Thursday, June 16, 2011

Human Beings Must Work In Order to Survive

If you were stranded on a deserted island and decided to lay on the beach 24 hours a day, within a few days, you would die.  From this observation, we can induce a simple principle: for an individual to survive, work must be done.  In other words, the fact that an individual must work to survive is not a choice or societal convention - it is a law of nature.   

In an advanced society, this simple principle often gets disregarded since the chain of causation, so obvious on a deserted island, can often be blurred.  But the principle is still true.  For example, if someone has saved a lot of money (or inherited savings from others), they can appear to not be working.  In reality, they voluntarily lent their savings to others at interest (or in exchange for equity in a business).  Their savings represents previous production and the choice to save, rather than consume, was a choice to defer present consumption for future consumption.  In reality, the saver may appear to be doing nothing this minute, but in reality, a large chain of causation can be shown, in complete congruence with our simple principle that one must work to survive.

I thought of this while following the total implosion of Greece.  Greece's socialist government has borrowed money - a lot of money.  They have borrowed hundreds of billions of dollars from banks, i.e., from the pooled savings of individuals all over the world.  (I wrote about this in detail in a previous post, Greece aka Dysfunctionalopolis.)  Naturally, the government has squandered this money, and has little ability or intention of ever paying it back.  Since many European banks own this debt, officials are worried that a default by Greece will in turn lead to the impairment or bankruptcy of these banks, a process presently being dubbed "contagion." 

Greece could try and pay the money back, but, evidently, that is not considered a realistic option.  The other option, favored by most governments and modern intellectuals, is to pay back debt holders with counterfeit money created by a treasury.  However, since Greece owes investors interest and principle denominated in euro currency, they can not simply print counterfeit money as countries like the United States are able to do.  They must urge the European Central Bank (ECB) to print the euros for them. Since other European governments, party to the Eurozone, are balking at either lending Greece more money or printing money, the situation is at a boiling point. 

As I watch Greek citizens rioting in the streets over so-called "austerity measures", i.e., attempts to cut their government's budget deficits, I couldn't help but think of the simple principle above.  What are the rioters hoping will happen?  Evidently, they don't want the budget to be cut, but they don't want to work or pay taxes either. So, they want others to work and lend their savings to them so that they can do what? The answer is: not work as hard. It is literally this simple. 

The people of Greece are not rioting against the government, they are rioting against the nature of reality which does not allow one to have his cake and eat it too.  I will end with a quote from my previous post linked above:  
However, if investors and intellectuals only take away the obvious, albeit not unimportant, question "Will Greece default?," they will miss the forest for the trees. That is because I believe Greece is a microcosm of the problems that are destroying the world. Greece, as a living (or dying) symbol of welfare statism and its underlying philosophy of collectivism, is a window into America's future if present trends continue - a future marked by chaotic stagnation and a culture of malevolence.

7 comments:

scott said...

brilliant

Per-Olof Samuelsson said...

Will you link to this post on Facebook?

Doug Reich said...

POS,

I posted to wall. For some reason, the network blog app didn't pick it up, but it is there.

Thanks!

Per-Olof Samuelsson said...

Doug: This Facebook app doesn't work any more. Earlier, if I wrote a blog post, it came up automatically on Facebook; but now I have to do the linking manually.

Anonymous said...

Well said Dougie boy!!

Anonymous said...

So, let's get this straight: savers who are apparently doing nothing are in fact being productive, even if they lend their money to Greece at low interest rates just because it's part of the Euro?

Saving is I'm sure very virtuous, but what is virtuous about giving money to corrupt politicians and then moaning when you don't get it back? I mean, Greece is not exactly known for its fiscal credibility, and yet investors kept piling in there. If you're so dumb as to buy Greek bonds at a fraction higher return than German bonds, then you deserve everything you get.

Doug Reich said...

Anon: "So, let's get this straight: savers who are apparently doing nothing are in fact being productive, even if they lend their money to Greece at low interest rates just because it's part of the Euro?"

Did I say that? Where? I said people have to work to survive and surviving off savings is not exempt from that principle. In fact, saving properly is very hard as your point illustrates, you can make very bad decisions if your not careful. That furthers the point that even saving properly takes work.

*******
Anon: "If you're so dumb as to buy Greek bonds at a fraction higher return than German bonds, then you deserve everything you get."

Hear, hear. Unfortunately, the promise of government bail outs draws investors into this market at lower rates than otherwise. If everyone would accept reality, no one would lend to Greece on these terms and losses would simply be born by the risk takers as they should be.

The whole situation is an attempt to avoid the reality that work is required for survival and you can't get a free lunch (from governments or the bond market).