Response to Henry Paulson interview on NPR

(For the context of this comment, read the interview at NPR.)

We have periodic financial crises. True enough.

We have a business cycle that reflects a fundamental instability which, in its larger-scale fluctuations shows itself as an actual collapse of civilization.

Why is there no discussion of the fact that we are living in a civilization that appears trending toward collapse? There is no discussion of the fact that a deeper commitment, a more thorough commitment to basic moral principles could allow us to build a sustainable and more just civilization.

By facilitating business models that involve borrowing money to pay employees, we are perpetuating a social and economic system that will become more brittle over time. If we fund current consumption through borrowing, we make the continued functioning of the system contingent on lenders' confidence in our ability to repay in the future. Confidence is a resource of the human mind or psyche that is subject to fluctuation, and it can become thoroughly depleted at times.

When the functioning of the system is made more contingent on numerous factors, rather than on few factors, the system becomes less stable. It becomes more subject to catastrophic collapse in the future.

A moral hazard argument would be that, to fund today's payroll through borrowing, increases the risk to and burden on future generations.

This is similar to the problem of over-consumption of natural resources that precedes collapse of civilizations. When natural resources are depleted, the options that our children will have are constrained. Options are constrained and opportunities are eliminated, to the point that the challenges that they face will become greater than their ability to withstand.

Where are the voices in positions of influence calling for principled action that could remedy the systemic flaws that threaten the stability of our civilization? Is it the view of people in power that we have solved the defects that have caused civilizations to collapse in the past? The continued fluctuations of the business cycle that are recognized by Paulson as a threat to the system would suggest that fluctuations in the form of the thriving and collapse of civilizations are still inherent in society as it is.

We should respect public and private property rights. When natural resources are owned equally by all, industries will pay money to the people when they take or degrade natural resource wealth in pursuit of profit. Money will be spread more evenly throughout society. There will be a minimum income below which no person will fall, even if they lack gainful employment and even between jobs.

This would mean that an economic slowdown need not be seen as a dangerous threat to the system. Natural resource wealth, including air and water, belongs to all of us. Our political and economic systems should reflect this fact.


By the way, I wonder why would someone not ask a moral hazard question, unless they are constitutionally willing to neglect moral concerns?

Sleep deprivation causes us to loose our ability to think clearly.

If I had to guess, I'd say that Paulson was worrying about the impending crisis well before it became obvious to the general public. That worry was likely caused by the fact that he could see chickens coming home to roost. (He had been involved, while at Goldman Sachs, in efforts to limit regulation of financial institutions by the SEC, so that the house of cards known as highly leveraged loans could be built higher and more flimsily.)

Henry Paulson at Wikipedia

Moral hazard of bank bailouts

Quantum mechanics of the price structure


A cure for what ails the planet