LTJX, welcome and why don't we just set aside the question of what worked, didn't work or what now's. Take a look at this video from Mish's site and ask yourself the most important question: Is this some shit or what and wherever do we start?!
Scroll a bit:
http://globaleconomicanalysis.blogspot.com/
Respectfully Given
Go Tigers
BOB
Grover - great follow-up!
This article was just on Zero hedge. While it talks more about war, it also applies equally to those that tell us the state knows best on fiscal and monetary matters:
We all agree here I think that we have neither free markets or a functioning domecracy. This makes it easy for us to either attack the markets (banksters) or the government, depending on your particular point of view. But what fun is that, like shooting fish in a barrel. No one here has said, that I am aware of, that we should entirely eliminate free market capitalism (with or without money) or entirely eliminate government of any kind. I have heard that big government is bad, does that mean that small government is necessarily good? Big and small seem like feeble descriptors that will lead to an intelegent discussion about governments. Was the German government that arose in the 30's bad because it was big or are there other descriptors that we can use to describe it?
When do multinational coorporations become so big that they dominate the market place to such a degree that there are no longer market choices? Is that something that is OK, should we live with it until the market hopefully takes care of it in the future? How do you maintain the rule of law so that markets can function freely and fairly without interfering with basic market functionallity?
How do you manage the money supply so the number of dollars in circulation match the goods and services in the economy without the managing entity distorting markets for their own devices?
[quote=treebeard]We all agree here I think that we have neither free markets or a functioning domecracy. This makes it easy for us to either attack the markets (banksters) or the government, depending on your particular point of view. But what fun is that, like shooting fish in a barrel. No one here has said, that I am aware of, that we should entirely eliminate free market capitalism (with or without money) or entirely eliminate government of any kind. I have heard that big government is bad, does that mean that small government is necessarily good? Big and small seem like feeble descriptors that will lead to an intelegent discussion about governments. Was the German government that arose in the 30's bad because it was big or are there other descriptors that we can use to describe it?
[/quote]
treebeard,
Good questions. I think that our fiat money system and its inherent fundamental flaws rot the very basis of honest society. The problem is that bankers can legally create money based on a debtor's signature and then require that debtor to figure out how to pay back the debt. Usually, that entails trading time for wages. So what is a banker contributing to the deal? Is it really worth the interest that the debtor ends up slaving to pay?
Bankers know they have it easy, particularly when they "invest" some of their unearned income to elect government officials. The officials know that they need to repay the bankers' favors or they will not receive more when reelection rolls around. How does a political person repay favors? They create loopholes in regulations and/or tax the populace and give the spoils away. Does this sound like innocent taxpayers are getting a fair shake?
Government shouldn't be any bigger (or smaller) than it needs to be. Government cannot do anything without first taking from the citizenry. I'd really like to hear of any refuting examples. When it is bigger, it needs to take more. The questions should concern the appropriate size for government. What are the fundamental issues that government should do? How do we keep government in check?
Hitler's government filled the void left behind by the Weimer Republic. Hitler was one of the first politicians to embrace Keynesian monetarism. Hitler borrowed money in Germany's name and put the Germans to work building roads and factories. He slowly gained power by keeping his true intentions secret until it was too late to stop him. Slowly, the situation changed from apparent good to an outright dictatorship. I can't think of a more efficient government system - and few that ended in such despair.
When money can be created out of pure fancy and can purchase as well as honest money, it invites corruption from those in power. When politicians have to levy taxes to pay for a war, a road, or any other item, the taxpayers will decide whether or not to reward the politician on election day. When they can perform accounting tricks and claim that they are not raising taxes to provide this good, the populace gets lulled - particularly the ones benefitting from the largess. That is where the Gordian knot starts. Cut that tie and you're on your way to freedom.
Honest money, such as gold, can not be printed into existence. There is just exactly enough of it in the world, regardless of the quantity above ground. When more comes to the market (think of the conquistadores bringing their ill gotten booty from the Incas and Aztecs,) there is a temporary inflation. The inflation makes mining less profitable and thus limits new money coming to market. When the market has achieved balance and honest money (gold) is worth more than it costs to extract it, the signal will be there for the producers.
When producers run rampant and degrade the environment sufficiently, the politicians will figure out a way to convince the populace to vote for a small increase in taxes to stop the raping of the land. It is self-correcting as long as the citizens remain vigilant.
Grover
Grover
I agree that an honest money system is a good start. Anything that prevents us form kicking the can down the road and avoiding reality is a good thing. But counting on market forces to establish an honest price for gold might be difficult to achieve. Look at what is currently happening to the price of silver and gold, what is to prevent the same fraud and manipulation that is par for the cource now happening in the future? How do you get the power to set the price of gold away from the central banks if we were to go that way. I'm sure they will not sit idly by if we can ever move to such a standard.
I do think that your comment regarding a vigilant citizenry are key, but that also presuposes that the average citizen has access to good information. Look at what happened in the lead up to the 2008 crisis. Private banking interests, including the "federal" reserve, treasury department, and the media were all lock step talking the same nonsense. There were a small minority of economists and market commentators who were raising the red flag, but they were all written off as nut cases. How do you break that cycle?
These same guys are still missing from the mainstream commentary and all the crazies who missed the whole thing are now trying to "solve" the problem for the rest of us.
I think ultimately decentralization of the decision making process to those directly impacted by the decisions made is the best way to prevent fraud. But how do you extrapolate that onto larger systems that work at a national level? Reliance on any "system" to create an honest foundation for operating markets puts to much faith in an idea for me. Human beings, left to their own devices will always find a way to corrupt any system, if they can operate out of the light of day.
HItler was a fringe crackpot who found legitimacy because he had lots of funding from German heavy industry who loved his union busting ways (that is not a comment for or agianst unions either way). He had lots of boosters in the US includig Westinghouse, IBM and the very famous Henry Ford. They were very happy to trade with him until it became politicallly impossible. How do you stop that from happening again in a modern culture that puts some much faith in monetary success to detriment of all other values?
[quote=treebeard]I agree that an honest money system is a good start. Anything that prevents us form kicking the can down the road and avoiding reality is a good thing. But counting on market forces to establish an honest price for gold might be difficult to achieve. Look at what is currently happening to the price of silver and gold, what is to prevent the same fraud and manipulation that is par for the cource now happening in the future? How do you get the power to set the price of gold away from the central banks if we were to go that way. I'm sure they will not sit idly by if we can ever move to such a standard.
[/quote]
treebeard,
The whole power structure needs to change. Right now, the owners of the central banks have ungodly power over the political class. They need to have the "flexible" currency or they cease to be necessary. Their flexible currency can be conjured from the depths for any reason whatsoever. Go to an honest money system and all their power has been removed. There is no reason for them to exist, so decommission them. Individuals will set the price of gold by their very actions concerning gold. Take the current price structure - would you buy or sell at $1600? If more people buy, the price goes up until enough sellers place enough ounces on the market.
It is tough to break that case while the cabal has the power of the printing press. These people generate the ability to purchase wealth at a flip of the switch. They reward the behavior of their followers and destroy their enemies. That is why all public facets were spewing the same drivel. Tell a similar lie enough times and people will believe it.
I wish I had a silver bullet for you, but there isn't one (that I know of.) Those who cut through the official crap will be eventually rewarded. Success has a way of inviting imitation. Let the lawyers who are currently whittling nits provide positive services (for profit) for the working class. Would you pay someone a fee to monitor companies whose stock you own? Let them be the watchdogs (and have other watchdogs watch them.) If the government provided the court system that it should, many lawyer's best interests would be aligned with ours.
I agree.
I totally agree with your first sentence.Those who don't learn about fraud when their money is taken won't have the money to be defrauded again - economic Darwinism in practice. If the government were limited to what it should be, there wouldn't be a national level that needed to be extrapolated into. Think about it. If the government had to raise taxes to fund projects, people would quickly tire of the increased taxes and vote the bums out. There may be some class warfare where we soak the top 2% and leave the bottom 98% sitting pretty, but that choice will have fallout that blankets society as well. "Tax the rich / feed the poor / 'til there are no / rich no more …" [I'd Love to Change the World - Ten Year's After]
Hitler was a demonic genius who used everything and everybody for his own means. The people who got sucked into his realm were like moths attracted to an open flame. Eventually, they stray too close and get burned. They were lucky that political reality saved their very skins.
Hitler would never have been able to come to power were it not for the hyperinflation and subsequent collapse of the Weimar Republic. Industry was essentially nonexistent and good money was even harder to come by. By and large, the German people were destitute and depressed. Their Kaiser Wilhelm sold them a bill of goods (world domination) and failed to deliver. Had his government been limited by the taxpayers, he wouldn't have had the opportunity.
Grover
I didn't want to get into the whole Germany thing to much, it was a side point, but no industry in Germany?!:
The bank was set up by Harriman and Bush's father-in-law to provide a US bank for the Thyssens, Germany's most powerful industrial family.
