THE NEW GILDED AGE (Part 2)
THE NEW GILDED AGE (Part 2)
19th February, 2009 0
The basic assumptions of the progressive push for a waste-money-to-save-money "stimulus" spending package do not stand to reason. Every single Senator knows it, yet less than 60 seemed willing to admit the basic facts of life.
Matter is neither created nor destroyed. There is no such thing as a perpetual motion machine. Alchemists could never actually achieve the transmutation of common metals into gold. Those who claim these illusions to be real are common frauds; all too common frauds, as it turns out.
>Many so-called experts, whom George Ure describes as, "the current crop of formulaic trance-masters and economystics", agree that something must be done before the sky falls in. These same denizens of Americas failed school and university system, along with Barney Frank, John McFall and the rest of the sanctimonious meddlers, all tacitly participated in the biggest financial fraud of all time. Private debt rose from only about 2% of disposable income in 1945 to about 15% in 2006. Where were they on this indicator of insolvency? Out front doing cheers, that's where.
The very fact that a stimulus package involving over $400 billion in spending, plus $2 trillion more, according to the new Geithner plan, were even taken seriously, let alone implemented, is testimony to the failed ethics of our elected leaders. To irresponsibly print or borrow money for a massive government spending program only emphasizes that our government dominated monetary system is a Ponzi scheme; a shadow banking system bound to fail.
Basic rationality tells lenders, borrowers, buyers and sellers alike that unbacked currency is unreliable. If the time value of money is subject to easy manipulation (confiscation) by unaccountable insiders who are actually propped up by the authority the government (The Fed), then to pull back from open economic activity is the natural response. As such, promised stimulus will in fact breed stagnation, and a prolonged crisis of stagnation in today's instant gratification political culture can lead in only one direction: fascism.
To produce unbacked paper money through a combination of printing and foreign borrowing is government's answer to the failed promise of alchemy. This is by no means what Adam Smith had in mind when he described currency as a commodity developed to facilitate the free flow of capital.
There is nothing inherently wrong with currency, other than it's susceptibility to political manipulation when not pegged to tangible assets. Today, the currencies of the world are pegged to the US dollar, and US dollars are promissory notes backed by nothing but the promise of a sound US government.
This history has played out time and again in mixed economies; the "powers that be" need only delay discovery of the ruse for a generation at a time, until a tipping point is reached, when a massive transfer of value from property to money is needed to maintain economic dominance. In this case, the adjustment sucked the privately owned wealth out of 410K and real property equity.
Our fate may reveal itself over about 2 years. There may be a fast acting bull market. Interest rates are still at historic lows. Higher interest rates will come, and will wipe out a huge amount of capital in the bond market (which is much larger than the Stock Market). When that happens, the stock market equities (and real property prices) will fall again.
China, our biggest lender, is considering ways to diversify out of the dollar. The Chinese are nobody's fools. Mr. Luo Ping, director general at China's Banking Regulatory Commission recently gave his opinion of U.S. bailout policies: "Once you start issuing $1 trillion-$2 trillion …we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do." They see what is coming – the corrective deflationary process will be cut short, and then inflation will destroy the value of the dollars they hold (China owns the largest portfolio of US currency ever assembled).
Inflation could destroy the value of low interest loans China and other counties have made to the US. As of 2008 the US is by far the largest net debt nation in the world, at minus $ 570 billion in debt. The only other nation that owes over 100 billion is Spain, at a negative 152 billion. China is owed $370 billion ,with Germany, Japan, Saudi Arabia, and Russia also holding huge positive foreign debt balances. When the inflation comes, these debts will lose value. Good for America, right? Wrong. When we can no longer beg, borrow, and steal foreign wealth, because the foreigners will no longer buy our reserve notes, lend us money, or buy our currency, then we are out of business.
None of this reflects a failure of capitalism or free market economics, as infamous currency manipulator George Soros and other socialists contend; just the opposite. It is a manifestation of the reality that to deny citizens their basic economic liberties and security is just something powerful governments do when they abandon the foundation principals of a republic and give in to the urges of pure unrestrained democracy, which makes political power dependent on pandering.
Pandering costs money. And money doesn't grow on trees…unless you make pulp appear to have value. This paper alchemy depends on weak property rights, and the deception that a heavily regulated mixed economy is properly called a free market.
Judas Iscariot and Gaius Julius-Caesar knew the value of hard money. Rome accepted nothing less than the Tyrian shekel as payment for the temple tax in Jerusalem, and so did the friend Judas, whose very name translates as "the betrayer" in modern languages. These icons of evil were savvy to the ways of the world, but by their acts they damned themselves forever.
This will be the fate of Democrats as well, when the reckoning comes. To create a plausible claim of shared blame, the titans of statism have bought off three Republican Senators Susan Collins and Olympia Snowe, of Maine, and Arlen Spector, of Pennsylvania, who snatched defeat from the jaws of victory in the battle to stop the final push for nationalization of the American economy. The spending gambit won't work to fix what ails America. America is sick from all the fixing. The very idea of interfering in natural economics is "shovel ready" manure. The only fix here is that billions of dollars of taxpayers' money will be funneled into the campaign coffers of the new majority party.
What does the Obama-Pelosi-Reid administration have to give the new betrayers? Power, access, security; all the things money could buy if it still had value. Arlen Spector thinks that in 2010, when he faces reelection, the fix will be in because the stimulus is actually a massive one-side public financing of elections scheme. "Bought" does not necessarily mean "paid for", is the lesson that Spector may learn instead; his 30 pieces of silver are stored somewhere in a metaphorical lockbox with my social security.
By the destruction of the value of currency, through manipulations unprecedented in degree (though not in kind), the worthless paper these new betrayers get for their Judas kiss won't be enough to buy them out of the reckoning that is sure to come to those who sold the world. By trying to save their precious public careers, at all costs, they have rendered their own political graves "shovel ready", and brought damnation upon their house.
By allowing the very miscreants got us here in the first place to "solve" this crisis by stopping the correction, without insisting on the transformational changes which are needed to give structural integrity to the monetary system, and needed to allow rational growth based on real fundamentals Americans are only inviting decades of subjugation to the political class that has lured us into self-consuming overconsumption, all in the name of a crisis that the government brought on in the first place.
I for one want my money back; but, as gold is the only financial asset that's not simultaneously someone else's liability, I would like mine in Eagles, Maples, or Krugerrands please.
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THE NEW GILDED AGE (Part 2)