The Virtual Economy

Economics is neither a science nor an art -- it's a tool, and like any tool it can be used to create or destroy.

It can also become rusty, broken or obsolete.

And that's where we are today, peering in confusion into a toolbox that doesn't contain one single implement that will fix the damage.

The problem is that the damage we're facing now is different from anything we've known. The economic meltdown -- as it is poetically referred to -- has not been caused by a breakdown in production, by inflation, by social upheaval, or even by war. Those are the usual suspects when your economy is "real" -- that is, when your economy is measured in goods and services.

But when your economy is running another program side by side, a program that has nothing to do with production but runs on speculation and dissimulation and manipulation, you're in trouble. Deep trouble.

That is the Virtual Economy that has just imploded, pulling everyone into a very black hole.

Moralists could have a field day with this, blaming greed and dishonesty for the disaster. True enough, but how many people saw the fundamental sham and vacuity of the Virtual Economy? How many people recognized that these hedge fund managers and investment brokers were just playing Monopoly on a huge scale? No, worse than playing Monopoly -- they were gambling. Trying -- and brilliantly succeeding -- to make money with money.

While many states were outlawing casinos and lotteries, these people were indulging in those very activities: games of chance backed up by some clever calculations, and maybe a foot on the hidden throttle.

Their winnings (don't call them "earnings"!) were lightly taxed, if at all, and their non-productive activity was factored into our economic picture, wildly distorting it. Their tentacles reached invisibly into so many areas of American life that only the poorest of the poor and the richest of the rich were untouched and unaffected.

That is why it seems the Virtual Economy has to be "saved" now, or the disaster will spread further into the Real Economy; we know it has already begun. But are we, implausibly, saving the gamblers? And, irrationally, preserving the system? Are we putting a 700-billion dollar Band-Aid on an infected limb that needs to be amputated?

The problem with anything virtual is its elusive, illusory nature. You can't exactly see it, locate it, touch it. But the Virtual Economy must be seized and dismantled, redefined and restructured, and carefully regulated and reintegrated if it is ever to serve a useful purpose.

And at the moment, I can't see that it ever will.

Comments

[WIpatriot]

02:25 AM on 10/02/2008

Wow.

Yeah, let's continue to feed the beast and hope it doesn't demand human sacrifices next month.

Lots of people are aware of the "virtual economy" and have been warning others, who didn't listen. It WILL crash, sooner or later. You choose later.

So, just keep feeding the beast. There's less pain that way.

[Yermammy]

04:16 PM on 10/01/2008

There was a time a long way back, where the revolution­aries would come to a village and check the people's hands for callouses. It was a very bad day to not have work worn hands. I am a welder/fab­ricator and I am not afraid. I'm not a money changer.

[Mattjoe]

02:50 PM on 10/01/2008

So then, consider the argument for ‘virtual democracy’ also made.

[melmoid]

02:21 PM on 10/01/2008

This is a very astute analysis. I have concluded that McCain and many Republican­s have ironically embraced probably subconscio­usly the new age thinking promoted by many gurus and pseudo-sci­entists that we somehow can create reality just by thinking or wishing for our version of it--sort of an extreme version of the power of positive thinking. Alas nature just doesn't work that way. There is a reality that we are subject too involving real matter and energy and the laws that pertain to the operation thereof. A society that just manipulate­s money in cyberspace and does not create anything will not make it.

[kaski]

03:34 PM on 10/01/2008

It's called Freidman disaster shock economics. We must overturn the 1913 law that gave total control of our central banking system to the Robber Baron elite families, such as the Rockeffell­ers, Morgans, Warburgs..­. They also own Wall Street. They are holding America and Americans hostage because they can. They were given these powers illegally in 1913. NO BAILOUT!!

[MistahCharleyPhD]

01:37 PM on 10/01/2008

I'd like to recommend the work of Dr. Michael Hudson, " a financial economist and former chief economic advisor to presidenti­al candidate Dennis Kucinich. In part one of this wide ranging interview, originally broadcast on the Pacifica program Guns and Butter, Hudson explains how the parasitic dominance of the financial sector has led to the creation of a completely fictitious U.S. economy which creates nothing, but is exclusivel­y devoted to extracting wealth from the rest of us." See the rest at

http://tin­yurl.com/5­4bcpx

[WorkingClass]

08:09 PM on 10/01/2008

Thanks for the link.

[robotfog]

01:27 PM on 10/01/2008

I like these statements -

"Their winnings (don't call them "earnings"­!)"

"But when your economy is running another program side by side, a program that has nothing to do with production but runs on speculatio­n and dissimulat­ion and manipulati­on, you're in trouble."

and

"but how many people saw the fundamenta­l sham and vacuity of the Virtual Economy?"

I saw the faults as stated by the last statement. I don't understand why some people don't understand this.

Maybe we *would* have been better off if Perot had won in 1992. I wasn't interested in voting for him, but I remember he talked about producing real goods.

[Michale32086]

08:10 AM on 10/01/2008

I'll be the first to admit that I am an economy dullard.. But, as near as I can tell, the only people who will get hurt by this collapse will be the ones who made their living, made their savings or got obscenely rich by gaming the system.. If this is true, then I really can't generate much sympathy for them..

The BAIL OUT (and make no mistake, it IS a Bail Out) failed yesterday.­.

Lo and behold, we are all still here. The world goes on.. The Internet is still standing..­. And stocks even rose a little...

So, someone please explain to me why this Bail Out MUST happen or there will be a catastroph­e of biblical proportion­s??

Michale...­..

[WIpatriot]

02:33 AM on 10/02/2008

Sure, Michale. If you don't pay the ransom, er, bailout, er, rescue, yeah that's it, then the elites will huff and puff and bloooow your house down. See. Now, fork it over.

[Romeover]

06:24 AM on 10/01/2008

Indeed, they have been playing Monopoly on a grand scale. With our money.

What people forget is how the game of Monopoly ends: one player has everything­; the other players are bankrupt.

That's where the real economy is heading.