Though this is not a laughing matter, it does belong on this site. The man has cracked the fiat currency, he is the hacker of the economy. If some farmer did it, who actually grows hogs, he'd be able to not pay the income taxes on his sales of bacon and only pay the sales taxes with it, when he transacts.
IRS would have a fit. So would most other gov't agencies, including FDA. He'd be arrested for sure.
In a fractional reserve system the money supply is amplified by debt
- the big difference is that fractional reserve banking is on the bank's balance sheets and if it blows up, it's only the people who lent their money to that bank that should lose. The FDIC was set up specifically to ensure that people lend their money to the banks, so that the banks wouldn't go belly up (while they should have, many times).
Fractional reserve banking is not in itself a problem that requires any laws, it's a market situation, the only thing that is required is people need to be aware who they are giving their money to and what is happening to that money. Maybe people wouldn't put their money into a bank that did that, but they don't care because of FDIC. Maybe people would put their money into a bank that did it, that's if the bank shared the percentage points it gained from the loans.
Money printing by the Fed is not as simple, it cannot be unwoun if it's straight 'stimulus' for example. If it's about selling debt, then the debt has to be bought back, but it can't be bought back with fake money, it has to be real money, or that currency will collapse.
As to what inflation is, whether it's trust or what not, yes people don't understand inflation and so they 'trust' the government. I don't trust any government in the world and there are many people who do not, we will be proven right and many of us are better positioned for the eventuality of the incoming implosion of that system.
But you are wrong there about why the loaf of bread costs more, it's not because of trust. A loaf of bread has many economic inputs that go into it. Wheat, eggs, milk, other products, shipment costs, labour costs, taxes, whatever.
All those things are priced by the market and with more and more fake money being thrown into the system by the central banks, the prices will be bid up. At an auction where everybody has 100 dollars in their pockets, no single item can be sold for more than 100 dollars.
At an auction where everybody has 1000 dollars in their pockets, no item can be sold for more than 1000 dollars.
If the expectation is that tomorrow at another auction, the same items can be resold with people present, each one having 100,000 dollars in their pockets, then the prices for all items in this today's auction will go up and hit their maximum that is possible today, everything that can be bought for 1000 bucks today will be bought. The expectation is that the gov't will print so much money, that tomorrow the same items could be resold at 100,000 a piece.
And that is a completely rational expectation.
So in reality the prices for bread are going up not because of confidence in money, they are going up because of confidence in the actions of the government.
This brings me to your next point:
the government wants to maintain trust in the currency
- it doesn't matter what the gov't wants or what it says, the only thing that matters is what it does.
Falling wages increase productivity within the economy, because with falling wages it's possible to hire more help and thus produce more.
There is always competition between wages and capital (automation). Buying a robot for example is a way to avoid hiring more people, but wages are a consideration here. If the wages are low enough, buying a robot will become much less competitive and thus it makes more sense to hire people when their wages are lower than a certain threshold.
USA is full of subsidies, everything that the government does is about hiding true levels of inflation. For example prices of postage stamps are dictated by the government to be stuck at well below inflation adjustment, that's part of the reason USPS is losing all that money. Oil prices are up and going higher, the price buffer that USA has around it because of the foreigners willing to hoard US dollars in exchange for the actual produced goods will come home to USA, it will come all at once. Today prices in USA are much higher than 10 years ago, and their rate of increase is definitely much higher than the official inflation numbers. However again, the US dollars that are printed end up mostly abroad, that the 54 Billion per month trade deficit, so USA has an inflation hiding buffer.
Government was constantly growing, including prior to 9/11. That's the big con that was played by all the presidents for the last 50 years, including Clinton, who created massive amounts of inflation, in his case it was Greenspan (Greenspan's put), which inflated the stock market bubble (and created all those phony jobs and prosperity of the nineties, which blew up eventually, leading to more money printing, a looser fiscal policy and the next bubble being inflated in the housing sector). Clinton was spending printed but also borrowed money.
It's possible to defer inflation into the future. Of-course, Clinton had major trade deficits, which he hid by refinancing US debt with short term, adjustable rate debt, basically he put government on an ARM together with Rubin (heil the master).
Now, when WWII ended, gov't did cut spending by 64% and cut taxes by 32%, it shouldn't be a surprise that gov't did that, because it didn't have to produce all those bombs. However the success of fifties that came from that huge gov't austerity was negated quickly, when the gov't decided to go onto a spending binge, the cold war, the space race, the military action everywhere without any declaration, the SS, the Medicare, all of the departments that were created.
What, you didn't know that most of the departments that are part of gov't were created in the time between WWII and today? EPA, FDA, dep't of energy, dep't of education, dep't of commerce, Medicare, massive hike in SS and income taxes, HUD, all sorts of gov't was created in the past WWII era, I haven't even mentioned the massive increase in unfunded liabilities yet.
As to debt touching 'non-debt' sectors - there are no non-debt sectors when half of the transaction is debt-based.
No, you don't let your enemies win to try and turn that into a later victory. If you have no gun at the moment, you hit them on the head enough times for them to pass out, then you step on their throats, until they are dead, and then, just in case, you use a big enough stone to let their brains out. That's the way to win, not this wishy washy bullshit.
So if you owned a small restaurant in NYC near the close of prohibition
- prohibition. It's a decrease of my freedoms to produce, sell, consume a product. It's a decrease of freedoms brought upon by the government.
(the mob was branching out now that their main funding source was being eliminated)
- the mob that was created by the prohibition.
and you were told to pay protection money to the mobster or there'd be a "accident", would increased police protection (including protection from Big Tony) be a net increase or decrease in your freedom to keep your kneecaps?
- as I said: police force, court system, jails none of it required income taxes.
Did you think that before 1913 in USA there were no cops, no jails and no courts? In fact I don't believe government should be involved in criminal law, prisons and policing, I have expressed my opinions on this matter enough times, I don't want to repeat myself.
However given that most people do not understand that point and are ready to have the predictable knee-jerk reaction to what I am talking about, I'd say that there is no problem with people organizing their city in a way that pays for cops, a prison and a few judges. And none of it requires any income taxes at all. However there is something else to be said about the criminal organizations: they exist regardless of the system people have. Crime happens in every system, would you agree?
I personally believe that a restaurant owner should be able to hire a private security force and take out every criminal that threatens him and he shouldn't be liable for it in the eyes of government.
---
I, and every economics book, disagree with that nonsense
- I beg to differ.
Hold on a moment, just a second.
I'll start with this one, which is ready for a quick view online , this one to debunk the propaganda about the so called 'natural monopoly'. It's government created monopoly, there is nothing 'natural' about it.
and now a list of many other economics books that disagree with you:
The Real Crash: Americaâ(TM)s Coming Bankruptcy â" How to Save Yourself and Your Country
How an Economy Grows and Why It Crashes
Crash Proof 2.0: How To Profit From the Economic Collapse
The Little Book of Bull Moves: Updated and Expanded
Crash Proof: How to Profit From the Coming Economic Collapse
The Road to Serfdom, Fiftieth Anniversary Edition
Economics in One Easy Lesson: The Shortest and Surest Way to Understand Basic Economics
Extraordinary Popular Delusions and the Madness of Crowds
Capitalism, the Unknown Ideal
Americaâ(TM)s Great Depression
The Case Against the Fed
The Biggest Con: How the Government is Fleecing You
How an Economy Grows and Why it Doesnâ(TM)t
The Kingdom of Moltz
The Wealth of Nations
Manias, Panics and Crashes: A History of Financial Crises
Human Action: A Treatise on Economics
The Mainspring of Human Progress
State Against Blacks
Knowledge And Decisions
A treatise on political economy: or The production, distribution, and consumption of wealth
- it is. I would never pay a single cent in income taxes if not for the guns in the hands of gov't, if I don't pay they'd use them (figuratively at first and literally in a worst case, people do go to jail if they don't pay income taxes after all).
Otherwise, most of the growth of government has been related to increasing individual freedom, not restricting it.
- what do you think freedom is? Freedom is freedom from government. Freedom from being oppressed by gov't, from being dictated what to do, how to do it, etc. The bigger the government the fewer freedoms you have.
Well, many people live off of gov't dole, which means they are part of the machine that steals and redistributes. If you are one of those people, you see it differently, you want the theft to continue.
