Archive for the ‘Invasive government control’ Category
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
“A private central bank issuing the public currency is a greater menace to the liberty of the people than a standing army.”
“I do not take a single newspaper, nor read one a month, and I feel myself infinitely the happier for it.”
“The man who reads nothing at all is better educated than the man who reads nothing but newspapers.”
“Paper is poverty, it is only the ghost of money, and not money itself.”
“The spirit of resistance to government is so valuable on certain occasions, that I wish it always to be kept alive.”
“The will of the people is the only legitimate foundation of any government, and to protect its free expression should be our first object.”
“It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.”
“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.”
“I have the consolation of having added nothing to my private fortune during my public service, and of retiring with hands clean as they are empty.”
–Thomas Jefferson, letter to Count Diodati, 1807
“No government ought to be without censors and where the press is free, no government ever will.”
–Thomas Jefferson, letter to George Washington, September 9, 1792
“An honest man can feel no pleasure in the exercise of power over his fellow citizens.”
–Thomas Jefferson, letter to John Melish, January 13, 1813
“Some men look at constitutions with sanctimonious reverence, and deem them like the ark of the covenant, too sacred to be touched.”
–Thomas Jefferson, Resolutions, 1803
“Experience has shown that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.”
– Thomas Jefferson
” I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.”
–Thomas Jefferson, to Archibald Stuart, 1791
“No nation is permitted to live in ignorance with impunity.”
Malo periculosam libertatem quam quietam servitutem. (“I prefer the tumult of liberty to the quiet of servitude”)
–Thomas Jefferson to James Madison, 30 January 1787.
Posted February 9, 2012
Until very recently I reckoned this Upper Caste of loyal servants comprised about 20% of the American populace, but upon closer examination of various levels of wealth and analysis of advert targeting (adverts only target those with enough money/credit to buy the goods being offered), I now identify the Upper Caste as only the top 10% (the aristocracy is at most the top 1/10th of 1%). Wealth and income both fall rather precipitously below the top 10% line, and as globalization and other systemic forces relentlessly press productivity into fewer hands, then the rewards aggregate into a smaller circle of laborers.
As noted yesterday in Social Fractals and the Corruption of America (Of Two Minds, February 8, 2012), you cannot aggregate healthy, thrifty, honest, caring and responsible people into a group that is dysfunctional, spendthrift, venal and dishonest unless those individuals have themselves become dysfunctional, spendthrift, venal and dishonest.
Since non-pathological people will quit or be fired, then these fractals of corruption are self-selecting and self-perpetuating. This is true not just of financial America but of elected officialdom. Anyone who is still naive or delusional enough to think that getting elected to Congress or the state legislature will empower “doing good” will soon learn the ropes: the next election is less than two years away, and if you want to retain your grip on power you’re going to need a couple million dollars.
So much for “working within the system.” By the time all the donors, lobbyists, leeches and parasites have been properly serviced, the “reform” bill is 2,000 pages long. As a result of the feudal structure of wealth and power in America and the self-reinforcing, self-propagating fractals of pathological servitude, the citizenry are increasingly remote from power. The aristocracy, like feudal lords in distant, fortified castles, demands obedient service of the powerless citizenry: work hard, pay your taxes and service your debt – and fears any awakening of true self-interest.
Just because a devoted member of the Upper Caste is allowed to enter the castle to do his work doesn’t mean he is part of the aristocracy. That glow of proximity to power is his reward for dutifully slaving away as a higher-order serf.
This is a must-see! The European Stability Mechanism (ESM) accord is scheduled to replace the EFSF. The following video highlights the key sections of the proposed treaty. This is a horror story, folks!
Key Details of ESM Accord
- Article 8 says “Authorized Capital stock 700 billion Euros”
- Article 9 says “ESM members irrevocably and unconditionally undertake to pay capital calls on them within 7 days”
- Article 10 allows the ESM board of governors to “change the authorized capital and amend article 8 accordingly”
- Article 27 says ESM shall enjoy “immunity from every form of judicial process”. Thus the ESM can sue member countries but no one can challenge it. No governments, parliament or any other body or laws apply to the ESM or its organization.
