Tuesday, February 10, 2009
More stimulus = Greater Depression
I am rather weary of those who think Obama can "fix" our economy. This thinking, promulgated and hyped by the mass media, is patently false, has never worked in the history of civilization, and won't work this time. The only thing it will accomplish is to prolong the misery.
The economic time frame from roughly 1930 to 1945 is referred to as "The Great Depression." Rest assured, at the speed our government is going, this will surely be "The Greater" if not "The Greatest" depression for our country. The larger the stimulus packages and debt creation by our federal government, the longer it will take our country to recover.
This is the secret of the last "Great Depression": the government got heavily involved in managing the economy once the recession started, spent money it didn't have, subsidized prices, created jobs and turn a recession into a nasty depression. Yes, I said it. Our government caused the last Depression and they are doing it all over again and making the same mistakes all over again only on an even grander scale! Prepare accordingly.
The common sense test is supposedly irrelevant when it comes to modern economics. When there is too much debt, too much currency debasement, and too much malinvestment in things like McMansions and Super-Hummer auto dealerships, does it make sense that the solution is the same? Trying to "prop up" asset prices is code word for destroying the value of our currency. Adding debt to a system and country of individuals who already have too much debt is a recipe for total disaster.
Recessions are not aberrations to be fought tooth and nail by throwing counterfeited money at them! The boom was overindulgent so the bust will overshoot to the downside. Yes, people will lose jobs and lose their homes. Capitalism (or what's left of it) is not about making sure everyone lives the American Dream by hook or by crook, it's about giving people opportunity. Now, I realize we haven't been a capitalist society for quite some time, but this current experiment in fascism will work as well as the planned central economies of Russia.
Unemployment can be made artificially lower by expanding government, but this has a cost to us all and will decrease the standard of living for everyone. The government cannot "stimulate" anything without stealing money and prosperity from its citizens. The government cannot create jobs without stealing money and prosperity from its citizens. Of course the money stolen doesn't feel like it's been taken from us, which is the shameless con game that goes on with bonds sold to the world. Those bonds require interest payments and from where do you think the interest comes?
Kicking the can down the road and foisting debt onto the next generation is a travesty and highly unjust. If the auto companies, insurance companies, Wall Street firms and banks of this country are failing, then they should fail. Period. All those who talk about how bad things would get if we let that happen don't have to worry: both the Bush and Obama administrations have committed themselves to making sure it doesn't happen.
How bad would things get if the government did nothing, stopped destroying the future value of our money and stopped getting our children and grandchildren into debt? For 2-3 years, pretty fucking bad. Yes, there would be mass unemployment and yes there would be crime and riots. The dirty little secret is that we are going to have those things anyway, we are just piling debt and currency destruction on top of it and making sure the hard times last a decade or more!
Jag-offs like Paul Krugman always point to little tweaks and shimmies that need to be done just the right way by god-like PhD economists or the whole economy just falls apart. Keynesian economics is the biggest economic lie ever told, perpetuated to allow continuous government expansion and a slide into socialism. Bernanke and his crew are not mechanics that need to turn a fucking wing nut 3 more degrees to the right. Bernanke is a PhD with no real world experience in managing a company, an industry, or employees. He has no idea what the hell he is doing and the sooner we all come to accept that, the sooner we can all begin to educate ourselves and stop waiting for mommy to save us.
Investment wise, still short. Gold is being a real bugger and I am excited by the strength it has shown. It means that after the impending correction in the gold price occurs, we ought to get a very strong rally into the spring. Waiting patiently to re-enter gold stocks from the long side and buy more physical gold.