People who are not paying the income and various other taxes, not being forced to comply with all the mandates, etc., people who get more from gov't than they put in don't have a problem with gov't growth. Any politician who promises ot shrink gov't is a threat to them, they are not interested in shrinking gov't, to them all this gov't seems to be free.
Never mind that the economy they end up with is much worse than what they would have if the gov't was much smaller and much more constrained.
Or, the company becomes a monopoly, then hires private security to attack competitors, enslaves workers, and gives nobody what they want, while the government sits idly by, saying "laissez faire is good.
- a company cannot become a monopoly without gov't. It can become an economy of scale, but never a monopoly.
A company may seem like a monopoly to you, if you don't take into account that the company in question must be providing the customers with the best product at the lowest price due it being an economy of scale. Once it stops doing what the market wants, a competitor comes in and eats its lunch.
As to attacking other companies by force, etc., that's a discussion about criminal law. AFAIC this is also not a place for gov't to interfere, I'd let all private conflicts to be handled privately, including private courts and jail and private security forces. But since most people don't understand this, I would agree that people can organize their criminal system as a function of gov't, including the court system and police for it. This is an easy one - this is paid without destroying production, this was paid by sales, excise and other type of taxes unrelated to income and productivity in USA.
As to power void - as I said, I am not talking about anarchy, but I do prefer anarchy to what is happening right now.
Gov't is supposed to exist in order to protect individual freedoms, that should be its function and nothing else. This means the gov't in place needs to fill that power void and not let anybody take over that power.
There is a very simple process where deflation can rapidly destroy an economy, if left unchecked. It goes as follows: - and then you come up with a contrived example of something that was not actually happening while USA was in a deflation.
Here is your failure: you think of 100,000 dollars or whatever, you are thinking of the FIAT CURRENCY.
WTF does that mean for a farmer? How can currency deflate over time? Over time fiat currency inflates, it doesn't deflate, fiat currency is printed.
-----
How about a real situation? A farmer owes some money, maybe he took a loan from a bank to expand his operation. He took 500 ounces of gold. He has to return the 500 ounces.
Over time his productivity grows, as he invests the 500 ounces into more machines, buys some supplies, whatever. He has his farm, HE MADE A BET. The loan is not without risk, the bank takes risk by giving out the loan, the farmer takes the risk by taking on a loan (and providing collateral obviously, maybe it's part of his farm, maybe it's a couple of tractors he owns, whatever).
So he makes a bet that he can use the loan to grow his productivity. He can either WIN on that bet or he can LOSE on that bet. That's all there is to it. If he loses, he loses the collateral and his time.
If he wins, he has more profits, he can return the loan, he has more productivity, he is making himself wealthier, he is making money for the bank and he produces more goods for the market and with deflation the goods are sold at lower prices, but they reach more people because of lower prices.
That's all there is to it, that's how it actually worked in America.
---
Actually, that's how it works in a few sectors of economy where there is much less regulation and more competitive efficiencies than in other sectors, like in electronics. People bought much fewer phones when the phones cost thousands of dollars. As phones dropped in price the market for them became enormous, the entire planet is the market for all the phones that are produced.
--- Again, you are talking about a contrived example of a farmer that doesn't take into account that the farmer is not in a static universe, he is subjected to the same rules as the rest of the market and as a businessman he is making a bet when he takes on a loan. If he wins, the market wins, if he was wrong and he loses, the market loses. But he has to fail if he loses but also he has to be able to gain if he succeeds, and he shouldn't be punished for his success by government stealing from him, neither in income taxes nor in inflation tax.
---------
gold and silver starts migrating to other countries due to trade imbalances. This migration can easily reduce the amount of available gold or silver available to back currency to a level that cannot be made up for by any sort of mining. If you try and protect your reserves by limiting the ability to transfer gold/silver out by law, you become unable to trade. If you allow the reserves to be depleted, you cannot print enough money to maintain your economy.
- so your economy is inefficient, that's what the trade imbalance is telling you, and your immediate response is to steal (that's the equivalent of your idea of changing the law, that's actually what Nixon did). Well, what can I say, you are perfect for this system.
Again, as I said, I don't want to impose anything on anybody. Gold is perfect as money, but it doesn't have to be the only money.
If your economy is unbalanced, you have huge trade deficits and you have to pay for everything with gold, it means that you are not producing enough of things that other people want. So all that gold is NOT DOING YOU ANY GOOD, IS IT?
You have all that money in your reserves and you are not producing. The only reason for that has to be all the laws that you have so far, all the impediments before the businesses that prevent efficient allocat
- growing government means shrinking individual freedoms, yes it means something bad.
Go read some of the many studies about psychopaths in executive positions and such.
- without government intervention it doesn't matter who is running companies, companies prosper by giving to the people what people want. Governments grow by stealing from people, businesses grow by giving products and services to people.
Without government power a company cannot become a monopoly, it can strive to be the largest competitor, an economy of scale, but it can only succeed and stay successful as long as it gives people what they want.
All that businesses do is give. Businesses give products and services, businesses give investment opportunities, businesses give jobs to people that pay wages, salaries. It is businesses that create everything that we consume. Without businesses all we are is what we were for millions of years, when everybody was only producing enough for himself - surviving on subsistence.
Some had it better than others, some were hunters, some fished, some were farmers, life was not fun, it was mostly about making everything you need for yourself to survive. Capitalism and free market allowed savings to be applied by businesses upon the labour and land in a way that created productive output, where all the inputs into the business mixed together and properly managed produced something that is greater than the parts that went into it.
The point of running a business is to make yourself wealthier, but to do that without government intervention you have to produce and give.
You sounded ultra-conservative up to that point, but what you describe is a new world order type where people govern locally, but wider policies are made at the global level, which is one of the things the conservatives state is happening and is a bad thing.
- I don't want any global government at all, I think all global government is global corruption.
I don't know if this is 'conservative' or whatever, but I do know that allowing some unproductive people to be the elite and rule all productive people leads to a disaster.
Gold is useful, but also has a very deflationary aspect to it.
- first of all deflation is good.
Secondly, you are right, gold does have somewhat a deflationary aspect to it. With gold as money the prices in USA were falling before the Fed was created, dollar was gaining value all while the USA became largest manufacturer, exporter and creditor in the world, which it did after centuries of being an afterthought to European nations.
It can be an anchor that drags on an economy because once you have run out of gold, you run out of new money to pay people with.
- gold has a natural inflation level of about 1.5 to 2% per year, that's the normal production of gold per year (and it increases with price of gold increasing, because it becomes more lucrative to mine for it).
There is no such thing as 'running out of gold' by the way, the prices for goods fall but the same applies to all prices, meaning that wages fall, which is a good thing, all things considering, we want everything to cost less, including labor.
Yes, your purchasing power remains high, but its useless because holding on to your purchasing power, instead of using it, destroys the economy.
- which never happened except in the propaganda literature of government preferred charlatans that they pass for economists. The real issue is that under gold the government sees decrease in tax revenue over time in nominal terms (and as I said, all wages must fall over time with gold, which is the correct thing to happen), but of-course government officials do not like seeing their wages go down in nominal terms (well, nobody really does, but the government officials can do something about it - they can start inflation by issuing fiat currency and putting road blocks in front of people using real money).
Finally, your comment has this propaganda in it:
And while inflation can run rampant, at least money is out there to support a growing economy.
- it's not the real economy that grows under the inflation situation, as I said, it's the nominal relative prices for assets and goods and even labour, but inflation is theft, pure and simple.
Inflation via fiat currency printing is not production, inflation via fiat currency printing is theft by the governments of the world.
Money is like oil to an economy. You may not want too much of it, but you absolutely cannot have too little of it or it seizes up and dies.
- money can be anything.
In fact without government getting into the money business gold does not have to be THE ONLY money.
Get it? You can issue your own money if there is no government with its nonsense in money. You can issue your own money. Actually stock of your company can be used as money. You can have bank notes that can be backed by ANYTHING, it doesn't have to be gold.
My point is not to force people into one particular monetary system, my point is the exact opposite - the people should be deciding what money is and how to issue it and what it is worth, not governments.
Whatever passes for 'austerity' is no such thing. Austerity is supposed to be cutting government spending, not increasing taxes to pay for the same size or growing government.
Keynesianism will (hopefully sooner rather than later) destroy the fiat currencies of the world and people will no longer trust all this paper and with the paper will go their governments.
That's exactly what the US Constitution provided for before IRS and Fed were created.
The government was getting its taxes proportionate to the population and proportionate to the commercial transactions that were taking place. There was no income tax, no payroll tax, no corporate tax, no death tax, no capital gains tax, no dividend tax, no income related taxes.
All taxes were either direct apportioned taxes (so the government had to raise some money, it would have to calculate how much, it would have to earmark the money and then apportion the total amount among the States based on the population as reported by the census. This was a great idea, it prevented the States from over-stating their population to get more Congress seats, so poorer States wouldn't be able to have more power to tax richer States, everything was proportional to the population.
The other legal type of tax was excise, import, duty tax. It could be a sales tax, it could be a tax collected at the border (import or duty), whatever. But it had nothing to do with production, it was a consumption tax, which is extremely fair and intelligent, because it keeps the government being a small part of the overall economy. If the economy was getting worse, there would be less commercial activity maybe, people would avoid buying things and would save more money, this would FORCE the government to cut back as well and save money too! Which is what the doctor ordered - real austerity, bottom up austerity.
As the people saved more money, they could use it to invest and do more production, more business, so more people would be hired and then commercial activity would pick up, more purchases, more transactions, government would be able to expand a bit as well.
It was a system that made all the sense in the world.
But then they figured out how to expand the government not by taxing consumption, but by taxing production, productivity, creation, work, business. This was the beginning of real government expansion. Of-course they also figured they should take over the money and impose fiat.
There was a good reason the founders of USA didn't want fiat to be the money, they wanted the money to be what people chose it to be. The founders did have experience with a terrible disaster created by the fiat - the Continental. There was an expression: not worth a Continental. Not too long from now they'll be saying; not worth a Federal.
Printing money is one thing that can cause inflation.
- inflation is money printing. Rising prices are a symptom of inflation, they are not the cause of it and rising prices are not even a necessary symptom of inflation within USA borders, because other countries are willing to give USA something for the printed dollars, keep the dollars inside their banks and exchange them for the local currency, which is also printed in response to the USD.
The problem for those people is that they are trying to be on a standard, the US dollar standard. The problem for them is that USD is no standard at all, it's worthless. Once they understand this, they will stop hoarding dollars, will dump them and will stop trading for them, then the problem will come back to USA all at once in one shot.
You think you don't have inflation because your prices are buffered by the foreign manufacturers, who are currently absorbing your inflation? You do have inflation, your inflation will hit you with all its force at once.
As to gold, the supermarkets are paid in 'legal tender' and you can sell gold and buy gold to sell or buy legal tender.
There is a government conspiracy, it's the capital gains tax upon gold and other precious metals. The gov't creates inflation which means that the relative values of commodities and precious metals, etc., go up, but if you try to save yourself by hiding in precious metals from inflation, the government wants to tax you.
Here is the problem: you don't have any income by storing your money as gold. If you put 100 ounces of it into a vault, you are not going to get 200 ounces of it back in 5 years, it's going to be the same 100 ounces.
In the meanwhile all other costs went up for you, but if now you want to use gold as a direct payment, your government wants you to give it the difference, it wants you to give up your purchasing power, it wants to take your gold away with capital gains taxes.
Eventually people will figure this out, but judging by your post it's too early for them.
Here is something I am going to expand on later on for the people who CARE about actual economic solutions to the economic problems to think about:
If the gov't is prevented from collecting taxes on production, so no more income taxes, no more payroll taxes, no more corporate taxes, then the production is not going to be limited artificially by these impediments.
If simultaneously the gov't is prevented from destroying the value of money, by printing them and by setting fake interest rates, then all of a sudden the gov't bonds become an ATTRACTIVE opportunity for people, who do NOT want to be in the stock market.
Yes, most people shouldn't even be in the stock market, they are forced into the stock market by the gov't regulations and inflation.
But if the bonds paid the real rates of return, then the majority of people could buy gov't bonds and hold on to them for the return, and that would mean that they would be bullish on the economy of their own country.
So the taxes that still would be collected off the transactions (like sales taxes, duties, levies, they are very much Constitutional), these taxes could be used to pay the interest on the gov't bonds.
Now, if the bonds paid the interest, maybe 5-6%, but there was no income taxes, no gov't regulations, then the growth of economy would directly mean more transactions, more taxes from those transactions, more taxes collected FROM CONSUMPTION, because all legal taxes are really consumption taxes, not production taxes.
This would mean that production would keep growing and the consumption would pay for consumption.
----
Imagine that, a growing economy, more and more savings (high interest rates), so more and more credit available for various business ventures. The more business activity - the more taxes are collected from transactions.
With high efficiencies in the business due to lack of gov't protections and regulations and thus lack of monopolies and price distortions, the people would be extremely productive, would be working much less than they are now, which, by the way, what the initial industrialization allowed in USA.
People sometimes say: what would happen if ALL jobs were automated, all production would be automated? Well, people would be freed to come up with new things to produce, something that cannot be automated, because the concept doesn't exist yet.
But what about the TRANSITION period? Well that is the point of owning part of the economy via the government bonds (or stock market) - you are invested in the economy with these bonds, stocks, and you are paid DIVIDENDS.
DIVIDENDS that are paid to the investors, and everybody becomes an investor.
--
Here you go, this is how the very much Marxist utopia becomes a reality VIA FREE MARKET CAPITALISM.
All production is owned by the people simply through investments. But the difference between this and all of the forced attempts at Communism and Socialism is that it is NOT FORCED.
This is purely voluntarily, nobody is forced to buy investments, nobody is forced to buy gov't bonds, but if the bonds return a good rate, you'd be stupid not to be invested.
The industrialization allowed people to be much more than previously that's why people could produce so much more and make so much more money while working so much less. So yes, the Jetsons theory was right. The problem of-course is that the government saw all this productivity and decided to steal it to grow the government and that's the reason you don't have a 3 day work week today. A capitalist society ends up providing the capital necessary to make the workers much more productive but then the wealth that is created attracts all sorts of people into government and all they do is find ways to grow their own power there and steal the productivity from the workers.
It's a funny thing about those 500 Euro bills, I remember about a year ago I was going to UK through France and at the passport check the lady asks me why I am going there, what my citizenship is, whatever. I am asking her why? Basically the gist I got was that she was afraid I'd come to UK to stay there and collect welfare?!?:)
So I open the wallet, there are a few cards and a few 500Euro bills, maybe 6 of them. She almost falls off her chair, she is like: where did you get those? I am like: WTF? Seriously? She let me through, but for a moment I thought she was going to call the cops on me or something.
Well, one of the things that government loves to do is turn unpaid labour into paid labour, this way the gov't can collect income taxes where it couldn't before. Untold hundreds of millions of taxpayer dollars were spent on various pro-feminist movements and women entered the work-force, lessening the economic hit that inflation had since the seventies.
How many people remember when most women used to stay home and didn't have to go to work? When a woman got married before the seventies, she normally would quit her job. Today huge numbers of women can't quit their jobs when they get married, there is a pretty good reason that number of marriages is down and there is a much higher percentage of divorce as well. There is no real incentive for women to get and stay married.
I am not saying that women don't want to work, some do, but it doesn't mean that majority of women who are working wouldn't rather do work at home, spend time with kids (by the way taking better care of kids, growing a better next generation). Instead the woman goes to work as well as the man (good thing if it's only one job) and the kids are left with either older relatives, friends or most likely sitters, in kindergartens, whatever, so the gov't shifts women into a higher tax bracket immediately. Here they didn't have to pay taxes and here they now are earning a salary and have to pay taxes.
And the very reason women are working in any case is because of their husbands being overtaxed as is, the average family after-tax income is about as large as a man's pre-tax income, so there you go - women are sent to work to pay the taxes to grow the government. There are more taxes collected as a result of all the child sitting, and the future generation is much worse off as a result, in many cases being indoctrinated from the young age by public officials into following the party propaganda (and when I say party, I do not mean Rs or Ds, I mean the government party, the only party that matters, the ruling party).
Oh, don't worry, the government is absolutely ready to try and re-inflate the housing bubble again. Federal reserve, while not technically a government agency is still acting as an arm of government, and Bernanke came out very specifically saying that he will be printing money and buying mortgages off the banks and whoever, and is absolutely dead set on having people refinance their mortgages at lower rates with ARMs (only with ARMs now, that after his QE3 announcement the 10 year bonds went down in prices and interest rates went up to over 3%. Obviously the long term interest rates will keep going higher and obviously fixed rate long term mortgages cannot have lower interest rate than government bonds, so Bernanke wants everybody to refinance their mortgage with a bigger loan with ARMs only, which he hopes to push down, but I think it will backfire this time and he won't succeed, instead the money will flow into other assets, commodities, precious metals, food, energy, equities, so Bernanke is going to create what he really says is not in his powers to create: hyper-inflation).
The basket of prices does not include many important things, that are excluded supposedly because they are too volatile.
However when reporting on inflation not on a weekly or monthly basis, but instead reporting on inflation per year or even decade, those supposedly 'volatile' goods MUST be included in the numbers.
Beyond that, the real inflation should be counted against the relative value to gold, which is the real money, it's what people use as real money and it's what governments fight against, they hate real money, that's because real money prevents long terms deficit and debt financing of all that government spending and thus prevents growth of gov't, prevents destruction of individual liberties.
AFAIC gold = freedom and fiat = slavery.
Your old friend may not even realize it, but he is part of the propagandamachine.
Austrian economics is the only economics that we know works, all other theories are used for propaganda, nothing else, they are not useful to predict economic situations and outcomes.
1. Definition of inflation has been updated in dictionaries to support government propaganda. There is a reason the government doesn't publish M3 numbers anymore, they go against government propaganda.
2. Inflation only does one thing to 'increase productivity', that one thing is equivalent of a pay cut.
When the Fed's chairman (Bernanke right now) talks about 'employment mandate', he is talking about using inflation (*which is his only tool, he has no other tools, all tools he has only use this one hammer: creating money out of thin air and pumping them into the economy one way or another, loans or asset purchases or whatever*), he is talking about DECREASING YOUR WAGE IN REAL TERMS.
That's right. The only reason the economy may 'pick up' in the short term due to higher inflation (stimulus, QE, whatever) is because while your nominal pay check stays the same, your labour is now cheaper to higher in real terms. So the Fed devalues your labour, congratulations. Heads they win, tails you lose.
3. "inflation adjusted" - this is government propaganda. First they underreport inflation by 1000%, then they 'adjust' your fixed incomes to that number, that is 10 times smaller than the real inflation rate.
Policies designed to shift wealth never benefit the bottom, they only benefit the top. Somebody sells an apartment at 70 million and somebody else buys it, how does it benefit the bottom? The bottom ends up paying more for food, energy, rent - the REAL things people pay for every day, not that fake 'basket of goods'.
4. 1930 is infamous, that's when the government truly upped the ante, stepped in with massive stimulus, bail outs, work programs designed to make it look like there is economic activity, while in reality destroying and mis-allocating the scarce resources further. That recession was started by the Fed printing dollars to buy bad UK debt from France. Hoover started with huge purchases of assets, huge money printing, FDR came to power on the promise of austerity but then doubled down on the bail outs and money printing. That recession was created by the Fed and turned into a depression by the Fed and the Treasury and the government (president and the Congress and the Senate and SCOTUS, everybody participated in that disgrace). Since 1947 (when the depression ended with the end of the WWII due to gov't cutting spending by 64% and all taxes by over 30%) USA had massive growth of gov't, which couldn't be sustained on a gold dollar, so 1971 was the time Nixon defaulted and the seventies were a disaster, which shows you to be wrong about the 'post-regulation' era as well.
The stagflation was the final nail in the coffin of Keynesian charlatanism. It was a paradox, impossible by Keynesian standards, but there is nothing impossible about inflation and rising unemployment. It's very simple: the production was falling even faster than inflation, so unemployment was rising.
5. The busts are restructuring of the debt, and the debt touches everything. When the gov't is half of the economy (and money is half of every transaction) you are not safe in any part of the economy, there is debt in everything. Even if you are doing something with no debt and you have customers and profits, your profits are going to disappear once your customers disappear, and they will disappear because they are in massive debt and have no productive jobs themselves.
You are the product of the propaganda machine that I am talking about. The real inflation in USA has not been reported since Nixon either, they have changed the way the inflation is counted enough times for it to mean absolutely nothing.
Same with the GDP numbers, they are completely meaningless. It's a number, it means nothing. It's reversed engineered to fit the necessary levels of propaganda. 70% of it consumption, not production. Consumption of imported goods. 40% of economy is financial manipulations, banking, stock market, whatever. Again, that's not production. Maybe 5% of it is all the manufacturing and agriculture that still exists in USA. The rest of it is government spending, military, all sorts of government contracts.
The real GDP in USA has been falling since 1971. There WAS a bump in 1981, that's when Paul Volcker took the interest rates to 21.5%, which was high enough for people to get back into dollars and government debt purchases. Since then it has been falling steadily again. The GDP is supposed to be deflated by the real inflation numbers, and the real inflation numbers are reverse engineered, manufactured by the government for your consumption.
The real inflation numbers in USA vary between 11 and 15% year to year, and you can trace them by looking at a basket of commodity prices going up, precious metals, oil, even food, etc.
Well, it will come eventually. I mean Greece wasn't a problem 2.5 years ago, right? What I mean is that nobody heard of Greece as being a problem 2.5 years ago. All of a sudden it became a problem.
So did the problem happen in a few days? No, of-course not. Greece had the problem of government spending of money that it didn't have (borrowed money) for decades. Greece should never have entered the Euro zone, because Greece was fundamentally screwed up even when Euro zone was being established. Same with many other countries there.
But Greece could keep borrowing with short term papers (ARMs) and it could keep spending money it could never repay. Eventually this became obvious and now there is a depression, which is again, a way for the market to rebalance the equation. A way to allow the scarce resources to be allocated more efficiently. Companies that are inefficient and governments that spend more than they can take in, spend borrowed or stolen money, they must fail so that the credit, the money can be saved and eventually the savings can be used to restart production.
Instead the European union decides it's going to start printing more and more Euros, placing the burden on the people who still produce and pay taxes, be it in Germany or in Switzerland (now, that the Swiss committed economic suicide by hard linking their currency to the Euro). This will not solve the problem for Greece, it will only make the problem bigger for everybody else.
Same thing for USA. Since 1971, when Nixon defaulted on the dollar, the economy has been going down. If you take all sorts of graphs, that compare wealth distribution, compare wages, salaries, purchasing power, manufacturing, government spending, whatever you want, you'll see an interesting thing that happened since about 1971 - there is an edge there, and all these charts show that since then the disparity started growing, the real earning power started going down, the debt started growing much more than before, inflation really took off, all the bad things that eventually do destroy the economy started around that moment.
Of-course to lead to that moment, it took 1913, when the Federal reserve (and IRS) were established in the first place, which allowed for rapid expansion of government.
People don't realize it, but growing government is not a good thing. Government shouldn't be growing all the time, it should do a few things and stay about the same in terms of size and power. A government that is growing all the time signals that the real economy is shrinking all the time and government that is growing is gov't that is getting more powerful, it signals that individual freedoms are shrinking.
That's the combination that eventually destroys the economy, everything. The problem is the government, it's a very lucrative place to be, even if you are very mediocre or just plain stupid. I mean to grow a successful business you have to be productive, you have to work pretty hard, (maybe you have to be luckier than your average guy, but still, it takes a huge effort).
To become wealthy by working for government you have to be cunning, cheating, lying and as unprincipled as possibles - those are the qualities that get rewarded. And those people have the power in their hands. Of-course they'll abuse it for personal gain, what else is new? The problem is that they should never have had that power, they used to be constrained by the law that was set above the government - the Constitution, but they figured out how to get around the law. That's a pretty good explanation as to why so many people in government are lawyers.
Lawyers. Not engineers. Not scientists. Not real business people. Not even just plain folks without anything special about them, who are not lawyers.
I think the next crisis will force the people to review what kind of government they want, what is the function of government, what is the role?
As far as I am concerned, the time of ultra-nationalist ideas must pass, the government shouldn
Slashdot Mirror
So Sue Lowden was just ahead her time and they laughed at her. Who is laughing now? WHO I ASK YOU, IS LAUGHING?
Though this is not a laughing matter, it does belong on this site. The man has cracked the fiat currency, he is the hacker of the economy. If some farmer did it, who actually grows hogs, he'd be able to not pay the income taxes on his sales of bacon and only pay the sales taxes with it, when he transacts.
IRS would have a fit. So would most other gov't agencies, including FDA. He'd be arrested for sure.
In a fractional reserve system the money supply is amplified by debt
- the big difference is that fractional reserve banking is on the bank's balance sheets and if it blows up, it's only the people who lent their money to that bank that should lose. The FDIC was set up specifically to ensure that people lend their money to the banks, so that the banks wouldn't go belly up (while they should have, many times).
Fractional reserve banking is not in itself a problem that requires any laws, it's a market situation, the only thing that is required is people need to be aware who they are giving their money to and what is happening to that money. Maybe people wouldn't put their money into a bank that did that, but they don't care because of FDIC. Maybe people would put their money into a bank that did it, that's if the bank shared the percentage points it gained from the loans.
Money printing by the Fed is not as simple, it cannot be unwoun if it's straight 'stimulus' for example. If it's about selling debt, then the debt has to be bought back, but it can't be bought back with fake money, it has to be real money, or that currency will collapse.
As to what inflation is, whether it's trust or what not, yes people don't understand inflation and so they 'trust' the government. I don't trust any government in the world and there are many people who do not, we will be proven right and many of us are better positioned for the eventuality of the incoming implosion of that system.
But you are wrong there about why the loaf of bread costs more, it's not because of trust. A loaf of bread has many economic inputs that go into it. Wheat, eggs, milk, other products, shipment costs, labour costs, taxes, whatever.
All those things are priced by the market and with more and more fake money being thrown into the system by the central banks, the prices will be bid up. At an auction where everybody has 100 dollars in their pockets, no single item can be sold for more than 100 dollars.
At an auction where everybody has 1000 dollars in their pockets, no item can be sold for more than 1000 dollars.
If the expectation is that tomorrow at another auction, the same items can be resold with people present, each one having 100,000 dollars in their pockets, then the prices for all items in this today's auction will go up and hit their maximum that is possible today, everything that can be bought for 1000 bucks today will be bought. The expectation is that the gov't will print so much money, that tomorrow the same items could be resold at 100,000 a piece.
And that is a completely rational expectation.
So in reality the prices for bread are going up not because of confidence in money, they are going up because of confidence in the actions of the government.
This brings me to your next point:
the government wants to maintain trust in the currency
- it doesn't matter what the gov't wants or what it says, the only thing that matters is what it does.
Falling wages increase productivity within the economy, because with falling wages it's possible to hire more help and thus produce more.
There is always competition between wages and capital (automation). Buying a robot for example is a way to avoid hiring more people, but wages are a consideration here. If the wages are low enough, buying a robot will become much less competitive and thus it makes more sense to hire people when their wages are lower than a certain threshold.
USA is full of subsidies, everything that the government does is about hiding true levels of inflation. For example prices of postage stamps are dictated by the government to be stuck at well below inflation adjustment, that's part of the reason USPS is losing all that money. Oil prices are up and going higher, the price buffer that USA has around it because of the foreigners willing to hoard US dollars in exchange for the actual produced goods will come home to USA, it will come all at once. Today prices in USA are much higher than 10 years ago, and their rate of increase is definitely much higher than the official inflation numbers. However again, the US dollars that are printed end up mostly abroad, that the 54 Billion per month trade deficit, so USA has an inflation hiding buffer.
Government was constantly growing, including prior to 9/11. That's the big con that was played by all the presidents for the last 50 years, including Clinton, who created massive amounts of inflation, in his case it was Greenspan (Greenspan's put), which inflated the stock market bubble (and created all those phony jobs and prosperity of the nineties, which blew up eventually, leading to more money printing, a looser fiscal policy and the next bubble being inflated in the housing sector). Clinton was spending printed but also borrowed money.
It's possible to defer inflation into the future. Of-course, Clinton had major trade deficits, which he hid by refinancing US debt with short term, adjustable rate debt, basically he put government on an ARM together with Rubin (heil the master).
Now, when WWII ended, gov't did cut spending by 64% and cut taxes by 32%, it shouldn't be a surprise that gov't did that, because it didn't have to produce all those bombs. However the success of fifties that came from that huge gov't austerity was negated quickly, when the gov't decided to go onto a spending binge, the cold war, the space race, the military action everywhere without any declaration, the SS, the Medicare, all of the departments that were created.
What, you didn't know that most of the departments that are part of gov't were created in the time between WWII and today? EPA, FDA, dep't of energy, dep't of education, dep't of commerce, Medicare, massive hike in SS and income taxes, HUD, all sorts of gov't was created in the past WWII era, I haven't even mentioned the massive increase in unfunded liabilities yet.
As to debt touching 'non-debt' sectors - there are no non-debt sectors when half of the transaction is debt-based.
All the money that USA is printing is debt.
No, you don't let your enemies win to try and turn that into a later victory. If you have no gun at the moment, you hit them on the head enough times for them to pass out, then you step on their throats, until they are dead, and then, just in case, you use a big enough stone to let their brains out. That's the way to win, not this wishy washy bullshit.
So if you owned a small restaurant in NYC near the close of prohibition
- prohibition. It's a decrease of my freedoms to produce, sell, consume a product. It's a decrease of freedoms brought upon by the government.
(the mob was branching out now that their main funding source was being eliminated)
- the mob that was created by the prohibition.
and you were told to pay protection money to the mobster or there'd be a "accident", would increased police protection (including protection from Big Tony) be a net increase or decrease in your freedom to keep your kneecaps?
- as I said: police force, court system, jails none of it required income taxes.
Did you think that before 1913 in USA there were no cops, no jails and no courts? In fact I don't believe government should be involved in criminal law, prisons and policing, I have expressed my opinions on this matter enough times, I don't want to repeat myself.
However given that most people do not understand that point and are ready to have the predictable knee-jerk reaction to what I am talking about, I'd say that there is no problem with people organizing their city in a way that pays for cops, a prison and a few judges. And none of it requires any income taxes at all. However there is something else to be said about the criminal organizations: they exist regardless of the system people have. Crime happens in every system, would you agree?
I personally believe that a restaurant owner should be able to hire a private security force and take out every criminal that threatens him and he shouldn't be liable for it in the eyes of government.
---
I, and every economics book, disagree with that nonsense
- I beg to differ.
Hold on a moment, just a second.
I'll start with this one, which is ready for a quick view online , this one to debunk the propaganda about the so called 'natural monopoly'. It's government created monopoly, there is nothing 'natural' about it.
and now a list of many other economics books that disagree with you:
The Real Crash: Americaâ(TM)s Coming Bankruptcy â" How to Save Yourself and Your Country
How an Economy Grows and Why It Crashes
Crash Proof 2.0: How To Profit From the Economic Collapse
The Little Book of Bull Moves: Updated and Expanded
Crash Proof: How to Profit From the Coming Economic Collapse
The Road to Serfdom, Fiftieth Anniversary Edition
Economics in One Easy Lesson: The Shortest and Surest Way to Understand Basic Economics
Extraordinary Popular Delusions and the Madness of Crowds
Capitalism, the Unknown Ideal
Americaâ(TM)s Great Depression
The Case Against the Fed
The Biggest Con: How the Government is Fleecing You
How an Economy Grows and Why it Doesnâ(TM)t
The Kingdom of Moltz
The Wealth of Nations
Manias, Panics and Crashes: A History of Financial Crises
Human Action: A Treatise on Economics
The Mainspring of Human Progress
State Against Blacks
Knowledge And Decisions
A treatise on political economy: or The production, distribution, and consumption of wealth
Conscience of a Conservative
Geeks' charitable donations need to go towards building companies.
Geeks shouldn't be charitable, they should be smart. Pool your money together, set up your own VC fund and use it to grow new ideas.
- it is. I would never pay a single cent in income taxes if not for the guns in the hands of gov't, if I don't pay they'd use them (figuratively at first and literally in a worst case, people do go to jail if they don't pay income taxes after all).
Otherwise, most of the growth of government has been related to increasing individual freedom, not restricting it.
- what do you think freedom is? Freedom is freedom from government. Freedom from being oppressed by gov't, from being dictated what to do, how to do it, etc. The bigger the government the fewer freedoms you have.
Well, many people live off of gov't dole, which means they are part of the machine that steals and redistributes. If you are one of those people, you see it differently, you want the theft to continue.
People who are not paying the income and various other taxes, not being forced to comply with all the mandates, etc., people who get more from gov't than they put in don't have a problem with gov't growth. Any politician who promises ot shrink gov't is a threat to them, they are not interested in shrinking gov't, to them all this gov't seems to be free.
Never mind that the economy they end up with is much worse than what they would have if the gov't was much smaller and much more constrained.
Or, the company becomes a monopoly, then hires private security to attack competitors, enslaves workers, and gives nobody what they want, while the government sits idly by, saying "laissez faire is good.
- a company cannot become a monopoly without gov't. It can become an economy of scale, but never a monopoly.
A company may seem like a monopoly to you, if you don't take into account that the company in question must be providing the customers with the best product at the lowest price due it being an economy of scale. Once it stops doing what the market wants, a competitor comes in and eats its lunch.
As to attacking other companies by force, etc., that's a discussion about criminal law. AFAIC this is also not a place for gov't to interfere, I'd let all private conflicts to be handled privately, including private courts and jail and private security forces. But since most people don't understand this, I would agree that people can organize their criminal system as a function of gov't, including the court system and police for it. This is an easy one - this is paid without destroying production, this was paid by sales, excise and other type of taxes unrelated to income and productivity in USA.
As to power void - as I said, I am not talking about anarchy, but I do prefer anarchy to what is happening right now.
Gov't is supposed to exist in order to protect individual freedoms, that should be its function and nothing else. This means the gov't in place needs to fill that power void and not let anybody take over that power.
Talk about propaganda.
There is a very simple process where deflation can rapidly destroy an economy, if left unchecked. It goes as follows: - and then you come up with a contrived example of something that was not actually happening while USA was in a deflation.
Here is your failure: you think of 100,000 dollars or whatever, you are thinking of the FIAT CURRENCY.
WTF does that mean for a farmer? How can currency deflate over time? Over time fiat currency inflates, it doesn't deflate, fiat currency is printed.
-----
How about a real situation? A farmer owes some money, maybe he took a loan from a bank to expand his operation. He took 500 ounces of gold. He has to return the 500 ounces.
Over time his productivity grows, as he invests the 500 ounces into more machines, buys some supplies, whatever. He has his farm, HE MADE A BET. The loan is not without risk, the bank takes risk by giving out the loan, the farmer takes the risk by taking on a loan (and providing collateral obviously, maybe it's part of his farm, maybe it's a couple of tractors he owns, whatever).
So he makes a bet that he can use the loan to grow his productivity. He can either WIN on that bet or he can LOSE on that bet. That's all there is to it. If he loses, he loses the collateral and his time.
If he wins, he has more profits, he can return the loan, he has more productivity, he is making himself wealthier, he is making money for the bank and he produces more goods for the market and with deflation the goods are sold at lower prices, but they reach more people because of lower prices.
That's all there is to it, that's how it actually worked in America.
---
Actually, that's how it works in a few sectors of economy where there is much less regulation and more competitive efficiencies than in other sectors, like in electronics. People bought much fewer phones when the phones cost thousands of dollars. As phones dropped in price the market for them became enormous, the entire planet is the market for all the phones that are produced.
---
Again, you are talking about a contrived example of a farmer that doesn't take into account that the farmer is not in a static universe, he is subjected to the same rules as the rest of the market and as a businessman he is making a bet when he takes on a loan. If he wins, the market wins, if he was wrong and he loses, the market loses. But he has to fail if he loses but also he has to be able to gain if he succeeds, and he shouldn't be punished for his success by government stealing from him, neither in income taxes nor in inflation tax.
---------
gold and silver starts migrating to other countries due to trade imbalances. This migration can easily reduce the amount of available gold or silver available to back currency to a level that cannot be made up for by any sort of mining. If you try and protect your reserves by limiting the ability to transfer gold/silver out by law, you become unable to trade. If you allow the reserves to be depleted, you cannot print enough money to maintain your economy.
- so your economy is inefficient, that's what the trade imbalance is telling you, and your immediate response is to steal (that's the equivalent of your idea of changing the law, that's actually what Nixon did). Well, what can I say, you are perfect for this system.
Again, as I said, I don't want to impose anything on anybody. Gold is perfect as money, but it doesn't have to be the only money.
If your economy is unbalanced, you have huge trade deficits and you have to pay for everything with gold, it means that you are not producing enough of things that other people want. So all that gold is NOT DOING YOU ANY GOOD, IS IT?
You have all that money in your reserves and you are not producing. The only reason for that has to be all the laws that you have so far, all the impediments before the businesses that prevent efficient allocat
Growing government isn't a bad thing, either.
- growing government means shrinking individual freedoms, yes it means something bad.
Go read some of the many studies about psychopaths in executive positions and such.
- without government intervention it doesn't matter who is running companies, companies prosper by giving to the people what people want. Governments grow by stealing from people, businesses grow by giving products and services to people.
Without government power a company cannot become a monopoly, it can strive to be the largest competitor, an economy of scale, but it can only succeed and stay successful as long as it gives people what they want.
All that businesses do is give. Businesses give products and services, businesses give investment opportunities, businesses give jobs to people that pay wages, salaries. It is businesses that create everything that we consume. Without businesses all we are is what we were for millions of years, when everybody was only producing enough for himself - surviving on subsistence.
Some had it better than others, some were hunters, some fished, some were farmers, life was not fun, it was mostly about making everything you need for yourself to survive. Capitalism and free market allowed savings to be applied by businesses upon the labour and land in a way that created productive output, where all the inputs into the business mixed together and properly managed produced something that is greater than the parts that went into it.
The point of running a business is to make yourself wealthier, but to do that without government intervention you have to produce and give.
You sounded ultra-conservative up to that point, but what you describe is a new world order type where people govern locally, but wider policies are made at the global level, which is one of the things the conservatives state is happening and is a bad thing.
- I don't want any global government at all, I think all global government is global corruption.
I don't know if this is 'conservative' or whatever, but I do know that allowing some unproductive people to be the elite and rule all productive people leads to a disaster.
Gold is useful, but also has a very deflationary aspect to it.
- first of all deflation is good.
Secondly, you are right, gold does have somewhat a deflationary aspect to it. With gold as money the prices in USA were falling before the Fed was created, dollar was gaining value all while the USA became largest manufacturer, exporter and creditor in the world, which it did after centuries of being an afterthought to European nations.
It can be an anchor that drags on an economy because once you have run out of gold, you run out of new money to pay people with.
- gold has a natural inflation level of about 1.5 to 2% per year, that's the normal production of gold per year (and it increases with price of gold increasing, because it becomes more lucrative to mine for it).
There is no such thing as 'running out of gold' by the way, the prices for goods fall but the same applies to all prices, meaning that wages fall, which is a good thing, all things considering, we want everything to cost less, including labor.
Yes, your purchasing power remains high, but its useless because holding on to your purchasing power, instead of using it, destroys the economy.
- which never happened except in the propaganda literature of government preferred charlatans that they pass for economists. The real issue is that under gold the government sees decrease in tax revenue over time in nominal terms (and as I said, all wages must fall over time with gold, which is the correct thing to happen), but of-course government officials do not like seeing their wages go down in nominal terms (well, nobody really does, but the government officials can do something about it - they can start inflation by issuing fiat currency and putting road blocks in front of people using real money).
Finally, your comment has this propaganda in it:
And while inflation can run rampant, at least money is out there to support a growing economy.
- it's not the real economy that grows under the inflation situation, as I said, it's the nominal relative prices for assets and goods and even labour, but inflation is theft, pure and simple.
Inflation via fiat currency printing is not production, inflation via fiat currency printing is theft by the governments of the world.
Money is like oil to an economy. You may not want too much of it, but you absolutely cannot have too little of it or it seizes up and dies.
- money can be anything.
In fact without government getting into the money business gold does not have to be THE ONLY money.
Get it? You can issue your own money if there is no government with its nonsense in money. You can issue your own money. Actually stock of your company can be used as money. You can have bank notes that can be backed by ANYTHING, it doesn't have to be gold.
My point is not to force people into one particular monetary system, my point is the exact opposite - the people should be deciding what money is and how to issue it and what it is worth, not governments.
Whatever passes for 'austerity' is no such thing. Austerity is supposed to be cutting government spending, not increasing taxes to pay for the same size or growing government.
Keynesianism will (hopefully sooner rather than later) destroy the fiat currencies of the world and people will no longer trust all this paper and with the paper will go their governments.
That's exactly what the US Constitution provided for before IRS and Fed were created.
The government was getting its taxes proportionate to the population and proportionate to the commercial transactions that were taking place. There was no income tax, no payroll tax, no corporate tax, no death tax, no capital gains tax, no dividend tax, no income related taxes.
