Financial Rescue Nears GDP as Pledges Top $12.8 Trillion

http://www.bloomberg.com/apps/news?pid=20601087&sid=armOzfkwtCA4

It is unreasonable to think that government can stimulate an economy. If that were the case, then why shouldn’t government always stimulate an economy so that we could constantly achieve full employment?

In several decades during which our money supply and credit creation were expanding at 15%, 20% or 25% , how come nobody ever noticed that GDP was only expanding at 6% in a good year but more often than not at 3% ?

Why is it so difficult to see that every penny spent by government must necessarily and inevitably be collected through taxes? The more a government spends, the more money it has to collect from taxes. This is not an opinion. This is an arithmetical truth.

If government could stimulate an economy and run it by decree, then Russia, China, Zimbabwe or Cuba should be the richest countries in the world.

If government stimulation was a viable option, then Argentina, Zimbabwe and Japan would never have suffered the sort of economic roller coaster which, in the case of Japan, is still persisting twenty years after the initial implosion.

Government decrees are not and cannot be the drivers of a florid economy. A government should only uphold the application of the law, ensure transparency and facilitate transactions. Period.

From “The Politics of Obedience” by Etienne de la Boetie

[…] All this havoc, this misfortune, this ruin, descends upon you not from alien foes, but from the one enemy whom you yourselves render as powerful as he is, for whom you go bravely to war, for whose greatness you do not refuse to offer your own bodies unto death. He who thus domineers over you has only two eyes, only two hands, only one body, no more than is possessed by the least man among the infinite numbers dwelling in your cities; he has indeed nothing more than the power that you confer upon him to destroy you.

“Where has he acquired enough eyes to spy upon you, if you do not provide them yourselves? How can he have so many arms to beat you with, if he does not borrow them from you? The feet that trample down your cities, where does he get them if they are not your own? How does he have any power over you except through you? How would he dare assail you if he had no cooperation from you? What could he do to you if you yourselves did not connive with the thief who plunders you, if you were not accomplices of the murderer who kills you, if you were not traitors to yourselves? You sow your crops in order that he may ravage them, you install and furnish your homes to give him goods to pillage; you rear your daughters that he may gratify his lust; you bring up your children in order that he may confer upon them the greatest privilege he knows – to be led into his battles, to be delivered to butchery, to be made the servants of his greed and the instruments of his vengeance; you yield your bodies unto hard labor in order that he may indulge in his delights and wallow in his filthy pleasures; you weaken yourselves in order to make him the stronger and the mightier to hold you in check. From all these indignities, such as the very beasts of the field would not endure, you can deliver yourselves if you try, not by taking action, but merely by willing to be free.

“Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break into pieces.

http://www.mises.org/store/Politics-of-Obedience-P529.aspx?AFID=14

If you understand what is going on, it is time you take a stand. It is time we take a stand in the US, in the UK, in Spain, France, Italy and Germany. It is time we force our leaders to recognize their own shortcomings, their own self imposed ignorance and we must force them to admit that the persistent and pervasive use of political expediency instead of reason is criminal and ruinous.

We must take a stand peacefully. It can be done. One of the things you can do that sends the strongest possible but peaceful signal to government indicating that you do not agree with your leader’s policies and that you are losing faith in our monetary and economic system, is to accumulate gold. Accumulate gold in any form you wish: jewellery, coins, bullion, shares.

I am often asked why it is that accumulating bullion should send a signal to government.  The reason is enshrined in the unilateral choice our governments have made to adopt a fiat monetary system.

Fiat money, by definition, cannot and must not be constrained by comparative values. That is because the whole purpose of fiat money is for the issuing authority to be able to create any amount of money as deemed necessary at any given time.

At the other end of the spectrum, you have money that is tied to a metal for example. Money based on a metal cannot be easily manipulated. That is because if a politicians suddenly wishes to allocate a wad of money to some project, the money could only be created once more metal had been discovered, extracted, conveyed, refined and distributed.

The rationale of fiat money is that it speeds up government operations and allows politicians to allocate any sum required to any project they please on the assumption that in the future their pet projects will bring in revenues many times the initial allotted amount. Thus a fiat monetary regime is inherently and necessarily inflationary.

(By extension, you will also have deduced that a fiat monetary regime is vastly more susceptible to incite corruption.)

Inflation is exponential in nature AND it has a limit. The limit is mathematical.

The point at which inflation’s expansion hits the buffers, no amount of government money printing can induce more of it.

The thing about the limit of inflation is that the end of the cycle is characterized by crushing debt and excessive industrial capacity.

At that point, the only way to restart inflation is to write the debt down and/or destroy industrial capacity.

In 7000 years of human history, fiat money of all sorts of stripes and colors has come and gone in many countries. None of these currencies exist today. Just think of how many currencies have disappeared in the past ten years alone for example. All fiat currencies disappear because that is what inflation does. It erodes the value of the currency.

Gold and silver on the other hand, have been used in one form of value or other throughout the course of human development. And although at times politicians have tried to discredit the advantages of using gold or silver as monetary metrics, eventually, over time, gold and silver always have made a come back. The weight of 7000 years of historical evidence is rather compelling I’d say.

This is the time gold and silver will make a come back. This is the time we need to tell our politicians we have lost faith in their ability to guarantee fiduciary duty.

This is why you should accumulate gold over the coming years.

Advertisements

Tags: , , , , , , , , , , , , , , , , , , , , ,

2 Responses to “Financial Rescue Nears GDP as Pledges Top $12.8 Trillion”

  1. podritske Says:

    I was directed here by an automatically generated link to my own recent post. Thanks for the good read on gold. I’ve been fascinated by honest money for years.

    • guidoamm Says:

      Hi, thanks for taking the time to check in. So far, all indications are that gold and silver will be the currency of last resort. Interestingly, copper and oil seem to be bottoming out without a corresponding bottom in the economy. Granted that the latter is a lagging indicator another viable explanation might be that entities are hoarding hard assets to counter currency devaluation. Time will tell.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: