Hmnnn.. I wonder. Ya think you can go to Detroit and buy a 5k house and put it on your Visa card? Better idea, then fix it up spend maybe 10k charge it on the same card, then throw the card away.
What went wrong? It's very simple, the FED was completely released from any bondage in 1971. The true gold standard was the pre 1913 variety, until the early 1930's you had a psuedo-gold standard, and from then until 1971 you had a psuedo-psuedo-psuedo gold standard. But after 71, you had a completely fiat currency and a FED which was released from all limits on their power. The FED as an institution, definitely in practice if not in theory, redistributes wealth from the middle/upper middle class to the rich. They push interest rates below the true rate, which allows banks to borrow money at low rates and lend them out at higher rates. The FED also entices people to borrow more money than they would otherwise have done and save less ---if the reward for saving is lower due to lower rates and the cost is lower due to lower rates, people are going to borrow more money and save less. Furthermore, all the power they have is the power to create money out of nothing, legalized counterfeiters. This doesn't create more wealth, just more inflation. The people whom benefit are the rich, they are typically the ones who get the money first, mostly through government spending and contracts. However, this inflation causes the prices of everything to rise, including real estate. It also causes malinvestment, along with all its other problems. This malinvestment can also be described as "bubbles." It created a bubble in housing which increased the price of real estate to astronomical levels. But why haven't wages kept up? Well, because wage earners have gotten RELATIVELY poorer. This is due to big government. Most people in the world have fallen for the ruse that big government helps the poor/middle class at the expense of the rich/upper class. The propaganda goes that regulations are there to protect the small guy from big bad companies. The government spending is there to help the little guy. Humorously enough, people have fallen for this trick hook line and sinker. Just think how absurd this sounds. laissez-faire capitalism means no regulations and small government spending. It means that power is not centralized. If you are a filthy rich guy, a massive corporation, etc., which situation would you prefer? A situation in laissez-faire capitalism, where the way you make money or keep your money is by persuading the people to buy your product? Where since you are rich, there is a lot of money in your business, and you have a million other small business men or even big business men getting into your industry, selling your products/services at better quality and cheaper prices. Would you rather have this paradigm, or would you rather have a large central government whom you can co-opt, whom you can basically buy to do your bidding for you. To pass regulations in order to stamp out competition, to give you corporate welfare and government contracts? Which situation better keeps the status quo, which situation is better for you as a rich corporation? POliticians are easy to buy, they are easy to lobby. Continuously making better products for cheaper prices are almost impossible to conitnue ad infinitum. Eventually there comes a better product at a cheaper price and you lose your market. There are only a few Aaples in the world, and even Apple will eventually get beat out in a free market capitalist environment. The rich and big corporations have used big government and corporate welfare and regulations in order to redistribute power and wealth from the middle class to themselves. This is the result of big government. The absurdity that the dumb average person actually believes that if you concentrate power into the hands of a few elite men in Washington, that those few elite men will use their powers to help out the little guy at the expense of their friends and buddies who are part of the elite, who go to the same parties and same functions, who send their kids to the same schools, who fund their campaigns, and most importantly, who give them billions of dollars after they are out of office for "consulting" work. The absurdity of it all. And this entire situation has just gotten worse over the last 5 years. Before the FED merely created inflation. Now they create inflation in order to hand directly to these large corporations, mainly banks, who have losses, lol. It is a direct bailout of massive corporations, out of the pocket of the general public through inflation. Basically, if you truly care about the little guy, you will support true free market capitalism. That has been the reality throughout history.
Nothing is wrong, this is how reality works. Everything in this world has a cost and a benefit in our monetary system. The bill for socialism and liberalism (or socialism lite as I call it) is due here and now. Government doesn't produce any market product to sell and it's "services" are neither efficient nor market tested for proper pricing to willing buyers. So the payment for the cost for government comes from somewhere else then. Surprise! we have all been paying it over the years, albeit with a lag time sometimes. When someone votes for lower taxes and more services, pensions, etc. at the same time, reality must eventually catch up with them. Who held politicians accountable for the costs of their promises? This is the same problem as the "tragedy of the commons". There are only so many tricks one can try to hide faulty accounting. Many have been used up. If you measure your net worth (or your value for some folks) using a rubber measuring-stick, then don't be surprised when the answer is neither constant nor what you want to believe. Just my two cents worth.
But aren't you confusing wealth with money? Money is not wealth. Wealth is produce - things made by humans, land, minerals, etc. What is a million $$$ worth if there is nothing to buy, nothing to spend it on? Wealth is production/creation, and in order to ramp up production and therefore "wealth", the banking authorities have to ramp up demand. Encouraging people to save is definitely NOT one of the ways to spur demand. To the contrary, they lower interest rates and increase the money supply to discourage saving/hoarding by the masses, and encourage spending here and now. Not to be redundant, but savings/hoarding is counterproductive to the economy as it is opposite to spending (demand) which leads to an increase in production (and therefore wealth). Deflation is the enemy of the debtor (the 99%) and a boon to the big bad creditor. Because in a deflation their money undergoes a reverse time value of money effect, increasing in value, the lender doesn't have to charge interest, as there is already an inherent interest present in the currency itself (the deflation rate). Great point, and unfortunately too often missed by the average Joe.
StarDust9182 09-23-11 01:37 PM Nothing is wrong, this is how reality works. //////////////////////////////////////////////////////// Are you nuts? Obama is what's wrong. don
It's not socialism or capitalism that's just an ideologic discussion to keep the little ants busy. Before the crisis of 08 the US which is 5% of global population used 25% of the global oil suply. That should show anyone with a peanut as a brain how unsustainable it all was regardless of the economic or political system implemented. The US peaked post WWII cause the rest of the world got destroyed and as they recovered the US retraced... It's as easy as that in my view.... Ofcourse the right policies could delay or hasten it's demise a few years here and there but the larger trends are what they are.
"Are you nuts? Obama is what's wrong." Perhaps, but Obama is not the person in charge of this particular problem. If he were, then he would have solved it since he desperately wants to get re-elected. I would love to live in a world where every problem has a simple solution and every problem has a solution. Somewhere over the rainbow ....
"It's not socialism or capitalism that's just an ideologic discussion to keep the little ants busy. ..... The US peaked post WWII cause the rest of the world got destroyed and as they recovered the US retraced... ...... It's as easy as that in my view...." I agree with you. I didn't dare post that both of these ideological discussion are funded by the same power bloc in my view. Their intent is just as you say. There is written evidence in the past about what they do and why they do it - to keep the political system tied in knots with an illusion of choice while they accomplish their aims. There is nothing new under the sun, only vanity. Some say that this depression signals China doing to the US what they did to Britain in the last depression. Personally, I think the issue is much bigger than that. I have explained more in my thread about the new organizing principle behind society in the economics section. Great post.