Author Topic: Is the global economy just a giant ponzi scheme??  (Read 18289 times)

vwDavid

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Is the global economy just a giant ponzi scheme??
« on: July 18, 2012, 10:54:14 AM »
I am really hoping for a honest discussion here. I am asking this question to elicit the opinions of MMM types here that are older and wiser than myself. I realize that we can all have different opinions- so if we can discuss those opinions without the requirement for anyone to have to be right I would appreciate it...

I brief history that I have been serious learning about my own investing style for about 2 years now for the purpose of FIRE. but have been investing for 15 years and have gained some wisdom of 2000 and 2008 events.

The more I research, read, and think, I have come to wonder if the entire global economy is just a giant ponzi scheme. Particularly, after watching this video, I am more included to believe this is true. But I realize that the video may not have the whole story.

What aspects of this video are questionable to you?

Who here thinks this world is heading toward a situation where confronting this problem is unavoidable? Am I just being an MMM complainy/worrypants? I'm not asking you to move to the doomsday camp, or saying this is going to happen tomorrow or anything...

I tend to think that MMM himself and is super positive disposition would have reason to dismiss this. However I find it difficult to avoid- and when planning for ones FIRE with great amounts of ones hard earned $ it is distressing to consider all this could be for naught....

So, what does the MMM investing forum thinks?

Then

arebelspy

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Re: Is the global economy just a giant ponzi scheme??
« Reply #1 on: July 18, 2012, 10:59:53 AM »
No.  I think real value is being created, each and every day.

I think quality of life and standard of living are both increasing and have been continually for several hundred years.

That - to me - does not mean Ponzi scheme.
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tooqk4u22

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Re: Is the global economy just a giant ponzi scheme??
« Reply #2 on: July 18, 2012, 12:35:43 PM »
I don't know if it is a ponzi scheme but there are clearly elements of it, but the one big difference is that Ponzi schemes are isolated to a single entity/organization.  With the global economy wealth/resources will be redistributed/reallocated to different areas and flow around the world so when one loses there are other winners.

But let's say the global economy is one big ponzi scheme and ultimately topples down everyone goes down - guess what its all paper and when the dust settles there will still be global economies and you are right where it was anyway.  Now that doesn't mean that there aren't individual countries that are more ponzi like (can you say Greece), which gets back to my point above about flow of capital.

mechanic baird

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Re: Is the global economy just a giant ponzi scheme??
« Reply #3 on: July 18, 2012, 12:45:00 PM »
here is what I believe:
- The standard living in US and level of consumption is propped up by the easy credit. We are spending money that didn't exist.
- The GDP growth does not remotely correlate with the stock market. So that tells you something..
- We produce much less than we consume.

So in some way, it's a big giant ponzi scheme that the corporate america has been shifting their jobs and facilities oversea while the Fed created easy money to sustain the American's consumption level. We consume more and the Chinese make more for us to buy.. all on the money pulled out of Fed's ass
« Last Edit: July 18, 2012, 12:47:43 PM by mechanic baird »

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Re: Is the global economy just a giant ponzi scheme??
« Reply #4 on: July 18, 2012, 12:47:39 PM »
I think the global debt market is one giant Ponzi scheme.   The obligations outstrip our ability to pay them back.  That's ponziesque, for sure.

We should pay off what we can, write off the rest, and rid the global financial system of these debts so real, organic economic growth (i.e., productivity growth via investment through savings) can take root.  All else is just bullshit financial engineering which defers solutions while allowing the imbalances to reassert themselves.   

Donovan

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Re: Is the global economy just a giant ponzi scheme??
« Reply #5 on: July 18, 2012, 12:53:10 PM »
That video seemed overly simplistic.  The beginning seems built to create fear, especially of bank runs, and underplays the steps that have been taken to prevent these in the long run (like FDIC insurance).  Also, I'm not sure how current that video is, but I was under the impression that banks are currently keeping much more than the required amount of reserves with the central bank because of currently high government interest rates for doing so, further safeguarding the system.

The one good point that it did have was it's condemnation of over consumption.  It's hard not to agree that we are squandering a large number of resources unnecessarily at our current levels.

By the way, anyone who wants a MUCH deeper explanation of international financial systems might want to check out the course Financial Markets over at Open Yale.  It's a very well done class, and part of it explains the full history and reasoning behind varies regulations, such as the reserve requirements.

James

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Re: Is the global economy just a giant ponzi scheme??
« Reply #6 on: July 18, 2012, 01:08:49 PM »
The simple answer is "no", the global economy is much to complex to classify under any such label.  There are certainly parts of it that could be considered in that way, but there are other parts that are functioning quite well and providing excellent improvements as arebelspy pointed out.  While most systems have played themselves out multiple times over history, and history does repeat itself, there is also the fact that life on earth in 2012 and going forward has never been played out before and there are many good reasons for optimism.  No one knows how the future will play out and whether predictions of doom and gloom will come true, much less within any short range time frame.  I choose optimism while giving some thought to being a well rounded and knowledgeable person so that I can handle the future as it comes, whether apocalyptic, wonderful, or most likely something in the middle.

tooqk4u22

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Re: Is the global economy just a giant ponzi scheme??
« Reply #7 on: July 18, 2012, 01:11:28 PM »
So in some way, it's a big giant ponzi scheme that the corporate america has been shifting their jobs and facilities oversea while the Fed created easy money to sustain the American's consumption level. We consume more and the Chinese make more for us to buy.. all on the money pulled out of Fed's ass

This was my exact point, while the US may be in a ponzi like situation there are others that are not and capital will ultimately flow there, and it has.  The GLOBAL  economy cannot be one big ponzi scheme at the same time, but parts of it can be.

gooki

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Re: Is the global economy just a giant ponzi scheme??
« Reply #8 on: July 19, 2012, 04:24:41 AM »
If you are worried about it my best advice is to not keep your savings in cash, invest in property and stocks.

vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #9 on: July 19, 2012, 09:44:20 AM »
Thanks for the discussion guys. This is going really well. I forced myself to wait about 24 hours to reply just to think about the comments and I'm glad a number of you have posted up your thoughts. It reminds me AGAIN (why can I never learn this for once and all) that nothing is every black and white. There is always a shade of grey to it.

That being said, I was reading blogs on "Do the Math" blog (which incidentally was referred to in some MMM comments recently) and stumbled across this video. While it isn't exactly related to the question of the topic, it does certainly relate to how much longer can our current financial situation continue.

This is a long one at 75 minutes, but I hope some of you will watch it and give some critical feedback. I'd like to know where you see shades of grey in this mans opinion on the state of consumption of the human race:  http://www.youtube.com/watch?v=umFnrvcS6AQ

There is a significant section on Peak Oil half way through, but he does acknowledge that part is more of a prediction than the other parts.

What do you wiser and senior folk think?

Thanks


grantmeaname

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Re: Is the global economy just a giant ponzi scheme??
« Reply #10 on: July 19, 2012, 09:53:29 AM »
I won't have the opportunity to watch this until later, but I figured while we're talking about nonrenewable fuels, I could stop in and leave my favorite coal statistics. We in the United States have an incredible 241 years of coal left at current production levels due to the incredible quantities of coal, so running out of coal domestically is not an immediate problem. China has 35 years of proven coal reserves. As a nation, they consume half the world's coal while having an eighth of the proven reserves. That terrifies me much more than peak oil.

arebelspy

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Re: Is the global economy just a giant ponzi scheme??
« Reply #11 on: July 19, 2012, 10:03:43 AM »
That terrifies me much more than peak oil.

I'm not following.  Why?
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vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #12 on: July 19, 2012, 10:32:03 AM »
I won't have the opportunity to watch this until later, but I figured while we're talking about nonrenewable fuels, I could stop in and leave my favorite coal statistics. We in the United States have an incredible 241 years of coal left at current production levels due to the incredible quantities of coal, so running out of coal domestically is not an immediate problem. China has 35 years of proven coal reserves. As a nation, they consume half the world's coal while having an eighth of the proven reserves. That terrifies me much more than peak oil.

WOAHHH now gratmeaname - as soon as your start talking about coal reserve life you need to go and watch this video now. Your caveat saying "at current production levels" can be a very dangerous misleading statement. I really ask you to watch this video.

Now, I don't want this discussion to go the way of a debate over the life expectancy of renewable and non renewable fuels- but it I hear what you are saying and plead with you to watch the video and let me know if your perceptions change or not...

vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #13 on: July 19, 2012, 10:33:39 AM »
That terrifies me much more than peak oil.

I'm not following.  Why?

arebelspy, Please give the video 10 minutes of time, I am eager to know if you will be interested to watch the following 60 minutes- if it holds your interest or if you BS meter goes off...

grantmeaname

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Re: Is the global economy just a giant ponzi scheme??
« Reply #14 on: July 19, 2012, 10:37:30 AM »
It means that one of the world's largest countries is going to have to completely retool its industrial economy within the next twenty years. I'm not predicting a world war or anything over it, so maybe terror wasn't the right emotion to mention, but the fact remains that China has negligible natural gas reserves and tiny proven uranium and oil reserves.

I'm not the kind of person to get overly worked up about peak oil, but if you're worried about peak anything, peak Chinese coal is much more imminent.

WOAHHH now gratmeaname - as soon as your start talking about coal reserve life you need to go and watch this video now. Your caveat saying "at current production levels" can be a very dangerous misleading statement. I really ask you to watch this video.
Like I said, I can't go watch the video now and am planning to later. I'm aware that current production levels are not a terrific estimate, which is why I mentioned them as part of the calculation and why I expect a change in the next 20 years instead of the next 35 years. I don't think I misled anyone, I think you're inferring things I didn't state based on what you think my position with regards to the issue is.
« Last Edit: July 19, 2012, 10:39:42 AM by grantmeaname »

tooqk4u22

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Re: Is the global economy just a giant ponzi scheme??
« Reply #15 on: July 19, 2012, 10:46:53 AM »
Keep in mind that China is a very large country and while there may be limited proven reserves of various resources there still may be a meaningful amount of unproven reserves that could be identified with investments in exploration.

That said I am in the camp of China being the biggest potential global threat (economic, environmental, war, just about everything).  A communist nation with the largest population that plays capitalist but adhears to no rules of any kind and invests heavily (more thany any other nation) on defense is troublesome.  But I guess it is all worthwhile because we get cheap crap that is disposable and fills our landfills - awesome!


arebelspy

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Re: Is the global economy just a giant ponzi scheme??
« Reply #16 on: July 19, 2012, 10:49:28 AM »
It means that one of the world's largest countries is going to have to completely retool its industrial economy within the next twenty years. I'm not predicting a world war or anything over it, so maybe terror wasn't the right emotion to mention, but the fact remains that China has negligible natural gas reserves and tiny proven uranium and oil reserves.

I'm not the kind of person to get overly worked up about peak oil, but if you're worried about peak anything, peak Chinese coal is much more imminent.

I gotcha now.

arebelspy, Please give the video 10 minutes of time, I am eager to know if you will be interested to watch the following 60 minutes- if it holds your interest or if you BS meter goes off...

Okay, I'm downloading it.

I have to admit, considering the title of this thread, I'm already skeptical.  There's plenty of fear mongering out there, and you seem (no offense intended) at least somewhat susceptible to it.

EDIT: And the title of that video. Ugh.
« Last Edit: July 19, 2012, 10:52:12 AM by arebelspy »
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grantmeaname

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Re: Is the global economy just a giant ponzi scheme??
« Reply #17 on: July 19, 2012, 10:50:30 AM »
In 2011, we spent 2.5 times as much as China by %GDP and five times as much in real dollar figures on our military. They don't have a blue-water navy, much in the way of an air force, or modern infantry equipment.

arebelspy

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Re: Is the global economy just a giant ponzi scheme??
« Reply #18 on: July 19, 2012, 10:53:12 AM »
In 2011, we spent 2.5 times as much as China by %GDP and five times as much in real dollar figures on our military. They don't have a blue-water navy, much in the way of an air force, or modern infantry equipment.

That's an area where I don't think it would be hard to catch up rapidly.

Especially given the manufacturing infrastructure they have.
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grantmeaname

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Re: Is the global economy just a giant ponzi scheme??
« Reply #19 on: July 19, 2012, 10:57:47 AM »
That's an area where I don't think it would be hard to catch up rapidly.

Especially given the manufacturing infrastructure they have.
I agree. I was just pointing out that they do not currently invest more heavily than any other nation on defense by any metric.

arebelspy

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Re: Is the global economy just a giant ponzi scheme??
« Reply #20 on: July 19, 2012, 11:12:31 AM »
That's an area where I don't think it would be hard to catch up rapidly.

Especially given the manufacturing infrastructure they have.
I agree. I was just pointing out that they do not currently invest more heavily than any other nation on defense by any metric.

Oh, somehow I missed took's comment that you were replying to.  Your comment did seem out of the blue.

Yes, you are right, we spend the most currently, I'm not sure where he got that stat. 

I also don't think it will be as hard as it may have once been to retool away from a coal based economy.  Almost all solar improvements and manufacturing are being done in China nowadays, for example.

It will be interesting to see what the next 30-50 years bring though.
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vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #21 on: July 19, 2012, 11:19:01 AM »
arebelspy,

I absolutely appreciate that you call me out as susceptible to some fear mongering. I am willing to admit that I may be more susceptible than others. Partly this is why I bring these ideas up for discussion in a community like this to get others take on it, and dispell some fear. I also think though, sometimes we should fear things and humanity may ignore things we don't understand.

But I guess that is some of the beauty of the human race is we all are different and we all bring different ideas to the table. Hence I like to discuss these ideas with you guys- and to be perfectly clear it is not to try to win over anyone's thinking or bust anyone's bubble anymore than my own.

arebelspy, Please give the video 10 minutes of time, I am eager to know if you will be interested to watch the following 60 minutes- if it holds your interest or if you BS meter goes off...

Okay, I'm downloading it.

I have to admit, considering the title of this thread, I'm already skeptical.  There's plenty of fear mongering out there, and you seem (no offense intended) at least somewhat susceptible to it.

EDIT: And the title of that video. Ugh.
[/quote]

As for the title, UGH, yes, I can see how it could be a turn off for those with sharp BS sensors. Give it a try though, for the sake of helping out another MMM reader...

vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #22 on: July 19, 2012, 11:21:43 AM »
Briefly the premise of the video is that the human race chooses to ignore things that are difficult to understand. Because the exponential fucntion, while fairly simple, is somewhat difficult to comprehend the lecturer contends the lack of understanding the exponential function is one of the biggest misgivings of the human race can/could/may/should lead to our mis-statement of energy reserves, growth targets, sustainable populations etc...

It is a well spoken lecture.

I admit I have not done any leg work to look at the references of the lecturer.


arebelspy

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Re: Is the global economy just a giant ponzi scheme??
« Reply #23 on: July 19, 2012, 11:24:00 AM »
Briefly the premise of the video is that the human race chooses to ignore things that are difficult to understand. Because the exponential fucntion, while fairly simple, is somewhat difficult to comprehend the lecturer contends the lack of understanding the exponential function is one of the biggest misgivings of the human race can/could/may/should lead to our mis-statement of energy reserves, growth targets, sustainable populations etc...

It is a well spoken lecture.

I admit I have not done any leg work to look at the references of the lecturer.

Okay, I have no problem with that premise.

Does he offer any constructive solutions?
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vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #24 on: July 19, 2012, 11:27:44 AM »
Quote
Okay, I have no problem with that premise.

Does he offer any constructive solutions?

The solutions are not concrete you shalt do this and the world will be perfect- but there is some implication that reduced consumption, global equity or equilization, and mitigation of population growth are required.

He also points out what we currently think are solutions, and why they are not.

-David

arebelspy

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Re: Is the global economy just a giant ponzi scheme??
« Reply #25 on: July 19, 2012, 11:33:07 AM »
Sterilization, basically?









;)
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grantmeaname

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Re: Is the global economy just a giant ponzi scheme??
« Reply #26 on: July 19, 2012, 12:52:27 PM »
Briefly the premise of the video is that the human race chooses to ignore things that are difficult to understand. Because the exponential fucntion, while fairly simple, is somewhat difficult to comprehend the lecturer contends the lack of understanding the exponential function is one of the biggest misgivings of the human race can/could/may/should lead to our mis-statement of energy reserves, growth targets, sustainable populations etc...

It is a well spoken lecture.

I admit I have not done any leg work to look at the references of the lecturer.
Okay, I have no problem with that premise.
I've got problems with it. Again, I haven't watched the video yet, but I'd like to point out that industrial and financial projections are not made by laymen but by extraordinarily intelligent, highly trained, numerate, literate people. Halliburton's chief economist and the policy directors at the CDC have no problems understanding exponential growth, and they're the ones making the projections, not John Doe. Further, it's only relevant if the exponential model used in any case is an appropriate model for the phenomenon, and I'm not convinced that it's always, or often, an appropriate model (compared to, say, a logistic model).
« Last Edit: July 19, 2012, 01:33:38 PM by grantmeaname »

tooqk4u22

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Re: Is the global economy just a giant ponzi scheme??
« Reply #27 on: July 19, 2012, 12:55:40 PM »
That's an area where I don't think it would be hard to catch up rapidly.

Especially given the manufacturing infrastructure they have.
I agree. I was just pointing out that they do not currently invest more heavily than any other nation on defense by any metric.

Oh, somehow I missed took's comment that you were replying to.  Your comment did seem out of the blue.

Yes, you are right, we spend the most currently, I'm not sure where he got that stat. 

I also don't think it will be as hard as it may have once been to retool away from a coal based economy.  Almost all solar improvements and manufacturing are being done in China nowadays, for example.

It will be interesting to see what the next 30-50 years bring though.

Should have been more clear but I meant every other nation, as in other than ours. 

Additionally, over the last few years they have been increasing the spending rate by double digits and are highly focused on building a more sophisticated military (jets, missiles, stealth, picked up an aircraft carrier not long ago - only one but we only have 11 and want to reduce to nine). 

Also keep in mind (1) that it is widely believed that China's figures are underreported and (2) only a third of the US budget goes to R&D and new purchases - the rest is payroll, benefits, maintenance, housing, etc.   I would guess that China's budget is more heavily geared to R&D and new stuff and not as much to the other stuff.  Also don't forget that they are nuclear. 

It takes time to get it right and build it but they are working on it, and we are giving them the money to do it. Sure, it is not on par with US spending and it will take a long time to build up to be on par with US even if we stop spending but the trend is there, and don't forget about your point regarding their significant reliance on imported energy sources - that could be a catalyst.  China is antagonistic at best when things are good, like now, how would they act if things weren't so good.

I am not being a fear monger but believe this is something that should be watched and the US has to stop bending over backwards letting them do what ever they want - but if did that then we might see inflation in those cheap goods we love so much - debt sucks.

Jamesqf

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Re: Is the global economy just a giant ponzi scheme??
« Reply #28 on: July 19, 2012, 01:01:21 PM »
That video seemed overly simplistic.

Of course it is.  Anything presented as video HAS to be overly simplistic.  It's just the nature of the medium.  It's also likely that it's designed to appeal to emotion rather than reason.  If the creators wanted a serious discussion, they would write.

vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #29 on: July 19, 2012, 01:25:02 PM »
The second video gives a much better feeling of trustworthiness but I'm open to your opinion on that (the presenter has spent a fair bit more time on earth than me and is a professor emertius of Physics and a university faculty member since 1950, and has put this thoughts into writing too). I'm a scientist after all so the concept is understandable to me and engages me while the application frightens me.

vwDavid

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Re: Is the global economy just a giant ponzi scheme??
« Reply #30 on: July 19, 2012, 01:30:24 PM »
For me, as I mentioned, I am in the sciences and I understand the exponential function, but as  human being I fail to see how it plays out of centuries previous and post to me and its unstoppable force, and how even small growth rates lead unsustainable doubling times. This is how the video enlightened me.

Does it do that for you, or have I been BS'd?

For me, its is not a great leap to bet that a good proportion of the big smart dudes you mention miss this aswell. I'm not willing to bet my future by having faith in a smart halliburton chief economist...

Quote
I've got problems with it. Again, I haven't watched the video yet, but I'd like to point out that industrial and financial projections are not made by laymen but by extraordinarily intelligent, highly trained, numerate, literate people. Halliburton's chief economist and the policy directors and the CDC have no problems understanding exponential growth, and they're the ones making the projections, not John Doe. Further, it's only relevant if the exponential model used in any case is an appropriate model for the phenomenon, and I'm not convinced that it's always, or often, an appropriate model (compared to, say, a logistic model).
« Last Edit: July 19, 2012, 03:47:49 PM by vwDavid »

sol

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Re: Is the global economy just a giant ponzi scheme??
« Reply #31 on: July 19, 2012, 05:03:51 PM »
How did this thread so rapidly drift from money as debt to Chinese coal wars?  It's like we all have ADHD around here.

To the original question, I think this is a ponzi scheme that will continue for many generations to come.   The world has always been pyramid shaped, with the lucky few living large on the backs on the toiling masses.  I think everyone recognizes that our economy doesn't function if every person on Earth lives an American lifestyle.  Our prosperity is predicated on the poverty of third world nations, just like it used to be predicated on immigrants, or slaves.

But unlike a typical ponzi scheme, this one is enforced from on high by the World Bank and the US military.  The entire global economy functions on the same model: extract value from places with cheap labor and commodities, capitalize that value in places with high standards of living, then use the profits to leverage more debt to repeat the process.  The immediate threats to the continuity of this system are all top-down, like Lehman Brothers and subprime mortgages, not bottom-up like a proletariat uprising.  Ponzi schemes don't fail from top-down threats, so I think we're safe for a long while.

Resource scarcity will be a problem some day, but that day is a long way off.  Hundreds of years, in my estimate.  With abundant renewable energy we'll build robots to mine our landfills for scraps of metal.  We'll chemically synthesize liquid fuels for our jet liners.  There will certainly be bumps along the road as we transition off of fossil fuels, but they will be bumps and not game enders.

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Re: Is the global economy just a giant ponzi scheme??
« Reply #32 on: July 19, 2012, 07:07:57 PM »
Resource scarcity will be a problem some day, but that day is a long way off.  Hundreds of years, in my estimate.  With abundant renewable energy we'll build robots to mine our landfills for scraps of metal.  We'll chemically synthesize liquid fuels for our jet liners.  There will certainly be bumps along the road as we transition off of fossil fuels, but they will be bumps and not game enders.
Or we'll eventually learn to make the vast majority of our material things out of infinitely renewable, biodegradable organic materials, either producing them synthetically or engineering organisms to grow them for us. Since the supply of carbon, oxygen, and hydrogen are for all practical purposes infinite on this planet, we won't be running out of the basic feedstocks any time soon.

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Re: Is the global economy just a giant ponzi scheme??
« Reply #33 on: July 19, 2012, 09:32:02 PM »
The sky is not falling, and no, it's not different this time.

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Re: Is the global economy just a giant ponzi scheme??
« Reply #34 on: July 20, 2012, 08:01:42 AM »
And in the future, everyone will have a pony! Because science will fix things.

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Re: Is the global economy just a giant ponzi scheme??
« Reply #35 on: July 20, 2012, 09:08:50 AM »
And in the future, everyone will have a pony! Because science will fix things.

If that's the case, this is our guy:
http://www.youtube.com/watch?v=4d_FvgQ1csE#t=2m20s

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Re: Is the global economy just a giant ponzi scheme??
« Reply #36 on: July 20, 2012, 09:24:40 AM »
Folks, I've not come here to claim the sky is falling or to convert you.

In the latter part of this post I've hoped to convince you to watch some of that second video and to remark on it. It appears I am unsuccessful.

I was commiserating with my wife last night how it appears to me one of humanities failures is black and white thinking. For example, time and time again I read news story comments from the public on articles related to global warming and since there was a contingent of dishonest scientists, the general public automatically denounces the whole theory let along a whole lot more science with it.

Even within this thread it appears to me that some are saying science will save the day and allow us to rearrange matter- maybe when we perfect cold fusion, while others blithely state science can't be trusted. I see this as a failing of humanity to consider and seek out truth in peoples opinion. Do we all want a black and white answer? Why are we unwilling to seek or accept shades of grey? It has been a lot of science and engineering that has brought the world to our current technological state, for better or for worse...

I still hope that some will watch this university lecturer and his opinions and have a rational discussion with me why you do and why you don't like his opinions.

Thanks

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Re: Is the global economy just a giant ponzi scheme??
« Reply #37 on: July 20, 2012, 09:51:53 AM »
Do we all want a black and white answer? Why are we unwilling to seek or accept shades of grey? It has been a lot of science and engineering that has brought the world to our current technological state, for better or for worse...

You have to remember that it is human nature to look for black and white answers because as inteligent as we are as a species we are still not comortable if something can't be absolute and a relatively small percentage of the population is comfortable with gray and tend to be people who are curious, inteligent, creative, etc (many on this board would fall into this category).  This is good becaue helps keep order or in some cases take advantage (dictators).

Much of the gray in life is typically rationalized by people with faith in some higher power. 

Also Remember the earth was flat for a very long time. 

Question everything.

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Re: Is the global economy just a giant ponzi scheme??
« Reply #38 on: July 20, 2012, 09:57:43 AM »
Quote
a relatively small percentage of the population is comfortable with gray and tend to be people who are curious, inteligent, creative, etc (many on this board would fall into this category)
It all comes down to what you believe about humanity, and I don't know if I believe that or not. I think the problem, if there is one, is made much more dramatic in the age of mass communication. Mass communication is always seeking the lowest common denominator for the greatest perceived impact, so radio, movie, tv, and newspaper media have a very clear-cut moral bent to them. That doesn't mean the general public, the consumers of mass communication, have no capacity to understand nuance. It just means they're not presented with any.

Quote
Question everything.
Amen.

tooqk4u22

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Re: Is the global economy just a giant ponzi scheme??
« Reply #39 on: July 20, 2012, 10:10:57 AM »
It all comes down to what you believe about humanity, and I don't know if I believe that or not. I think the problem, if there is one, is made much more dramatic in the age of mass communication. Mass communication is always seeking the lowest common denominator for the greatest perceived impact, so radio, movie, tv, and newspaper media have a very clear-cut moral bent to them. That doesn't mean the general public, the consumers of mass communication, have no capacity to understand nuance. It just means they're not presented with any.

I agree - for me this extremely applicable in politics. If it were up to me I would ban ALL politcal advertising as it caters to these people and instead all campaigning should rely on stumping, debates, and interviews (recognizing there is certainly bias to this).

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Re: Is the global economy just a giant ponzi scheme??
« Reply #40 on: July 20, 2012, 11:05:13 AM »
Great discussion guys. This is really going well and I'm enjoying your thoughts

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Re: Is the global economy just a giant ponzi scheme??
« Reply #41 on: July 20, 2012, 12:23:16 PM »
In the latter part of this post I've hoped to convince you to watch some of that second video and to remark on it. It appears I am unsuccessful.

I think I've explained why you're never going to be succeed with me.  Video is not a useful way to convey rational arguments.  On top of that, I can read roughly 5x as fast as most people speak, with greater comprehension, so you're asking me to invest a lot more time.  If you want me to pay attention, make it easy for me, and write.

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Re: Is the global economy just a giant ponzi scheme??
« Reply #42 on: July 20, 2012, 01:42:05 PM »
There is no black or white answer, or any gray one for that matter.  What we're discussing is the future.  There was a fortune cookie saying I'm fond of--"He who predicts the future lies, even when he tells the truth."  No one knows what the future holds.  Any projection is just that, looking at the present and the trends and usually just extrapolating them out along their current trajectory.  Why would you assume that is what will in fact happen?

I could argue that history teaches us that it isn't that way, talk about all the technological advances in the last 200 years and how non-linear that has been.  But I'm doing the same damn thing--predicting the future based on the past.  So when you say you want me to watch some movie length video about some guy's prediction of the future, and expect that his "facts" are going to  convince me of impending doom, I think you're reaaaally stretching. 

So what you're really left with is what I and the others here believe.  I can and have read books that talk about how the whole money system in the US is destined for failure and the only solution is to return to a 100% gold standard, scorched earth and all to get there.  I don't believe it will happen that way.  Bank runs and chaos, go buy guns and emergency stores of food?  No thanks.  Plenty of "convincing" arguments to support that mentality though.  There are also plenty of convincing counter-arguments about how all of that doomsday talk is vastly overblown.  I personally have more faith in my fellow men, that the difficult problems ahead of us will get solved.  I believe my children have a great future ahead of them.  I think as we reach a tipping point or when a problem gets so severe it cannot be ignored, very smart people will come up with solutions.  I think they are already working on them, all the time.

Whether you like it or not, I think a lot comes down to what you want to believe.  You can choose to seek out arguments supporting either sort of viewpoint.  You can scare yourself to death, and get yourself to the point where you're shopping for a hideout in the back country where you can live off-off grid.  I prefer a much more positive, upbeat view of the future, and I think from a very practical standpoint I think that helps me achieve that better future for myself and my family.

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Re: Is the global economy just a giant ponzi scheme??
« Reply #43 on: July 20, 2012, 03:15:18 PM »
for James: Here is a english transcript and here is Al Bartlett's home page if you want more info. I'll leave it at that for the readers.

to ShavinItForLater,

First of all, I love your user name, and thanks for the discussion. I agree that it could be an easy slide down the slippery slope and find your self wanting to live like a hermit or monk if you believe all these bad news stories.

I want to be a more positive person and I admit that my disposition is toward the negative at this moment in life, so the purpose of this thread is to begin to train myself to analyze these issues in a new manner, and have others hold me accountable, in order to seek a rounder viewpoint of life etc...

Having said that, I am still left with a unpleasant feeling that I cannot get a single like minded, thinking MMM type, to even watch a part of this video. I shall make one last attempt to try to interest people in watching even a portion of this video

1) This is a well regarded 81 year old university professor who is published and doesn't appear to have a following of hecklers about quack science.
2) for me, although one could take the topic of this video as a dooms day prediction on many facets and let you scare you off, for me, it is a revelation of new open and honest thinking about what could be going on, in our globe.
3) I like what ShavinIt says that discussing the future is perhaps a waste of time, and I will try to hold myself accountable to that because it sounds reasonable to me- it is better to live in the present and a lot less anxiety provoking.
4) BUT, regarding that tipping point you speak of and that very smart people will save us...I am going to issue my gray statement here by admitting I think there is a lot of technology and science yet to come...perhaps...maybe...hopefully... but this video is suggesting that our human nature to gloss over the power of exponential growth which will leave science and technological advances no time to fix a problem (insert big problem here) before its disaterous consequences occur.
5)  I'm not trying to get anyone here to believe in a specific impending doom, but this is my last gasp to get some super positive attitude MMM readers to view/read this lecture and report their feelings following that. I would like to see what specific holes MMM's will poke in Barlett's conclusions- beyond the obvious ones and beyond getting mad or passionate about some of his specific targets (such as sustainability, energy, population, global equity).

Will anyone discuss the video with me, rather than discuss whether or not they will even watch it?
« Last Edit: July 20, 2012, 03:36:47 PM by vwDavid »

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Re: Is the global economy just a giant ponzi scheme??
« Reply #44 on: July 20, 2012, 04:32:44 PM »
VW

I know when the physicists in the Manhattan project had built the bomb, and tested it, many felt all the efforts of people they saw - building things, going to school - were a waste of time, because soon the world would be destroyed by global atomic war....


I don't want to watch some propaganda video either, sorry, but what are the implications for individual action? How does it impact your day to day life, or asset allocation, etc?

I've always been well served by the hitchhikers guide - don't panic! (and always bring a towel) because it does sound extreme. Is he selling something?

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Re: Is the global economy just a giant ponzi scheme??
« Reply #45 on: July 21, 2012, 08:55:22 AM »
I may have gone too far if I've given the impression of saying that thinking about the future is a waste of time.  I plan for the future constantly.  I also love to read and learn about other viewpoints, as I've indicated with some of the types of books I've read.  The more I learn and grow, the more I realize that ways of thinking and living different from my own are perfectly valid and understandable, if you take the time to understand them or walk in the other person's shoes for a while.  I think it's important to keep a critical mind though.  Too many people today accept anything on TV or other media as truth.  Take what is useful for you, but also seek out opposing viewpoints (which I think is a lot of your motivation in this discussion).

I also firmly believe that it has been very helpful to me personally to cultivate the inputs to my thoughts.  I very deliberately do not watch TV news, ever.  It is almost 100% negative (and the positive stuff is mostly silly time fillers).  It has very little actionable information that would benefit me personally.  On the contrary, I seek out things that reinforce positive attitudes and viewpoints, even when dealing with major challenges like what you're describing.  That's what you're getting a lot of in these responses--OK you say doom is coming, what actionable steps can we take? 

The philosophical difference to me is limiting your scope to what you can control, accepting that everything else is simply out of your control, and ceasing to worry about the rest.  Trite maybe but I consider it one of the guiding principles of my life.  I think I am pretty good at it--a lot of people have asked me how I can just not worry about stuff, I'm not sure I can answer *how* but I just don't, although there are plenty of resources out there to learn how, e.g., How to Stop Worrying and Start Living by Dale Carnegie.  I expect you'll find that ability to focus on what you can control is a common trait among mustachians.

I'll veer a bit back more on topic though.  I did locate and read an interview of your esteemed Mr. Bartlett where he was asked what steps people can take regarding this.  Although his base response is find a way to get population growth down (and sounds like he wants population reduction to "a sustainable level"), he did offer some specific advice:

1) Get more food locally.
2) Educate people in ways to try to get the fertility rate down.
3) Reverse current tax incentives for having children to tax *penalties* for having too many children.
4) Put in a policy of zero net new immigration.
5) Put a great emphasis on energy conservation to reduce petroleum usage and dependence.
6) Have a good program of medical care so that people can live longer and more productive lives (although he admits this worsens the population problem...)
7) Increase environmental programs to reduce air and water pollution.

I think mustachian attitudes would applaud #1, #5, #6, and #7.  #2-#4 I think would be more controversial and seem to be the most essential to Bartlett's argument.  Personally I'm for personal responsibility and on that standpoint I would agree that I don't need a tax break for having kids, I should be able to pay to raise them on my own.  I would also be alright with #2 as long as it was just education, and not government control or restrictions on fertility.  #4 I actually think is short sighted, because hell, we all live on the same planet.  What good is it going to do to put up a strong fence if all the resources are drained on the other side of it.  As much as I love the USA, I don't think it's realistic to say we'll be OK as long as we keep this one part of the earth sustainable while the rest goes to shit.
« Last Edit: July 21, 2012, 08:58:40 AM by ShavinItForLater »

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Re: Is the global economy just a giant ponzi scheme??
« Reply #46 on: July 21, 2012, 12:40:58 PM »
Thanks for posting the transcript.  I had downloaded the video, but much prefer text, so I read the presentation.

It was fine, nothing in there was particularly novel or new information.  I didn't see anything to get worked up about.

I'll address some of his examples.

First he talks about monetary inflation:
Quote
Now, we worked a lot of examples. I said to the students, ďLetís talk about inflation, letís talk about 7% per year.Ē It wasn't this high when we did this, it's been higher since then, fortunately it's lower now. And I said to the students, as I can say to you, you have roughly sixty years life expectancy ahead of you. Letís see what some common things will cost if we have 60 years of 7% annual inflation.

The students found that a 55-cent gallon of gasoline will cost $35.20; $2.50 for a movie will be $160; the $15 sack of groceries my mother used to buy for a dollar and a quarter, that will be $960; a $100 suit of clothes, $6,400; a $4000 automobile will cost a quarter of a million dollars; and a $45,000 home will cost nearly 3 million dollars.

And my response is ....so?  Wages will have to rise, or no one could afford a loaf of bread.  In fact, I'll go so far as to say that this is completely 100% meaningless.  If a home cost 3MM, and wages were the same in that 60 years as they are now, very few people could have one.  If rents rose accordingly, no one would be able to afford that either.  SO is everyone gonna live on the streets and we have empty 3MM homes?  Of course not. They only have value because that's what people are willing to pay for them.  They're willing to pay it because they can.  If values are going up that much, it's because people are paying that much.  So to say "OH NO!  Prices will be so high!" is ridiculous, because people will be able to afford them.  Them being priced 3MM then is the exact same as them being priced 45k now.  In fact, many items are going DOWN in price in real terms.

So this example is given and sounds scary, but really.. it's meaningless.

Now this is not to say inflation is not important.  It is crucial for an early retiree to understand, and I think one of the most underestimated things in the ER community.  But in general it doesn't represent a threat to... anything.

Okay, so let's jump to his next idea, about energy:
Quote
Well, letís translate that into the energy crisis. Hereís an ad from the year 1975. It asks the question ďCould America run out of electricity?Ē America depends on electricity. Our need for electricity actually doubles every 10 or 12 years. That's an accurate reflection of a very long history of steady growth of the electric industry in this country, growth at a rate of around 7% per year, which gives you doubling every 10 years.

Now, with all that history of growth, they just expected the growth would go on, forever. Fortunately it stopped, not because anyone understood arithmetic, it stopped for other reasons.

I'm gonna pause right here to point out that the author glosses over that last sentence and just goes on with his purely hypothetical example.  Because in reality, it didn't happen!  The growth stopped, for other reasons!  Why does he not think other exponential growth will slow or stop?  Naturally it will, it has to.  And in practice it actually HAS, as he admits.  But then ignores, and does his fun hypothetical to make things sound scary.


Let's look at (what I feel is) his strongest example:
Quote
Bacteria grow by doubling. One bacterium divides to become two, the two divide to become 4, the 4 become 8, 16 and so on. Suppose we had bacteria that doubled in number this way every minute. Suppose we put one of these bacteria into an empty bottle at 11:00 in the morning, and then observe that the bottle is full at 12:00 noon. There's our case of just ordinary steady growth: it has a doubling time of one minute, itís in the finite environment of one bottle.

I want to ask you three questions. Number one: at what time was the bottle half full? Well, would you believe 11:59, one minute before 12:00? Because they double in number every minute.

And the second question: if you were an average bacterium in that bottle, at what time would you first realise you were running of space? Well, letís just look at the last minutes in the bottle. At 12:00 noon, itís full; one minute before, itís half full; 2 minutes before, itís a quarter full; then an 1?8th; then a 1?16th. Let me ask you, at 5 minutes before 12:00, when the bottle is only 3% full and is 97% open space just yearning for development, how many of you would realise thereís a problem?

I do enjoy this thought experiment.  The main problem is that the compressed timescale is intended to confuse.  Let's say instead we have a constant 0.5% growth, which translates to doubling roughly every 140 years.  That means that 5 minutes before midnight is really 700 years.  Small beans on a geological scale, and even in a human timespan not that long.  But do I think it's long enough to do something about it? Absolutely.  Think of the changes from 1312 to 2012.

Or if we use his number of population growth, that's 1.3%, doubling roughly every 54 years.  So when we're only "3 minutes from midnight" (or 1/8 "full" - however you define full), that's 150 years.  Do I think that's enough time to deal with problems?  Yes, absolutely.

Does this mean we should ignore problems (current and future) now?  No way.  Should we try to reduce consumption? Absolutely.  Is there a crisis though?  Should we be that worried about exponential growth?  No, sorry. 

I think the big thing that should change is mindset.  Growth isn't the be all end all (nor is it a terrible threat).  The idea that a natural balance/equilibrium can be achieved should be promoted as a good thing.  One of the first things that needs to happen there is population, however.  And how do you do that without doing some terrible things (birthing laws, wars, famine, disease, etc.)?

I was also a little annoyed at the end when he used generic quotes from brilliant people, as if they proved his point.  The Asimov and MLK ones were relevant, but the Churchill "Sometimes we must do what is required" and Huxley and Sevareid and Galileo.. none of those were relevant, they were just generic "don't ignore facts" and such.  Stop it.

In any case, I agree, perpetual growth is impossible.  Does it worry me?  No.  Do I think we're anywhere close to "midnight"?  Not at all.  Do I think we can solve problems when we do get close? Absolutely.

If I missed something, feel free to explain why you think that talk was so important or enlightening or life changing. Or, like the title of the video, "The Most IMPORTANT Video You'll Ever See" -- hardly.  Have you seen Bill and Ted's Excellent Adventure?  ;)
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Re: Is the global economy just a giant ponzi scheme??
« Reply #47 on: July 23, 2012, 02:30:21 PM »
vwDavid, I watched the Grignon video last week and I found it to be a fascinating description of how debt money is created and distributed.

For my purposes, it has forced me to rethink my entire negative stance on US treasures (I"ve been running around saying the "bond collapse in US debt can be measured in months, not years").  I've gained greater perspective seeing the internal mechanics of debt-money creation, and the role of quantitative easing or QE in staving off deflation (never mind inflation, the lesser evil in the Fed's eyes) by replenishing the destroyed debt money (via bankruptcy and consumer debt repayment).

I think I vaguely understood the relation between these complex parts, but now I see the debt machine in a better context and light.  On that note, the bond-collapse in US treasuries probably won't be measured"in months" as the process of consumer deleveraging which began 4 years ago will be joined by sovereign deleveraging (hello Europe and the PIIGS) going forward, and this dual edge-debt bomb will  keep US treasuries elevated (if not drive them even higher) for longer than maybe any of us think possible.  Irrational exuberance as applied to bonds?  Sub .5% on the 10 year?  Sub 2% 30 year mortgages?  Amazing, and unthinkable (for me at least) a short while ago.

« Last Edit: July 23, 2012, 02:38:33 PM by smedleyb »

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Re: Is the global economy just a giant ponzi scheme??
« Reply #48 on: July 24, 2012, 03:19:11 PM »
Hi all,

Thank you for your responses. I allowed myself some time to cogitate on your posts and watched parts of the video again.

Firstly my apologies for pursuing two similar but quite different lines of thinking in this post (ie first video and second video) and thus confusing the discussion in this thread. Nevertheless, I do, sincerely appreciate your comments and the time everyone took to think through this publicly with me.

Thank you for teaching me to think bigger and more broadly when encountering these interesting, sensitive, but important topics. I have now been able to rationalize in my mind, with your help, and the help of others, how to dissect "alarmist" information without getting as emotionally involved.

I still have a healthy respect for peak oil, energy consumption, and over usage of resources. Population growth is now on my radar and as intelligent and regarded as this author may be, it appears some of his arguments are dated and set up to scare you all the more with massive worst case scenario is coming tomorrow viewpoints all of which could be true by the numbers, but aren't necessarily the current trajectory- although, maybe an alarmist jolt is what we need to turn things around...

I was surprised to learn that many MMM forum readers resist so strongly this type of information in that I had difficulty persuading any of you to view the video. I think a few of you eventually read parts of the transcript but I'm not aware of anyone that watched any of it. I guess this is an MMM muscle to learn to flex. Like many of you already stay away from mainstream news on TV, so I will attempt to step up my game here.

For me, the greater picture this video created was that humans, whether we are the blue collar, white collar, executive workers, or dare I say it (as it is in contradiction to other view points above) the super smart CEOs I still believe will ignore the morally sound decisions in favour for more favorable, more greedy decisions with immediate benefits paid for by future calamity. So personally, I don't for a second buy it that our nations' leadership or our industrial leadership will plan humanities' escape from major calamity. But, there are so many variables between then and now- who's to say.

This brings up another issue of the long term outlook for Canada and USA and I DO NOT see any impetus for 50, 100, 200 year planning and it appears the current political system cannot work this way. Thus, in my opinion although we may not be 3 minutes to midnight now, I suspect someday the earth will be and I doubt our ducks will be in a row and anything will be any different...

Well, this is just spouting off things on my mind. I'm sure I've pissed someone off again. Feel free to light me up...

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Re: Is the global economy just a giant ponzi scheme??
« Reply #49 on: July 24, 2012, 04:30:59 PM »
We enjoy the great variety of input here, please don't think that because we didn't jump on board with your videos that your input wasn't appreciated.


One thing I really like about MMM is that it is bottom up and not top down change.  We simply cannot control the government (for better or worse) or force whatever changes we think is necessary.  Neither can we control society.  But we can control our own lives and lead by example.  I think MMM typifies the focus we all need of being the change we want to see.


I don't see anything you have posted that should piss anyone off, but I also don't think you will gather a lot of attention around here for the kind of topics those videos bring up.  It simply isn't what unifies us and brings us together in a common cause here on this forum.  But since we have such a great variety here also know that you are certainly not alone in whatever views you have on those issues.