‘Creative Destruction’

People would like the crisis to be over. Many are counting on it. But the market doesn’t give any uplift. People do not get what they want or what they expect from the markets; they get what they deserve. Yet there is a quarter century’s worth of mistakes, bad investments, businesses failures, and nonpaying individuals. When so many mistakes have to be corrected it is called recession, and when an entire economy goes bad, as is going to happen, it is called depression. Today’s economic model has caused more mistakes than ever before. It encouraged people to spend, borrow, and speculate. And each time the market tried to make some corrections, central bankers came along with more printed money and easier credit. Businesses that should have gone bust years ago kept digging themselves even deeper into debt. Homeowners kept running up more debt too. And speculators kept taking bigger and bigger gambles. The bubble in the financial sector – including subprime debt, housing prices, Wall Street bonuses, and derivatives – blew up in 2007/8.


“The force of a correction is equal and opposite to the deception that preceded it.” The misconceptions image003and absurdities of the 2008 bubble époque were monstrous. Accordingly, the correction has been huge. World stock markets were nearly cut in half post-2008. Property prices, too, have been knocked down almost universally. The total loss of nominal wealth is estimated at $50 trillion.


Could these losses have been prevented? “Certainly many of them could, if governments never would have distorted the mortgage market as much as it did. And if they hadn’t created the Federal Reserve Bank, then it couldn’t have provided ready money for so many speculators and borrowers. And if the Fed under Alan Greenspan had done what it was supposed to do – “taking away the punch bowl” before the party got out of control – the bubble in the financial sector probably would have been far more modest.” In this environment, people drew all the wrong conclusions. They thought, “Capitalism failed.” They saw the economy going downhill – but didn’t notice how government distorted the monetary system. Instead of warning investors of the dangers ahead, they lowered the lending rates, to turn a bad situation worse.


Whoever was responsible for the mistakes, capitalism went about correcting them with its customary élan. It hit imprudent investors with trillions in losses. It knocked down mismanaged corporations. It wrecked homeowners – and pounded housing-based derivatives to dust.


Capitalism operates by a process that the economist Joseph Schumpeter called “creative destruction.” It destroys mistakes to make room for fresh innovations and new businesses. Unfortunately, this puts it at odds with governments and what most people want. When people make mistakes, they maintain that they are blameless. “Who could have seen this crisis coming?” they ask. And say, “Some-one else should pay for the loss.” Today the feds, “…who mismanaged their regulatory responsibilities during the bubble époque, bailed-out mismanaged corporations to protect lenders who mismanaged their money.” They are determined to prevent capitalism from making major changes – in the worst possible way. What’s the worst possible way? Simple. Leave the failed-managers in place. Keep the brain-dead companies alive – along with the zombie banks. Let the government take ownership of major sectors of the economy. And saddle a debt-ridden society with even more debt! As the communist Fidel Castro said:


“My idea, as the whole world knows, is that the capitalist system now doesn’t work either for the United States or the world, driving it from crisis to crisis, which are each time more serious.”


The US government is expected to borrow $2 trillion this year alone. From whom? By printing money that has to come from the value of the existing currency – from money earned and saved by the people – in other words stolen out of the value of the old money. People who had saved their hard earned money have lost part of their purchasing power – at least theoretically. They surely never agreed to let their money be clipped. Even worse they never knew what was happening with their money. So, who will repay it? Nobody.


The more central bankers try to delay and distract the process of ‘creative destruction’, the longer it takes to get the recovery, and the higher the eventual cost. “The severity of a depression is inversely correlated with government’s efforts to stop it.” When Japan was confronted with a major correction in 1990, its politicians desperately tried to stop the correction. Politicians could not make bad debts disappear, or turn bad decisions into good ones. All they could do was to delay the necessary corrections – and cause new mistakes! Over the years, an amount equivalent to almost an entire year’s output has been spent on recovery efforts. But all they did was to prevent and forestall the needed changes. Now, 24 years later, the Japanese economy is still in corrective mode – still fighting deflation. The latest economic numbers show that Japan’s economy shrank at an annualized 1.6% in the July to September quarter. This means Japan is officially in recession and Abenomics has been a failure. In fact, Abenomics has been nothing more than whole scale looting of Japan’s pensions and other financial assets aimed at supporting the cabal in the US.


The Worst has still to come:

Is that the end of the story? Not yet. The Central Bankers’ efforts to stop the progress of capitalism will have some spectacular consequences. The collapse will start when the bond market implodes, sending yields through the roof, for nations addicted to debt cannot sustain a credit crisis for long.