- Article 30 says “Governors, alternate governors, directors, alternate directors, the managing director and staff shall be immune from legal process with respect to acts performed by them (…) and shall enjoy inviolability in respect of their official papers and documents”
There are no independent reviewers and no existing laws apply. Thus Europe’s national budgets will be in the hands of one single, unelected body that is accountable to no one and immune from all legal actions. Is this the future of the EU or will the German supreme court and other governments put an end to it?
by Charles Hugh Smith
from Of Two Minds
Posted November 03, 2011
Financialization has led to a “hothouse” global economy where the slightest disruption in central bank/Central State intervention will cause the sickly flowers to wilt and expire.
Of the three great financial truths that have been left unspoken for the past four years out of sheer dread, lest their mere mention collapse our economy, let’s start with the most obvious:
The first great financial truth: If the Federal Reserve and Federal government ever crimped the dripline of “easing” and bailouts, America’s financial sector would promptly roll over and expire.
Does this strike you as a robust, flexible, transparent system? Of course not. Rather, it is a “hothouse” financial sector, one that needs constant injections and a carefully controlled environment just to keep it alive.
And since the U.S. economy has been fully financialized, it is now dependent on financial machinations and skimming for its “growth,” profits and the debt expansion that fuels everything else, including the metastasizing Savior State, a gargantuan aggregation of an unaccountable National Security State with crony-capitalist cartels and a dependency-inducing Welfare State.
Without the debt conjured into existence by the Fed, Treasury and the financial sector, even the mighty multi-tenacled Savior State would quickly starve.
As a result of our dependence on financialization and exponential debt, our entire economy has become a weak, sickly “hothouse” economy which can only survive in a narrow band of temperature, debt injections and opaque manipulations of data and what’s left of the nation’s shriveled markets.
Once exposed to Nature, i.e. “wild” transparent markets that are allowed to discover the price of all assets naturally, then both the nation’s financial sector and its economy would implode.
The second great financial truth is that the financial sector has long been detached from the real economy. The real economy is for chumps; the “no-risk” skimming of monetary legerdemaine is the raison d’etre of the entire financial sector, a point brilliantly made in this “must read” essay posted on Zero Hedge: MF Global Shines A Light On Monetarism’s Incapacity To Enhance The Real Economy. Granted, some of the financialization schemes described are not that easy to grasp, but here’s the primary point:
That is why this system has to change at some point. It is exactly designed to be misleading, and the reason is so very simple. In any fractional system there will be a desire to amplify that fraction to the maximum degree. But in doing so, participants recognize that the process of maximization entails creating negative human emotions and perceptions since history is not really that kind to this manner of fractionalization. So the system has institutionalized, abetted by the very regulators that are supposed to cap fractions and leverage, these methodologies of hiding just how much financial entities have engaged in maximizing themselves under the cover of mathematical precision.
The Panic of 2008 was supposed to correct these excesses and remedy the fact that risks have not been accurately priced for decades. Yet the system has resisted every effort, simply settling for redefining the appearance of safety yet again. Somewhere in that mathematical pursuit of maximum fractions, the very goal of finance changed, as if traditional banking was no longer sufficient to support the pursuit’s ever-growing ambitions. So the financial economy has broken away from the real economy, using the ironic cover story of enhancing price discovery to the process of intermediation.
The fact that money is disconnected from the real economy never enters the consciousness of monetarists since money is always the answer. But make no mistake, the primary reasons for this global malaise are that money has lost its productive capacity and its proper place as a tool within the system.
The third great unspoken truth is that the conventional Status Quo – the financial punditry, the Cargo Cult of Keynesianism, the incestuous academic community, the PhDs in the Fed and Treasury, the politico lackeys, the self-serving think-tanks of both empty ideologies (“which is better, Bud or Bud Light?”), not to mention the lobbyists, revolving door toadies and all the other hangers-on in New York and Washington – have no Plan B and certainly no Plan C. In other words, they are utterly clueless about what to do when their abject and total failure becomes unavoidably obvious.
It is of course a crisis of self-service; nobody dares put their own status, wealth, power and perks at risk by thinking independently, much less speaking All That Cannot Be Spoken Lest This Sucker Implode.
But it is also a monumental lack of imagination; the lackeys and toadies cannot imagine any other Beast other than the one whose teat they have sucked all their lives. They live in mortal fear not of being ignorant or lacking in imagination – those deficiencies are too obvious to contest – but of the truth of the system’s increasing weakness and vulnerability being openly revealed.
America’s (and the world’s) financial sector is a fragile, sickly hybrid which will shrivel and expire the moment it is placed in the real, dynamic world. And because the global economy has become dependent on the slouching beast of financialization, it too is fragile and sickly, sensitive to the slightest perturbations and exquisitely vulnerable to any disruption of the constant life support offered by central banks and Central States.
