19 December 2008

Leaves die when the roots are cut

There's much discussion in the US about how to recapitalize their banking system, and what will restore consumer confidence, and return velocity to credit.

There's much discussion of this globally, and it's mostly wrong because it's mostly talking about finance.

Finance depends on, derives from, work done to create value. If the work is not done, the finance system hits some inelastic limits about how much value exists and therefore how much of a loan we can get from the future.

All of the public suggestions so far in the States seem to have missed the idea that it does not matter what happens to the finance system if the work being done to create tangible value is supported, protected, and extended; with sound roots, new leaves will appear.

I'm kinda hoping we get—though I would needs must be an exceptional idiot to expect a CPC government to produce, or Ignatieff Liberals to push for—something that recognizes the need to support productive work in the January budget.

That means differentiation, extension, and expansion of industries producing value add in tangible goods. Services are real work and produce real value but only in a context of the tangible goods. (Perfect accounting will not rescue you from no tractor tires; enough tangible goods will excuse shoddy accounting.)

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