Failed Dreams & Destroying Europe
The whole idea of a One World Government that began in Europe with the Treasty of Rome was based upon the idea inside Europe that a single government would end war. They never considered that there are two sides to that coin – international war and internal war we call revolution. As Thomas Jefferson said: “I hold it that a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.”
The ECB’s policy of negative interest rates was supposed to create rising inflation by forcing people to spend. They cannot understand that raising taxes is the offset. You cannot spend what you do not have and you will NOT spend as long as you lack confidence in the future outcome. Draghai’s policy is a fool’s dream and the collapse in bond markets demonstrates those who think they can manipulate society are just out of their minds.
The difference between those in government and the private sector is monumental. The private sector, no matter how big the corporation, they seek to stimulate sales by providing what people want at the lowest cost to sell more, gain market share, and increase profits. Government functions precisely opposite – they seek to manipulate society with the big stick always threatening to punish – never reward.
The private sector, lacking the guns and tanks, no matter how corrupt the conspiracy theorists portray them, realize that they must stimulate more business only with the reward model. Even Henry Ford raised wages to $5 a day (when a Model-T was priced at $260) to try to stimulate a higher living standard recognizing the higher the standard, the more cars he would sell. Of course there are the assholes who claim Ford’s idea wouldn’t work citing Boeing as an example because the people do not buy its products. They stop shy of the fact that it costs less to fly and that generally the price of an air ticket is 50% tax.
Nevertheless, governments, never learn this lesson for they always grow larger with each crisis pretending to always be the solution. They took Keynes’ advice that they should move to deficit spending in a depression, not every year, and lower taxes during a recession, which they never do. We are watching government right now raising taxes in the middle of an economic decline and they think punishing people even more with negative interest rates will offset their budgets that are out of control.
It does not take a genius to do a simple correlation. Do interest rates rise or fall with inflation? Gee wiz, they rise! Why would that be? Because if the purchasing power of the currency declines, then the lender would be a fool to hand you a pile of cash that would buy a house today and get back a pile with interest that will only be enough for a down-payment. Interest rates rise with inflation for they normally should be higher that the inflation rate to provide a profit to the lender. Hello! Just do the math. Yet we have bubble-gum analysts and economists on TV saying precisely the opposite raising rates is somehow bearish for stocks and the economies. Unbelievable. ALL BOOMS unfold with rising rates and ALL DEPRESSIONS/RECESSIONS unfold with declining rates. What is so hard to understand?
Yes, lower interest rates implies deflation not inflation. Interest rates must rise, not decline, to ensure any hope of normalization in the economic environment. Government do not want higher interest rates simply because they are the LARGEST borrowers in the system who NEVER pay anything back. DAH!
Until there is someone with some real world experience in trading that step up here, there is zero hope that these people will do anything right.
London Protest Draws 100,000’s Anti-Austerity
This is Socialism Collapsing. Hundreds of thousands of people have joined together to protest anti-austerity. So many, the police refuse to number the crowd fearing it was just too many.
We are at a crossroads. We have people like Rogoff and Buiter who live in their little bubbles and tell government they need to eliminate cash to prevent bank runs and to force more austerity down the throat of the economy to really kill it. The government loves these people who are becoming the new Beavis and Butthead characters of economics.
Governments cannot face the facts. There is NO WAY to maintain the current system. It is dead and trying to blow air into a dead-corpus is pointless. They will not bring this back to life. We need SERIOUS REFORM to save society and to embrace the fact that money is different than theory and debt is the great destroyer. We must move forward and abandon federal taxation and do a debt to private equity swap for government debt to revive the economy and pensions. See SOLUTION CONFERENCE
If we continue down this road, we will see these types of protests turn violent. There will be uprising blaming aliens as always happens during the Sovereign Debt Crisis. There were violent confrontations in Philadelphia with gun battles against the Irish for coming to America and take their jobs in 1844. We will see this everywhere.
The protest in London this weekend demonstrates that government is moving into a confrontation mode where they do not understand that if they continue along this path, the end result will be economic desolation. They have absolutely no solution and continue the brain-dead ideas that they must support the bondholders the same as Roosevelt’s Brains Trust who he had to ignore. It is time to wake up.
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