August Thyssen, the founder of the dynasty had been a major contributor to Germany's first world war effort and in the 1920s, he and his sons Fritz and Heinrich established a network of overseas banks and companies so their assets and money could be whisked offshore if threatened again.
By the time Fritz Thyssen inherited the business empire in 1926, Germany's economic recovery was faltering. After hearing Adolf Hitler speak, Thyssen became mesmerised by the young firebrand. He joined the Nazi party in December 1931 and admits backing Hitler in his autobiography, I Paid Hitler, when the National Socialists were still a radical fringe party. He stepped in several times to bail out the struggling party: in 1928 Thyssen had bought the Barlow Palace on Briennerstrasse, in Munich, which Hitler converted into the Brown House, the headquarters of the Nazi party. The money came from another Thyssen overseas institution, the Bank voor Handel en Scheepvarrt in Rotterdam.
By the late 1930s, Brown Brothers Harriman, which claimed to be the world's largest private investment bank, and UBC had bought and shipped millions of dollars of gold, fuel, steel, coal and US treasury bonds to Germany, both feeding and financing Hitler's build-up to war.
Would WWII happened without Thyssen? Who knows, but I think that chances would have been a lot slimmer without the worlds largest private investment bank behind him.
The point that I have been driving at is exactly how do we " Go to an honest money system and all their power has been removed. " What entity is going to make that happen, are we going to elect Ron Paul to Government?
http://www.youtube.com/watch?list=PLB8F07875B150A28A&v=3fUKbzROwKs&feature=player_detailpage
Hows that working out?
Is the free market going to create an honest money system on their own? Should we be working for a smaller and more effective government rather than repeating empty slogans about government being the root of all evil?
[quote=treebeard]
The point that I have been driving at is exactly how do we " Go to an honest money system and all their power has been removed. " What entity is going to make that happen, are we going to elect Ron Paul to Government?
http://www.youtube.com/watch?list=PLB8F07875B150A28A&v=3fUKbzROwKs&feature=player_detailpage
Hows that working out?
Is the free market going to create an honest money system on their own? Should we be working for a smaller and more effective government rather than repeating empty slogans about government being the root of all evil?
[/quote]treebeard,
I'm afraid the current system is doomed to failure. They knew (or should have known) it was eventually going to happen when they created the Federal Reserve, but they did it anyway. I expect the majority of the populace will perish - and that's the best case scenario. In the worst case, someone in some government will push a button to release a hail of nuclear bombs. In the best case, those who remain will have no need or trust of paper promises. In the worst case, no one will remain.
I don't have an answer for transitioning gracefully to a sustainable system. Hybrids won't work and the moneyed interests have too much to lose to if we dump fiat. They buy the best government that money can buy to keep the masses in line. They want all of us to be their slaves.
Ron Paul has spent a career fighting these interests. He's been effectively cast as a nice but kooky uncle. He doesn't have a chance of winning, but I'll write in his name on election day. I'll continue to talk to anyone who will listen.
Grover
treebeard,
I apologize for remaining mired in the depths of despair. It doesn't promote a good conversation.
Humans have always organized a government structure. Small groups follow a clan leader while bigger groups form more complex governments. Governments must therefore be part of the human experience. Government must provide a service that the governed desire at a price that is considered reasonable.
Governments have to consume portions of the governed production - taxes. As society becomes wealthier, governments can grow as well. As a result, the services provided also increase. The bigger the government, the more taxes it needs. What is the point of diminishing returns? Which functions are most suitable for government to tackle and which should remain in the people's realm?
The founders of this country enumerated specific functions that the federal government should provide. Were their imposed limits constructed because society was much smaller (and less wealthy) then? Had they known of today's USA, would they reduce limitations to accommodate all the complexities of modern society?
Look at the various cabinet level departments. Which ones do you think are valuable and necessary? Which ones do you think have outlived or outgrown their usefulness? When you look at the necessity, consider the true cost (GAAP costs instead of cash costs) to determine your own benefit/cost ratio.
Grover
To clarify the GAAP comment: That acronym stands for Generally Accepted Accounting Principles. In essence, it requires that deposits are to be made in the year they accrue … to set aside enough funds to pay promised benefits when those costs occur in the future.
In 2011, the federal government collected approximately $2.5 trillion in taxes. They borrowed approximately $1.3 trillion in order to spend approximately $3.8 trillion. If the government abided by GAAP, the deficit would have been approximately $5 trillion. In other words, we would need to triple all federal taxes just to stay even. At least, that is what an honest government would do.
