Our Middleman-Skimming Economy   (February 11, 2014)

The Internet is enabling sellers and buyers to bypass the predatory State and the parasitic middlemen the State enforces.

Why do we read commentaries and analyses? To understand why the Status Quo is dying and to have a hand in shaping the new way of living that will replace it. Longtime correspondent Zeus Y. recently encapsulated the core dynamic of our era:

"Here's the deal between the two worlds right now: the Status Quo is dying but trying to take everything with it and the other is trying to hold the old world up enough to avoid complete collapse, buy time, and construct the airplane of the new world, all while flying."

Humans avoid changing current arrangements until there is no choice left but to change them--usually when the arrangement collapses in a heap. Greece is an interesting example of just this dynamic: the political parties left, right and center are desperate to keep the corrupt Status Quo intact, while those whose slice of the swag has vanished have already moved on to new arrangements that no longer depend on Central State swag or the many layers of middlemen that skimmed off most of the wealth for various monopolies, cartels and Elites:
After Crisis, Greeks Work to Promote ‘Social’ Economy.

Here's the Status Quo arrangement: the Elites trying to take everything they can before their vast skimming arrangement finally collapses:

Corruption in the EU and Greece (Acting Man)

Greek official bribed 'more times than he can remember'

At the time, Mr. Kantas, a wiry former military officer, did not actually have the authority to decide much of anything on his own. But corruption was so rampant inside the Greek equivalent of the Pentagon that even a man of his relatively modest rank, he testified recently, was able to amass nearly $19 million in just five years on the job.

Corruption across EU 'breathtaking' (BBC)

It's instructive to study the key strategy in Greece's social/community economy: get rid of the middleman.

There's a couple of things we need to understand about middlemen before we can grasp the revolutionary nature of a social/community economy.

A middleman adds value to both supplier and buyer by making transactions faster, easier and cheaper. A bank, for example, clears payments made with checks, and takes depositors' savings and loans the money out at interest to borrowers. Both of these transactions are fraught with various risks and complications, and the bank charges a fee for taking on the management of the transactions.

A wholesaler adds value by providing a market for both sellers and buyers that enables a transfer of risks and transaction costs to the wholesaler in exchange for lower prices to the seller and higher prices to the buyer.

The keys to this middleman economy are transparency, voluntary choices and the competition that arises in transparent voluntary markets. Middleman economies function for both sellers and buyers only as long as all transactions are voluntary and the costs and risks of using middlemen are transparent to all participants.

The problem, as Marx foresaw, is that profits are always at risk in such a competitive marketplace. Middlemen who raise their prices enough to skim big profits are soon abandoned by sellers and buyers who can get lower transaction costs elsewhere.

The ideal system for middlemen is the exact opposite of an open competitive market: low-risk fat profits flow to monopolies or cartels that obscure costs, and turn sellers and buyers into involuntary participants who have no other choice but to give money to the middlemen.

This is the middleman-skimming economy, in which middlemen are free to skim enormous profits from participants who've been left no other choice. The classic skimming middleman is of course the State (government), which holds a monopoly on violence and other forms of coercion (for example, threats from the F.B.I.: Green is the new red: Will Potter on the problem of treating environmentalists like terrorists).

Everyone who thinks the State is a warm and fuzzy uncle here to help the disadvantaged should study these paragraphs closely:

At the Tribune, I was covering breaking news, shootings, murders and local government, and it was all horribly depressing. It was not the type of thing I went into journalism to do. I had a background in college in environmental activism, and protesting the World Trade Organization and the economic sanctions on Iraq, and I wanted to be involved in something positive like that again. So I went out leafletting with a group of people. We just passed out pieces of paper in a residential neighborhood about animal testing. I thought that was the most I could do as a working journalist — something so benign. And of course, since I have the worst luck ever, we were all arrested and charged. It was the only time I’ve been arrested. Those charges were later thrown out, of course. It was a frivolous arrest. And it’s still lawful to pass out handbills.

A couple weeks later, I was visited by two FBI agents at my home, who told me that unless I helped them by becoming an informant and investigating protest groups, they would put me on a domestic terrorist list. They also made some threats about making sure I wouldn’t receive a Fulbright I had applied for, and making sure my girlfriend at the time wouldn’t receive her PhD funding. I really want to think that I wouldn’t be affected by something like that, especially given my activist background, but it just scared the daylights out of me. It really did. That fear eventually turned into an obsession with finding out how this happened, how nonviolent protestors are being labeled as terrorists.

They knew everywhere I worked, they knew my editors at the Tribune, they knew different journalism awards I received — and their message was, “Help us or we’re going to put you on a different path.” And they kept saying, “Don’t throw all this away.” And so at one point, I just said, “What are you going to make go away? This is a class C misdemeanor for leafletting, there’s no way it’s going to hold up in court, and you’re talking about ruining my life.” I of course never became an informant, and never thought about doing anything like that, but — it changed the focus of my work, without a doubt.

There's your warm and fuzzy State in action. I can attest from personal experience that these are exactly the same tactics used to suppress, undermine and criminalize the anti-war movement in the late 1960s and 70s.

Pimping the Empire, Conservative-Style

Pimping the Empire, Progressive-Style

Substitute middleman-skimming operation for empire and you get the basic idea.

The State is thus the ultimate skimming middleman: Every transactional fee is set by a monopoly seeking maximum profit and/or leverage from every transaction.

In our middleman-skimming economy, the State partners with various private cartels to fix prices, guaranteeing immense profits for the corporate cartels and the State functionaries who enforce the involuntary trade.

Would you like to see the "competitive" healthcare available in your area? It turns out all the insurance plans are ultimately operated by two companies in the cartel--ditto for the hospitals, Big Pharma medications, and so on.

How about our "competitive" national defense weapons industry? Oops, there's only a handful of suppliers--or in many cases, one supplier. Here's your $1,000 hammer--sorry about the high cost, but our overhead costs include very large bribes paid to politicos under the polite guise of "campaign donations." We're sure you understand (snicker).

Higher education is another middleman-skimming operation. Want a degree that may (or may not) still have a few shreds of "value" in the real economy? Pony up $100,000, buster, or better yet, make that $200,000. Here's the friendly Federal government which will issue you the loans to pay us. Oh, and these loans can't be discharged in bankruptcy--they're due and payable for the rest of your days (with rare exceptions that require a full-time legal team and many years of effort).

In a no-middleman system such as the one I propose in The Nearly Free University and The Emerging Economy: The Revolution in Higher Education, students (buyers) pay the lecturers, working professionals/mentors, adaptive learning providers, etc. directly, cutting out the middleman universities entirely because the system is based on the professional model of accredit the student, not the institution.

The same elimination of middleman-skimming is possible in a cash-barter only healthcare system: The "Impossible" Healthcare Solution: Go Back to Cash (July 29, 2009).

The Internet is enabling sellers and buyers to bypass the predatory State and the parasitic middlemen the State enforces. Banks--no longer needed. Sickcare cartels--no longer needed. Higher education cartel--no longer needed.

If you still think all these cartels are essential, please re-read the article on how people find new ways of living and interacting once the corrupt skimming operations of the State and cartels collapse.

After Crisis, Greeks Work to Promote ‘Social’ Economy.

Collapse of this system is akin to the collapse of debt-based serfdom. It's called freedom, and it's only a disaster for the middlemen-skimmers. For the rest of us, it's a new arrangement with many advantages over the long term.

The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economy

With the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?

go to Kindle edition
We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Read Chapter 1/Table of Contents

print ($20)       Kindle ($9.95)

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

go to print edition 1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.

Read the Introduction/Table of Contents

Kindle: $9.95       print: $24

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, G. Wayne A. ($20), for yet another monumentally generous contribution to this site -- I am greatly honored by your steadfast support and readership.   Thank you, Loy R. ($5/month), for your exceptionally generous subscription to this site -- I am greatly honored by your support and readership.

"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.

"You shine a bright and piercing light out into an ever-darkening world."
Jeremy Beck

Contributors and subscribers enable Of Two Minds to post 275+ free essays annually. It is for this reason they are Heroes and Heroines of New Media. Without your financial support, the free content would disappear for the simple reason that I cannot keep body and soul together on my meager book sales alone.

Or send coins, stamps or quatloos via mail--please request P.O. Box address.

Subscribers ($5/mo) and those who have contributed $50 or more annually (or made multiple contributions totalling $50 or more) receive weekly exclusive Musings Reports via email ($50/year is about 96 cents a week).

Each weekly Musings Report offers five features:
1. Exclusive essay on a diverse range of topics
2. Summary of the blog this week
3. Best thing that happened to me this week
4. Market Musings--commentary on the economy & global markets
5. From Left Field (a limited selection of interesting links)

At readers' request, there is also a $10/month option.

What subscribers are saying about the Musings (Musings samples here):

The "unsubscribe" link is for when you find the usual drivel here insufferable.

Dwolla members can subscribe to the Musings Reports with a one-time $50 payment:

The Heroes & Heroines of New Media:
oftwominds.com contributors and subscribers

All content, HTML coding, format design, design elements and images copyright © 2014 Charles Hugh Smith, All global rights reserved in all media, unless otherwise credited or noted.

I am honored if you link to this essay, or print a copy for your own use.

Terms of Service:
All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.

blog     My Books     Archives     Books/Films     home


Making your Amazon purchases
through this Search Box helps
support oftwominds.com
at no cost to you:

Add oftwominds.com
to your reader:

Free Page Rank Tool

Oftwominds.com #7 in CNBC's
top alternative financial sites