It is neither capitalism nor socialism, but a twisted hybrid of the worst traits of each.
I happened to catch a brief interview on DW TV (German TV, with English announcers and subtitles) of one of the few ECB (European Central Bank) officials with the integrity to resign in protest at the ECB’s blatant interventions in the bond market (buying Italian bonds to prop up a market that would implode the second ECB support vanished) and the central bank’s slippage toward money-printing as the answer to every problem.
This gentleman said that the ECB had to monitor the global economy 24 hours a day lest some tiny policy mistake bring the entire shaky edifice down.
Does that strike you as a description of a robust, adaptable, capitalist system based on transparancy and price discovery of assets? Of course not; it describes a hothouse economy, always on the ragged edge of collapse if its central bank and Central State minders make the tiniest error in its care.
For four precious years we have been force-fed nothing but lies, obfuscation, misdirection, fear-mongering, spin, sins of omission, misinformation, propaganda, false rumors and false hopes. The hothouse is slowly falling apart, and the sickly global financial sector is wilting. The financial media is heralding every “save” and every “rescue” with ever-shriller enthusiasm, lest a contagion of truth spread through the hothouse like a chill wind.
But we can be sure of one thing: those who know better have already sold, and it is now the job of the politico lackeys and the toadies of the Mainstream Media to convince the bagholders to hold on and not sell, because “everything’s been rescued.” Distilled to its essence, that is their one and only job: to convince you not to sell. That keeps the bid up for their Masters to sell into.
If history is any guide, the final collapse will be triggered by an apparently “controllable” event, something like the bankruptcy of MF Global. All eyes are on Greece’s referendum, apparently scheduled for December 4 or 5; but regardless of the vote, does a “yes” or “no” change that nation’s fundamental insolvency? No, it doesn’t.
Does the passage of some toothless law in Italy magically render that nation solvent? No, no, a thousand times no; none of these public-relations tricks can change the fact that all these nations are insolvent, the banks are insolvent, and even France and Germany are staggering under unprecedented burdens of debt.
The smart money sold in May, 2010, and the disbelievers among the Power Elite sold in May 2011, or perhaps August. Now those below the smart money (but still above the dumb money) are sniffing the fetid hothouse air, where the rank, sweaty desperation of the minders is now ever-present.
So the apparatchiks and foot soldiers have been ordered to keep the dumb money from selling, until their “betters” can sell into a rumor-juiced bid. This explains the sudden jump in the S&P 500 on every rumor of rescue, as if an over-indebted and leveraged-26-to-1 financial system can be rescued with “belt-tightening” and ECB intervention with taxpayer money.
The entire euro “project” was a scam that enabled a vast new scale of financialization. Now that the “project” is falling apart, the bagholders who bought into the shuck-and-jive are nervous and fearful; has it all really been “saved”?
No, it hasn’t; it cannot be saved. The only “solution” available is to sell: sell now, while there is still a bid. Sell fast, sell hard, sell everything denominated in euros. That is precisely what the Status Quo fears the most: an awakening continent of bagholders and debt-serfs.
Anyone thinking the euro (and eurozone) can’t possibly go down until after the Greek referendum may well find their confidence in the Status Quo’s “rescue” has been sorely misplaced.
500 Million Debt-Serfs: The European Union Is a Neo-Feudal Kleptocracy (July 22, 2011)
The Dynamics of Doom: Why the Eurozone Fix Will Fail (July 25, 2011)
The European Model Is Also Doomed (February 7, 2009)
When Debt-Junkies Go Broke, So Do Mercantilist Pushers (March 1, 2010)
Why the Euro Might Devolve into Euro1 and Euro2 (March 2, 2010)
Why the Eurozone Is Doomed (May 10, 2010)
Ireland, Please Do the World a Favor and Default (November 29, 2010)
Why The European Union Is Doomed (March 28, 2011)
Greece, Please Do The Right Thing: Default Now (June 1, 2011)
Why the Eurozone and the Euro Are Both Doomed (June 23, 2011)
Greece Is a Kleptocracy (June 28, 2011)
by Grant Williams
25 October 2011
With deference to European readers, I have removed (most of) the original baseball references. Please forgive, Grant!! – Aurick
“Everyone needs the ECB to step up to the plate. The ECB has no excuse not to act. In trying to keep its monetary virginity intact, the bank threatens to destroy the Euro Zone. If that happens, nobody will be able to profit from its virginity.”
– Paul de Grauwe
The total overall cap [of the ESM] is 500 billion Euros
160 billion Euros has been spent
340 billion Euros remains
340 billion Euros + zero Euros = 940 billion Euros“
- Mike Shedlock, on the latest European ‘Masterplan’ to merge the EFSF + ESM
“The trouble with quotes on the internet is that it’s difficult to determine whether or not they are genuine”
- Abraham Lincoln
Right now, the team comprising the ECB, EU and the various parliaments that make up that fractured and faltering alliance are sending, in baseball parlance, pitcher after pitcher to the mound (sometimes in groups of two or three) trying to combine for the perfect game that they NEED in order to escape the debt trap they have backed themselves into.
Being in a situation where you lose unless you can pull something off against odds of multiple-thousands to one and pitch a ‘perfect game’ is a ridiculous spot in which to find yourself, but as this month has rolled by, it has become ever-more apparent that that is precisely where the Brussels Eurocrats now find themselves. It appears as though, as the pressure has ratcheted up this week, we are now in the ninth inning.
Personally, my own belief (as regular readers are by now well aware) is that the very best the Eurocrats can hope for is to extend the game by an inning or two, but their arms are tired, their bullpen is empty and, at some point, we are going to see an absolute avalanche of runs scored against them as the whole thing finally topples under its own weight.
This past week has been nothing short of farcical as the tension has built towards a crescendo that seemed at first to be willfully engendered in order to generate just enough sense of impending crisis to enable a resolution to be forced through in a similar fashion to that which preceded Henry Paulson and Ben Bernanke’s now-infamous closed-doors fright-fest (hyphenation alert!) that led to the passing of the TARP in late 2008.
Obviously, any and all capitulation towards outright bailouts (or ‘QEU’) must at least be seen to be against the will of the Germans and that proviso goes a long way towards explaining the raft of headlines that have flooded the Reuters and Bloomberg screens of investors all around the world this week. We have seen misdirection, scaremongering, u-turns and abject incompetence as well as the kinds of ‘leaks’ that are, frankly, laughable – the prime example being the ‘leaked’ draft copy of the Euro Summit statement which was printed, in its entirety, in the Daily Telegraph on Thursday – coincidentally at the precise moment when things were starting to come unglued as it became clear that this Sunday’s Summit would NOT produce the magic bullet required.
The statement itself is priceless. It begins with a bit of back-slapping for the passing of the EFSF (after no less than six months of wrangling and an eleventh-hour drama in Slovakia):
The strategy we have put into place encompasses determined efforts to ensure fiscal consolidation as well as growth, support to countries in difficulty, and a strengthening of euro area governance. At our 21 July meeting we took a set of major decisions. The ratification by all 17 Member States of the euro area of the measures related to the EFSF significantly strengthen our capacity to react to the crisis.
The agreement on a strong legislative package within the EU structures on better economic governance represents another major achievement. The euro continues to rest on solid fundamentals
It then moves on to more familiar ground; an agreement to display their strong determination to fix things. Nothing concrete, of course, but they sure as hell are determined:
The crisis is, however, far from over, as shown by the volatility of sovereign and corporate debt markets. Further action is needed to restore confidence. That is why today we agree on additional measures reflecting our strong determination to do whatever is required to overcome the present difficulties.
The rest of the text, should you want to read it, is here, but allow me to summarise it through a few select phrases that will save you the trouble of doing so:
“blah, blah, blah… All Member States are determined, blah, blah, blah… We want to reiterate our determination, blah, blah, blah… We reaffirm clearly our unequivocal commitment that, blah, blah, blah… All other euro area Member States solemnly reaffirm their inflexible determination, blah, blah, blah… The euro area Heads of State or Government fully support this determination, blah, blah, blah… All tools available will be used in an effective way to ensure financial stability in the euro area, blah, blah, blah… We fully support the ECB, blah, blah, blah… “
See. I told you they were determined.
But, buried deep in the draft are (amazingly enough) some specific measures that will surely help solve the crisis:
• There will be regular Euro Summit meetings bringing together the Heads of State or government (HoSG) of the euro area and the President of the Commission. These meetings will take place at least twice a year
• The President of the Euro Summit will be designated by the HoSG of the euro area at the same time the European Council elects its President
• The President of the Euro summit will keep the non euro area Member States closely informed of the preparation and outcome of the Summits
• As is presently the case, the Eurogroup will ensure ever closer coordination of the economic policies and promoting financial stability.
• The President of the Euro Summit will be consulted on the Eurogroup work plan and may invite the President of the Eurogroup to convene a meeting of the Eurogroup, notably to prepare Euro Summits or to follow up on its orientations
• Work at the preparatory level will continue to be carried out by the Eurogroup Working Group (EWG)
• The EWG will be chaired by a full-time Brussels-based President. He/she should preferably also chair the Economic and Financial Committee
…and my personal favourite:
• Clear rules and mechanisms will be set up to improve communication and ensure more consistent messages.
It’s at this point that the non-Europeans amongst you are possibly finally beginning to get the joke that anybody caught in the tractor beam of ineptitude that is ‘Europe’ (and by ‘Europe’ I mean the bureaucratic construct rather than the land mass) has understood for years.
THIS IS HOW EUROPEAN BUREAUCRACY WORKS, PEOPLE!!!!
Millions of Euros spent on days of‘talks’ to come up with solutions that fail to address any REAL problems.
Don’t believe me?
Article 47 of the Common Fisheries Policy will ensure that every fish caught by an angler is notified to Brussels so that it can be counted against that countries quota. If you go out for a day’s fishing and catch a couple of cod or mackerel you will now be required to notify the authorities or face a heavy fine.
There are EU regulations on the greenness of the person on the pedestrian crossing lights.
There are 3 separate EU directives on the loudness of lawnmowers.
Regulation (EC) 2257/94 – a great read, by the way – stated that bananas must be ‘free from malformation or abnormal curvature of the fingers’. It also contained stipulations about ‘the grade, i.e. the measurement, in millimetres, of the thickness of a transverse section of the fruit between the lateral faces and the middle, perpendicularly to the longitudinal axis’ …
And then there are cucumbers:
Under regulation (EEC) No 1677/88 cucumbers are only allowed a bend of 10mm for every 10cm of length.
Do you think any of those were drawn up in ten minutes on a single piece of paper?
No. (Actually, in fairness to Europe, they don’t have a monopoly on silly legislation: there IS a law in Alaska that makes it illegal to push a moose out of a moving aircraft.)
The Brussels bureaucracy has always been something of a laughing stock amongst the people of Europe – since long before the final creation of the EU, in fact. Way back in 1955, with a European union freshly on the drawing board ten years after the end of WWII, Russell Bretherton, an English Civil Servant was dispatched to Brussels to inform European ministers what Britain thought of plans for an ambitious new European treaty. Upon arrival, he had these words of wisdom for those assembled:
“Gentlemen, you’re trying to negotiate something you will never be able to negotiate. If negotiated, it will not be ratified. And if ratified, it will not work”
Three years later, the Treaty of Rome was signed, establishing the European Economic Community and from that day to this, the degree of meddling, interference and sheer bureaucracy has increased year after year until we find ourselves here.
Europe is broken and the people charged with trying to fix it are clearly not up to the job. There are way too many vested interests, too many national peccadillos and way too many good, old-fashioned egos in play for it to come down to anything but a last-ditch solution when they are forced into it – and that solution WILL be the printing of money in some shape or form which will help to magically inflate the debt away. The other alternatives are either just too painful (default/ forgiveness) or plain unworkable (growth).
A look at a selection of newsflashes that hit screens this week shows just how ridiculous things have become as everybody involved in trying to sort out the mess that is Europe attempts to get themselves in front of a microphone in order to let the world know just how important they are. Some of these appearances, it would seem, are stage-managed for maximum effect on markets – others are simply self-important politicians who just can’t bring themselves to utter the words “no comment”:
by Jim Quinn
The Burning Platform
Posted August 23, 2011
“LENIN IS SAID TO HAVE DECLARED THAT THE BEST WAY TO DESTROY THE CAPITALIST SYSTEM was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.” – John Maynard Keynes – The Economic Consequences of the Peace
While Barack Obama vacations on Martha’s Vineyard this week he’ll be thinking about his grand vision to save America – again. There is one thing you can say about Obama – he’s predictable. He promises to unveil his “new” plan for America in early September. The White House said Obama will give a speech after the September 5 Labor Day holiday to outline measures to boost hiring and find budget savings that surpass the $1.5 trillion goal of a new congressional deficit-cutting committee. It is heartening to see that Barack has turned into a cost cutter extraordinaire. He should be an inspiration to the Tea Party, except for one little problem. The plan he unveils in a few weeks will increase spending now and fret about spending cuts at some future unspecified date.
I can reveal his plan today because the White House has already leaked the major aspects of his plan. He will call for an extension of the Social Security payroll tax cut of 2% for all working Americans. This was supposed to give a dramatic boost to GDP in 2011. Maybe it will work next time. He will demand that extended unemployment benefits be renewed. Somehow providing 99 weeks of unemployment benefits is supposed to create jobs. It’s done wonders thus far. He will propose some semblance of an infrastructure bank or tax cuts to spur infrastructure spending. It will include a proposal for training and education to help unemployed people switch careers. He will attempt to steal the thunder from the SUPER COMMITTEE of twelve by coming up with $2 trillion of budget savings by insisting the Lear jet flying rich fork over an extra $500 billion.
You may have noticed that followers of Keynesian dogma like Paul Krugman, Larry Summers, Brad Delong, Richard Koo, John Galbraith, every Democrat in Congress, and every liberal pundit and columnist have been shrieking about the Tea Party terrorists and their ghastly budget cuts that are destroying our economy. They contend the stock market is tanking and the economy is heading into recession due to the brutal austerity measures being imposed by the extremists in the Republican Party. There is just one small issue with their argument. It is completely false. It is a bold faced lie. This is 2011. The economy has been in freefall since January 1. No spending cuts have occurred. Nada!!! As the CBO chart below reveals, the horrendous slashing of government will amount to $21 billion in 2012 and $42 billion in 2013. Of course, those aren’t even cuts in spending. They are reductions in the projected increases in spending. Politicians must be very secure in the knowledge that Americans are completely ignorant when it comes to anything other than the details of Kim Kardashian’s wedding and who Snooki is banging on Jersey Shore.
I’d like to remind the Harvard educated Keynesian economists that Federal government spending is currently chiming in at $3.8 trillion per year. Federal spending was $2.7 trillion in 2007 and $3.0 trillion in 2008. Keynesians believe government spending fills the gap when private companies are contracting. Obama has taken Keynesianism to a new level. Federal spending will total $10.8 trillion in Obama’s first three years, versus $8.4 trillion in the previous three years. Even a Harvard economist can figure out this is a 29% increase in Federal spending. What has it accomplished? We are back in recession, unemployment is rising, forty six million Americans are on food stamps, food and energy prices are soaring, and the middle class is being annihilated. The standard Keynesian response is we would have lost 3 million more jobs, we were saved from a 2nd Great Depression and the stimulus was too little. It would have worked if it had just been twice as large.
The 2nd Great Depression was not avoided, it was delayed. Our two decade long delusional credit boom could have been voluntarily abandoned in 2008. The banks at fault could have been liquidated in an orderly bankruptcy with stockholders and bondholders accepting the consequences of their foolishness. Unemployment would have soared to 12%, GDP would have collapsed, and the stock market would have fallen to 5,000. The bad debt would have been flushed from the system. Instead our Wall Street beholden leaders chose to save their banker friends, cover-up the bad debt, shift private debt to taxpayer debt, print trillions of new dollars in an effort to inflate away the debt, and implemented every wacky Keynesian stimulus idea Larry Summers could dream up. These strokes of genius have failed miserably. Bernanke, Paulson, Geithner and Obama have set in motion a series of events that will ultimately lead to a catastrophic currency collapse. We have entered the second phase of the Greater Depression and there are no monetary or fiscal bullets left in the gun. Further expansion of debt will lead to a hyperinflationary collapse as the remaining confidence in the U.S. dollar is exhausted. We are one failed Treasury auction away from a currency crisis.
John Maynard Keynes argued the solution to the Great Depression was to stimulate the economy through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.
It sounds so good in theory, but it didn’t work in the Depression and it hasn’t worked today. It is a doctrine taught in every business school in America with no actual results to support it. Who needs facts and actual results when a good story believed and perpetuated by non-thinking pundits will do? Every Keynesian play in the playbook has been used since 2008. The American people were told by Obama and his Keynesian trained advisors that if we implemented his $862 billion shovel ready stimulus package, unemployment would peak at 7.9% and would decline to 6.5% by today. The cascade of recovery was going to be jump started by a stimulus package that equaled 27% of the previous year’s entire spending. Obama’s complete package was implemented. The outcome was an eye opener.