Just like in the Great Depression in the 1930's we are now 80 years on and are struggling to find the answers that will lead the World Out of the most severe Economic Downturn since the Great Depression that was thought unimaginable only a few years ago.
While I do not purport to have all the answers, it is time for some exceptionally radical thinking.
We have all subscribed to Keynesian philosophy over the years and there is No-Doubt it has served us well up until now.
But I am sorry Keynes, "It is Different This Time"
Since 2008 Governments have done everything they can, to stem the destruction of the Capitalist system as we know it, but nothing is working anymore we have ZIRP, TARP, EFSF etc, Trillions in money printing and countless government funded fiscal programs and yet prosperity for all seems still a mirage for the many.
Sovereign Nations are now at risk, that will set off a chain of events should Greece fall, very similar to the Failing of the Austrian Bank Creditanstalt during the Great Depression in 1931.
However, we simply can't continue Bailing Out the system, so as painful as it may seem, the economic destruction of allowing a Country to fail such as Greece will quickly start to cleanse the system.
While Keynes advocates more Government spending financed by borrowing and more money printing, surely to all who can see, "This is not working this time Keynes!"
Although I appreciate Professor Krugman claims there was not enough spending and we should be spending even more, but shall Governments keep digging until they find the pot of Gold buried somewhere beneath the earth ?
While I appreciate they are Theories and Ideas at the moment, I advocate the following :
1. An immediate establishment of "World Economic Reconstruction Foundation"
2. The "World Economic Reconstruction Foundation" not be owned by Governments, Corporates or Influential Lobby Groups, but be an "INVESTMENT WAR CHEST" owned by society at large through the largest Online "Social Giving Program," using Crowd Funding and Social Media the world could ever imagine. This will act as the catalyst for "NEW CAPITAL" to be born to Invest directly in New Infrastructure World Programs.
3. It is not more Debt the world needs, but a transfer of Capital in a manor that will reinvigorate the Enterprising Spirit within individuals to build a Good and Fair Society, harnessing the enginuity of individual creativity, combined with people's desire to share their triumphs with others. It is a very lonely experience and existence if you are one of the lucky few with vasts amounts of wealth and might have been lucky enough to have been bailed out in 2008. "The Winner Takes All" attitude, no longer prevails, as citizens now realize the only way to take the real prize of prosperity is for citizens to collectively work and co-operate together and share their knowledge, expertise resources and capital with others. The selfish attitude that still prevails among the elite with vast amounts of resources at their disposal, but are so afraid that this time they might not be so lucky to be bailed out, are hoarding capital, "Just in Case," to preserve their own wealth and importance.
4. The Traditional Theory of "Animal Spirits" I would suggest no longer applies to those who may have created their orginal wealth prior to 2008, as now those with Capital or access to Capital are so afraid of failure or loosing their fortune, they do everything possible to preserve their wealth, even if this means well below par expected economic returns by investing in the safety of Government Bonds as there is an expectation that the Government will never default, but will print money instead.
5. I would suggest it is those now with nothing, who have the greatest "Animal Spirit" to take that risk if given the opportunity with even a small slice of Capital and resources, who will be the future leaders of tomorrow and lead the World out of such a terrible Economic Depression. It is a misnomer to conclude that our so called "Star Financier's" have the Animal Spirit, when there is the State backstop or they realize next time the State might not bail them out, increasing the opportunity of only "Very High Probability Investing such as Government Bonds at practically Nil %"
6. In the past several years, Traditional wisdom has so far focussed on encouraging those who have already substantial wealth to Invest and create New Jobs. This theory in practice is clearly not working, as those with wealth are simply so afraid to take a risk and invest for fear of a potential loss, that they have lost the so called "Animal Spirit." Or alternatively those with wealth have succumbed to the expectation of Government hand-outs to re-ignite the economy as Keynes advocates, that they are waiting in expectation of the next Government hand-out before investing further. Just this weekend in the UK papers there was a war of words between Government and Big Business, each blaming each other and asking each other to get on and do something.
7. Central Banks have flooded the system with money and yet this money has not trickled down to the real economy and the Velocity of Money is at a near stand-still in the real economy. I have a theory that as Big Government and Big Business has evolved and the dominance of the Financial Setor has over-powered everything, there is no Velocity of money to keep the economic engine purring in the real economy. The only Velocity of money occurring is the many micro second transactions occurring daily in the Financial Sector. (Just look at MF Global the week before it went bust $105 Billion Cash went through its Accounts, this is an astonishing velocity of money, that does not hit the real economy),
7. What can we all Do, You Say ?
This time I believe it is up to society to stand up and do something, Governments have done all they can, Big Business could do more, but this time it is up to all citizens to Rise up to the Challenge.
As proposed establishing "World Economic Reconstruction Foundation" would be the start
Harnessing the Internet and modern Technology for "Social Giving" into a War Chest for Investment in the World on such a Grand scale it will make Roosevelts "New Deal" look relatively insigniifcant.
If you would like to be part of this World Project and for Colletive Minds, then I welcome you all to play a role in shaping the future and we can all look back and say this was the real turning point when we all shared ideas, knowledge, capital resources to re-build the world economy.
The Future is in all of your Hands, and we are going to need all sorts of people from IT, Finance, accounts to marketing, to project planning, HR etc etc to turn an idea and the theory into reality, I look forward to hearing from you all.
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Economist and Social Entrepreneur
I challenge you all to Now Rise Up to the Challenge and unlock the Enterprising Spirit within