sectors, industries, firms, and indeed households of an economy.
Dominant firms protect their positions by reducing the profitability of their competitors positions so as to reduce their rivals ability to conduct competitve or novel r and d. Ultimately, such a process would result in a stifling of competition, and in turn a lowering of the profit rates for all but the most dominant of commercial entities.
In a world of industries based on economies of scale, those with economies will attempt to achieve more and more such economies until the distribution of profit in their area of competition is monopolized.
How then is discovery outside of established industries and concerns possible? Technology is notoriously difficult to dominate in a society where their is independent r and d. Hiwever, discovery isn't possible in societies that are dominated by huge firms the stife novelty as on Africa or in a world dominated by economies of scale unless the dominant firms themselves create new industries. But, one must ask why they would do that.
As a dominant firm, in addition to ruining your competition through economies if scale, you can ruin them by buying their shares and by trying to take control through public markets. Thus, for example, Cadbury's is bought by rival firms. And thus large firms increasingly stifle competition through the profits they mainly gather through achieving economies of scale, domination of profit, and accumulation of competitors shares acquired by higher profit margins.
In addition, the pace of domination can be accelerated without saving when interest rates are low. Borrowing to prevent competition in times of low interest rates means that innovation and growth in an economy can be stifled sooner. The money large firms gather is thus used directly to stifle competition. This process is speeded up when money is too cheap.
Low interest rates hasten the appearance of many undesirable side effects of the modern economy. People can buy houses only to see them lost when their incomes decline. Their incomes decline because solid growth dud not occur in their economy. Apparent growth was in real estate markets as developers achieved economies of scale and gambled on dominating the property markets. The competition arising from low lending rates fir money priduced house price inflation and a dakse sense of economic well being. The profits to builders and banks resulted in monopolization of profit and further maldistribution of profits, savings, and incomes. They banks were bailed out, but the lessons of the period were not understood and the process of destructive market forces in the US and UK will repeat as in the case of Thailand.
The low interest rates do not encourage people to pay off debt as they should, but
In the longer term easy money borrowed from China where economies if scale are enormous hasten the maldistribution of incomes on the US, slow the rates of meaningful innovation and bring about the disappearance of the middle class of society.
Low interest rates, aka easy money, hastens the destruction of social fabrics in the US that leads to fascism, yes fascism and not socialism. The greatest danger from low interest rates is social conflict leading to the many forms of fascism: communism, dictatorship, and outright fascism. Thus a dictatorship can result in the US which was the home of democracy, but is increasingly a place of social conflict and unruly goverance.
Underlying low interest rates is the competition between banks and between the finance rooms of large companies to stifle competition, redistribute profit towards their goals of greater economies of scale and dominance of society's income streams.
The process is addictive and repetitive and can only be foreshortened by slowing down the accumulation of excess savings arising in profits of large firms and banks.
We all, through the IMF, have flooded the world with cheap money thinking that it will produce a solution to the financial market turmoil arising from banks trying to achieve economies of scale by lending more and more at looser and looser terms.
It can only hasten the rise of fascist dictatorial tendencues of industries, countries and firms. Throwing easy money at the problem is not the solution.
Ask yourself why Africa us in such a mess after all the money poured into it through aid, and World Bank development loans. The problem is the weaknesses inherent in the solution that we opted for.
Throwing more money at our economic issues does not solve them when it makes them worse!
We think money in the hands of bankers will promote stability when it will only lead to more competition between banks. Banks are trying to dominate other banks and the more money they get to do this the less they will lend to small industry and the less stability there will be on the world economy.
The best policy right now is the most difficult to swallow if you are dominated by large industry and you are heavily into debt with banks. The policy is that of high interest rates to curb the growth of easy money and to ultimately slow down the pace of political change that is heading towards fascism brought about by social conflict.
The lending binge of the twenties and thirties in the last century led to the most dangerous of periods for humankind as people were pursuaded that the Jewish bankers were to blame for their economic ills. The real culprit was government spending and government demands for reparations. Governments brought about the first and second great wars! Will they bring about another?