Capitalism multiplies wealth:
The History of paper money that always ends by default:
The world can’t continue to function this way. The central banks keep overdoing the money printing. That’s what’s happened throughout history. The history of paper money reveals that in every case, the people in charge of controlling the money supply give in to the temptations to inflate and print. By doing so, they eventually lose control of inflation, they lose the confidence of the population, and people abandon the fiat money.
“The sure sign of that today would be a collapse in the 10-year U.S. Treasury rate, the benchmark interest rate for the entire world. It’s what all fixed income is priced off of… if continued; the rates will soar from all-time lows, while people start to desert the monetary system”.
Victims of financial policy:
As an example, France is still expensive. It’s trading like a free-market country, when it is actually a socialist paradise. And they always end the same way: bankrupt. It has become clear that even the U.S. economy is not recovering, and if a realistic deflator is applied, it is contracting in real terms. At the same time the largest economic region, the EU, is sinking into a deepening depression. Japan has resorted to printing Yen just so the government can pay its bills, and the U.K. is in a similarly precarious position as the U.S.
“Too much debt, too much government and too much regulation has hampered the major economies. Their ability to recover and generate the tax revenues to rescue government finances and the profits to bail out the banks of their bad debts, therefore, is fatally impaired. It is this dawning realisation that has become every central banker’s worst nightmare.”
The financial policy Victims:
Middle-class savers, for example, are penalised so that upper-class bankers and speculators – no matter how greedy or reckless – can stay in business. Small businesses too, are starved of the resources they need, so that big businesses can continue making campaign contributions and offering employment to incompetent political hacks, while honest workers’ wages fall.
When politicians go out for dinner, they don’t go out with poor people. They go with the rich. They take care of the rich and the rich take care of them. And we – the people in the middle – pay for it.
How much longer can this go on?
People will very soon be absolutely fed up with it.
US economy to add artificially 3% to its GDP by ‘changing’ its economic history: reads the latest headline. With the U.S. debt-to-GDP ratio over 100%, forexlive.com it’s critical to change the GDP side of the equation, which is easier than addressing the national debt! The new method of calculation will add the equivalent of the economy of a country the size of Belgium to the U.S. output, the FT reports.
The alternative to paper money is gold and silver:
When the collapse of the international monetary system occurs, “It is not the end of the world”. It’s occurred three times in the last 100 years, most recently when Nixon closed the gold window in 1971. A collapse simply means that the major powers reform the system. One likely implementation of reform this time, will be a return to some form of a gold standard; “not because central bankers want it, but because they’ll have no choice.” It will be the only way to restore confidence in the system, producing in today’s dollar value an approximate $10,000 gold/ounce valuation into this collapse-and-reform scenario. A collapse of confidence in the dollar can happen faster than many may realise.
Government debts and promises, traditionally actually meant something. But in the current economy of borrow and spend, holding a currency with actual value is becoming more and more appealing. The alternative to the government paper currency, is gold and silver. Yet for all the gloom and doom narratives within the gold investment space, there are indications that physical gold is becoming scarce. In fact, gold may be setting up for an explosive rebound, both in its nominal price and in the value of companies that mine it.
And then, the Bank of England played a vital role in one of the darkest episodes in central banking history, facilitating the sale of gold looted by the Nazis after their invasion of Czechoslovakia in 1938, reports FT. Where can we expect authorities to be reliable enough to lead society? Nowhere, do it yourself – DIY.
Capitalism multiplies wealth:
The anti–capitalism campaign by the elitists at the World Economic Forum in Davos, Switzerland was, to say the very least, embarrassing. Is Capitalism really doomed as the media is also pretending and propagating? Nonsense; in a free market economy, companies have the right to go broke if they’re not viable. Then, their capital assets can be taken up by other businesses and put to better use. That’s the way it is supposed to work in a capitalistic environment. But now, everyone seems to have lost faith in the market’s self-healing power. So, the Government with taxpayers’ money at hand, steps in.
These days the world is confronted with situations most never thought were possible; such as bail-ins, bail-outs, crashes, depressions, socialism, fascism, and nationalisation. Before, we only had read about some of these in history books. Manifestations so ridiculous, absurd and curious, no one ever thought they could be repeated.
People may not know what capitalism is, but they know they don’t like it. A poll taken by Globescan revealed that support for capitalism has fallen by 20 % in the last ten years.
However: Capitalism produces. Socialism distributes. The two systems do not coexist comfortably with one another. In fact, they are opposed. Socialist principles may score high marks for fluency and pathos; but they score very low marks for economic wisdom. As capitalism produces and socialism distributes: Without capitalism, socialism cannot function. In other words, socialism needs capitalism.
Intriguingly, the inverse is not true. Capitalism has no need of socialism whatsoever. Capitalism distributes wealth by creating opportunity, forged by the interaction of open competition. Capitalism amasses the capital that invests in the enterprises that enable others to advance their financial conditions. Capitalism does not confiscate wealth and redistribute it. Capitalism multiplies wealth, and in the process, it redistributes opportunity. Capitalism cares less whether people are prosperous or poor.
The free market operates as a kind of evolutionary arms race. Companies compete to offer the same product at a better price, or a better quality at the same price. Those that cannot keep up the pace, eventually disappear or are eliminated. Through this “survival of the fittest” process, prices are over time, driven down and the quality of goods and services forced higher. In this way, those at the lower end of the socio-economic spectrum benefit most from the work of companies competing to capture their business. And, the best part is that nobody has to steal a penny to pay for it. The “capitalist pigs” will finance the whole operation themselves – if only the safety-net socialists, would get out of their way and let them do what they do best.
Qin Xiao, a businessman from China understands this principle, he advised his Government:
“An economy now dominated by the government needs to become one led by the market. The government must scrap procedures for approving economic and market activities. It must stop interfering with market prices and transactions…”
Are these emerging market thinkers naïve? No, they are subject to influence. They will favour market systems when market systems are making them rich. Contrary to the industrialised world, in the emerging countries, real wages double every ten years or so. They like capitalism. They want to practice it.
The West’s real problem was not too much capitalism. Instead, there was too little, especially when we needed it, for example during the crisis of 2008.
Governments had corrupted the financial industry. Federal subsidies to the homebuilding industry, along with artificially low interest rates from the Fed, created a bubble in the economy and a frenzy on Wall Street. The financial industry became obsessed with fast profits. Bank managers learnt that they could earn fees by making loans; who cared about collecting them?
This was not a crisis of real capitalism. It was a crisis of distorted capitalism, a simple problem that real capitalism knew how to fix. Left to do its work properly, capitalism would have made these banks go out of business, as they should have.
Collapsing banks would have meant the collapse of many other things too, for example Greek debt. The banks’ holdings would have been subject to fire-sale prices, driving down their own prices, and putting Greece and other major debtors into bankruptcy too.
The blunders of the Central Bankers:
This, of course, is just what the Central Bankers wanted to avoid. Today, more than 10 years later, they’re still trying to avoid it. This caused the drama in Europe.
But far from illustrating ‘capitalism in crisis,’ it shows the fixers themselves caused the crisis. Now they’ve got banks that would have gone bankrupt, if Mr. Market had been allowed to fully express himself. Now the bankrupt banks are kept in business by governments, who should have gone bankrupt too.
Keynesians think in terms of stuffing cash into the black hole in the hope of creating a self-sustaining economy. That will most likely remain an eternal utopia as is becoming increasingly clear.
And since Mr. Market has been side-lined, he is not able to solve the real problem. The bankrupt institutions stay in business, shifting more and more real resources to zombie institutions, run by incompetent, but highly paid managers.
While the US-authorities couldn’t spot a crisis, the Euro-fixers were actively creating one.
“Draghi is a veteran of the World Bank, the Italian Treasury, and Goldman Sachs. He was on the job in Rome while Italy was building up the debt it now finds so hard to pay. Christine Lagarde, now head of the IMF, was French finance minister from 2007 to 2010 — when France increased its public debt by about 50%. They are the very same people who brought Europe – and the world – to the brink of a financial disaster. And now they preside over more monetary and fiscal policy tweaks, more controls, more regulations, and more ‘stress tests.’”
Are the Central Bankers more of a hindrance than a help to the recovery? Absolutely. The government bureaucrats are involved in a massive redistribution of wealth. The Fed is holding interest rates lower than they should be. They’re doing that to subsidise homeowners, many of whom bought too-big-to-afford houses. And who pays for that? People who save money – particularly older people, who are now getting much lower interest rates on their deposits than they would be getting if it had been a market-determined interest rate.
Most likely, the leading financial institutions – as with, presumably, most of the sovereign nations of the developed world, are insolvent. “Presumably” as nobody can know for certain. Neither earnest ratings, phony stress tests, nor bureaucrats judge real solvency, like the value of the ECB’s collateral. It is determined by the real stress test of the marketplace.
Insolvency is like death. When conditions change, so does life expectancy. But instead of allowing the processes of price discovery go on, authorities stop the test of true viability.
What a pity. Now no one knows which bank, or which nation is insolvent. Most likely, they all are.
The Tale of two political systems: