Wednesday, January 21, 2009

Current Conditions: Part 2 of Massive Email I sent to a friend who asked

This would mean it’s going to get nasty regardless with only the impending hyperinflation and the unimpeded gov’t grab for power which always entails a lot of death and destruction. But there is one more issue. Our standard of living as a whole and all the markets that support it have been over all in their own boom period (consumer goods being the “last in line” in the economy get hit after all the construction and industrial) this is on the cusp of ending.
It is my belief that Obama and his advisors realize some of this to some degree and are planning to use the powers given to the president unconstitutionally by congress to make America his own massive socialist kingdom decreeing that only through his leadership will we all be saved. The masses will follow and times will get worse. We will see an extreme rise in the police state, people like your parents will probably be arrested for crimes against society and such lovely state institutions like concentration camps will begin to arise once more.
Before I get too dark, let me remind you that ALL revolutions stem from two main factors. A tireless minority willing to strive for their ideals AND a sudden, perceived change in the wealth/ living of the populace at large.
As the crackdown occurs and the life of the people quickly becomes what Hobbes called “nasty, brutish, and short” there will be many uprisings across the nation against the federal government. Now these can be by and large peaceful, as what happened when the Soviet’s collapsed, well…mostly. Or it can be much more violent, which has also been seen. America is much too large and diverse for there to be a single gov’t for long in such times. It also has the benefit of a liberty movement. Russia, when faced initially with such, murdered 20 million Ukrainians. I hope this does not happen here, but if you really think it can’t then you haven’t been paying attention to history and what we have been doing for the past century.
This will all begin within the next 5 years. I said 20, 2 years ago, so pray that I’m right this time and it’s not less. Hell, if things go badly enough, maybe the Mayans would have been right. Humanity might only have less than 4 years. I doubt that highly though. For one, why try if there is not hope? And for a big fucking two people have been predicting the apocalypse since they could think of such a thing, and it’s always just been another turn in the cycle for humanity’s growth.
I think there is a damn good chance that we can come out of this with an even better future than what we went into it with. Thanks to technology and liberty. A group of people just need to survive and retain some of the advances and liberty long enough to become the beacon to the world that America once was while the empires crumble around them.
There you go, some short view, some long view. There is MUCH more. But I’ve been at this for a while, so I’ll go over more later.


back to my explanation. Shit, I’m sorry I ran out of time, anything I missed just ask.

So, here we stopped with the beginning of the crash, or the bust part of the cycle, when reality intervenes and puts the economy back in its place. Business ventures, that were only profitable due to an illusion caused by inflationary practices, cease to be profitable and the economy has to rearrange itself causing the brief unemployment and drop in prices. The banks realize that their money is not coming back to them as people begin to default on loans and industries cease to be able to pay back their debt, and they begin to tighten the restrictions to credit. They do this by increasing interest rates and by increasing the requirements for credit issue, this is y you didn’t get a card…the first time. Given a small amount of time, the economy works itself out, people are back to work, and banks begin loosening the restrictions on credit again. Thus beginning the next boom and subsequently setting up for the next bust.
Now if the bust part was a return to reality, where growth is a lower constant than the boom but continuous nonetheless, then what harm is it to society as a whole if we enjoy periods of seemingly extreme prosperity followed by sobering reality followed by another period of extreme prosperity? Wouldn’t the economy be growing at an even faster pace because of these periodic “bursts” of growth?
With a fairly nondetailed look at recent history it may be said to be so, and it is the inevitable conclusion to the arguments of a couple other schools of economic thought. However, if one were to predict using such a model, one would fall short in no time at all (and they constantly do). As an aside, isn’t one definition of insanity is repeating the same thing over and over again and expecting different results? This falls into the category of what is seen and what is not seen. Or in other words, goddamn propaganda is what is “seen” causing reality to go more or less under the radar of popular purview.
As noted before each time these booms irrevocably place scarce resources into areas where they would not have gone had there not been the boom in the first place. Those resources either cannot be recovered without using additional resources, or at all. Since all laws of economics are derived from the effect of differing levels of scarcity, this is a BIG issue. Perhaps the biggest. Simply put if you do X, then you can’t do Y. In the boom, X is wasting resources on projects that would never have gotten funding because it would have been throwing away money in more realistic economic conditions. When the bust inevitably hits those resources for that time are gone. For good.
So all the good that Y could have been, and with it being based on actual savings and realistic wealth assumptions it would have been a permanent step forward, will have to happen with different resources, if it happens at all.
Now imagine that this has been pushed so far that what actual wealth exists pales in comparison with what people believe exists.

Perhaps a good example would be to mention the whole male/female work wage disparity. It is stated that on average women earn 70 cents for every dollar a man receives. The reality of this is that this is an extremely disingenuous manipulation of numbers. No crap it’s true that women, as a group, which is what an average does, do not earn the money that men do. What could it possibly be that would remove a woman from the work force? What group, men or women, have a larger number stay at home during able bodied adult working years? And if you’re doing X, can you be doing Y? Not really. In fact, if you remove from the study all women that had anything to do with marriage then the disparity disappears. So empirically, this is shown not to support a supposed sexism in businesses. It also does logically, which is why I point it out, because common sense by ITSELF debunks most everything the gov’t does. If businesses could get away with giving away a position to women for 70% of the cost to the business as they would incur hiring a man, who the hell do you think would ALWAYS get the position?

Another side effect of a boom is the amplification of bureaucracy. Truly competitive business tends to have a fairly low ratio of administrators to actual workers/producers. DePauw, and universities in general are a good example of this. Easy credit has flooded the education market directly from the federal gov’t. This has both enabled many people who really didn’t need further education access, which seems great at first. But now the job market is flooded with people with degrees to the point that it is almost useless to have a bachelor’s, and it definitely is to have an associate’s. It also has lead to the universities fearing bankruptcy, and thusly having to cater to their consumers, students and their families. Instead they cater to where the money really coming from…the State. Also, higher demand, higher prices. So universities and the government are in an upward spiral just like the price of housing was. The gov’t gives them money directly and indirectly through student loans, they ask for more, the gov’t ups what they give them and so on. The point where this will stop is, once again, when students aren’t buying anymore. Once students, and in reality families who fund them, reach the point where they cannot or will no longer buy, then you will see a major bust in the higher education industry. I am positive that this will happen, but not for some time. It has been a staple of the mid to upper class public indoctrination centers that college is the end all and be all, so much so that people literally will give up an extremely large portion of their life savings for little hope of any return. It’s insane!!! Some stats try to state that college degrees earn more than non over time…well, no crap. Those going to college tend to be middle class which tends to be a bit more motivated section of the population and so will go towards better paying jobs, or upper class and they’ll just get a degree because they can and then move on to inherit positions. I would say this skews the crap out of those numbers. You know
This bureaucracy creation is also caused by gov’t regulation as well. The effect is that people are employed in the work force but waste time, resources, their very lives away doing tasks that do not need to be done. For example I’m pushing papers right now in a department that only came into existence in the early 90’s because of the growing bureaucracy of Children’s Hospital in direct response to gov’t regulation to all sides of the health system. All these resources could be going to furthering medical technology, or working in other currently existing and nonexistent industries (both flying cars and cell phones have been around for 50 years…guess why we don’t have flying cars and cell phones didn’t come out till late 80’s. Yep, special interests lobbying for laws and regulations inhibiting competition. So, someone can create the tech, but they can’t make a business out of it.

