4. Economic graphs and diagrams

In the last chapter we have seen many phenomena of the problems of capitalistic economies. It seems to be that the governments have no possibilities to avoid unemployment with their policy. Therefore we should analyze the traditional macroeconomic steering in capitalstic countries and their consequences in history and in foreign countries.
We have seen that a big part of capitalistic debt is used like money with a speculative value. The value of the volume of the capitalistic debt depends from the developments on the stock exchanges. The stock exchanges with their speculative securities are not only a detector but also generator of booms and depressions. The cycles of such waves can be big or small and the duration of a period can be long or short. But what is a big, a small, a long or a short economic wave?
The bigness of a wave is like the amplitude of it and the duration means the frequency. Traditional economists and politicians say, the changes of booms into depressions are unavoidable like unemployment and inflation. It is necessary like the money distribution from a monopolistic central bank to private institutes without a return of service and it is necessary like the money distribution of the governments through deficit spending.
After World War II. the representatives of the governments and the experts told the citizens of their countries that unemployment and the cycles of the economies are habitually like the waves on the sea. They learned to calculate with a cycle frequency of perhaps three or four years. The most of them do not remember of the big international bubble at the twenties and thirties of the 20th century between World War I. and World War II. It seems to be that nobody knows that small waves can swim on big waves, like the waves on the sea. Usually the performance of politicians are calculated in periods of four or five years. Hence they must only consider the short economic waves. It is necessary for them to push a small boom in the year of their own elections.
Additional, enthusiastic speculants can push the stock indices and lower the interest rates. Why?
On the stock exchange exists not only a speculative competition between central bank money and the money of business banks. It exists not only speculative competition between banknotes and bonds. There is also a speculative competition between bonds and stocks. In a booming economy the stockowners expect higher dividends for their stocks. Thus more and more speculants demand stocks. Consequently the exchange rates for the stocks grow higher and higher. Although the exchange rate-yield-ratio becomes now lower, the demands on stocks is still growing. Why?
The speculants calculate not only the yield of a stock for their decision in new investments but also the rate of exchange. They add the yield of the stock and the difference of the expected rate to the amount they paid really. Such a trend to stocks is possible if they sell their bonds collectivly.
The levl of funds accounts

The level of funds accounts shows us the structure of the assets in a country. Especially the relation of all assets to the Gross Domestic Product is an important indicator for an economy.

In consequence the interest rates of the bonds drop deeper and deeper in relation to the inflation rate. Hence more and more speculants will sell their bonds and buy stocks. The reactions of more and more expensive stocks are cheaper and cheaper bonds. In such a time all investors will be enthusiastic because they "earn" without working. It is an era in which the investors are prowd about their own cleverness and foreknowledge.
On the other side the debtors are also satisfied. Because they can call in, that mean terminate their debts and make new contracts with lower interest rates. When the rates of the stocks rise the amounts of the debts must fall, because of their decreasing interest rates.
The hausse will strengthen the hausse. And not only the boom is strengthening the boom. There is an additional power which can strengthen the booms.
The governments can strenghten the rights of the speculants and the creditors and weaken the rights of the debtors in many kinds. They can strenghten the rights of the stockowners and the managements and weaken the rights of the workers. Especially with deregulation and privatization of monopolized services the government is able to promote the upper class. In this case the management must invest more money for advertising of the monopolized services. The growing number of stockowners and their income is only a small part of the advantages of the upper class of proprietors. In those times the managements will allow themself to take higher salary and add their income with stocks and stockoptions of their own company. On the other side the class of working poor will increase. What the upper class takes to much, for the lower class remains to less. The differential of economical earning is increasing faster in relation to the differential of the economical performance of the people. Both differentials look like the parts of a scissor. If the differential of the rich and poors is growing, it looks like an on opening scissor. The inequity of wealth and income is a constant partner of unemployment in capitalistic economies.

The levl of sectors from the funds accounts

In a market economy a credit contract should be the result of a private agreement. But the credits from the public and from the financial sector contain an earnest danger for the economy. They are the reason for endless political disputes.

The governments have another possibility to strengthen the rights of the speculants and to weaken the rights of their contract partners. They can legalize socalled new financial instruments. These are a special forms of debts. The amount of the debt depends not only of the interest rate or the exchange rate. The derivative debt is more than a contract between two contract partners, because the worth of a derivative contract depends from the value of strange property. It is like a guarantee for a specific value of traded things. Such traded things may be stocks, bonds, interest rates, exchange rates, indices of a speficific selection of securities or risks. Sometimes the prices of material things like the metal gold or mineral oil can be the base values of derivative guarantees too.
It seems to be a very serious business, because everybody wishes security. Even the speculants of bonds and stocks and of foreign currencies should have security at their business. Therefore it is usual that the the creditors of the derivative contract make their contracts with other partners in order to minimize their own risk. They do this like assurance companies who make additional insurance contracts with a reinsurances in order to minimize their risks. But all this claims give the speculants more solvency for additional speculative contracts and the calculation of the true risk of insolvency from the creditor is more difficult. Everybody wishes more ability to pay of course. But this method is a kind without work. Nearly nobody does notice this kind of business, because it is a growing business for the satisfaction of the speculants.
The sum total of derivative debt was growing approximately constant in the western economies at the last years of the 20th century. Therefore it seems to stabilize all financial transactions, financial savings and financial activities. The international statistics of this mysterious forms of debt will be published regularly from the Bank for International Settlement (BIS) in Basel, Switzerland. The traders of derivative securities learned to calculate the risks of such business in the era of growth. A big crash, that means the implosion of a big speculative bubble, is not possibible without an implosion of the sum total of values from derivative debts.

The world derivative debt in relation to World-GDP

The derivative debt in the world is still growing faster than the World-GDP. Although the market value of such debt is only some percent of the notional amounts, their market value grow very fast in case of a money crash.

At the end of a bubble the solvency of lenders does finish like in the game of dominoes, because the most creditors are als debitors. This rule of the capitalistic financil system is in the derivative credit sectors more a reality than in other credit sectors. Hence the derivative financial sector is like the stocks sector very dangerous for the stability of the financial system.
In the next chapter we consider the main characteristics about the

5. The traditional alternative economic systems