When you are considering your benefit/cost ratio for various departments, consider that the GAAP cost is approximately double the amount they currently spend ($7.5 trillion versus $3.8 trillion.)
Grover
I have no idea if you will think this is topic related but I know this: All of this bantering is past tense, it does not account for present decisions, and until everything truly comes crashing down will we even know how to dig ourselves out of this mess. I do not speak just for the United States but for the World and until all derivatives, and all the obscure hedges and paper has been fully vaporized will any system be remotely manageable. So again, where to even start? Chris speaks of being thankful for this time to prepare and I wholeheartedly agree. Mish says NOBODY knows which way any of this will turn out and I believe I see Chris nodding. With that in mind I prepare first, and learn as much as I can, will error in the process of learning but I don't care about this so long as I have 6 months supplies of the most basic of needs and can relax while watching everything unfold.
Preparations are key because the crisis that occurred in 2008 may pale as to what may occur next out of Europe, China, Japan and the rest of the world. Perhaps this will be worse than 2008, who knows. Cash, Gold and watch the paint dry seems to be a good idea for now. As Chris says, "it is better to be a year early than a day late", I subscribe to my Professors words on this opinion without question.
Respectfully Given
BOB
Grover,
I agree with all of your criticism of the current government. I agree that it may have to collapse because at this point it is so corrupt that it may be beyond reapair. We are truly in uncharted waters here.
There are two basic points that I was trying to make. First was that the concept of government, perhaps its a minor one, as an organizational structure for large number of people use create societal order is not a bad idea. Should it look anything like what we have now, of cousre not. Its easy to tear down what we have now, but I think that it would be a much more productive discussion if each criticism was followed with a possitvie suggestion about what policy or structure should be in it's place.
Seocnd, large private entities, like multinational corporations, can be just as distructive to our freedoms and quality of life as government can be. They can come in and destroy local economies and environments and move on to someplace else after they have explointed what ever was of value there. It may make short term eceonomic sense to do so, profits for the next reporting season on wall street. But in the long term, there are eventually not going to be any other places to exploit. Remember one of the three "E"s is the envronment.
Combine large powerful out of control government, powerful and out of control wealthy special interests, no rule of law, and dimishing resources and you have the mess that we are in. You can't attack either just the governemnt or just the market system, they both need radical revision.
Remeber that when the country was founded only white male property owners could vote, slavery was legal and the idea that the average working stiff should have any say in things was really not part of the concept. You could argue that things have not changed all that much.
I think that we both agree that small and local is the way to go, both in terms of markets and government. How do we get there?
I think it is a mistake to assume that "large multinational corporations" like we see now can exist without a heavy hand of government and central banks to do their bidding. With sound money and limited government a lot of the issues we see today can't exist because it is not profitable. For instance, without the magic of fiat reserve dollar you couldn't see the type of trade deficits we see today. They would self correct much quicker as any nation would be unable to sustain the continous debt. Also without government eliminating competition for the large corporations we would see many smaller companies competing for business. In a truly voluntary trade system, the business must provide what a customer wants at a price they can afford.
"No rule of law" is a huge problem. It's why you have to get government out of the "business" of favoritism for both companies (regulation) and individuals (entitlements). If government isn't handing out favors, it also removes the incentive to influence it.
I think the first thing you have to do is stop the distortion via fiat currency. Get rid of legal tender laws and allow any number of currencies to compete and allow citizens to choose what currency they want to use. That right there will put a huge damper on government. When they can no longer borrow or inflate it means you have to tax enough to pay for programs - a tough sell. That right there should begin to reduce the willingness to go to war when we actually have to pay for it.
Next, you have to begin dismantling large Federal programs that can be better handled by local communities or businesses. Education, Transportation are key places to start.
You have to start removing government involvement in business. Withdraw all subsidies. If a business is not able to survive on it's own it probably shouldn't exist because that means it's unsustainable at least in it's current form.
We need to start pushing responsibly back to individuals and communities. There is no nanny to take care of you, you have to be responsible for yourself - but you also get the freedom to control what you do with your own body.
We also have to start acknowledging that what most people view as "necessary" is ultimately going to fail because it is based on faulty economic assumptions. We won't have Social Security as it is currently done, we won't have Medicare, Medicare or Obama care. We won't have many of the services currently provided by governments because they can't be afforded over the long haul no matter how much you wish it were so. Once we can no longer borrow to pay for programs many of them will become unpalatable. If every year each household got sent a bill with each program itemized, you can bet many would get chopped. Would you be looking to change things if you got a bill like the following: