Wednesday, April 9, 2008

How many times do I have to say it....

....the problems with the economy do not stem from consumption related issues, they stem from 1.) the lack of domestic production, and 2.) super liquidity.

Overall there are too many dollars floating around in the economic system to try to "provide full employment and low interest rates," to use Bernanke's words, while not creating opportunity through the productive mechanisms of the economic structure. So basically, what he means is that after Wall Street has been slathered with enough green to cover a St. Paddy's day festival in Ireland, and the value of the dollar collapses, we will need an alternate way to fuel the economic structure.

This can be done in three ways, 1.) by opening the economy up for the average person to competing currencies and the use of commodities as trade items, or a return to the use of "silver and gold" as legal tender or 2.) through a political and populist redistribution of wealth and 3.) through continued aggressive warfare that leads to depopulation.

It CANNOT be solved by increasing the supply of money and injecting more liquidity into the system at the point where it is weakest, that is, into the banks.

If liquidity needs to be injected into the system anywhere it is directly into the pockets of the people, and not through a bum tax refund but through meaningful long term, productive employment opportunities within the domestic economic structure.

When not addressed all of these factors lead not necessarily to a depression, though it is highly likely and between that and credit contraction and direct government intervention virtually guarantee a depression, but to the fear of political populism.

This populism can come about in one of two ways, either, 1.) Franklin Roosevelt's use of J. M. Keynes or J.K. Galbraith Solution or 2.) Tom Jefferson's elimination of central banking and return to sound money, this is called the founder's solution.

This reluctance to accept either the Keynes solution or Galbraith solution, or to follow the advice of the founders, in essence ensures that we all become the working poor.

Instead of equality in the terms of of our rights and obligations, the only equality you have in an unaddressed command market (as opposed to a true free market) is that you are equally as poor as your neighbor.

Either of these solutions, either the Keynes' or Founder's solution manifest themselves as political populism. That is the same populist political movements that terrify the super-elite masters into redistributing some of their wealth as Henry Liu explains.....or to opening up the market.

Is anyone out there even listening to this advice? Or have we chosen depopulation as the best and most morally comfortable way to make the system work again? And, if so, what does that say about the system in the first place?

No comments: