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Financial Capitalism vs Productive Capitalism


Once upon a time financial paper was as good as real assets. These days are gone. The oversupply of financial paper has eroded the trust in the real value of this paper. As first financials and now also nations collapse under their debt, financial paper looses it credibility at fast pace. Preventing this credibility decline in financial paper was the main reason why a) the banks had to be saved (burdening the nation’s balance sheets to/over the max) and b) the nations had to be saved (burdening the balance sheets of the yet good performing nations to/over the max). But there’s no money left to save the banks (only in the USA this is still possible: as they have the advantage of still operating the global reserve currency) and there’s no money left to save the nations. Those last two ‘conventional’ (10 years ago they where to outrageous to imagine/consider/discuss) barriers to support the credibility of financial paper has become useless.

The only barrier left standing to support the financial paper in the Global West is the dollar as global reserve currency and that barrier is eroding at fast pace too. But yet more nations make extra-dollar trade pacts with other nations. And yet more central banks make extra-dollar currency swaps with other central banks.

By this all the weight of the dollar on the global economy is declining very fast and with that the barrier of last support for financial paper in the Global West is eroding too. Just one example: the FED/FRB has bought by its POMO schedules the last year $ 40 billion of MBS and $ 45 of US gov debt per month, as otherwise they would not be sold and both the banks and the USA itself was hitting bankruptcy within one month. The US banks are supported by a money flow of near zero interest rates that could be lend out with huge margin spreads, with paper of any quality (even toxic) as collateral. But both games depend completely on the global demand for dollars (and that demand is declining). On top of this is the FED/FRB with other OMO schedules since Black Monday (October 22, 1987) on the stock and currency markets: making these markets also not real but managed too. Add to this all the currency swaps the FED/FRB makes with other major foreign central banks (ECB etc) and you know that markets are managed and an incrowd is profiting big time on both insider trading as the volume of these interventions. Financial Capitalism at its worst.

When the decline of the global demand for the dollar has reached a certain threshold the Global West will only have two options: 1) doing the same with the euro as has been done with the dollar (the euro area buying out the dollar area), but this demands a global trust in and therefore use of de Euro far beyond current levels: so this option is not that valid, or 2) merge of the dollar and the euro into one new Global West currency as possibility of last resort, they will offer nations that join a debt discount and therefore all nations of the Global West will join (it will not improve anything, it only will deliver a huge stagnation of the Global West, so it has no future and will eventually default/explode/end.

Other nations outside the Global West will not join: there no incentive for them to be looted again by the same nations that did that the last 200 years. Therefore the merge of the dollar and euro in to one central lead economy of the Global West will divide the world in a central lead declining economy in the Global West and in multiple not central lead emerging economies in the Global East and Global South. Buying imports/resources/energy will become too expensive for the Global West: the elite of the Global West will try to extend their reign for sometime but than this modern day EUUSR i.e. Forth Reich with the name NAR (Northern Atlantic Republic) will collapse. Savings and pensions will be vaporize by defaults and inflation. The social security nets of the nations will be abolished by the end of money supply possibilities (no loan possibilities and no money creating possibilities anymore: reaching the end of the elastic of possibilities). Think Russia in 1991 short after the end of the USSR.

Democracy (government by the people for the people) will be watered down towards just a ‘nice’ low level as marketing coat/trick needed to deliver some legitimacy. Therefore an active powers investigating critical free press is more important than democracy and will more insure the public interest than politicians. This view is against the Western Ideology, but that makes it not less true: the Western Ideology is polluted and watered down to large extent. Western style of government only wears democracy as nice marketing coat, but is has moved away from its roots towards democracy without demos. The ultimate goal of all these ‘free’ trade agreements is making the merge between government and big business unaffected by people’s votes/interests. Western style democracy is just an hollow marketing slogan with not that much of its original content, but still thriving on ‘branding’ of the old content. Governments are by nature always heading towards more power concentration, towards less serving the demos and more serving themselves and those who can afford to pay for lobbyists i.e. influence: Government for the self-promoted elite, by the self-promoted elite, not for the people, by the people. Achieving public interest is just a game for beginners. Narrow private interests will run the government in cooperation with the administrative elites. Not watching/protecting that of value will have its price.

The price of having chose financial capitalism above productive capitalism is more and more becoming clear for the Global West as it more and more has to been paid: this process of payment is just started and will not end soon: there are no limits to their parasitism on the real economy. Financial Capitalism concentrates wealth by the market. Productive capitalism distributes wealth by the market. Financial Capitalism is also not sustainable (nor in the inequality it creates, nor in the unemployment it creates, nor in the break down of social safety nets it demands, nor in the value/trust/credibility of the papers it issues), productive capitalism delivers sustainability (if one extern condition is met: moving in the direction of making production as clean as possible: otherwise it’s benefits will be eaten out by its damages).

And as Financial Capitalism has also taken over the State Departments of nations of the Global West (and by their 'free' trade agreements, foreign policies towards nations and war efforts) even a new era of colonialism (version 2.0) is born. Bring 'democracy' to nations as part of an energy/resources and logistical choke-points controlling agenda. Everybody with the least knowledge of the energy/resources market knows that the crucial facet of profitability is controlling the market supply (otherwise prices will drop too much): this is the case since Rockefeller build Standard Oil and Deterding build Royal Dutch Shell. After the break up of Standard Oil in 1911 as result of the Sherman Act of 1890 the 'Seven Sisters' have played this game till today. 'Competition is Sin' said JDR: monopolization is the core/foundation of the energy sector. Limiting market supply is something the State Departments are very good tools in: by boycotts (Iran: BP never forget 1951, never), by turmoil (Sudan, Syria, etc) and as option of last resort: by war (Iraq, Libya, Mali, CAR, Sudan, etc).

Mutual interest based cooperation is replaced by an unilateral (Global West driven) exploitation agenda. This has destroyed the 'brand' of the Global West severely and still does. Penny wise, pound foolish: The Global East and Global South are getting more and more Global West allergic. Financial Capitalism is destructive: bith internally as externally. Russia and China are already through with the Global West's power plays. The natural gas (pipeline and off shore) driven Syria conflict has shown that the Global West is no longer in the driver's seat i.e. is calling the dicisive shots. The game of 'divide and conquer while looting the place' is not that effective anymore.

Another future development that will brake the back of Financial Capitalism is the desolvement of federal states: Many regions will leave the federal nations they now are part of (also as with the objective of just leaving behind i.e. walking away of the federal government debt): See Scotland (the UK will bear responsibility for the federal debt said the Chancellor of the Exchequer/Treasury in a statement). See Catalonia. See maybe in the future even some US states (starting with the Pacific orientated west coast states like California), this time without a Civil War, but still with a lot of tensions and damaged state relations. By those who left the debt burden will increase on those who stay to no longer sustainable levels. Most federal governments just will dissolve into the air: they just will stop to exist as the revenue streams dry up. Their debts will be worthless to the loaners. Their currencies will dissolve together with them.

Money was, is and never will be a safe storage of value. That's the misconception the financial industry is build on: it's just a standard price indicator and a standardized medium of exchange. Issuing credits (i.e. holding debts) is no storage of value: it's an accumulation of risks that come home when the economic wind changes. The financial industry just should be at a serving real values building 2% GDP and should never have risen to it's parasitic real values destroying 10% GDP level of today.


The Global West should free themselves out of the destructive realm of financial capitalism and move back/forward towards productive capitalism. Away from paper towards real assets. Away from credit driven fake ‘growth’, towards real economic production. Away from too much derivated financial paper towards direct real asset connections. As said: away from financial capitalism that concentrates wealth by the market, towards productive capitalism distributes wealth by the market. As said too: away form financial capitalism that’s not sustainable by its nature (nor in the inequality it creates, nor in the unemployment it creates, nor in the break down of social safety nets it demands, nor in the value/trust/credibility of the papers it issues), towards productive capitalism delivers sustainability (if one extern condition is met: moving in the direction of making production as clean as possible: otherwise it’s benefits will be eaten out by its damages).

This is change is very difficult (regardless the huge advantages of productive capitalism over financial capitalism) as financial capitalism has bought the political and monetary systems to levels never seen before. But as the destructive and parasitic characteristics of financial capitalism come to the surface since 2007, change towards a productive capitalism model is possible. People, companies, corporations, organizations, some bankers, some central bankers and thereby some politicians (as they are mainly followers, they don’t lead changes, they react to changes) are moving away from financial capitalism, towards productive capitalism.

The fact that the choice is between collapse or rebuild helps a lot in the choice for this transition, also for politicians (who will be afraid of the voters, while they now yet think that voters are just stupid people who they need one day every 4 years). The rising interest rates will make anything to everyone clear. It will become a movement of the 99% against the 1% and no longer of the 1% against the 99%. The 1% will lose their offensive play advantages and will be pushed into defence. The main goal of the 99% will not be growth (as that will be out of reach for the Global West), but preservation of wealth and that will be hard enough to realize.

The Global West will try enter economic maturity: trying to maintain current levels: it will not succeed at full at this goal. The advantages of the Global West (high standard of living) will become a weapon against itself. The education advantage will be gone. The global power advantage will be gone. The global reach advantage will be gone. The 'brand' of the Global West will be damaged severely.

Some changes are needed. Difficult ones. Taxation of labour should be ended for example. Governments should not be allowed to rise their debts anymore. Debt is dependency. Debt is handing over the steering wheel of the political process towards the loaner. Government should forbid fractional reserves based banking (retracting the money creation license of the commercial banks). The State Departments should abandon their 'the Global West is better than the rest' attitude and power plays of the past (as both are no longer that adequate: see the composition of the UN Security Council for example).

Money creation should be done by the central banks only and only in a non-inflationary way: non-inflation QE. See the non-inflation QE paper for a detailed description of these types of QE. QE with direct real asset backing by less tier securitization. The kWh as unit of value will not only rise as amortization/interest payment/collateral, but also rise as inflation free unit of value for trade deals. Pension funds should recognize their objectives (long term stability) and stop feeding the beast of financial capitalism (which has a contrary agenda). Complementary currencies should be grown (to facilitate the growth of community services), etc, etc, etc.

All fake insurance should be winded down. Fake insurance is insurance that is based on the misconception that insurance primarily is about sending insurance invoices and channeling this revenues towards the shareholders, based on the other misconception that there are no systemic risks. Any size of the financial sector beyond 2% GDP is eating out the real economy, the size of the financials and the sector should be smaller. The credit crunch was doing that, but PQE (permanent QE) prevented this adjustment to a more healthy size of financial sector. Etc, etc, etc.

Production should become more important again. The nations of Global West has to rebuild the most part of their economies again. Based on less manufactured imports, less raw material imports and less energy imports. Better said: develop in a 180 degrees other direction than their current directions. Not only productivity (products and services) should be re-vitalized, also the quality of the press (at the moment cosy in bed with the powers to be) and the quality of politics (at the moment cosy in bed with the powers to be) and the quality of civil servants (at the moment cosy in bed with the powers to be) and the quality of regulators/auditors (at the moment cosy in bed with the powers to be), etc, etc. Better said: not only an active (non credit nor subsidies driven) reveille, but also an ethic reveille is needed.

The neo-colonial globalism (‘the work of the world should be done by the yellow people’) has stranded (and was a little racist too: neo-colonialism has its delayed price tag too: a wrong global perspective for example: a perspective that brought us financial capitalism with all its downsides). Time for some old fashion no longer imperial focused 19th and 20th century industrialization. In a 21st century model: efficient and clean. Distributed production will replace distribution a lot. Knowledge / technology will be more open. Re-inventing production in an open technology realm could have huge benefits: that’s the good news. Patents will not the deliver the next round in the looting of the Global East and Global South as they will no longer recognize these patents. While the Global West still will be milked out by a nothing producing patent elite: that will milk any business profit and any manufacturing to the max. Global food DNA patents (the Monsanto/US model that could replace the dollar system in global looting) will not be recognized by the Global East and Global South. It also will driving both the farmers and agricultural banks of the Global West to the brinks. So much for food production in the Global West: just by allowing one small interest group to run a food DNA patent based global food chain extortion scheme.

On top of those huge and difficult changes the northern hemisphere (i.e. the Global West) will face and have to deal with another Maunder Minimum ( as the magnetic values of the sun are heading towards lower values. This New Maunder Minimum will deliver them a) less food production and b) more energy consumption. Not only the economic sun will shine in the Global East and Global South the next century, the real sun unfortunately will do too. Al Gore will become the symbol of non-scientific manufactured consensus. The word consensus is a-scientific in its nature: science is primarily about keeping asking questions: not about defining an one and only truth that must be defended: that’s politics and religion. Manufactured/politicized science it’s total blinded by one facet and therefore not comprehensive and thereby derailing. Comprehensive not political funded science will rise in influence again. Universities will decline in credibility. New scientists will rise together with new/better models that will have less white spaces than the current models. That what’s wrong with the financial world and the political world is also wrong with the science world.

A change from credit driven ‘growth’ towards real economic performance will not be driven by ideology. Ideology has no power to change mainstream directions that much. People don't like changes that much and certainly don't like paradigmatic changes. The only reason why paradigmatic changes will happen if we're forced to change. Not by laws, nor by propaganda, but mainly/only by just no longer functioning of the old realities. The change will be powered by the dire straits that we are entering: the collapse/bankruptcy of financial capitalism and its fake assets and the rise on its ruins of a new type of productive capitalism. If and to what extend this transition will include collapse and repression is just a matter of when the transition will begin. Till than debt turbulence and monetary turbulence will set the stage. People, companies, corporations, organizations, banks, governments and central banks will only change if they have to i.e. are forced to by developing situations. This is what makes it all so sad: the excess of damage by just lack of courage to choice new directions before collapse.

See also International Currency Stability
See also Europe: Diagnosis and Prescription
See also Governmental Funding Turbulence
See also Labour Taxation
See also Money Creation
See also Energy Open Finance Platform
See also Global PV Solar Energy Finance Model
See also EQE/EBS Model Summary Diagram
See also BQE: Bilateral Currency Swaps
See also Gold Backing vs EQE/EBS Backing
See also Secular Stagnation as Denial Term
See also Financial QE vs Productive QE
See also Productive Capitalism Perspectives
See also Emerging Nations - Electricity PPP
See also Emerging Nations - Solar PPP
See also Easy Instant Solarizing Nations
See also Making The Euro More Offensive
See also Structural EU/EC Boat Refugees Solution

See also Global Solar Rollout - Description - Diagram
See also Regional Solar Rollout - Description - Diagram
See also Obama Administration Energy Strategy
See also China As Global Leading Solar Energy Nation
See also Open Finance Platform for Energy Investments
See also Iceland 3.0: Geothermal and Energy as Currency
See also Addressing Economic Decline of the Global West
See also IntraContinental: Continental Rail Schedules
See also Global West Enters Economic Adulthood
See also Global East Driven Globalization 2.0
See also Financial Capitalism vs Productive Capitalism
See also CIRI (China India Russia Iran) Avoids Dollar
See also Global West Gets A Common Currency
See also What Ended Global West Dominance
See also National Economic Development Organizations
See also Desert Investment Economics
See also Ending Global Poverty (By Sea Water Irrigation)

See also Global Deserts Exploration Model
See also WaterTech and MicroCredit Merge
See also Lupin As Soy Replacer
See also Global Seed Cartels Aren't Right
See also Global Food Model: Local to Global
See also Sun / Earth Interactions
See also Telco 3.0 : Telco out of the Cloud
See also National Business Clusters Abroad
See also Scientific Education/Research Funding
See also Iran: National Economic Plan
See also Immigrants and Trade
See also Emerging Nations - Minerals PPP
See also Emerging Nations - Deserts PPP
See also Emerging Nations - Energy PPP
See also National Solar Fund Model
See also Secular Islamic Finance
See also Open Energy Finance Platform


Gijs Graafland / Planck Foundation / Amsterdam

(texts can be republished freely when the source location is mentioned or the source link is provided)

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