[Rod_Cloutier]

For a person to make money in the present Capitalist world economy, he/she must be able to sell something of value to someone else. The scarcer the product or service offered the greater the reward to the seller. The person who has sold his or her product or service to the marketplace now has resources to buy scarce goods for themselves, and the process repeats indefinitly. The inverse being true as well the more commonly available the good or service being provided the lessor the reward to the seller. On the whole this process should guarantee that scarce goods are produced with priority over commonly available resources.

Numerous problems with these basic tenets are known to occur. A shortage of a means of exchange, such as money, can create a Keynesian problem with deficient demand. Keynes wrote during the 1930's depression that the economy did not appear to be trending towards recovery, neither did the economy seem to be trending towards total collapse. His solution, still controversial, was for the government to step in to fix the problem of deficient demand (by running short term deficits). This has been used time and again with varying results.

The other problem is inflation. If too much money exists relative to the stock of goods and services being provided the cost of goods and services will rise to correct the overabundance of money, hense general inflation. This is also problematic, history has shown many cases of runaway inflation, where the means of exchange have been so devalued that it essentially becomes worthless and people stop selling goods and services for money and revert to bartering.

For economic growth to occur, people must have faith in the currency, (ie no over surplus of money), and their also cannot be a sustained period where goods and services are essentially worthless because of a shortage of currency to purchase them (deficient demand).

This leaves a very tricky balancing act, traditionally 'managed' by the world's central banks, and governments; to prevent inflation but avoid deficient demand. Over many decades the results have been generally mixed. Some periods inflationary, other periods mired in recession/ depression.

The currect situation is, in fact, probably the most problematic economic situation yet to be encountered. Massive amounts of 'imaginary' or electronic money has been created by banks, investment houses and speculation. At a time when real physical and social resources such as fossil fuels, foodstocks, fresh water, and other natural resources are entering precipitious decline. Combine this with criminal negligence of everyone living with credit beyond the limits of anything they can ever pay back and virtually every business and government living way, way beyond their means; and we should expect hyperinflation to arrive sometime soon.

The current situation aside, the best long term policy is perhaps to have 'slight shortages' where anyone who wants to provide goods and services to the market is able to do so, inflation is slight, allowing businesses to have minor markup ablilities so they can grow and give their employee's minor salary increases each year, while still maintaining confidence in the currency. So everyone who wants and is able to work can earn money, but where resources are implicitly rationed, money is kept scarce enough to prevent general (runaway) inflation.

Growth then is inversely related to the supply of goods and services to the market. When slight shortages exist, everyone who can work and supply goods or services for money do, and times are good. When surpluses occur, massive layoff's occur, people lose access to money and resources both in terms of goods and services provided and the ablitity to pay for what is actually available. As a consequence resources become more scarce, and times are bad. Essentially in a market economy, we starve ourselves in times of plenty, and feast in times of shortages.

With real and undeniable reductions in the natural stock of both non-renewable and renewable resources occuring, with unbelivably vast increases in the money supply, combined with massive increases in unemployment, as well as never before seen rates of debt and default, as well as political and public corruption; we as a market civilization are truly in uncharted territory. There is no clear way forward towards a managed market recovery.

I would bet on systemic social and economic collapse. How this will play out is anyone's guess?? Both factors are in play that could create either a long term deflationary (deficient demand) scenario, or near term massive inflation and/or a collapse in the confidence in the currency. Peak oil, peak food, climate change and other 'externalities' to trade could also create an economic climate unlike anything else yet experienced to date. So the past is in no way a guide for the comming future events.

[cipi604]

I would bet on systemic social and economic collapse. How this will play out is anyone's guess?? ...So the past is in no way a guide for the comming future events.

I bet too on that, altough I do not believe that all the countries will experience the same amount of doom. Canada , I hope, will have less of a doom (less people/still more to chew).
The past is a guide for a social breakdown, but economically not because this is new (globalisation) and I think noone can predict the speed or the depth of the collapse.