Destructive help comes from this side of the Atlantic too, turning a bad economy even grimmer, the EU started on behalf of the USA a war in Ukraine, wherefore EU taxpayers pay the bill. Inexcusably applying image005sanctions on Russia to let the EU’s medium sized enterprises severely suffer. Resulting in unnecessary business closures, less employment, more people on the dole, less tax income, lower or negative GDP, etc. Are governments stupid or do they this deliberately? Presumably they are instructed to do this on purpose, as they don’t want this crisis solved. As we know from Dr Richard Day who told the meeting in 1969 that long-established communities would be destroyed through an economic crisis, mass unemployment and mass immigration.


EU citizens are very upset being pressured by the US that essentially said, “Let’s you and Russia fight.” – Germany has always been turning towards Russia, all the way. Germany is pro-American, but turned economically towards Russia. Actually the Germans always wanted to maintain their ties with Russia. But the US requires the starting a new Cold War. Which creates a lot of resentment with the people of the EU that nevertheless capitulated. All this is happening because the EU is owned by the Rothschild Illuminati – they dictated the EU into sanctions, and NATO into military confrontation with Russia. They say plainly, “the sanctions are going to continue unless Russia gives back Crimea,” which of course won’t happen. It is the old ‘divide and conquer’ strategy over and again. The sanctions are hurting Europe, and ironically turnout to be a great benefit for Russia because finally Russia realises: “We can’t depend on other countries to supply our basic imports, we have to rebuild our industry.” So Russia loves the sanctions, Europe is suffering and the Americans are finding that the Europeans are suddenly angrier at them than they are at Russia.


The EU has fallen right into Putin’s hands and is now reliant on Russian natural gas and oil – a third of its fuel needs come through Putin’s pipelines. He can bend the EU to his will simply by twisting the valve shut. No need for military intervention. Crimea and the eastern Ukraine with the oil and gas reserves in the Black Sea are his. Putin controls the world’s most vital energy sources. He’s turned Russia into the go-to source for countries desperate to secure long-term supplies of energy. A Uranium shortage is coming too. So, Putin is preparing to turn it into a cash register and make controlling in-the-ground resources a tool of geopolitics.


Germany and Japan are direct competitors in high-end manufacturing exports. Japan has taken steps to dramatically weaken its currency, weaker currency means Japan’s manufactured products will be cheaper than Germany’s manufactured products. That means the German economy is going to take another blow as markets favor Japan’s cheaper manufactured products – even more as the global economy is already slowing – now the ECB is FORCED to do what Japan did, to stimulate the moribund EU and weaken the euro to help make EU exports more competitive under the argument we need more inflation. Implicating the provision of additional loans to banks and the purchase of ‘certain types of debt’, which will have a significant impact on the ECB’s balance sheet. Expect an increase that amounts up to EUR 1 trillion more than now.


But, the worst is still ahead of us – the western world will experience what the Japanese experienced when they saw their Baby Boom population peak 15 to 20 years ago – earlier than western Boomer generation. Japan’s stock market, real estate, and economy declined for 14 years. It has continued to decline or falter in what is called a “coma economy” due to endless stimulus that doesn’t allow the debt bubble to re-balance and restructure.


To make matters worse, most of the EU countries experienced post war Baby Booms of their own too. And are undergoing similar generational shifts in spending, although the worst of this decline lies still ahead. This demographic reality has made this recession global in scope – and that could be the reason this recession lasts longer than anyone anticipated. In fact, all the evidence points to the next phase being a depression as the great financial bubbles burst in concert more deeply and the enormous debts finally get restructured.


And… there’s another great bubble to burst too – “China is ripe for a bubble bust, where government has been building cities designed for a million people, yet have zero inhabitants – they continue to build infrastructures they will not need for decades – they strive for excess industrial capacity – all to keep unemployment from soaring after their exports collapsed in 2008 and 2009.”


Deflation or Inflation:

The greatest credit bubble in modern history will continuing to deleverage – and that means deflation, not inflation, is ahead. Inflation is on everyone’s mind these days. All of us are experiencing higher prices somewhere. But don’t be fooled. Deflation is the greater threat in the short term. And it’s crucial you understand this. Deflation, as the name suggests, is exact the opposite of inflation.


Inflation happens when there’s strong demand for goods and services and limited supply due to low productivity. When inflation falls due to a strong productivity like in the 1980s through the 2000s, interest rates fall, credit gets easy and people and businesses borrow more and more. They over-expand and overspend. They also speculate increasingly and that causes bubbles in financial assets from stocks to real estate.


With deflation, the opposite occurs. There’s too much supply of goods and services due to over-expansion. There’s less money flowing because credit tightens up, causing money to become scarce. And because people have less money to spend, demand for goods and services go down. The aging of the Baby Boom generation will also cause demand to fall very substantially. And when demand goes down, so do prices.


Once credit bubbles go to extremes, they always burst and deflateresulting in a sudden tightening of money supply (credit) – followed by deflation as massive amounts of debt are written off and financial image007wealth disappears as markets crash which actually is Schumpeter’s “creative destruction”, with the following chain consequences:


  • Less credit means less money in the economy.
  • Less money means less demand for goods and services.
  • Less demand means lower prices and less production.
  • Less production means more factory closings and more job losses.


It’s all a domino effect. For those who don’t prepare now, the impact will be devastating. – Gold is in a pretty unique position right now. In essence – except for market price manipulation – it is decoupled from central bank interventions, even as the bond and stock markets kept charging ahead. The gold market has shed speculators that helped fuel massive price rises through 2011, and then fled to equities to chase gains.


Nevertheless, or thanks to extensive manipulations the demand for gold still is strong, especially in Asia. Chinese gold demand rose sharply once the price fell under $1,200 an ounce this month. India, with its obscene restrictions on gold imports and purchases, saw a one-third increase in demand year-on-year. Even central banks are in on the game. Year-on-year purchases are up 28% for Q2 2014. So by buying gold and silver you put yourself on a gold standard, and time will tell you the significance of your decision. The following view in the near future will be more than convincing.


Ron Paul – “The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than (petro) dollars or euros. The sooner the better.”


In de early 70s, the Saudi governments and US created the petrodollar system. Under this system, the US guaranteed the survival of the House of Saud by providing a total commitment to its political and military security. That agreement changed the world trade – without dollars, no access to the world’s most image009important commodity. In other words it made the US a toll collector in any transaction that nothing had to do with a US, or US made products or services – transforming the US into increased powerhouse and having a deeper, more liquid market for the dollar and Treasuries.


But today, geopolitics is rapidly changing. The U.S. failed strategic interventions in the M.E. with faltering protection for the House of Saud, the rise of Iran – which is not part of the petrodollar system -, Russia’s increasing power as energy giant, and the emergence of the BRICS nations – which offer the potential of future alternative economic/security arrangements – all these affect the sustainability of the petrodollar system. Putin would like nothing more than to sabotage the petrodollar, and he’s forging alliances across the planet that he hopes will help him achieve his goal.


At the same time, the relationship between the US and Saudi Arabia, has been deteriorating. The Saudis are furious at what they perceive to be the US not holding up its end of the petrodollar deal. They believe that as part of the US commitment to keep the region safe for the monarchy, the US should have attacked its regional rivals Syria and Iran by now. And they may feel they are no longer obliged to uphold their part of the deal, selling their oil only in US dollars.


The Saudis are already heavily involved with China and could also tilt toward Russia. Oil traded in rubbles or Yuan could be the future result—a death knell for the petrodollar.


Vladimir Putin is stripping America’s superpower status, by forging to break the monopoly of the dollar in the global energy trade. Which is going to affect the average citizen too and costing them dearly. The EU is for one third reliant on Russian natural gas and oil and is going to feel the pinch too. The writing is on the wall: the petrodollar is on life support, and Putin is going to pull the plug.


Along with China, Putin delivered another crushingimage011 blow to the US Dollar with the New Development Bank that invests in developing nations, and through a non-dollar international payment clearing system. Putin is using Russia’s vast energy and resource wealth as the ultimate economic weapon. No need for Cold War 2!


Moscow and Beijing have dealt another blow to the petrodollar by agreeing a second mega deal – a western pipeline gas deal in addition to the previous eastern route of $400 billion, that deal was signed last May. And about oil deliveries Putin said: “We have built and put into operation an oil pipeline from Russia to China and concluded agreements providing for the increase in crude oil supplies.”  And more: “Strengthening ties with China is a foreign policy priority of Russia. Today, our relations have reached the highest level of comprehensive equitable trust-based partnership and strategic interaction in their entire history. We are well aware that such collaboration is extremely important both for Russia and China.”


Headline in the FT: “The euro is in greater peril than ever.” The Eurozone has no mechanism to defend itself against a drawn-out depression. And it is getting even more bizarre; the European Central Bank now sets all banking standards throughout Europe, according to which a bank may fall or rise. This is a clear infringement on the Eurozone nations’ sovereignty. Executed on behalf of Wall Street, read Rothschild Zionists, to undermine EU trade and investment with Russia and China.


A picture says more than thousand words: Obama is out – China and Russia are the partners.


Russian President Vladimir Putin (L) next to Chinese President Xi Jinping and Obama 4th from left.


G20 a total Cabal failure:

The G20 meeting ended in Australia with a total defeat for the cabal and its agenda, multiple sources said. The cabal tried to use the Ukraine as an excuse to start war against Russia as a way to rebuild Western economies and keep itself in power. However, instead, the French, British and Germans abandoned the cabal controlled Americans and joined with the vast majority of the planet to support a BRICS led initiative for a new Marshall plan for the planet, the sources say. Fortunately, the attempts to inflame the sentiment for war using the Ukraine and ISIS went nowhere with most world leaders.

Gerald Celente: First Financial Calamity then War