Posted by
Forgive My Patriotism on Wednesday, April 15, 2009 11:40:13 AM
Because there are many who still don't understand suicide economics:
Ronald Reagan said
in 1981 that
"A trillion dollars would be a stack of
thousand-dollar bills 67 miles high." That means that the debt
that has just been created would be equal to a stack of
thousand-dollar bills reaching 737 miles high.
Keynesian
economics. Fiat money. Future-value loans and debt. An economy that
is largely based on a numbers-game cannot be maintained indefinitely.
Why not? Here it is, as simply put as possible:
A home is
valued at $60,000 based on population, buying and selling, local
income, etc. but the value of the home is said to be $100,000 because
it has been artificially inflated. Along with all the other homes,
this numbers game increases the profits of those in the sales process
when they cash-out, or buy and sell quickly.
Then to push this
game even further, the homeowner is given a loan at 125% of its
value. That's $125,000 for a home that is worth $60,000 in the true
scheme of things. Over the course of the loan, the homeowner would
pay $270,000. The more often homes are sold, the more often the
numbers are fudged and the value goes up even more. If an economic
situation causes people to stop buying and selling homes, the values
stop increasing. Greater economic problems cause values to go down.
The greater the problem, the greater the decrease in values and the
burden on the homeowner to make payments. And when value is artificially inflated, these value drops tend toward those actual values very quickly.
But the homeowner is
hoping the home will be worth more than that in the future, so he can
sell or refinance and maybe make a profit in the
future-inflated-value of his home. This is the simplified
future-values game.
Now to a bigger picture. The lender
immediately sells the loan he just made along with hundreds of other
loans, to another company that is also banking on the future-value of
the loan. This future-values game is called
"securitizing".
If
one homeowner loses his ability to pay his mortgage, the purchaser of
the loan forecloses, sells the house and takes a loss on their
investment.
Keynsian economics (our government's economic
policy) says that that foreclosure is ok because the majority of
loans can be kept afloat. By a moderate but steady inflation of the
costs in all markets, there is an increase in everyone's salaries,
and thus the economy is adjusted to follow this numbers-game and
support the increases and losses. The actual value of the home may be
$70,000 next year. And this boosts the ability to increase the fudged
loan value to $130,000. More people are made wealthy in these games.
And they'll continue to be played just as long as we are willing to
ignore the truth of the numbers with regard to the value of the
products they are based on. And we are on a path to play this game
just as long as some retain the power to play with the numbers.
But
what if something causes many people to lose their ability to pay
their mortgages? Many companies taking many losses can cause
investors to try to sell their stock in those companies before they
lose too much. This crisis is called
"a run". If people run,
others tend to do the same in other places, and when many people pull
their investments out of companies, the companies must pay them. The
objective of companies is to make money, not give it away. If
companies give away too much money, they fail and then their people
lose their jobs.
An even bigger picture. Government, though
not empowered by the Constitution, has been addressing these crisis
with a new numbers game. A new future-value game is created to cover
the crisis that was created by a future-values game. Money is simply
printed and given to support the system. This is largely done, not to
keep homeowners afloat, but to keep investors investing. Because, if
investors stop investing, the economy stops growing. If the economy
stops growing, what people produce with their hands goes strait to
their mouths. People don't buy iPods or new cars, and the people who
make those things lose their jobs. When people lose their jobs, taxes
don't get paid, and without taxes the military doesn't defend,
bridges aren't built, roads fall to ruin. The economy (the money we
make and spend or invest) stagnates or goes backwards.
The goal in this new game
of course is to sooth investors into ignoring any future problems
that might occur in the numbers game, and rely on the next numbers
game to fix things. But with every numbers game, the risk of our
economy going backwards and the irreversibility of this increases
toward inevitability.
A problem with fiat money (money based
on the value of nothing but hope) is what it does when it is put
together with commodity money (money based on something tangible).
Diamonds are worth lots of money. We'd all love to have lots of
diamonds! But if suddenly ten pounds of diamonds were discovered
buried on each persons' property, the value of diamonds would drop to
1/10,000th their value. And by value, I mean, how much of something a
diamond will buy. Because everyone now has lots of diamonds, the
value goes down, or rather, the prices of all things would go up.
Massive inflation.
Imagine if every adult in America were to
win a million dollars in the lottery. If you owned a saloon, how much
would you charge for a beer? Four dollars? Not likely. You would
charge $75 dollars for a beer because everyone can afford it. And the
keg you tap to pour the beer would no longer cost you $110, it would
now cost $7,500.
Having a $10,000 diamond would now mean
nothing, because a loaf of bread now costs $5,000. This is the
simplified explanation of the process behind the steady increased
costs we see every day in all the products we buy.
The money
that is printed and given to mortgage lenders by the government, is a
loan to the government from the Federal Reserve (money printers, bank controllers, government partners). And
because this is just a game, there is no intention of ever paying it
back. But just like the homeowner's mortgage, these loans are up for
sale. Now just imagine if these printed-money-loans were purchased by
someone that has animosity for America. Say China, for example. These
loans that China buys are in the form of Treasury Notes or Bonds. And
China would have purchased these loans based on their future-value.
You can buy a $25 bond for $18, and then in several years you give it
back to the government and they give you $25. If $18 dollars today
buys a DVD, inflation makes a DVD in several years cost $30. If the
$25 I get can't even buy a DVD, I may have increased my investment
from $18 to $25, but the value of that $25 is now less than the $18
used to be.
As I said, putting just-printed money into the
economy drops the value of all the money. And if, like the investors,
China sees the value of their investments dropping rapidly, at some
point they are going to avoid a loss, and pull out their money. If
they pull out their money, that means they have to get paid.
Government would print more money and we would all have to pretend
even more, that our money is not worth less.
If our money
becomes worth less and less, soon it will become worthless. And that
means China's money becomes worth more and more here in the US. That
means that China could, if they wanted to, buy American land and
companies at very cheap prices.
Now stick with me on this. If
China owns our debt, and can suddenly demand to redeem their money,
thereby dropping the value of our money and increasing the value of
theirs, they could conceivably, in deliberate fashion, weaken our
economy and buy up enough property and companies to take control of
America. Actually, they are buying these things right now. But the
game players are not really talking about it.
At present, that
stack of thousand-dollar bills reaching 737 miles high is what we are
pretending doesn't exist. And we have been getting away with ignoring
it for quite some time. But we are now in a crisis, and this numbers
game is being played with, let's say, tremendous enthusiasm. The game
is kept going with even more pretense. These and other factors that
are holding this game together are beginning to swing wildly. In the
last six months, in their attempt to get their money before it is
lost, investors have been selling their stocks. Like the depreciated
bond, but now instantly, the value of the stocks people buy in
companies has gone down. This is a loss of the value of our money
that equals a 201 mile high stack of thousand-dollar bills. And
during this present crisis, with hope to make a quick profit in the
downturn, investors caused a jump of more than 10% in the whole
market value 4 times. That has happened only 4 times in history. Once
before the 90s recession and 3 times before the Great Depression. The
economy is rocking like a cheap swing set that is overloaded with fat
grown-ups, and they are making the legs come off the ground. If the
timing of events become anymore synchronized, it's going to flip
over. This game is dangerous.
This explanation is overly
simplified. And it does not address the concerns that the fiat money
used by government to artificially support failing corporations,
comes with government control strings. What exactly is it called when
together the government, banks, and corporations control the economy? Hmmm?
What is
actually happening in our economy is not something that is openly
discussed by those who play these numbers-games. Perhaps they don't
want everyone to think about it.
Eliphas Levi profoundly wrote
in the 1860s:
"The masses are not in need of absolute
truths; were it otherwise, progress would be arrested and life would
cease in humanity; ... The masses know it full well, and so they
quickly desert their doctors and seek out charlatans and quacks. Some
... too often resemble the children playing at charades, who quickly
turn out those who know the answer already, lest the game should be
spoiled ... ."