Let me throw a quick post up here. I didn’t expect to put this up so my reference to the next post in my last post isn’t this post but next week’s post. Are you confused? Good. This graphic of the IBEX is a perfect comparative of monetary policies in the U.S. and Europe. First, as a baseline, both continents are forcing austerity on their citizens, although the dynamic are much, much different. Austerity in the U.S. has been a decades long dynamic.
The IBEX in Spain is falling because of one simple dynamic. The Spanish money supply is being hammered by Germany. Germany has essentially enslaved Spain under a gold standard and is forcing them into a depression. They are denying Spanish citizens access to their own capital just as a gold standard does. The dynamic has absolutely no difference. You don’t need gold to create the massively corrupt monetary dynamics of being on a gold standard. But this “hard money” dynamic in Spain is exactly what happened under the gold standard in the U.S. many times in history. How do you like me now? In Spain and other European countries money is being used as a tool to subvert economic determinism, democracy, job creation, new business creation, monetization of the economic creativity of Spain’s people. The crisis in Spain is essentially an illusion created by control. Did Spain build too many homes? Sure they did. Who cares? That’s not the basis of 25% unemployment. There is NO SUCH THING as a consumer-led recession or a consumer-red recover as we have discussed ad nauseam. By the way, Spain built too many homes because of political bureaucrats who guided their economy in that direction because of Soviet-style political meddling in the economy. Just like in the U.S. While excessive home production, a consumption dynamic that is not the source of Spain’s economic disaster, is an issue, outsourcing of their economic sovereignty and economic determinism is. Corruption is. The European Union at its core is a tool of corruption and control created by elites, corporations and politicians. It’s trickle down economic policy of unelected political toads.
Contrarily, even though the U.S. hasn’t outsourced its monetary sovereignty as Spain has, it has completely outsourced its economic sovereignty and economic determinism. Monetary and fiscal stimulus created in the U.S. is going directly to major banks, corporations and the pockets of the investor class. Trickle down economics. For those who think corporations create jobs, get a clue. As we have noted before, people create jobs. Corporations ultimately kill job creation and economic dynamism. That is why stimulus is having no sustainable impact in our society. That is why Obama’s absolutely ridiculous calls for multinational American corporations to hire American workers is a joke. Large corporations haven’t hired a net new American worker in 40 years and that isn’t going to happen because Obama dreams of it.
Instead of disseminating U.S. stimulus for productive use as banks are supposed to do, banks are instead using it to speculate in financial markets for their own self-interest and that of the investor class and enabling more of Ponzi economics that was so popular before the 2008 crash. That’s what happens when you bail out a failed economic system without reforms. More failed economics. (We need a public banking system whose goal is to serve democracy, democratic economics and human development. So does Spain, Greece, etc.)
This dynamic is one of many leading to forced austerity in the U.S. Wall Street and corporations have slammed the brakes on the money supply. Forget the nonsense you see in monetary aggregates. People who cite those as skyrocketing have no idea what they are talking about or why they are skyrocketing. As I have noted before, the U.S. economy is choking on its own vomit due to lack of money. That lack of money creates lack of capital creation and eventual economic collapse. Of course, we could surmise all of this before Bernanke started with the stimulus because, as we noted numerous times before the collapse, there is no demand for capital in this country. Wall Street criminals are substantially responsible for this. Not wholly. There are many dynamics driving this. All of the dynamics were enabled or created by politicians.
The value of equities and financial assets in the U.S. are completely without reality. We are flirting with new equity highs at massive valuations while Spain is flirting with new lows. The U.S. economy most certainly is not in better shape than Spain. Neither equity market would be rising with healthy economic policies. There is a finite amount of money available in any economy and that would not be going into speculation were either country in a recovery.
The difference between Spain and U.S. financial assets is the endless pumping up of said assets to save the investor class and trickle down economics in the U.S. That may not be the intent of many politicians who are so dimwitted they don’t understand what they created or how to fix it but regardless politicians and the Federal Reserve are most certainly supporting existing policies they created. Those policies are meant to reward the investor class and trickle down economics. That is as it should be. Who butters the bread of a for-profit government? The investor class. The Ponzi class.
The issue with creating money for nothing in order to inflate assets is that there is no underlying sustainable economics or wealth creation to support it. So, as we have noted numerous times, the Federal Reserve is now caught in a loop of needing to continually print in order to sustain artificially valued assets. To feed the corrupt beast to save the investor class, corporatism and Frankenfinance. The minute they quit, the system lacks fundamental demand because the economy is completely broken. The system starts to unwind again and assets start their return to fair value, which on here has been and remains at 200-450 on the S&P. This policy clearly isn’t the answer.
Printing money, as I have advocated since late 2008, can only have a lasting and sustainable impact if it is used to create capital. Gold money advocates most certainly understand this about money created under our current structure. But, what they don’t understand is printing money under a reformed monetary structure can and will create more capital and prosperity than a gold standard could ever dream of creating. Gold money has no primacy as capital unless you are a neofeudal lord, robber baron or tyrant. All gold does is create primacy for those who control the gold. Not the primacy of self-determined economics and community. As noted in three of the last four Labor Day posts, the only true source of capital is our citizens and our children. Nothing could better define the lack of demand for capital in the U.S. than the lack of demand for the economic services of our citizens. The true source of capital is not a new headquarters building for Goldman Sachs to launch predatory finance initiatives or a new spying headquarters for the NSA or a new Predator drone to murder people or endless money created by Wall Street criminals used to fund the political bubble in Washington. Gold artificially limits our democracy access to their rights of capital and enslaves those who are denied it. That being most people under the repression of gold.
The quantity of money is important as a means to an end. It is not the end. And, there are most certainly distinctions that should be made in the overall quantity of money. Money for consumption, mergers & acquisitions, investment banking, financial speculation, private equity and other Wall Street crimes against humanity have a substantially different impact than money created for capital investment. The former has the effect of destroying both capital and money as we most certainly have witnessed for decades in our great nation and the great nations of Spain, Iceland, Greece, Ireland, Portugal and Italy. In some great bout of irony, the Federal Reserve actually understood this eighty years ago but with now armed with the new economic mythology of the quantity of money and it has been forgotten. How much has humanity forgotten from our past in favor of new myths, voodoo, trickle down economics and unsubstantiated beliefs? How many lessons will be taught with the failure of these beliefs?
Inflate, slowdown, inflate, slowdown, inflate, slowdown. Each time we have done this for the last thirty-odd years yields less and less results. That is because each downturn takes more of the economy down with it. Reason being, for countless reasons of corruption and economic voodoo that I’m not going to get into here, we never produce capital to work our way out of those slowdowns. We just produce more money. In fact, that’s just about all we produce anymore. Well, and war and politicians, economists and MBAs who serve the corporate state. Friedman and the nonsensical interpretation by economists about his quantity of money nonsense has been used to bubble up our economy for thirty years. So we never get a recovery in large segments of the economy that fail in each of these slowdowns. Each printing exercise we call a recovery simply yields more money rather than more capital needed for recovery. That leads to less and less participants in each recovery. That leads to a greater and greater concentration of wealth in those who control the money.
I’ve remarked numerous times on here that U.S. economic activity peaked around 1980 give or take a few years. That was about the time Friedman became an economic advisor to Ronald Reagan and we started to see government policies based on monetarism. I’ve also noted that we could actually see some asset prices return to price levels of that time. I don’t believe that is going to happen but it really doesn’t matter what anyone believes. It only matters what is going to happen.
In other words, most Americans are essentially on a gold standard today and have been for decades. Trickle down economics has the exact same impact on our economy as a gold standard does. And, just like in 1929 and the endless examples of corruption surrounding gold money, those who are benefiting economically are those who control the gold. Trickle down economics is Social Darwinism defined. Rich people are somehow more qualified because they are rich. Although most rich people actually became rich off of the ideas, creations and work of other people. It’s just like 1929 in that regard. A time when the U.S. was on the gold money standard. And, it’s just like the English Empire in 1776.
If you want to see what the English Empire looked like in 1776, look at the U.S. today. Systemic poverty, class economics, an investor class of elites investing in massive state-backed corporations (trading companies, land title companies and other forms of pillage), said corporations using slave labor in “emerging markets” to loot global resources, and all of this backed by the force of the British navy and a brutally fascist government run by corporations, elites and self-granted authority of political whores. Who was the major beneficiary in England? Why of course, trickle down economics - the investor class. The poor bastards not born into birthright title in England and “emerging markets” were employed as coolies serving their elite masters. Just like trickle down economics today. Ronald Reagan’s economic team was a disgrace. Reagan’s true legacy is that you are now the coolie. Reagan took trickle down economics mainstream and gave cover to elites, corporations and political toads around the world to employ its practices.
Monetarists are fucking up the system at an ever increasing rate with this ex post facto analysis of what went wrong in the Great Depression that is then used to enable elitist, corporate and political corruption in this country. We have been operating under this nonsensical dogmatic position since Friedman won his Nobel Prize for voodoo economics and became an advisor to Ronald Reagan. I’ve mocked both of these men as doofuses numerous times on here. A far cry from their position of royalty within the looting class.
There are some accurate observations that Friedman made in his analysis of the Great Depression but if the only tool you have is a hammer(money), every problem looks like a nail. (The quantity of money.) The Federal Reserve thinks the answer to our economic crisis is more money without any distinctions. Predatory private equity, corrupt Wall Street speculation and treasonous investment banking are granted a higher rung on the Social Darwinian trickle down ladder of economic corruption than is providing food, health care, shelter, economic determinism and education for our citizens. That’s because private, for-profit banking and private capital in capitalism controls the gold. Those who have the gold always make the rules. Democracy needs to own the gold - a public banking system out of the control of political dunces and their corporate masters.
We most certainly aren’t going back to any prior example of how the world operated. So, what are the monetary and economic answers to get us out of this mess? Something for you to think about. The answers are really profoundly simple yet radically-transformative. But, as with everything else, no one with a microphone is talking about them. It’s all about control. It’s all about getting the American economy back on track using tried and true economic voodoo taught in our most hallowed universities. Universities that teach monetarism, trickle down economics, Soviet-style bureaucratic efficiency and the like. Who then graduate more students armed with beliefs that support the status quo.
We will eventually see the S&P join the IBEX in its downward draft as Harvard & Yale taught Nobel Prize-winning monetarism and economics in the U.S. eventually fails.