Archive for June, 2012

Economics is a zero sum game

June 12, 2012

Capitalism is a zero sum game for the same reason an economy is a zero sum game. Physical money is a trading medium. Nothing more. If one player accumulates all the wealth in a static economy, such as an isolated desert town, no trading currency is left. His neighbors must resort to barter for survival. The guy with all the money has to hire someone to do something so his neighbors can continue buying stuff from him. If he doesn’t he might need to hire some of them to protect him from the rest of the town. He might end up hiring half the town to protect himself from the other half. This will tend to solve the problem, because it redistributes the available cash. Otherwise everyone else dies, starves, or survives by barter long enough to vacate that economy. There is a game known as monopoly which does an excellent job of demonstrating this. A game of monopoly can continue as long as no one actually “wins”, but game typically ends when one or two players get all the monopoly money. When this happens on a national scale, the central bank relieves the problem by printing cash, which allows the “game” to continue. The federal reserve has invented a sneaky way to do this by auctioning bonds to those who have made off with the cash. A fine hedge against inflation. But eventually even the fed has to print cash to keep the money supply stable. When the savers chooses to spend their loot, the more they spend the more worthless the savings stash becomes. Economists call this inflation. The Capitalist dislikes inflation because it represents a redistribution of wealth by other means, so the game of commerce can be continued. When this happens on a more global scale it is known as the EURO. The only way the capitalist can actually win is by using his stash to pay his neighbors a salary to make or do something useful. He gets the product of their work, while they get the cash to continue the economic “game”. This keeps the neighbors fat and happy, and the presses down at the central bank idle.


Capitalism is also a zero sum game

June 12, 2012

The reason we have a worldwide financial catastrophe is that people in the financial industries gamed the system to incessantly drive share prices and dividends higher. As a consequence product prices were driven up. Item counts dropped. Prices increased. Every effort to fix the problem directly resulted in fewer buyers. Derivatives were used in various attempts to increase demand. Demand and Markets crashed. Authors of the US constitution instituted the commerce department. They understood that capitalism was also it’s own worst enemy, and that regulation of commercial activities would be needed to keep capitalism from destroying itself and the republic. Only the profoundly stupid fail to understand that capitalism is also a zero sum game, which includes choices.