Friday, June 10, 2011

Plan on instability....

The system is sick. As long as the Fed can pour money into the banks and they in turn buy the Federal bonds we will muddle through. But as the banks concentrate on making a free 3% return trading in  government bonds then the system is not getting new money for loans in the quantity it needs to expand. This is the futility of  quantitative easing and it has a  very limited  effect.

If the banks are only borrowing and investing in these bonds It remains to be seen if this can continue much longer without massive changes in the system.

Let's never forget that we can't drill our own oil thanks to the fanatics controlling the Democrats. And we shipped our middle class jobs overseas, thanks to the Republicans and the boy child Clinton, so there is very little wealth creation potential in selling Chinese trinkets and Jap cars to broke dicks without  good paying jobs or credit.

But the main point is the ruling class doesn't have a clue how to fix it!

Too involved in sex scandals and name calling which diverts our attention from the mess they got us into. But of course, you'll vote for them so the bad guys don't get re-elected and make any changes, right?

Death By Debt - Blogs at Chris Martenson
One of the conclusions that I try to coax, lead, and/or nudge people towards is acceptance of the fact that the economy can't be fixed. By this I mean that the old regime of general economic stability and rising standards of living fueled by excessive credit are a thing of the past. At least they are for the debt-encrusted developed nations over the short haul -- and, over the long haul, across the entire soon-to-be energy-starved globe.

The sooner we can accept that idea and make other plans the better. To paraphrase a famous saying, Anything that can't be fixed, won't.

The basis for this view stems from understanding that debt-based money systems operate best when they can grow exponentially forever. Of course, nothing can, which means that even without natural limits, such systems are prone to increasingly chaotic behavior, until the money that undergirds them collapses into utter worthlessness, allowing the cycle to begin anew.

All economic depressions share the same root cause. Too much credit that does not lead to enhanced future cash flows is extended. In other words, this means lending without regard for the ability of the loan to repay both the principal and interest from enhanced production; money is loaned for consumption, and poor investment decisions are made. Eventually gravity takes over, debts are defaulted upon, no more borrowers can be found, and the system is rather painfully scrubbed clean. It's a very normal and usual process.

When we bring in natural limits, however, (such as is the case for petroleum right now), what emerges is a forcing function that pushes a debt-based, exponential money system over the brink all that much faster and harder.

No comments: