Eco-Matrix

MORPHEUS: "The Matrix is everywhere, it's all around us, here even in this room. You can see it out of your window, or on your television. You feel it when you go to work, or go to church, or pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth."

NEO: "What truth?"

MORPHEUS: "That you are a slave, Neo. That you, like everyone else, was born into bondage. . . kept inside a prison that you cannot smell, or touch. A prison for your mind. Unfortunately no one can be told what the Matrix is. You have to see it for yourself."
The MATRIX: The movie. 1999

When the blockbuster film the Matrix came out back in 1999, it was a huge hit. Not just because of the ground breaking special effects, kung fu moves and cool slick imagery, but also because of an excellent story line. A creation of the Wachowski brothers, it was not designed to be your typical Hollywood film. One of the films defining moment is the the pill scene - red pill for truth and blue pill to carry on, with what you perceive as reality. A lot of discussion was directed towards the religious aspects that the film was trying to display, however this was not the intent of the Wachowski brothers and religion hardly encompasses everything, a lot of people are atheists anyway. The Matrix is indeed synonymous with the capitalist system - pod bound humans living a slave like existence, feeling they are living in a reality bound world, when in fact they are feeding the matrix - the capitalist system that obscures reality. For people who understand how the modern financial system works this will not seem like an odd concept. Concepts such as fractional reserve banking, debt, changes in interest rates to adjust the money supply and a whole series of economic terms designed to make the subject as inaccessible and boring as possible. Have you ever wondered why the wealthiest people in society are the people who actually produce nothing for society at all. The highest paid area of work is the financial sector, yet all they do is manage societies wealth. They produce nothing at all for societies benefit no food, appliances, clothing, housing - nothing. If this conflicts with the beliefs you hold about society the Wachowski brothers explain this throughout the dialog of the film.

MORPHEUS: "The Matrix is a system, Neo. That system is our enemy. When you are inside. You look around. What do you see? Teachers, lawyers, businessmen: the very minds of the people that we are trying to save. But until we do, these people are still a part of that system. You have to understand most of these people are not ready to be unplugged and many of them are so inert, so hopelessly dependent on the system, that they will fight any change."

Morpheus lists educated professions to illustrate a point that the people who should be able to understand the way the current capitalist system works and see its flaws are in fact the main drivers behind it. In the Reloaded sequel, the architect states that the vast majority of people "accept the program", or the system in which they are part of. People do generally believe what they are told or what they read be that information in the newspapers or on the BBC website during a lunch break. In a society that is supposedly better educated than any of our previous generations there is increasing amounts of voter apathy, less and less political protests with people more interested in discussing the X-Factor or big brother. If you were to ask quite a number of people what the program - capitalism - is, they wouldn't even know that it was the economic system they live in.

The media is generally controlled by big corporations and government - not by the people, so the truth is rarely told and quite often spun. With the advancements in technology and productivity we should be a lot better off as a society, when in reality we are getting worse. The system uses smoke and mirrors to mask reality. As I have mentioned above the truth is rarely told. Consumable goods are cheaper, but this is due to cheap foreign labor producing them now - and this is there to serve the feelgood factor. A plasma screen TV or a fancy car doesn't make me or other people happier it just gives us a sense of more materialistic wealth. Any increases in our disposable income for example have just been diverted which for the majority has not really increased much at all. Take for example the cost of houses which have skyrocketed recently. Society would be a lot better off if housing was cheap and we wouldn't have both parents of a family working to pay the bills. Income could get diverted to more meaningful streams in the economy. We could use the money for schools and hospitals or for developing sustainable areas of trade in the economy. Its a classic capitalist mechanism of creating a feel good factor among the masses, for most people it is their main asset so when it rises in value people feel like they are the next Warren Buffet or George Soros when in fact, recently it is just based on a mountain of debt. Economic indicators have been changed also to fool the sheeple. Instead of using RPI we now use CPI, GDP measures have been manipulated to favour the upside of growth and fiscal drag for tax brackets has made sure everyone is paying more tax of course apart from the rich. The recent debt bubble that has built up recently can only end in one way, and that is with defaults and a contraction which will act as a transfer in wealth, from the lower and middle earners to the rich when it all implodes. Our capitalist system gives the illusion of a liaise faire system, when in fact its always the rich that pull the strings - the market is never in the hands of the majority as people percieve it to be. Like agent Smith they find new ways to work within the system.


The film also mentions glitches in the matrix. I always find this an interesting concept. This could be similar to real world events such as the protests during the Vietnam war (the Iraq war in current times), the works of Noam Chomsky and others or now the with congressman Ron Paul challenging the FED, a man who understands the economic policy America has pursued and has warned for years the dangers of a fiat monetary system and the future problems we now see in the levels of debt that has been created and the fact it is the common person who is being penalised. All these glitches tell people something is not as it seems, but still most ignore them and never question them continuing to pursue their everyday lives and not find out the truth even in this day and age where information is so freely available. The film in essence supports the theories proposed by Karl Marx. The workers (humans) are there to produce all the goods and wealth for the capitalists (machines). The workers are given illusions of short term prosperity be that rising house prices, or increases in purchasing power as work is shipped to more cost effective destinations. The real winners are always the people who control the system. Marxism may be viewed under a communist negative bias, but Karl Marx had capitalism figured out. He understood the workings and saw the pain it caused to people. During booms and depressions he saw the majority suffer while the capitalists would prosper - wealth was simply transferred through the social classes.

So what alternative do we have instead of the current capitalist system? I don't believe in socialism, as this does not allow people the freedom that they desire and would not spur innovation and prosperity as well as a meritocracy based system. We need a truly free laissez faire system, reducing government, cutting taxes, removing the mass fractional reserve debt that enslaves people as it is a non-productive economic concept and keeping the money supply constant and backed by something of true value, a metal such as Gold or Silver. However one thing that history has taught is that people always manage to obtain power and sadly abuse it. Maybe all socio-economic systems are not flawed - it is just the people within them that make the systems fail.

I will end with a quote, again taken from the film. A lot of people will dismiss what has been written above but I did mention that above in the article, such is the nature of people - unwilling to face reality.

Neo: "I know what you are trying to do!"

Morpheus: "I am trying to free your mind Neo. But I can only show you the door. You are the One that has to walk through it. You have to let it all go Neo, Fear, doubt and disbelief. Free your mind!"

Morpheus: "There is a difference between knowing the path and walking the path."
The Matrix, 1999

Education, Education, Education!

"Ask me my three main priorities for government, and I tell you education, education, education"
Tony Blair (1997)

When Labour came to power over a decade ago, there was great promises to reform the public sector services, to reduce hospital waiting times, to improve transport and to use massive amounts of money to improve the education system. As the saying goes, there are some things that money can't buy and bringing quick fixes to the public sector was one of them. Throwing money at problems doesn't necessarily fix them. If the system that you throwing money at is fundamentally flawed, or wrong then it doesn't matter how much money you spend on it. This is where Labour were short sighted. The public services, were and still are outdated models. The one I wish to discuss is education.

Education is an important aspect to any society. It allows knowledge and ideas to be be spread between people. These ideas and knowledge are in turn are a vital cog that drives the economy. Unless you have an abundant amount of natural resources to trade with such as oil (OPEC nations) then you have to come up with tangible ideas or products in order to trade and generate wealth. All great empires of wealth have been built through knowledge. The British empire was built by the superior ability of Britain's engineering and financial capabilities compared with other fellow European nations. The Industrial revolution was founded on technology and the mass production of products that could be traded throughout the globe. This is also how America has now become the dominant power - it has become a center for scientific and productive innovation that has attracted the best talent from around the globe. Look at the latest technology to drive modern wealth - computers. Virtually all ideas surrounding computers in recent times have come from America.

So why with all of histories examples, has the British eduction particularly in science and maths focused subjects been failing along with the collapse of manufacturing. Why have there been science departments closing in Universities. In fact the whole state of affairs has got so bad that the government is now making these science based subjects easier. Like a vicious cycle, the less people do these subjects, the easier the authorities have to make them in order to encourage people to take them, the more they are actually harming the education system. Twenty or thirty years ago, people took these subjects as they were generally a way to get employment. It's a similar fact in foreign nations now, and I once asked a foreign student why they take mathematical and engineering disciplines as opposed to say arts based or humanities. "Simple" he said, "You only get jobs back home with practical degrees". If anyone who has studied at University realises, the lectures of medical, engineering and Computer based subjects are full of foreign students, compared with say a theatre hall of History or Psychology.

The Service Sector has been expanding rapidly over the past couple of decades and too much in my view. Many service type jobs, as the name suggests only supply a service for example personal shopper, recruitment consultant, fitness instructor there are many others. If you look at the above roles, non actually produce anything to trade and rely on societies wealth. The recruitment consultant relies on companies recruiting and paying for the service. The fitness instructor relies on someone wishing to pay for them to show them how to exercise. These jobs rely on the wealth generated from the disciplines listed above and these are typical jobs that have appeared more and more in recent times. The reason why my friend above did not wish to do a more abstract course is that his economy is still developing its wealth through science and manufacturing. If our country does not recognise this and under invests in these areas then these countries will overtake us and they will realise they don't need our products or ideas anymore, and a reverse in the trade system occurs - we become the subservient ones.

All the time the government sets quotas on the percentages of young people they wish to get through higher education, 40%, 50%, but do we really need to follow these 'targets' that almost seem to pulled out of thin air. I know many graduates end up in jobs that do not require a degree. The government always chases targets in the amount of students that pass GCSE's. We are told how every year that the pass rate is getting higher. Of course it is. It's getting easier and students are literally being taught to pass exams. Education isn't about passing exams - its about developing your mind and your creative thinking ability.

People are just as intelligent now as they were hundreds of years ago. We just have more knowledge now then we did back in the past that we can draw from. So what marks intelligence? What say differentiates an Einstein or Newton from a normal person? Its the creative questions that these individuals ask. When Newton thought about gravity, so the story goes, it was when an apple fell on his head and he asked the question "What force pulls that object to the ground?" and from that question he begun to explore gravity. Similar what differentiated Einstein from his colleagues was the questions he asked. He was traveling on a tram in Bern and saw the towns clock face. He asked "What if I was a beam of light, would time be the same?" and from it he wrote he famous paper on special relativity. All great minds have challenged convention by asking creative questions. Oddly enough people seem to think that if you have a good memory, that is deemed as intelligence, exactly the same as the education system works. If you memorise the curriculum, churn it out for an exam, then you pass this is deemed as 'education'. This is why teachers, quite rightly get annoyed with targets, and placing emphasis on pass rates. It's not exactly the way to develop minds for the future economy. This is why young people shun the sciences and maths - you can memorise all you want, but the exams test understanding and an ability to think creatively - but also with precision which is a difficult skill to master.

Its not just the curriculum. It has gone to such an extreme that the system is not even giving students from poorer backgrounds the chance to engage in social mobility. A friend of mine who worked as a supply teacher for around eight months saw first hand how the system was churning out the 'results' and 'targets', at the expense of children's futures. He spoke to numerous pupils during his time at some of the schools he taught at who were studying for their GCSE's. These schools were typically in deprived areas. He asked them what exams they had. Some, for instance, said they were only taking Art. He asked them why and found out the school relied on getting certain pass rates in key subjects to bolster a better position in the 'league tables' and these students were deemed to not have the ability to obtain the grades the school required, thus were not even given a chance to obtain a full education.

So not only do we have a curriculum that is based on targets rather than developing minds, we have a system that is neglecting the very people who require education the most.

Through the last few hundred years, most scientific advancement has come from Europe and lately America. However more and more the Asian block are catching up at a quickening pace. India's cultural belief in education and a hard work ethic has given them a large pool of highly educated people in engineering and medical disciplines. China too are creating huge numbers of educated people. In fact both countries have placed an emphasis on innovation and R&D - creating ideas that the west once had a monopoly on.

Things have moved quickly in the past couple of decades and education will become ever more important in order to sustain our living standards. Einstein once said,

"Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world."

If we are to carry out what Labour stated when they came to power, our education system needs to embrace this statement and scrap targets and manipulated government statistics. The only way to maintain our standards of living is to all roll up our sleeve's and find new ways to create and innovate. As Milton Friedman said "There is no such thing as a free lunch".

We Live in Interesting Times

"False interest rates and artificial liquidity create great illusions of wealth in business equity and real estate .... In the early stages of every instance of credit expansion and inflation, there is always optimism. People do not want to pay attention to the warning voices of economists. They stubbornly insist that their present situation has nothing in common with the boom periods of the past, and that the theorists are wrong in predicting the breakdown of the 'prosperity'."
Hans Sennholz (February 3, 1922 – June 23, 2007)


For the past decade or so we have all witnessed an increase in our purchasing power. Assets have rocketed in value, businesses are making record profits, employment has been at record levels and credit has been plentiful. People assume that we are in a new era of prosperity, that our economy is strong, that in some way we all earned this prosperity. In reality we are living beyond our means, and we will all realise what a real severe recession is like.

America is in a similar position to ourselves and they are just coming out of this era of cheap money with the reality of the situation only just beginning. There is a lot of discussion in the financial world that we are witnessing the end of an empire in America. It is running huge govt debts, has a massive trade deficit and is debasing its currency (Incidentally this is how the Roman Empire ended - by debasing its Gold currency). And yet all of the above applies to the UK. We have not yet actively begun debasing our currency like America - we don't need to the world can already see how exposed and weak our economy is and Sterling has been the only currency falling along with the dollar. We are more in debt than our American counterparts yet all the government can say is how strong our economy is - this rhetoric will not help in the coming downturn.

So how did we get into the current situation? A combination of factors, but due to the deflationary effects of China and the new CPI measure for inflation our central banks could pursue an ultra expansive monetary policy, round about the turn of the millennium. Our Broad Money supply has increased exponentially in the past decade. All this broad money is created through debt being sold, and the UK has become a leader in escalating the debt levels of its people. This is where the mirage begins, our economy is one large debt mountain waiting to implode. Instead of producing goods Britain has decimated its manufacturing base and has become a consuming nation. Britain is now one large service economy that actually produces very little, even America produces more proportionately than we do. Service economies are supposedly a higher level in the employment chain but a lot of it relies on wealth created in certain fields - mainly technology and scientific innovation. That's how any economy throughout time has become rich including ours (some economies have become rich from natural resources such as oil but this is unsustainable in the long run and the UK has very little resources). So surely we have been pumping lots of money and investment into the innovation and development of technology in this era of cheap money? In fact in reality this area has been shrinking just when our economy is going to need this field more and more. Less students are choosing science and maths related disciplines instead have been opting for Sports Science (P.E) or Media Studies (watching a particle accelerator - sorry we don’t do science any more - a TV). I could have picked a number of disciplines like the above two, in fact there are far worse disciplines than these currently taught in our educational institutions. One particular area of the economy that has been allowed to expand far too much is the financial sector. In reality bankers don’t create productive wealth they simply manage societies wealth generated through the productive trade. The financial sector should always be viewed a peripheral branch to the economy – not core to it, which is exactly the opposite of what has happened in our economy in recent years.

Now above I mentioned China the work engine of the world these days - although it applies to the whole Asian block, Vietnam, India etc. Mass amounts of capital have been pumped in to this region. So surely they have been going on cruises, buying the fancy cars on credit (debt) and probably have a BTL portfolio. No. Instead China has been wisely investing, yes investing, all this new found money on the economy, infrastructure and its people. They not only have huge manufacturing operations but are moving into the high tech economies and catching up fast. Google and Microsoft have recognised this and have set up centres there and guess what - more and more technical papers are being written there. Soon China won't just be making our goods - they will be designing them. China has witnessed double digit economic GDP growth in recent years whilst we have had 62 uninterrupted quarters of 'easy credit, debt fuelled' economic growth. Our GDP has been no more than 4% a year usually around 2-3%. When put into this context this is hardly a 'booming' economy. So while the Chinese have been investing their money in their economy, people and infrastructure what have we been doing with our new found 'wealth'. No not investing in the above, instead we have been buying and selling houses to each other for ever increasing values. It's complete madness. That’s not economic wealth. It's the same house. It's the cheap money that has pushed the value up not a solid economy. The recent house price rises are not predominantly based on the traditional GDP growth that raises land prices (it is not houses that rise as is commonly misconceived) as the economy has more money so can afford to pay more for land.

Our nation is now in the grips of a consumer culture, that's how our economy now functions. You just have to look at all the out of town shopping centers that have appeared in recent years, fueling our addiction to shopping, making it more convenient to spend money that hasn't actually been earned yet further fueling the debt bubble. People now actually put 'shopping' as a hobby on their CV's - this is the culture we have now descended into. Ever more keeping up with the Jones, delusional states of what people earn. We are materialistically brainwashed from an early age with a culture of recent youth 'I want it now' buy now, pay later.

So what will happen now? America has already chosen their course of action by trying to inflate their way out of trouble with 'Heli Ben' leading the cause, even though this has drawn criticism. This is due to the recent contraction of credit, which is exactly what happened during the great depression, so the Fed believes that it can increase the money supply by printing more cheap money, which is what has landed up in this current situation. The problem being this is what the Fed tried to do during the great depression they tried to inflate the monetary base however due to the crisis in confidence banks and individuals hoarded money and the money multiplier reduced so broad money continued to contract. The banks held higher reserves thus negating the Feds attempts to inflate. This is commonly known as the 'liquidity trap', even Greenspan, the previous Fed chairman said central banks have very little impact to negate these risks. What has happened during the past few years is that interest rates were too low for too long and private banks lent out too much on far too low lending reserve requirements, in short the damage is already done however the Fed will prop up these institutions thus the turmoil will linger for a longer period. I have noticed that the Government recently has brought in numerous regulations which is similar to what happened during the great depression, and it seems today that we are intent on repeating that very process. Global investors are warning of the economic turmoil ahead, from Marc Faber to George Soros who recently said it is the end of a 60 year boom.

The UK is more difficult to assess. Firstly the BOE has a remit on Inflation, so technically they shouldn't cut rates, however they are the flip-flop central bank at the moment so I feel cuts will probably be on the cards. I suspect they will use the deterioration in the markets as the excuse, the same as the FED but this will only worsen the process as detailed above, the liquidity trap. Economists generally agree that the best part of the business cycle is in the bust period. It removes all the excesses of the boom and restores the economy to its true optimum position. In a truly free market based on the Austrian school of economics, we would have a depression/recession. This will re balance our economy to address the problems described above, sooner rather than later and contrary to public opinion, would be effective by quickly addressing the issue that we don't have enough savings and we are far too much of a consumption based economy. We still have centuries of wealth in our economy, but this is not guaranteed to last forever as the points above should have outlined. It's like someone who wins the lottery, the money will run out at some point if all you do is shop, while as if you invest the money it will last for a longer period and be put to more effective use. With the emerging Asian Block of nations it has never been as important as now to invest in our education and industries. If we fail to do this we will witness a slow and gradual decline in our living standards as the recent 'wealth' has not been gained by productive labour. In fact I think we have already seen a decline in our living standards - technology and cheep foreign imports have just masked that. Typically both parents have to work to pay the bills - this can be seen by Britain's rising unhappiness occurring at childhood. The point is technology should make life easier and better, I could list many other issues with society but that would be another topic.

I know a lot of people reading this may be disagree, ‘our economy is in great shape with sound fundamentals' they may say, but I urge you to re-read the quote given at the start of the article. All periods of history of rapid growth have always succumbed to a bust. This is no different.