What caused the Great Depression was not the Stock Market crash of 1929, but actually the government’s response to the stock market crash. Schools outright lie to their kids and say that things like Hoover (president at the time) was a proponent of the free market and it was because of this he kept his hands off the economy and “let it” slide into a deep Depression. This is pure bull. Most of the socialist programs that flourished under Roosevelt were actually started by Hoover. It is this further gov’t intervention that kept the economy from recovering, and it wasn’t until AFTER World War 2, when Truman disbanded some of the programs that the economy began to recover.
Before I go into some of those policies and their effects, let’s begin at the beginning of the crash.
When banks suddenly find themselves no longer able to issue “easy” credit, they quickly move to hold onto everything what they have left. They do this by increasing the interest rates of loans and credit issue requirements. So that people with lower credit (you for a bit) have a hard time getting a loan/cred card and the people with good credit are less likely to borrow due to the higher interest rates. This sudden change from easy credit to harder to come by credit (though not impossible) causes people to conserve more themselves as well, not spending beyond their direct means. Less demand means prices drop. (deflation) Those price drops cause businesses that benefited from the excess credit to lose an equivalent portion of their business, destroying some industries entirely that were not based on realistic assumptions but rather faulty assumptions caused by the belief in the validity and continuance in the easy credit. (malinvestments) THIS IS GOING ON RIGHT NOW. Those malinvestments represent resources lost that could have been (and would of if not for the boom) spent on increasing the scope and breadth of sound entrepreneurial ventures. Basically what we see is the end of businesses that were seemingly EXTREMELY profitable before, the steep rise in unemployment, and an overall drop in prices as the economy adjusts back to reality. This theory is further validated by the fact that the industries hardest and first hit are the capital goods sector (construction, industrial) before consumer goods. This is because banks and similar institutions are doing MASSIVE amounts of “investing” in such projects. When the easy flow stops, the “bigger they are, the harder they fall”, so these companies have grown very large without the savings that are required for normal growth, and when they suddenly find themselves in the red, they have to cut costs. All other economic “theories” (I’m using this term because proponents of Austrian economics are nice enough to do so. I, however, know most proponents to be shills for the state or just outright parroting idiots. No offense to squeaker, she’d bite these people too.). But yes, all other economic “theories” cannot account for this phenomenon and try their damnedest to ignore it, which is a small portion of the entire reason why the intellectuals and pundits tend to be very confused at the present as to what’s happening.

Now, when the market is allowed to mend itself (1923, and many other examples) and work around the malinvestments and gov’t involvements that cause the problem in the first place, those unemployed are reemployed fairly quickly and the economy moves on. When the banks feel like it’s safe to venture out credit again they “open their doors” again and the inflationary spiral starts anew. Remember again, this is under the effects of having a central bank. Without such an institution there is no boom or bust cycle and thusly…none of this would be happening.
So why was, eventually, 1/3 of all able body Americans unable to find employment during an entire decade? Well, many factors, but chief among them are price controls pushed by Hoover, and later FDR, and as always, Unions. Individuals don’t like it when prices drop. Farmers complain that their not making as much when their milk is bringing in less money per jug. Oil producers complain when the value of a barrel drops. And so on, and so forth. Normally, reality would indicate to these people that they should either change their practices, “suffer” quietly, or move into an entire different business.
But, gov’t is here to solve our problems and so in our name it placed “price floors” or levels where producers are NOT allowed to sell goods below on pain of imprisonment and/or death. Many of these still exist today. To sell milk below a certain value, despite whether or not it is economically feasible to do so, would land the seller in jail, ensuring no profit made and no milk sold.
Another similar tactic would be to cut out a portion of the supply in order to drive up prices. This insanity was started under Hoover and further increased by FDR in such telling instances as the mandated and executed slaughter of hundreds of thousands of livestock which were left to rot in the fields. There is still some vestiges of this program around today. The farmers were sometimes paid in newly issued paper money, if they were lucky.
Trade unions caused similar catastrophe. When the prices drop, so do wages. The overall purchasing power doesn’t actually differ much. But trade unions used the threat, and sometimes used outright, the gun of the gov’t to keep employers from necessarily decreasing wages. Because a business cannot operate constantly at a loss, many people who should not of been became unemployed and most of the unemployed could not find a job.
So unemployment went up and so a bunch of business went belly up because they couldn’t do the necessary firing to balance their books due to, once again, threats by trade unions.
Unemployment at that high of a rate means that there are far fewer producers of goods and the same damn amount of demand, food shelter, etc. Which causes massive unrest.
In order to stave off civil unrest, the gov’t, headed by FDR, hired millions to do random pointless work, “I have three million men hard at work Mr. President, just for God’s sake don’t ask me what the hell they’re doing”, Secretary of State. This was also perfect for keeping FDR in power, when you can threaten a giant portion of the population with unemployment if they don’t vote for you and have one of the most extensive propaganda campaigns ever seen in the history of mankind. Hitler openly showed his respect and admiration for FDR and what he was doing. Like likes like.
How does the gov’t fund this? Taxes, and printed money. Since the creation of the income tax the rich had been targeted for fleecing and this period saw massive increases in their burden. But you can only tax a society so much before being very visibly counter productive, so the more insidious printing press was put to use. The gov’t paid all their debts in effect by spreading the debt around through inflation. Everyone’s dollar was worth less in order to fund a solution to a problem caused by the same people.
So what did all this effort amount to? Well, besides for making a good chunk of society complete and total state worshipers, nothing. Worse than nothing, the Depression was worse just before World War 2 than before. So two and a half terms of FDR had put this country in an even worse position, and because of this fact actually gaining acceptance in the general populace, people now say that it was World War 2 that got us out of the great depression, which is logically, and proven false. How the hell is a war ever going to get a nation out of a depression? It does on an even larger scale what a central bank did to the economy. And not only is the entire war industry one big waste of resources, but most of those are consumed/destroyed in the effort to destroy another nation and their economy. Plus, you don’t take a MAJORITY of young men and put them in the armed forces without having some way to fund them. If the entire cost of the war was to be taken directly from citizens in taxes, there would not of been enough wealth in the nation at that time. SAME WITH TODAY. They had to print and borrow money in order to fund all this misallocation of capital. It wasn’t until 1947, two years later and after many of the PRE war laws had been ended that the economy started to recover.

