For someone that takes pride in seeing things that others can’t, this piece of news is unsettling. It is unsettling on many fronts. First, because the one rule of thumb I follow is that whatever an official entity declares, the opposite is likely true. So it is unsettling that an official should be allowed to make remarks that pertain to the true state of the economy because it now shakes the foundations of my theory. Furthermore, it is unsettling because of the specific declaration made by this official that points to war; namely, I am referring to this pearl:
” Significant excess capacity has been built up and unless this issue is addressed, we will face a deflationary spiral and the crisis will become protracted“
If you have read any of my rants on this blog, you are aware that excess industrial capacity is the logical consequence of the adoption of a fiat monetary system. By extension, you are also aware that excess industrial capacity can only be maintained for as long as the debt burden can be expanded. Therefore, you are aware that once the debt burden can no longer be expanded, then pricing power is lost; thus earning streams are compromised, thus unemployment rises, thus further impinging revenue streams thus, eventually, compromising government revenues (taxes). Once government is bankrupt and significant swathes of the population are out of a job and potentially hungry, any self respecting government will resort to the only honorable thing to do in these circumstances… they’ll start a war.
Anyway, the only way excess industrial capacity can be taken off line is by destroying it… and there is only one way to destroy industrial capacity.
Got bullion?
Notice however the inanity of the statement towards the bottom half of the article. Monetary authorities are being chastized because they have no indulged in sufficient quantitative easing.
Excess industrial capacity comes about exactly because governments induce much greater quantities of credit and money into the system in the first place. So, if excess industrial capacity is now identified as the problem, then what is the point of inducing even more money and credit into the system?
Which, incidentally, was exactly GM’s problem for the past decade. GM became such a bloated zombie company to the point that they were losing an average of US$2000 on every single vehicle they sold…. Which begged the question. Why would GM want to sell more vehicles at all????
Tags: ambrose evans pritchard, bankruptcy, boondoggle, commercial real estate, consumer expenditure, credit, crisis, debt, deflation, deleveraging, federal reserve, fiat money, fractional reserve banking, fraud, gold, implosion, inflation, joblessness, leverage, mark to market, money multiplier, new world order, personal consumer expenditure, politics, poverty, real estate, revolution, scandal, toxic assets, treasury, unemployment, war, white collar crime, world bank, world currency