All taxes were either direct apportioned taxes (so the government had to raise some money, it would have to calculate how much, it would have to earmark the money and then apportion the total amount among the States based on the population as reported by the census. This was a great idea, it prevented the States from over-stating their population to get more Congress seats, so poorer States wouldn't be able to have more power to tax richer States, everything was proportional to the population.
The other legal type of tax was excise, import, duty tax. It could be a sales tax, it could be a tax collected at the border (import or duty), whatever. But it had nothing to do with production, it was a consumption tax, which is extremely fair and intelligent, because it keeps the government being a small part of the overall economy. If the economy was getting worse, there would be less commercial activity maybe, people would avoid buying things and would save more money, this would FORCE the government to cut back as well and save money too! Which is what the doctor ordered - real austerity, bottom up austerity.
As the people saved more money, they could use it to invest and do more production, more business, so more people would be hired and then commercial activity would pick up, more purchases, more transactions, government would be able to expand a bit as well.
It was a system that made all the sense in the world.
But then they figured out how to expand the government not by taxing consumption, but by taxing production, productivity, creation, work, business. This was the beginning of real government expansion. Of-course they also figured they should take over the money and impose fiat.
There was a good reason the founders of USA didn't want fiat to be the money, they wanted the money to be what people chose it to be. The founders did have experience with a terrible disaster created by the fiat - the Continental. There was an expression: not worth a Continental. Not too long from now they'll be saying; not worth a Federal.
Printing money is one thing that can cause inflation.
- inflation is money printing. Rising prices are a symptom of inflation, they are not the cause of it and rising prices are not even a necessary symptom of inflation within USA borders, because other countries are willing to give USA something for the printed dollars, keep the dollars inside their banks and exchange them for the local currency, which is also printed in response to the USD.
The problem for those people is that they are trying to be on a standard, the US dollar standard. The problem for them is that USD is no standard at all, it's worthless. Once they understand this, they will stop hoarding dollars, will dump them and will stop trading for them, then the problem will come back to USA all at once in one shot.
You think you don't have inflation because your prices are buffered by the foreign manufacturers, who are currently absorbing your inflation? You do have inflation, your inflation will hit you with all its force at once.
As to gold, the supermarkets are paid in 'legal tender' and you can sell gold and buy gold to sell or buy legal tender.
There is a government conspiracy, it's the capital gains tax upon gold and other precious metals. The gov't creates inflation which means that the relative values of commodities and precious metals, etc., go up, but if you try to save yourself by hiding in precious metals from inflation, the government wants to tax you.
Here is the problem: you don't have any income by storing your money as gold. If you put 100 ounces of it into a vault, you are not going to get 200 ounces of it back in 5 years, it's going to be the same 100 ounces.
In the meanwhile all other costs went up for you, but if now you want to use gold as a direct payment, your government wants you to give it the difference, it wants you to give up your purchasing power, it wants to take your gold away with capital gains taxes.
Eventually people will figure this out, but judging by your post it's too early for them.
I left a comment on this very topic - what happens to people in a transition period from one type of economy into another. I didn't get a very good response to it (I mean moderation), so it's not a popular thing on /. to think about it maybe? It's a long comment, here is the part of it that is relevant here:
Here is something I am going to expand on later on for the people who CARE about actual economic solutions to the economic problems to think about:
If the gov't is prevented from collecting taxes on production, so no more income taxes, no more payroll taxes, no more corporate taxes, then the production is not going to be limited artificially by these impediments.
If simultaneously the gov't is prevented from destroying the value of money, by printing them and by setting fake interest rates, then all of a sudden the gov't bonds become an ATTRACTIVE opportunity for people, who do NOT want to be in the stock market.
Yes, most people shouldn't even be in the stock market, they are forced into the stock market by the gov't regulations and inflation.
But if the bonds paid the real rates of return, then the majority of people could buy gov't bonds and hold on to them for the return, and that would mean that they would be bullish on the economy of their own country.
So the taxes that still would be collected off the transactions (like sales taxes, duties, levies, they are very much Constitutional), these taxes could be used to pay the interest on the gov't bonds.
Now, if the bonds paid the interest, maybe 5-6%, but there was no income taxes, no gov't regulations, then the growth of economy would directly mean more transactions, more taxes from those transactions, more taxes collected FROM CONSUMPTION, because all legal taxes are really consumption taxes, not production taxes.
This would mean that production would keep growing and the consumption would pay for consumption.
----
Imagine that, a growing economy, more and more savings (high interest rates), so more and more credit available for various business ventures. The more business activity - the more taxes are collected from transactions.
With high efficiencies in the business due to lack of gov't protections and regulations and thus lack of monopolies and price distortions, the people would be extremely productive, would be working much less than they are now, which, by the way, what the initial industrialization allowed in USA.
People sometimes say: what would happen if ALL jobs were automated, all production would be automated? Well, people would be freed to come up with new things to produce, something that cannot be automated, because the concept doesn't exist yet.
But what about the TRANSITION period? Well that is the point of owning part of the economy via the government bonds (or stock market) - you are invested in the economy with these bonds, stocks, and you are paid DIVIDENDS.
DIVIDENDS that are paid to the investors, and everybody becomes an investor.
--
Here you go, this is how the very much Marxist utopia becomes a reality VIA FREE MARKET CAPITALISM.
All production is owned by the people simply through investments. But the difference between this and all of the forced attempts at Communism and Socialism is that it is NOT FORCED.
This is purely voluntarily, nobody is forced to buy investments, nobody is forced to buy gov't bonds, but if the bonds return a good rate, you'd be stupid not to be invested.
The industrialization allowed people to be much more than previously that's why people could produce so much more and make so much more money while working so much less. So yes, the Jetsons theory was right. The problem of-course is that the government saw all this productivity and decided to steal it to grow the government and that's the reason you don't have a 3 day work week today. A capitalist society ends up providing the capital necessary to make the workers much more productive but then the wealth that is created attracts all sorts of people into government and all they do is find ways to grow their own power there and steal the productivity from the workers.
I worked as a printer engineer for 6 months, and during that time had nobody to talk to all day long
- oh, come on, you don't have to talk to yourself all the time, we have a solution for that now.
It's a funny thing about those 500 Euro bills, I remember about a year ago I was going to UK through France and at the passport check the lady asks me why I am going there, what my citizenship is, whatever. I am asking her why? Basically the gist I got was that she was afraid I'd come to UK to stay there and collect welfare?!?:)
So I open the wallet, there are a few cards and a few 500Euro bills, maybe 6 of them. She almost falls off her chair, she is like: where did you get those? I am like: WTF? Seriously? She let me through, but for a moment I thought she was going to call the cops on me or something.
Well, one of the things that government loves to do is turn unpaid labour into paid labour, this way the gov't can collect income taxes where it couldn't before. Untold hundreds of millions of taxpayer dollars were spent on various pro-feminist movements and women entered the work-force, lessening the economic hit that inflation had since the seventies.
How many people remember when most women used to stay home and didn't have to go to work? When a woman got married before the seventies, she normally would quit her job. Today huge numbers of women can't quit their jobs when they get married, there is a pretty good reason that number of marriages is down and there is a much higher percentage of divorce as well. There is no real incentive for women to get and stay married.
I am not saying that women don't want to work, some do, but it doesn't mean that majority of women who are working wouldn't rather do work at home, spend time with kids (by the way taking better care of kids, growing a better next generation). Instead the woman goes to work as well as the man (good thing if it's only one job) and the kids are left with either older relatives, friends or most likely sitters, in kindergartens, whatever, so the gov't shifts women into a higher tax bracket immediately. Here they didn't have to pay taxes and here they now are earning a salary and have to pay taxes.
And the very reason women are working in any case is because of their husbands being overtaxed as is, the average family after-tax income is about as large as a man's pre-tax income, so there you go - women are sent to work to pay the taxes to grow the government. There are more taxes collected as a result of all the child sitting, and the future generation is much worse off as a result, in many cases being indoctrinated from the young age by public officials into following the party propaganda (and when I say party, I do not mean Rs or Ds, I mean the government party, the only party that matters, the ruling party).
Oh, don't worry, the government is absolutely ready to try and re-inflate the housing bubble again. Federal reserve, while not technically a government agency is still acting as an arm of government, and Bernanke came out very specifically saying that he will be printing money and buying mortgages off the banks and whoever, and is absolutely dead set on having people refinance their mortgages at lower rates with ARMs (only with ARMs now, that after his QE3 announcement the 10 year bonds went down in prices and interest rates went up to over 3%. Obviously the long term interest rates will keep going higher and obviously fixed rate long term mortgages cannot have lower interest rate than government bonds, so Bernanke wants everybody to refinance their mortgage with a bigger loan with ARMs only, which he hopes to push down, but I think it will backfire this time and he won't succeed, instead the money will flow into other assets, commodities, precious metals, food, energy, equities, so Bernanke is going to create what he really says is not in his powers to create: hyper-inflation).
The basket of prices does not include many important things, that are excluded supposedly because they are too volatile.
However when reporting on inflation not on a weekly or monthly basis, but instead reporting on inflation per year or even decade, those supposedly 'volatile' goods MUST be included in the numbers.
Instead the calculations always exclude things that people truly use and buy every day. Food, energy, rent, housing, such things. These MUST be included into calculation of price inflation (and I say 'price inflation', I really mean just rising prices. Inflation is money printing, the change in dictionary definition came around 10 years ago, but it doesn't matter, their trying every Orwellian trick in the book, but people shouldn't fall for it.
Beyond that, the real inflation should be counted against the relative value to gold, which is the real money, it's what people use as real money and it's what governments fight against, they hate real money, that's because real money prevents long terms deficit and debt financing of all that government spending and thus prevents growth of gov't, prevents destruction of individual liberties.
AFAIC gold = freedom and fiat = slavery.
Your old friend may not even realize it, but he is part of the propaganda machine.
Austrian economics is the only economics that we know works, all other theories are used for propaganda, nothing else, they are not useful to predict economic situations and outcomes.
1. Definition of inflation has been updated in dictionaries to support government propaganda. There is a reason the government doesn't publish M3 numbers anymore, they go against government propaganda.
2. Inflation only does one thing to 'increase productivity', that one thing is equivalent of a pay cut.
When the Fed's chairman (Bernanke right now) talks about 'employment mandate', he is talking about using inflation (*which is his only tool, he has no other tools, all tools he has only use this one hammer: creating money out of thin air and pumping them into the economy one way or another, loans or asset purchases or whatever*), he is talking about DECREASING YOUR WAGE IN REAL TERMS.
That's right. The only reason the economy may 'pick up' in the short term due to higher inflation (stimulus, QE, whatever) is because while your nominal pay check stays the same, your labour is now cheaper to higher in real terms. So the Fed devalues your labour, congratulations. Heads they win, tails you lose.
3. "inflation adjusted" - this is government propaganda. First they underreport inflation by 1000%, then they 'adjust' your fixed incomes to that number, that is 10 times smaller than the real inflation rate.
Policies designed to shift wealth never benefit the bottom, they only benefit the top. Somebody sells an apartment at 70 million and somebody else buys it, how does it benefit the bottom? The bottom ends up paying more for food, energy, rent - the REAL things people pay for every day, not that fake 'basket of goods'.
4. 1930 is infamous, that's when the government truly upped the ante, stepped in with massive stimulus, bail outs, work programs designed to make it look like there is economic activity, while in reality destroying and mis-allocating the scarce resources further. That recession was started by the Fed printing dollars to buy bad UK debt from France. Hoover started with huge purchases of assets, huge money printing, FDR came to power on the promise of austerity but then doubled down on the bail outs and money printing. That recession was created by the Fed and turned into a depression by the Fed and the Treasury and the government (president and the Congress and the Senate and SCOTUS, everybody participated in that disgrace). Since 1947 (when the depression ended with the end of the WWII due to gov't cutting spending by 64% and all taxes by over 30%) USA had massive growth of gov't, which couldn't be sustained on a gold dollar, so 1971 was the time Nixon defaulted and the seventies were a disaster, which shows you to be wrong about the 'post-regulation' era as well.
The stagflation was the final nail in the coffin of Keynesian charlatanism. It was a paradox, impossible by Keynesian standards, but there is nothing impossible about inflation and rising unemployment. It's very simple: the production was falling even faster than inflation, so unemployment was rising.
5. The busts are restructuring of the debt, and the debt touches everything. When the gov't is half of the economy (and money is half of every transaction) you are not safe in any part of the economy, there is debt in everything. Even if you are doing something with no debt and you have customers and profits, your profits are going to disappear once your customers disappear, and they will disappear because they are in massive debt and have no productive jobs themselves.
Freedom is a human right.
There shouldn't be any government subsidized industries, by the way, that's how economies are destroyed - with government getting into business.
You are the product of the propaganda machine that I am talking about. The real inflation in USA has not been reported since Nixon either, they have changed the way the inflation is counted enough times for it to mean absolutely nothing.
Same with the GDP numbers, they are completely meaningless. It's a number, it means nothing. It's reversed engineered to fit the necessary levels of propaganda. 70% of it consumption, not production. Consumption of imported goods. 40% of economy is financial manipulations, banking, stock market, whatever. Again, that's not production. Maybe 5% of it is all the manufacturing and agriculture that still exists in USA. The rest of it is government spending, military, all sorts of government contracts.
The real GDP in USA has been falling since 1971. There WAS a bump in 1981, that's when Paul Volcker took the interest rates to 21.5%, which was high enough for people to get back into dollars and government debt purchases. Since then it has been falling steadily again. The GDP is supposed to be deflated by the real inflation numbers, and the real inflation numbers are reverse engineered, manufactured by the government for your consumption.
The real inflation numbers in USA vary between 11 and 15% year to year, and you can trace them by looking at a basket of commodity prices going up, precious metals, oil, even food, etc.
Some people still track inflation the way it was calculated before Nixon's time.
Well, it will come eventually. I mean Greece wasn't a problem 2.5 years ago, right? What I mean is that nobody heard of Greece as being a problem 2.5 years ago. All of a sudden it became a problem.
So did the problem happen in a few days? No, of-course not. Greece had the problem of government spending of money that it didn't have (borrowed money) for decades. Greece should never have entered the Euro zone, because Greece was fundamentally screwed up even when Euro zone was being established. Same with many other countries there.
But Greece could keep borrowing with short term papers (ARMs) and it could keep spending money it could never repay. Eventually this became obvious and now there is a depression, which is again, a way for the market to rebalance the equation. A way to allow the scarce resources to be allocated more efficiently. Companies that are inefficient and governments that spend more than they can take in, spend borrowed or stolen money, they must fail so that the credit, the money can be saved and eventually the savings can be used to restart production.
Instead the European union decides it's going to start printing more and more Euros, placing the burden on the people who still produce and pay taxes, be it in Germany or in Switzerland (now, that the Swiss committed economic suicide by hard linking their currency to the Euro). This will not solve the problem for Greece, it will only make the problem bigger for everybody else.
Same thing for USA. Since 1971, when Nixon defaulted on the dollar, the economy has been going down. If you take all sorts of graphs, that compare wealth distribution, compare wages, salaries, purchasing power, manufacturing, government spending, whatever you want, you'll see an interesting thing that happened since about 1971 - there is an edge there, and all these charts show that since then the disparity started growing, the real earning power started going down, the debt started growing much more than before, inflation really took off, all the bad things that eventually do destroy the economy started around that moment.
Of-course to lead to that moment, it took 1913, when the Federal reserve (and IRS) were established in the first place, which allowed for rapid expansion of government.
People don't realize it, but growing government is not a good thing. Government shouldn't be growing all the time, it should do a few things and stay about the same in terms of size and power. A government that is growing all the time signals that the real economy is shrinking all the time and government that is growing is gov't that is getting more powerful, it signals that individual freedoms are shrinking.
That's the combination that eventually destroys the economy, everything. The problem is the government, it's a very lucrative place to be, even if you are very mediocre or just plain stupid. I mean to grow a successful business you have to be productive, you have to work pretty hard, (maybe you have to be luckier than your average guy, but still, it takes a huge effort).
To become wealthy by working for government you have to be cunning, cheating, lying and as unprincipled as possibles - those are the qualities that get rewarded. And those people have the power in their hands. Of-course they'll abuse it for personal gain, what else is new? The problem is that they should never have had that power, they used to be constrained by the law that was set above the government - the Constitution, but they figured out how to get around the law. That's a pretty good explanation as to why so many people in government are lawyers.
Lawyers. Not engineers. Not scientists. Not real business people. Not even just plain folks without anything special about them, who are not lawyers.
I think the next crisis will force the people to review what kind of government they want, what is the function of government, what is the role?
As far as I am concerned, the time of ultra-nationalist ideas must pass, the government shouldn