Monday, January 19, 2009

Partial I Told You So

But since I started this blog long, long after I first told people so I'll give the kudos to the Mises Institute. Because they sure as hell told you so, years ago to boot.

Monetary union has left half of Europe trapped in depression :
http://www.thedailybell.com/index.asp

Current Conditions: Part One of Massive Email I wrote to a friend

In order to understand the present and the coming future, it is of paramount importance to accurately understand the past, and once you do, you’ll understand how much your so called education has been little more than indoctrination and adherence to ignorance.
That aside I’ll start with the existence of the central bank and its effect of causing booms and busts in the economic cycle. The reason that it does this I would like to go into but have not the time, suffice to say that it causes what has become known as the business cycle.
Our economy has been on the bust part of the cycle for the last 18-24 months. It, of course, started long before the main stream media ever took notice.
What is a bust? A bust is the correction of the economy or a sector there of to reality. Think of it this way, the boom happens when a flood of money printed by the Fed enters into a market. The market responds by the value of the goods increasing. With increasing value in a good, more people want to produce that good, so the market increases in size tremendously. However this is all based upon what is really no more than funny money. There is no capital, nothing of any substantial worth, backing it up.
What is supposed to happen is that people and businesses build up savings and then make investments with what savings they have. This causes a continuous positive growth. What all this Fed cred does is make people skip the savings part and just begin investing willy nilly, so to speak. Money, and subsequently, goods flow into areas of the economy where they would not of if there wasn’t a perceived sudden increase in wealth. For example, when housing prices were so high, more producers made houses which are now standing empty because the market was grown not by normal means but because of the introduction of people getting mortgages below what the market rate, because of the gov’t directly, and also the high prices causing people to view houses more as a large commodity that is to be bought and sold, driving the prices up more. More houses means that more goods, lumber, metal, glass, went into these houses which means that more jobs opened up in all the supporting industries.
All these companies grew because they received the benefit of the higher prices and put them to work in more materials, more employees, etc.
But with the induction of unbacked currency, the market ALWAYS eventually has to adjust to what reality dictates. Sellers of houses suddenly found that no one wanted to buy, housing prices began to plummet. Many people were left with what cheaper and cheaper homes, no good if you ;were looking to sell for more than you bought or looking to use the value of your home to finance the mortgage. REALLY no good since gov’ts (state and local) across the nation are greedy mofos and are still pricing the property at previous inflated values so they can get more out of the property taxes.
Also, all those jobs in all those industries that were increased in size or created outright are now impossible to finance and a wave of unemployment strikes momentarily in the system.
If let alone this whole thing culminates in a recession that’ll last 1-2 years MAX while the economy reallocates through market forces where those unemployed and those wasted resources go. Praise Entrepreneurs. This all is literally happening time and time again since recorded history (kings used to debased their kingdom’s currency with similar results, boom and bust, I tell you how if you want to know)
BUT, the same intervening fuckers that caused the damn issue in the first place can cause all sorts of other problems….ENTER SOCIALISM!!!

Say, for instance, that instead of allowing the economy to recuperate we feed it more and more doses of funny money in ever increasing quantities. If done to everyone at once this would cause hyperinflation. Since this is all given to banks, (at first, but this will change), the banks will try and save their money. This happened the past couple months when interest rates shot up and credit was “frozen” (it wasn’t, it was just harder to get, as you found out). This means that all that money that would cause massive inflation in all sectors is kept mostly in banks. Imagine what would happen to the price of diamonds if Debeer’s released their massive inventories, now imagine the value of the dollar bill. Now imagine paying 10,000 dollars for a milkshake. This staving off of the hyperinflation is further helped by the fact that almost the entirety of the world is right now retreating to the dollar because they ALL have the same damn issue, fiat (unbacked) currency, and because they’re smaller economies, this shit is happening faster to them. So right now, despite the fact that our gov’t is an extremely egregious offender against the markets, we’re so damn big that it takes a fuck ton to do any noticeable damage, we’re seeing the value of our dollar stop falling for a second (back in Oct) and prices drop a bit.
However, the gov’t through the Fed has decreed that all interest rates must be lowered and has taken over many of the insurance companies and banks (nationalizing them making them no more than gov’t beaucracies, which they were regulated enough before that they already pretty much that way) with this the banks are issuing massive amounts of credit again, without allowing the economy to recuperate and releasing the massive amounts of funds they’re receiving into the markets.
At the same time, gov’t is trying to stir up anti-free market sentiments by out right lying and saying all the problems stem from the free market and not the constant intervention made by the gov’t. This is aided by the public indoctrination that so many have received and believe in. So when shit is hitting the fan, the saviors are blamed and called devils while the satanic cult keeps on taking more and more.

.....TO BE CONTINUED