What is Going On...?

There are very many definitions of money, depending on who you talk to. Money is a medium of exchange, and anyone who defines it as anything more than that has designs on separating you from your money. Click to read on...

In terms of money, savings is wealth. In most economic theories, money and all other wealth can be objectively calculated, whereas the Austrian theory says it is subjectively calculated. Say I own a box of apples. I feel it is worth $20. You feel it is worth $10. There is nothing to keep the two of us at arriving at a price of $15, making us both wrong, but satisfied.

Now what is my $15 savings worth? All savings turn into investments. Either they are lent out, used to buy machinery or equipment that enhance my earning power, or I put it in a mattress where it gives me a confidence to do something risky, like go to school. Or I buy a painting that inspires me. It is all investment, and we would all generally disagree what it is worth.

In spite of this, progressives tell us they can objectively know value. To do their good work, they need to institute Communist manifesto item # 5. “Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”

Even under communism money is still a medium of exchange. But at some point money taken over by government in every case in history ends up in disaster. So much so, our government take over of money in 1913 was rather poorly hidden behind a legal fiction that the Federal Reserve Bank is a private entity (Ha!) and even in Hong Kong they do not let the government control money, indeed, various private companies issue money, they way it should be in a free market.

With control of money, governments tax and transfer wealth... so far so good. It is wrong to take money from one group and give it to another, we call this stealing, but it does work. It does transfer wealth with some unintended consequences, but it works. It is wrong, but it is not real harmful, since the targets learn to adjust.

But when the powers-that-be go to far, the productive elements in society resist, and the progressives see diminishing returns. In this case, schools of economics such as supply side, Chicago and monetarists figured you can inflate the money supply and stealthily increase taxes by means of inflation. The advantage here is the cost of inflation is pushed down the line so banks and industry avoid paying the inflation while ultimately workers pay the most cost. It is so subtle few realize that 40 years ago one wage-earner could own a home and support a family, while now mom has to work just to pay the taxes to keep unessential government workers employed, and kids come home from government school to empty housing.

This inflation distorts the economic landscape and causes malinvestment., too much unproductive capacity. The diminishing returns reappear, leveraged.

So the government tries to stimulate growth to employ excess capacity by printing more money. Which is pouring gas on a fire, making things all the worse. Stimulus packages and printing money is both wrong, but it is also harmful because it is transferring money that does not exist to unproductive capacity. It is either paid for by diluting what wealth people have, or charging off to the future some folly today.
The democrats tax and spend takes wealth and forces it around. At least there is wealth being spread around. The republican lend and spend is based on pretend wealth. It was wildly successful in stimulating consumption, and the productive capacity to deliver much. But such bubbles pop. Since all politicians benefit from both scams, they all vote to bail out the system that benefits themselves.

Can you protect yourself?

“Too big to fail” banks were bailed out with money they will never pay back, so it was nothing to agree to pay 5% interest on the bailout money. This is bad. But it gets worse. To advance the US Govt policy of “get big or get out,” the plan requires small responsible productive banks to join the large irresponsible banks ini taking bailout money. IN this way , no bank is allowed to be rewarded for being prudent in its banking practices, and expand where to powers that be have failed. At 5% return, banks must lend out at about 8% to turn a profit. There is nothing out there investment wise that can earn 8%. Lend the money and you will go out of business. Bank officers at small responsible banks can say good bye to equity, stock options, pensions.

Better to just park the money and collect the money on the bonds. Bubble time in bonds

This is a twist on outlawing shorting. In one you are not allowed to protect yourself, in the other you are obliged to join the losers.

You can fight this entire system. Find your customers, develop your product, and get enough orders to cover the suppliers minimum, in a workable amount of time, profitably.


John


PS

Here are all ten points of the Communist manifesto.

1. Abolition of property in land and application of all rents of land to public purposes.

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance.

4. Confiscation of the property of all emigrants and rebels.

5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.

6. Centralization of the means of communication and transport in the hands of the state.

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc.

Name one that has not been implemented, more or less, in USA:

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