This example has been given for an important reason. It illustrates the damage that was done to the people of America, both their freedom and prosperity, within a couple decades of the creation of a central bank. For a good analogy let’s use the infinity room at house on the rock. Say the vertical rock face is the level of economic growth that would of normally happened, the room sticking out is the malinvestment growth caused by the boom. An infinity room representing America circa 1929 would be about 20 feet long and 10 feet off the ground. So when the bolts break and the room “crashes” (get it?) It’s bad and noticeable, but not by much.
Today, we are now close to a mile off the ground in comparison and the amount of malinvestment in the economy causes the length of the room to be twice that of the rock face…and those bolts are popping off one by one.
Once again, the crash would stabilize in a relatively small amount of time if the gov’t NOT intercede with its type of “patching”. However we now have a president-elect who thinks FDR “didn’t go far enough”. He plans to save the economy with tons and tons of government action.
All the propaganda, INCLUDING THAT OF BUSH, is saying that the free market failed, and now gov’t planners need to take the reins of the economy to save us from ourselves. The vast majority of people are too damn vapid or distracted to realize the utter fallacy of this and thusly doom everyone to repeating history.

I must tell you that one of the many defining traits of the Austrian school of economics is a adherence to the idea that it is capital, not money that denotes actual wealth in an economy. It is from this that all the rest of the theory was derived BEFORE the great depression by Mises. It is from savings and actual goods that real wealth is derived. This may sound reasonable enough, but you will find quickly that no other school of economics does so, and so they have all been caught with their pants down, so to speak, whenever the economy changes, while the Austrian economist is left saying I told you so years ago, for example, check out the books on the “housing bubble” printed back in 2003 and earlier. Or the dot com before that. Hell, I could even tell you the several reasons why for a while there American jobs were going overseas faster than you could say holy f-bomb. Austrian economists are sidelined and ignored despite the fact they have been the best economic prophets that have ever existed because of the solution they preach. Remove gov’t intervention COMPLETELY. No other school of thought on economics does this as consistently. Mostly other schools believe that wealth is derived FROM gov’t (Keynes) or from the control of the money by a centralized authority (Monetarists like Milton Friedman). Basically, both sets of ideas would have been long been dismantled by society if they weren’t so damn useful to men with guns and a lust for power. Hopefully this gives you an idea of the hold statist ideas have on the society as a whole and makes you wonder…why?

If you remember what we have gone over so far, it would do you good to notice that the impetus for every single person’s action spoken of thus far has been self-interest. In a free-market that self-interest is kept in line, regulated so to speak, by the natural forces of human interaction, i.e. competition. Uninhibited competition actually has a few very beneficial effects, consistent improvement over time and keeping people directly responsible for their actions. If a business or individual fails it fails, no protection from its own folly through welfare and anti-competition laws, a much less gruesome survival of the fit. Fit in a free market means ability to cater to the consumer demands. We see some of these effects even in today’s very much state regulated economy due to the drive people have to voluntarily interact with each other. Despite the constantly growing invasiveness of the gov’t into our lives, most of the people live most of their lives in relative anarchy. Voluntary interaction is the glue that holds all of society together, and gov’t is doing its damnedest to destroy it from all sides.

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