This has been talked about before, but just to remind you in the hail of disinformation that's been going down the pike...
The problem that started the cascade of financial failures in Oct 08 (keep in mind that october is almost always when stock markets crash, in a year that they are going to) was the packaging of securities out of bad mortgage loans.
When the term "bailout" was first being thrown around, lots of people had the idea that maybe they'd make the bad assets good by helping people pay back their mortgages. This would have had a leveraging effect that would have reflated the market by making the packaged securities at each level of derivation "non-toxic" again.
Instead of doing that, they just gave the money straight to the banks. When pressed by the media, Paulson (may he rot in banker's hell) said specifically that he had no interest in using Tarp money to help mortgagees with their loans, even though this would have cost less in the long run and had the desired effect of fixing the derivative collapse.
Of course we all remember that when AIG got their bailout money they used it first and foremost to pay bonuses and to give their execs a nice trip to the bahamas, right? When called before Congress, they expressed no remorse, and did it again later when the heat died down.
Now I hope you've been following the trail to Goldman Sachs lately. If not you can go read some big long essays by Matt Taibbi that basically lay it all out.
So now, recently, the Vice Chair of Goldman Sachs International said the public should "tolerate the inequality" of large bonuses to bankers. "If we said we're not going to have as big bonuses or the same bonuses as last year, I think then you'd find that lots of City firms could easily hive off their operations to Switzerland or the far east"
It wasn't a bailout, folks. It was the biggest case of fraud and graft in history. It was raw theft. They could have fixed the impending collapse and saved a lot of people's mortgages, if they wanted to.
But that was never the plan. Besides, the worse things get for all these ex-homeowners, that will help prevent price inflation, allowing these guys to cash out their stolen money into various protected asset classes before the currency collapses. They WANT lots of poverty. It directly improves their bottom line.
If we wiped out poverty tomorrow, there would be a massive "economic collapse" from price inflation and wage costs. Of course it would only be a collapse for the crooks. For the rest of us, it would look like prosperity. I'm not saying that inflation is good here, what I'm saying is that the money has already been inflated, it's just almost all going into the hands of the super-rich.
Monday, October 26, 2009
Sunday, October 11, 2009
Some more thoughts on the Economic Scam going on.
Thinking about some things I've read lately, and over a longer stretch of time, and the old quote of Jefferson about "first by inflation, then by deflation" makes a lot more sense. Of course they had just come out of a war with England, and they had England as a living example of how it was done, and their own relatively stable monetary situation to compare it to.
The Fed is technically "inflating" right now, printing money and giving it to crooks. But at the same time, they have to induce structural deflation elsewhere, so that the value of that money they're printing stays relatively high enough to be useful, and to prevent "hyperinflation" effects. (keep people from ditching the dollar as currency, etc)
Some of this is handled through "globalization" which is why the G20 and its ilk are important to these people. They need to have more and more cheap labor working for their capital so they can keep the prices of certain goods low.
(of course other goods, they want to inflate, in order to make labor rates relatively cheaper, but that gets too complicated for a facebook note)
Another aspect of globalization that is rarely looked at is the effect of religion and other superstitions. The last thing the global money trust wants is for the third world to develop a cosmopolitan, enlightened culture, because then their breeding rates will slow down and they might even try to develop capital of their own. So they need to keep the traditional/religious cultural tropes in place there, even though that leads to other forms of conflict. They are ok with that to a large extent because war is considered "manageable" and helps destroy local capital (the less capital outside the sphere of control of the money trust, the better, in their perspective, because it makes capital more scarce, thus more valuable).
The other way they will induce structural deflation is by calling in debt. This is one reason why banks aren't renegotiating mortgages, even though it seems like it would be in their interest to do so. They might lose money on the foreclosures, they might not. But they'll lose a LOT more if the dollar collapses too suddenly (a gradual degradation is ok, because they can come up with some other fiat currency to use as the universal default over time). That would basically undo all the work of printing all that money for themselves and their buddies in the first place.
The Fed is technically "inflating" right now, printing money and giving it to crooks. But at the same time, they have to induce structural deflation elsewhere, so that the value of that money they're printing stays relatively high enough to be useful, and to prevent "hyperinflation" effects. (keep people from ditching the dollar as currency, etc)
Some of this is handled through "globalization" which is why the G20 and its ilk are important to these people. They need to have more and more cheap labor working for their capital so they can keep the prices of certain goods low.
(of course other goods, they want to inflate, in order to make labor rates relatively cheaper, but that gets too complicated for a facebook note)
Another aspect of globalization that is rarely looked at is the effect of religion and other superstitions. The last thing the global money trust wants is for the third world to develop a cosmopolitan, enlightened culture, because then their breeding rates will slow down and they might even try to develop capital of their own. So they need to keep the traditional/religious cultural tropes in place there, even though that leads to other forms of conflict. They are ok with that to a large extent because war is considered "manageable" and helps destroy local capital (the less capital outside the sphere of control of the money trust, the better, in their perspective, because it makes capital more scarce, thus more valuable).
The other way they will induce structural deflation is by calling in debt. This is one reason why banks aren't renegotiating mortgages, even though it seems like it would be in their interest to do so. They might lose money on the foreclosures, they might not. But they'll lose a LOT more if the dollar collapses too suddenly (a gradual degradation is ok, because they can come up with some other fiat currency to use as the universal default over time). That would basically undo all the work of printing all that money for themselves and their buddies in the first place.
The working class and freedom
I saw an idiotic comment on YouTube recently where someone who claimed to be a Rothbardian said that labor would get paid much less in a free market. Well I'm not sure if Rothbard ever addressed this directly, but Mises says otherwise and Hoppe implies otherwise.
According to Mises, the one thing that can permanently, universally raise wage rates is the application of more capital into the market, so if you want to help the working class, you should increase the amount of capital in the market.
The more capital there is looking for labor to work with it, the more valuable labor is relative to capital. Seems pretty simple, right?
Almost everything the government does right now acts to destroy capital, prevent capital formation, or restrict the application of capital. This is no accident because it makes the capital already in the hands of the existing owners more valuable, by making capital more scarce.
In a free market, the amount of total capital applied to labor would skyrocket, creating not a surplus of labor as we have now, but a permanent labor shortage. Wages would rise to eat up all profits beyond the natural rate of interest. And as Hoppe pointed out, as capital continues to grow, the natural rate of interest will fall asymptotically towards zero.
Thus, the free market is the workers paradise, not the capital owners paradise.
According to Mises, the one thing that can permanently, universally raise wage rates is the application of more capital into the market, so if you want to help the working class, you should increase the amount of capital in the market.
The more capital there is looking for labor to work with it, the more valuable labor is relative to capital. Seems pretty simple, right?
Almost everything the government does right now acts to destroy capital, prevent capital formation, or restrict the application of capital. This is no accident because it makes the capital already in the hands of the existing owners more valuable, by making capital more scarce.
In a free market, the amount of total capital applied to labor would skyrocket, creating not a surplus of labor as we have now, but a permanent labor shortage. Wages would rise to eat up all profits beyond the natural rate of interest. And as Hoppe pointed out, as capital continues to grow, the natural rate of interest will fall asymptotically towards zero.
Thus, the free market is the workers paradise, not the capital owners paradise.
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