The Final Collapse of the Economy

[myriad1]

free enterprise is a system that creates distortion by its very nature. it creates a psychology of us versus them and haves versus have nots. capitalism itself creates boom and bust periods as money moves from here to there.

interventions had BETTER improve its ability to police business in the free market. otherwise, we had better come up with a different economic model because to not intervene would be to invite catastrophe.

the right wing would have us believe that less government and more powerful business is the answer. yet, at no point in history can they show one instance where their theory held water.

 

[ACCT]

free enterprise is a system that creates distortion by its very nature. it creates a psychology of us versus them and haves versus have nots. capitalism itself creates boom and bust periods as money moves from here to there.

interventions had BETTER improve its ability to police business in the free market. otherwise, we had better come up with a different economic model because to not intervene would be to invite catastrophe.

the right wing would have us believe that less government and more powerful business is the answer. yet, at no point in history can they show one instance where their theory held water.

I think that you had better think again about your statement. It is not based on solid economic research. You would enjoy college courses in micro, macro and especially social economics.

It is the government that causes the misallocation of scarce resources! It is the socialist government that is causing the final of the economy! As long as trade is voluntary, both the buyer and seller come out winners in the free market.

**Economics Discussion Questions **

1. Define economics. In your definition, discuss why economics is a social science and why the terms unlimited wants, limited resources, and scarcity are usually used in a definition of economics.
2. How do economies based on market-capitalism and centrally-planned socialism differ in their solutions to these problems? Discuss the roles of incentive and prices
3. How does your employer solve these resource allocation questions? Which goods and services does your employer produce? How are these goods and services produced? For whom are they produced? How have the answers to these questions changed over time?

What Is Economics

Economics is a social science; it’s all about human economic behavior. The heart of economics is NOT about money – it’s about choices, economic choices people make and how those choices affect businesses and the economy. Economics is “the study of choice under conditions of scarcity.” This condition of scarcity leads to the three problems of resource allocation: 1) which goods and services should be produced, 2) how should they be produced, and 3) who should get these goodies. Deciding on how to accomplish these tasks is where human behavior (choices) comes into play.

Definitions of economics focus on the concept of scarcity. In economics, scarcity does not necessarily imply poverty. It means that people have limited (or scarce) resources, but unlimited wants. The concept of scarcity reminds me of a song by The Rolling Stones called “You Can’t Always Get What You Want.”

You can’t always get what you want,
But if you try sometime, yeah,
You just might find, you get what you need!–
The Rolling Stones, Jagger/Richard, 1969

If everyone could “always get they wanted,” then there would be no practical reason to study economics other than for the fun of it! Economic theory does not discuss “needs” because needs are subjective (those of you with young children will have no problem with this concept!), instead economics uses the term wants, which are usually things we don’t have like “I want a fire-engine red corvette!”

Economics has two branches – macroeconomics and microeconomics. Macroeconomics is the forest. Microeconomics is the trees. Macro statistics include the U.S. gross domestic product (GDP), unemployment rate, and inflation rate, among others. Micro statistics include automobile production, employment in the auto industry, and the wages of auto workers. One of the reasons for this distinction is the fallacy of composition, which states that even though something IS true for an individual or an individual business that something might NOT be true for sum of all individuals or businesses. For example, it IS true that if I get a five percent pay raise, then I can buy five percent more stuff (assuming that prices don’t rise). But it is NOT true that if everyone gets a five percent pay raise, then everyone can buy five percent more stuff because prices would inevitably rise if everyone got a five percent pay raise!

Economic Systems

I will concentrate on market capitalism. In a market economy, the forces of supply and demand rule. Price is the mechanism that regulates resource allocation. Prices are a signal, which directs the behavior of suppliers (sellers) and demanders (buyers).

In market capitalism, most of society’s resources are privately owned, and the owners of these resources can use them as they please within legal limits. ** Incentive is the key difference between capitalism (private ownership of resources) and socialism (state ownership of resources). Private ownership boosts incentive, while public ownership retards it.**

 

[myriad1]

@Acct: No, my statement is not based on ‘solid economic research.’ That’s because I am not an economist.

We have a simple situation and it does not take an economist to understand it:

1. We have an under-served domestic policy as evidenced by our under-educated and under-employed American workforce. American politics has not made it a priority to educate and employ them. Since 1980, we have neglected the real needs of the American employee. As an employee’s productivity has risen, its compensation has consistently fallen.
2. We have an over-emphasis on foreign policy spending as evidenced by the trillions spent on the Iraq and Afghanistan wars that were completely unnecessary.
3. We have a gross situation of mismanagement in our political system and in our self-serving business system.

Calling our government socialist because it cares about the needs of its population is not the answer. Right wing rhetoric and scare tactics are not the answer. We need moderation, vision, problem solvers, and a united front. It is not an ‘either-or’ proposition that we are facing. We sink or swim together.

 

[JimG]

Certainly we sink or swim together. But when one is aboard the Titanic after having hit an iceberg, it is rather useless to discuss how the living conditions aboard the ship might be improved through governmental action. The ship wil go down regardless.

And that is analogous to the situation the U.S.(and most of Europe) finds itself in with respect to unsustainable debt and huge unfunded mandates. The ship captains keep talking of how to bail out their vessels, which nevertheless continue to sink.

 

[myriad1]

I agree. We just do not have the political will to do what needs to be done. A depression might be necessary to right our ship.

 

[ACCT]

The disaster in Europe should be pushing the U.S. dollar up more than it is. But it’s not, and that has me deeply worried …

Worried that the next leg of the dollar’s decline may be right around the corner … worried that the loss of the dollar’s reserve-currency status could occur more quickly than even I had expected … and worried that the “X&@!” may soon hit the fan, across the entire globe.

Don’t get me wrong. The dollar may indeed soon rally a tad more. Which is what I expected for this part of the year, as Europe’s sovereign-debt crisis continues nearly unabated.

But the pathetic action in the dollar so far is very telling. Since the first of the year …

The dollar has lost 1.6% against the Aussie dollar, and 5.5% against the New Zealand dollar.

In the non-euro countries of Europe, the dollar has lost 1.3% against the Swedish krona … 3.2% against Norway’s krone … 1.9% against the Swiss franc … 6.4% against Hungary’s forint … and a whopping 7.2% against Poland’s zloty.

Against the Russian ruble, the greenback has shed a whopping 7.9%!

In South America, the dollar is not faring well, either. It’s lost 5.5% against Mexico’s peso and an amazing 8.6% against Columbia’s peso.

And in Asia, the dollar has lost 3.3% against India’s rupee … 3.8% against Malaysia’s ringgit … 3.7% against the Singapore dollar … 2.9% against the Philippine peso … and 2.5% against Taiwan’s dollar.

All told, against the euro — despite the European Central Bank’s (ECB) massive money-printing — the dollar has LOST 0.9% of its value!

Moreover, consider this: Measured by the widely monitored U.S. Dollar Index — the greenback is a mere 10.7% above its all-time record low of 70.7 made in March 2008.

Imagine that. It’s as if the Dow Industrials — whose March 2009 bear market closing low was 7,033.62 — were to have never bounced higher than 7,786 since then.

I repeat: At a time when the dollar should be staging a decent (although temporary) rally due to Europe’s MASSIVE economic and sovereign debt problems …

The U.S. dollar’s performance is utterly terrible.
.
L. Edelson

 

[JimG]

Is this what Bernanke wants? A cheap dollar with which to pay off Treasury debt?

 

[ACCT]

Is this what Bernanke wants? A cheap dollar with which to pay off Treasury debt?

We have gone beyond paying off the debt with cheaper dollars. The debt reduction that should have happened more than 13 years ago has not happened!

The U.S. debt will never be repaid. We are well beyond the point of no return. The last purging of debt was in 1929 and 1847. The local, state and federal governments have entered into an unsustainable debt crisis.

We are under judgment for what we have done, especially abortion. God is purging the system. The wealth of the wicked will go to the meek.

Do not let the final collapse of the world-wide economy catch you off-guard.

 

[Ridgerunner]

Is this what Bernanke wants? A cheap dollar with which to pay off Treasury debt?

I make no pretense to being an economist, and certainly none to knowing what Bernanke thinks.

But, it is my tentative belief that Bernanke really isn’t thinking about that. He has two problems that demand his full attention. One is the necessity of funding the grotesquely overspending government. He has no choice in that. The other is the desire on his part to encourage investment with low interest rates. So, is he wise or foolish in doing that? I’m not sure he’s either one, and I’m not sure he thinks it’s much of a cure for anything. One remembers that fairly early in his term he started raising interest rates to quell what seemed to him a forming bubble created by too-expansive monetary policy under Greenspan (and which Greenspan now admits was too expansive). But it was too late. The bubble exploded at the first touch.

So, what now? Raise interest rates in a recession in which business people won’t even borrow at super-low rates, and in which people won’t buy houses at those rates? What’s the man going to do when the government discourages business in every way there is to do it, add to that discouragement?

An inevitable consequence of that accommodation, it seems to me, is a possible bulge in the “carry trade”. If so, that’s scary, all by itself.

But I don’t think Bernanke controls very much of anything, and I doubt he would claim he does.

He’s “riding the tiger”, or rather, two of them, with one foot on the back of each.

 

[ACCT]

I make no pretense to being an economist, and certainly none to knowing what Bernanke thinks.

But, it is my tentative belief that Bernanke really isn’t thinking about that. He has two problems that demand his full attention. One is the necessity of funding the grotesquely overspending government. He has no choice in that. The other is the desire on his part to encourage investment with low interest rates. So, is he wise or foolish in doing that? I’m not sure he’s either one, and I’m not sure he thinks it’s much of a cure for anything. One remembers that fairly early in his term he started raising interest rates to quell what seemed to him a forming bubble created by too-expansive monetary policy under Greenspan (and which Greenspan now admits was too expansive). But it was too late. The bubble exploded at the first touch.

So, what now? Raise interest rates in a recession in which business people won’t even borrow at super-low rates, and in which people won’t buy houses at those rates? What’s the man going to do when the government discourages business in every way there is to do it, add to that discouragement?

An inevitable consequence of that accommodation, it seems to me, is a possible bulge in the “carry trade”. If so, that’s scary, all by itself.

But I don’t think Bernanke controls very much of anything, and I doubt he would claim he does.

He’s “riding the tiger”, or rather, two of them, with one foot on the back of each.

This debt crisis is more than macro economics. By all means, understand what the government is doing to your money. However, be prepared to build a new culture based on the words of Jesus. This evil culture is going down. The meek and humble will inherit the earth.

 

[ACCT]

I make no pretense to being an economist, and certainly none to knowing what Bernanke thinks.

But, it is my tentative belief that Bernanke really isn’t thinking about that. He has two problems that demand his full attention. One is the necessity of funding the grotesquely overspending government. He has no choice in that. The other is the desire on his part to encourage investment with low interest rates. So, is he wise or foolish in doing that? I’m not sure he’s either one, and I’m not sure he thinks it’s much of a cure for anything. One remembers that fairly early in his term he started raising interest rates to quell what seemed to him a forming bubble created by too-expansive monetary policy under Greenspan (and which Greenspan now admits was too expansive). But it was too late. The bubble exploded at the first touch.

So, what now? Raise interest rates in a recession in which business people won’t even borrow at super-low rates, and in which people won’t buy houses at those rates? What’s the man going to do when the government discourages business in every way there is to do it, add to that discouragement?

An inevitable consequence of that accommodation, it seems to me, is a possible bulge in the “carry trade”. If so, that’s scary, all by itself.

But I don’t think Bernanke controls very much of anything, and I doubt he would claim he does.

He’s “riding the tiger”, or rather, two of them, with one foot on the back of each.

So here you have rock-solid, irrefutable evidence that printing gobs of money and spewing untold hours of happy talk isn’t working. You have undeniable proof that all it buys you is a few weeks or months of relief, brief bounces in a continued long-term slump lower for growth and asset values.

Yet what do the powers-that-be do? They call for more of the same failed medicine!

Uber-“doves” at the Fed, such as Federal Reserve Vice Chairman Janet Yellen and New York Fed President Bill Dudley, reiterate statements like “a highly accommodative policy stance is appropriate” virtually any chance they get.

As long as Bernanke is at the Fed’s helm, you can expect the nonstop money printing to continue.
Adam Posen, an American economist on the Bank of England’s monetary policy committee, claims the BOE “cannot take our foot off the pedal … the right thing to do now is engage in more monetary stimulus!” This despite the UTTER FAILURE of previous rounds of money printing to actually accomplish anything for the real U.K. economy.

And of course, Ben Bernanke said at his post-meeting press conference on Wednesday that “we remain able and willing to take further action” — meaning more money printing — if the economy weakens. This despite the fact we know that QE only gooses asset prices, while accomplishing little to nothing for the real U.S. economy.

 

[Ridgerunner]

So here you have rock-solid, irrefutable evidence that printing gobs of money and spewing untold hours of happy talk isn’t working. You have undeniable proof that all it buys you is a few weeks or months of relief, brief bounces in a continued long-term slump lower for growth and asset values.

Yet what do the powers-that-be do? They call for more of the same failed medicine!

Uber-“doves” at the Fed, such as Federal Reserve Vice Chairman Janet Yellen and New York Fed President Bill Dudley, reiterate statements like “a highly accommodative policy stance is appropriate” virtually any chance they get.

As long as Bernanke is at the Fed’s helm, you can expect the nonstop money printing to continue.
Adam Posen, an American economist on the Bank of England’s monetary policy committee, claims the BOE “cannot take our foot off the pedal … the right thing to do now is engage in more monetary stimulus!” This despite the UTTER FAILURE of previous rounds of money printing to actually accomplish anything for the real U.K. economy.

And of course, Ben Bernanke said at his post-meeting press conference on Wednesday that “we remain able and willing to take further action” — meaning more money printing — if the economy weakens. This despite the fact we know that QE only gooses asset prices, while accomplishing little to nothing for the real U.S. economy.

I really don’t think it’s Bernanke so much as it is this administration and congress. Some things, he has no choice but to do. Some things he is doing because this administration does everything in its power to generate an unfriendly business environment and the unemployment and underemployment that results. I’m not saying the accommodation is a good thing, but in my opinion it is a reaction to something else. Picture how this economy would be functioning right now if business was faced with 15-20% interest rates as well as everything else.

In my opinion, whatever it’s worth, if we did not have the current administration in power, this recession would have already been over with, and the Fed would be free to act in a disinflationary manner.

 

[mercytruth]

Admittedly, the book of Revelations is not easily understood.** “Mystery Babylon” is drunk with the blood of the saints".**(Rev.17:6).

If one reads Prof. Antony Sutton in **America’s Secret Establishment **, he provides good documentary evidence that certain banking firms financed both Hitler and Lenin/Stalin. Never has so much blood been shed over mammon as under Hitler and Stalin. Millions of Jewish souls under Hitler, and millions of Christian souls under Stalin were slain.

If the banking/Wall street system collapses it is because it has fulfilled this scripture. Now, if this is true, what does St.John have to say to us? “Come out of her, my people, lest you share in her sins, and lest you receive of her plagues.” (Rev.18:4-8)

"The love of money is the root of all evil".

May God have mercy on us.

 

[ACCT]

Admittedly, the book of Revelations is not easily understood.** “Mystery Babylon” is drunk with the blood of the saints".**(Rev.17:6).

If one reads Prof. Antony Sutton in **America’s Secret Establishment **, he provides good documentary evidence that certain banking firms financed both Hitler and Lenin/Stalin. Never has so much blood been shed over mammon as under Hitler and Stalin. Millions of Jewish souls under Hitler, and millions of Christian souls under Stalin were slain.

If the banking/Wall street system collapses it is because it has fulfilled this scripture. Now, if this is true, what does St.John have to say to us? “Come out of her, my people, lest you share in her sins, and lest you receive of her plagues.” (Rev.18:4-8)

"The love of money is the root of all evil".

May God have mercy on us.

There is no future without Jesus!

 

[ACCT]

I really don’t think it’s Bernanke so much as it is this administration and congress. Some things, he has no choice but to do. Some things he is doing because this administration does everything in its power to generate an unfriendly business environment and the unemployment and underemployment that results. I’m not saying the accommodation is a good thing, but in my opinion it is a reaction to something else. Picture how this economy would be functioning right now if business was faced with 15-20% interest rates as well as everything else.

In my opinion, whatever it’s worth, if we did not have the current administration in power, this recession would have already been over with, and the Fed would be free to act in a disinflationary manner.

No matter how much money the ECB prints for Europe, it’s going to need help from Ben Bernanke and our Fed. Perhaps the Fed will print money and lend it to the ECB. Perhaps there will be currency swaps, where the Fed prints money and swaps it for euros with the ECB.

No matter what, Europe’s problem is not just the ECB’s. You can rest assured that as Spain and Italy start to buckle — which they are now doing — the Fed will be in there, helping out the ECB.

This means, of course, that both the euro and the dollar are going to suffer together.

Moreover, signs are coming to light that the U.S. economic recovery over the past few years has been nothing but smoke and mirrors.

Stocks are starting to wobble … real estate prices are on the verge of falling again … and the public isn’t buying the headline unemployment figures any more. The 8.2% official unemployment number is hogwash. The true unemployment figure is over 35% — and increasingly more and more people and investors realize it.

Plus, it’s an election year. And no way, no how is the Fed going to let the economy or the markets completely fall apart this year. Bernanke will print money at the drop of a hat.

 

[ACCT]

Keeping cash in your mattress may not be such a bad idea. J.P Morgan Chase, the second largest bank in the United States, lost $46 billion in market cap in 139 days in 2002! Do not forget Enron. JP Morgan Chase wrote off $450 million of Enron’s $2.6 billion. Japanese banks have even more bad debt and less capital than U.S. banks.

I am aware of the fractional reserve system. The Federal Reserve cannot allow the banks to go under. If the banks go under, our money system goes under. Where will all this end? **

**I am a big fan of the Austrian school of economics, mainly because they explain the consequences of credit expansion. Here is a quote from a German economist, Dr. Kurt Richebacher:

“It is a historical fact that every great financial crisis has been preceded by excessive confidence and absurdly inflated expectations that misled consumers and businesses to overextend themselves during the boom. One cannot explain the Great Depression of the 1930s with a collapse of confidence without pointing to the prior creation of inordinate confidence and expectations that had propelled the earlier borrowing and spending binges. Confidence, too, can be driven to dangerous excess. Yet, never forget: credit excess is the indispensable primary condition”

These are some of my favorite quotes from Ludwig von Mises. He is known as the head of the “Austrian school” of economics. He was a Professor of Economics at the University of Vienna from 1934 to 1940. I compiled these quotes over the years. I got some of the quotes over the Internet.

“The notion that it is possible to pursue a credit expansion without making stock prices rise and fixed investment expand is absurd.”

“Credit expansion is the governments’ foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate capitalists, to contrive everlasting booms, and to make everybody prosperous.”

“Firmly committed to the principles of interventionism, governments try to check the undesired result of their interference by reporting to those measures which are nowadays called full-employment: unemployment doles, arbitration of labor disputes, public works by means of lavish public spending, inflation, and credit expansion. All these remedies are worse than the evil they are designed to remove.”

“It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this the state of affairs, the government is able to collect the money that it wants to spend. Government is the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.”

“The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression”

“The boom squanders through malinvestment scarce factors of production and reduces the stock available through overconsumption; its alleged blessings are paid for by impoverishment.”

“The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application, and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about.”

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

“The whole system is the acme of the short-run principle.”

“The credit expansion boom is built on the sands of banknotes and deposits. It must collapse.”

 

[ACCT]

“No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts…” – The Constitution of the United States, Article One, Section 10.

I find myself in an awkward position defending cash. I do not believe in fiat money. However, I see us going to a cashless society. There is a war on cash, just as there is a war on gold. The selling points are convenience and, in my opinion, the illegal war on drugs. There is no free lunch, however. I think that the price of a cashless society will be the loss of liberty.

I am not an economist, but I am an economist at heart. I am always looking for self-interest to explain human behavior, especially political behavior. Where is the self-interest in a cashless society? I think that it is the same self-interest of government that drove us from gold to fiat money, power.

F.A. von Hayek, an economist and student of von Misses, wrote, “With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people. What is dangerous and ought to be eliminated is not the government’s right to issue money, but its exclusive right to do so and its power to force people to accept that money at a particular rate.”

 

[TEPO]

“No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts…” – The Constitution of the United States, Article One, Section 10.

I find myself in an awkward position defending cash. I do not believe in fiat money. However, I see us going to a cashless society. There is a war on cash, just as there is a war on gold. The selling points are convenience and, in my opinion, the illegal war on drugs. There is no free lunch, however. I think that the price of a cashless society will be the loss of liberty.

I am not an economist, but I am an economist at heart. I am always looking for self-interest to explain human behavior, especially political behavior. Where is the self-interest in a cashless society? I think that it is the same self-interest of government that drove us from gold to fiat money, power.

F.A. von Hayek, an economist and student of von Misses, wrote, “With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people. What is dangerous and ought to be eliminated is not the government’s right to issue money, but its exclusive right to do so and its power to force people to accept that money at a particular rate.”

Just a thought I’ve pondered on once or twice, but is there something wrong with a competing privatized monetary system to challenge the US backed public Dollar? How about multiple competing privatized monetary systems -you know, to bail ourselves out of the mess the gov. Created?

They could all be interchangeable at banks, that way if one failed, another would take its place… Just food for thought for when after the dollar crumbles.

Course we’d have to allow for the socialists to have their own privatized system too, which would be kind of seperate and on its own -but still interchangeable with the other monies.

I believe that the euro was a mistake… Instead of consolidating we should be doing the opposite for many reasons.

 

[TEPO]

There would also be no need for taxes under the new systems because theyre private. Everyone would have jobs because the socialist system would pick up all those outside of the free market systems… If the dollar is able to hang on - it would remain taxable because it is state owned, so the military and handicapped would be covered.

True freedom relies on having actual options after all.

 

[TEPO]

The idea is my own exclusive invention, so all I ask -is if it ever happens (and becomes a huge success) I want a few statues of myself planted at a few touristy public locations. I dont think that’s too much to ask.