You can't spend your way out of a recession.
cr113
http://www.europac.net/externalframeset.asp?id=15036
There's No Pain-Free Cure for Recession: Peter Schiff's Editorial in
The Wall Street Journal
As recession fears cause the nation to embrace greater state control
of the economy and unimaginable federal deficits, one searches in vain
for debate worthy of the moment. Where there should be an historic
clash of ideas, there is only blind resignation and an amorphous
queasiness that we are simply sweeping the slouching beast under the
rug.
With faith in the free markets now taking a back seat to fear and
expediency, nearly the entire political spectrum agrees that the
federal government must spend whatever amount is necessary to
stabilize the housing market, bail out financial firms, liquefy the
credit markets, create jobs and make the recession as shallow and
brief as possible. The few who maintain free-market views have been
largely marginalized.
Taking the theories of economist John Maynard Keynes as gospel, our
most highly respected contemporary economists imagine a complex world
in which economics at the personal, corporate and municipal levels are
governed by laws far different from those in effect at the national
level.
Individuals, companies or cities with heavy debt and shrinking
revenues instinctively know that they must reduce spending, tighten
their belts, pay down debt and live within their means. But it is
axiomatic in Keynesianism that national governments can create and
sustain economic activity by injecting printed money into the
financial system. In their view, absent the stimuli of the New Deal
and World War II, the Depression would never have ended.
On a gut level, we have a hard time with this concept. There is a
vague sense of smoke and mirrors, of something being magically created
out of nothing. But economics, we are told, is complicated.
It would be irresponsible in the extreme for an individual to
forestall a personal recession by taking out newer, bigger loans when
the old loans can't be repaid. However, this is precisely what we are
planning on a national level.
I believe these ideas hold sway largely because they promise happy,
pain-free solutions. They are the economic equivalent of miracle
weight-loss programs that require no dieting or exercise. The theories
permit economists to claim mystic wisdom, governments to pretend that
they have the power to dispel hardship with the whir of a printing
press, and voters to believe that they can have recovery without
sacrifice.
As a follower of the Austrian School of economics I believe that
market forces apply equally to people and nations. The problems we
face collectively are no different from those we face individually.
Belt tightening is required by all, including government.
Governments cannot create but merely redirect. When the government
spends, the money has to come from somewhere. If the government
doesn't have a surplus, then it must come from taxes. If taxes don't
go up, then it must come from increased borrowing. If lenders won't
lend, then it must come from the printing press, which is where all
these bailouts are headed. But each additional dollar printed
diminishes the value those already in circulation. Something cannot be
effortlessly created from nothing.
Similarly, any jobs or other economic activity created by public-
sector expansion merely comes at the expense of jobs lost in the
private sector. And if the government chooses to save inefficient jobs
in select private industries, more efficient jobs will be lost in
others. As more factors of production come under government control,
the more inefficient our entire economy becomes. Inefficiency lowers
productivity, stifles competitiveness and lowers living standards.
If we look at government market interventions through this pragmatic
lens, what can we expect from the coming avalanche of federal
activism?
By borrowing more than it can ever pay back, the government will
guarantee higher inflation for years to come, thereby diminishing the
value of all that Americans have saved and acquired. For now the
inflationary tide is being held back by the countervailing pressures
of bursting asset bubbles in real estate and stocks, forced
liquidations in commodities, and troubled retailers slashing prices to
unload excess inventory. But when the dust settles, trillions of new
dollars will remain, chasing a diminished supply of goods. We will be
left with 1970s-style stagflation, only with a much sharper
contraction and significantly higher inflation.
The good news is that economics is not all that complicated. The bad
news is that our economy is broken and there is nothing the government
can do to fix it. However, the free market does have a cure: it's
called a recession, and it's not fun, easy or quick. But if we put our
faith in the power of government to make the pain go away, we will
live with the consequences for generations.
Arnold Broese
news:f7f6aa86-2ab2-4a88...@x16g2000prn.googlegroups.com...
>
>
>
> The good news is that economics is not all that complicated. The bad
> news is that our economy is broken and there is nothing the government
> can do to fix it. However, the free market does have a cure: it's
> called a recession, and it's not fun, easy or quick. But if we put our
> faith in the power of government to make the pain go away, we will
> live with the consequences for generations.
Good article. However, there is one angle not covered. This current crisis
is the result of a *system* failure. The whole financial system within which
we operate, has been a house of cards. Recession won't fix that. Government
regulations made it near impossible for the likes of GM to make a profitable
small car. They were weighed down with financial burdens not carried by
foreign companies. Even if GM had been a better company than they are (which
they should have been), they were not responsible for the crisis in credit.
Their collapse would not help without a complete remake of this world of
fiat money we live in.
There is no good solution being considered, such as a revamp of the
relationship of the government to monetary control. They insist in building
up the house of cards again, and if that is the case, what is to be gained
by the collapse of so many innocent businesses? There were those who
embraced government policy in a corrupt way, and good riddance to them, but
as long as there is no choice for innocent business to escape the system,
that system owes them their survival. I don't believe in government
intervention, but that choice is not available. That only leaves one to
choose the type of government "help" they need to survive. IOW, the tax
payer is already sacrificed; what remains, is to choose who gets that
sacrifice.
Collectivist, and even those who should know better (Greenspan) have blamed
freedom in the market, not government policy, and rub their hands with glee
to see bastions of Capitalism collapse. It is almost impossible for even the
most ethical companies to compete without embracing some of the corrupting
influences of government policy.
So, yes, recession is good ---in a sane economy, but these days, the
recession should be in government intervention, not innocent businesses
caught up in a maelstrom not of their making.
--
Arnold
MalKantent
<arnold_br...@hotmail.com> wrote:
>Collectivist, and even those who should know better (Greenspan) have blamed
>freedom in the market, not government policy, and rub their hands with glee
>to see bastions of Capitalism collapse.
Where did you get this idea? Greenspan blamed his own belief in
self-correcting markets, and he blamed his own belief in the power of
selfishness and greed. Read something that he actually said. His faith
in human nature led him to take a hands-off approach to the economy
which, in the long run, failed him.
--
"Donaldson's Law (which I formulated back in
my teaching days) states that *bad* is
objective but *good* is subjective. If writing
or storytelling are *bad*, their badness can be
demonstrated, even proven. But as soon as we
move into the realm of *good* writing or
storytelling, any individual reader's reaction
will be almost exclusively a matter of taste."
"what human beings consider important guides
their actions far more than tangible, demonstrable
'reality' does."
Stephen R. Donaldson, "Gradual Interview"
Jerry
> On Wed, 31 Dec 2008 14:57:47 -0800, Arnold Broese
>
> >Collectivist, and even those who should know better (Greenspan) have blamed
> >freedom in the market, not government policy, and rub their hands with glee
> >to see bastions of Capitalism collapse.
>
> Where did you get this idea? Greenspan blamed his own belief in
> self-correcting markets, and he blamed his own belief in the power of
> selfishness and greed. Read something that he actually said. His faith
> in human nature led him to take a hands-off approach to the economy
> which, in the long run, failed him.
Alan Greenspan, chairman of the creature from Jekyll Island, should
read this article by Alan Greenspan, Objectivist. He should read it
over and over until he understands it.
Gold and Economic Freedom
by Alan Greenspan
[written in 1966]
http://www.321gold.com/fed/greenspan/1966.html
And the ugly creature from Jekyll Island should be destroyed.
Alan Greenspan vs. Ayn Rand and Freedom
by Harry Binswanger (November 7, 2008)
http://www.capmag.com/article.asp?ID=5353
robertmaas
> It would be irresponsible in the extreme for an individual to
> forestall a personal recession by taking out newer, bigger loans
> when the old loans can't be repaid. However, this is precisely what
> we are planning on a national level.
IMO that's not the correct way to analyze the situation. At a
national level, the key thing isn't money, it's productivity. The
nation must maximize the productiveness of its residents, by
providing incentive for every resident to perform useful work, by
acting as "employer of last resort" i.e. providing minimum-wage
jobs to anyone who can't find a better job. Even severely disabled
people can do useful work, perhaps only part time, perhaps working
from home or near-home with assistive technology, perhaps simply
acting as beta-testers for new Web-based software. Even people who
are totally incapacitated physically or mentally, for example by
coma or senility, can serve as test subjects for new medical
procedures (with absolutely required protection against abuse!!).
Even young children can do useful work an hour or so per day as
part of their schooling, such as beta-testing educational software,
or coaching/supervising even younger children at using CAI
software. As a beneficial side effect of 0% unemployment, we
greatly reduce the tendancy to form street gangs to fill otherwise
idle time, or to traffic drugs or fence stolen property as a
desperate attempt to get income to survive. As a beneficial side
effect of children starting from an early age to operate
educational software and/or coach younger children how to operate
educational software, and getting paid for their work, and
advancing toward beta-testing more advanced software as well as
writing their own software or doing other productive work during
their teens, they learn early-on of the value of labor, and develop
pride in their own ability to work through their school/teen years,
so that during late-teen and young-adult years they will think more
of spending some extra hours working rather than causing trouble
for society.
With *everyone* doing productive work, there will be plenty of
products and services for everyone, as well as plenty of income
buying these products and services thereby feeding into the local
economy and trickling up through retailers and wholesalers and
manufacturers, providing an increased tax base to offset the cost
of providing all these government-funded jobs.
> As a follower of the Austrian School of economics I believe that
> market forces apply equally to people and nations. The problems
> we face collectively are no different from those we face
> individually. Belt tightening is required by all, including
> government.
The main difference is that the nation has the ability to tax the
income/profit of the individuals/companies in order to pay for its
spending, and the nation is large enough that most of the money
spent to provide jobs to its residents will feed back into the
money-web of the economy (using "web" analagously to "food web"),
with tax collected at each link in the web, so that most of the
money spent to provide input to "trickle up" eventually comes back
in the form of taxes. Money doesn't disappear, it just gets passed
from one person to another. The only way a nation loses money is
when there's a trade imbalance with foreign countries whereby our
residents buy more foreign products than they sell to foreign
customers. But with 0% unemployment (100% productivity), there'll
be a surplus of products and services produced by our own
residents, offering more opportunities for foreigners to buy our
products and services, reducing any unfavorable trade imbalance.
> Governments cannot create but merely redirect.
They can't create *MONEY*, merely redirect, a zero-sum effect (at
least it is globally). But they *can* enhance productivity, which
is a nonzero-sum effect. That is how our nation (USA in my case)
must cure the recession.
> ... each additional dollar printed diminishes the value those
> already in circulation. Something cannot be effortlessly created
> from nothing.
Again, you're writing as if money were the only thing in the world.
Money is just a means to exchange value. The key thing in the world
is productivity (which accumulates to create *real* value in goods
and services). Productivity *can* be created where there was lack
of productivity before, merely by providing incentive for each
person to do more work than before. Productivity *is* something
that can be created from nothing in that sense. It's not effortless
to create it, it requires determination to go this route, to get
the votes in Congress to pass the InterNet-WPA bill, and it
requires good administration to set up procedures that perform
accurate accounting of labor and payments to prevent cheating
(getting paid without working). IMO your use of "effortlessly" in
that statement was a "straw man" because nobody ever said that the
recession could be cured without effort. I don't say that. I say it
can be cured by this relatively simple program, not that it can be
cured effortlessly. OK?
(Note, my proposal is called the "InterNet-WPA" because
management/accounting of the program would be based on the InterNet
and most non-physical-labor jobs i.e. mental labor would actually
be performed, or at least contracted and finished-work submitted,
mostly over the InterNet.)
> Similarly, any jobs or other economic activity created by public-
> sector expansion merely comes at the expense of jobs lost in the
> private sector.
If all InterNet-WPA jobs are at minimum wage, provided *only* as a
last resort for people unable to find any better job, then very few
jobs would be lost from existing private-sector jobs. The actual
unemployment rate currently isn't 8% as published by the Department
of Labor, because their 8% counts only people who have been
employed recently and are collecting unemployment benefits. Those
who have been unemployed for many years, due to disability or
simply lack of opportunity, aren't counted. The true unemployment
rate, counting *everyone* who might like to work if a suitable job
can be found, but who can't find such a job, is more like 20%. The
InterNet-WPA could put these 20% to useful work without diverting
hardly any of the remaining 80% who currently have jobs.
> ... if the government chooses to save inefficient jobs in select
> private industries, more efficient jobs will be lost in others.
Do you mean like rescuing General Motors by loaning them an endless
stream of money to manufacture gasoline-guzzling cars using
outdated manufacturing techniques? I agree, it's a bad idea.
> As more factors of production come under government control, the
> more inefficient our entire economy becomes.
That's one additional reason why it's extremely important to offer
only minimum-wage jobs with the InterNet-WPA, so that any company
that can run efficiently enough to offer higher than minimum wage
to its employees while still making a profit won't lose labor to
the InterNet-WPA. And as the economy improves, and more and more
companies are able to make a good profit, there will be more and
more jobs in the private sector at higher than minimum wage,
drawing more and more employees away from the InterNet-WPA, until
the latter shrinks down to providing jobs only to disabled people
(long term) and during brief "between job" times for anyone else.
And one additional beneficial side-effect of the InterNet-WPA would
be to give otherwise unemployed people experience doing new kinds
of work they didn't do before, using new tools or software they
never had a chance to use before, so that they will be better
qualified for private-sector jobs. Eventually the InterNet-WPA will
be a replacement for most of Social Security Disability and SSI,
whereby people otherwise collecting handouts will instead be doing
useful work however many hours they are able, right through
"retirement" age. As recent research has shown, keeping minds
active is a way to delay the onset and reduce the severity of
Alzheimer's disease, which will have the beneficial effect of
reducing the need for nursing care for such older people.
> ... For now the inflationary tide is being held back by the
> countervailing pressures of bursting asset bubbles in real estate
> and stocks, forced liquidations in commodities, and troubled
> retailers slashing prices to unload excess inventory. But when the
> dust settles, trillions of new dollars will remain, chasing a
> diminished supply of goods.
That won't happen if the InterNet-WPA triggers a tremendous
increase in productivity, as I stated earlier above.
> The good news is that economics is not all that complicated. The
> bad news is that our economy is broken and there is nothing the
> government can do to fix it.
Wrong. The government can institute the InterNet-WPA as I've
proposed, which will fix the economy.
cr113
I agree that government intervention caused the recession but I don't
agree with bailouts. That make things even worse. For one thing most
banks and automakers don't need a bailout. So as bad as the government
intervention is, most businesses are still surviving. Another problem
is that EVERY failed business could blame government intervention for
their failures in some way. Bankruptcy is not the worse thing in the
world. The resources of the failed company will be taken over by a
more productive company.
-
-
-
-
-
-
cr113
<seeWebInst...@teh.intarweb.org> wrote:
> > From:cr113<cr...@hotmail.com>
> > It would be irresponsible in the extreme for an individual to
> > forestall a personal recession by taking out newer, bigger loans
> > when the old loans can't be repaid. However, this is precisely what
> > we are planning on a national level.
>
> IMO that's not the correct way to analyze the situation. At a
> national level, the key thing isn't money, it's productivity. The
> nation must maximize the productiveness of its residents, by
> providing incentive for every resident to perform useful work, by
> acting as "employer of last resort" i.e. providing minimum-wage
> jobs to anyone who can't find a better job.
Won't work. The money required to finance make-work programs has to be
forcefully extracted from productive citizens. All you would be doing
is diverting resources from private to public. Any gain from make-work
programs would be offset by a loss in private production. And it's not
a zero sum offset. The loss in private production is always going to
be more than the gain in government production because of the loss in
freedom and incentive.
-
-
-
-
robertmaas
> > > forestall a personal recession by taking out newer, bigger loans
> > > when the old loans can't be repaid. However, this is precisely what
> > > we are planning on a national level.
> > IMO that's not the correct way to analyze the situation. At a
> > national level, the key thing isn't money, it's productivity. The
> > nation must maximize the productiveness of its residents, by
> > providing incentive for every resident to perform useful work, by
> > acting as "employer of last resort" i.e. providing minimum-wage
> > jobs to anyone who can't find a better job.
> Won't work. The money required to finance make-work programs has
> to be forcefully extracted from productive citizens.
That's the nature of tax-based government, whereby people with
extra-large incomes are taxed to pay for various services provided
by the government, such as common defense, common utilities such as
highways, and "safety net" for anyone unable to provide for his/her
personal needs such as housing and food. Since you seem to be
complaining, would you prefer a fees-based government, whereby you
have to pay every time you drive on a government-built roadway, and
you have to individually pay "protection" money or else 911 won't
answer your call for help when somebody is trying to break into
your home?
> All you would be doing is diverting resources from private to public.
That doesn't make sense. The money is paid to individual
WPA-workers, whereupon it's in their *private* funds which they can
choose to spend any way they want (within limits of the law of
course, like no illegal drugs etc.).
> Any gain from make-work programs
I'm not proposing make-work in the sense of paying people to do
useless stuff just as a "duty" to get their pay. I'm proposing
hiring people to do actually useless things, either for
common-infrastructure such as building/repairing highways and
sewers, or for common-defense such as monitoring CCTV systems to
watch for crimes in progress, or to provide individualized services
(partly compensated by fees charged to the people receiving these
services), etc.
> would be offset by a loss in private production.
I claim only partly offset. There'd be a net gain in productivity.
For example, consider a person who has personal income of 30
million dollars per year, who is taxed an extra one percent, i.e.
300 thousand dollars of tax. That's enough money to pay thirty
minimum-wage part-time workers at 10 thousand dollars per year each.
Although the extra tax might slightly discourage the 29,700,000 $/yr
worker, causing slight loss of value from that high-paid worker, I
really don't believe there's any way that person's productivity
will be decreased by as much as the increase in productivity of the
thirty minimum-wage part-time workers. Do you wish to dispute my
estimate, or agree I'm probably correct?
> And it's not a zero sum offset.
Agreed, but not the way you intended. There'd be an immense gain in
productivity by hiring 30 minimum-wage part-time workers, otherwise
not employed at all, in return for 1% increase in tax rate for
super-high-income people.
> The loss in private production is always going to be more than
> the gain in government production because of the loss in freedom
> and incentive.
1% income tax on super-rich people isn't any significant loss of
freedom. They still have "money to burn" either with or without the
extra tax. It ain't going to break the super-high-income person.
The tax would be a "drop in a bucket" compared to the huge
financial loss caused by the great Ponzi scam that was recently
discovered, and compared to the securities-speculation bubble that
burst during recent months, and especially compared to the new
government restrictions that are being imposed on major
corportations facing bankruptcy and asking for a government
bailout/rescue.
1% income tax on super-rich people isn't any significant loss of
incentive either. I'll let you choose whether to argue that point
or not.
cr113
> 1% income tax on super-rich people isn't any significant loss of
> incentive either. I'll let you choose whether to argue that point
> or not.
That's how we got into this mess. Millions of busy bodies that just
want to take a "little" bit of money for their schemes. Next thing you
know the government is taking 50%.
David Buchner
> I'm not proposing make-work in the sense of paying people to do
> useless stuff just as a "duty" to get their pay. I'm proposing
> hiring people to do actually [useful?] things, either for
> common-infrastructure such as building/repairing highways and
> sewers, or for common-defense such as monitoring CCTV systems to
> watch for crimes in progress . . .
Oh, I'm loving this.
> . . . There'd be an immense gain in productivity by hiring 30 minimum-wage
> part-time workers, otherwise not employed at all, in return for 1%
> increase in tax rate for super-high-income people.
Huh?
I don't get it.
If they're so _productive_ -- then why does the money have to come from
somebody else who has already produced, and been compensated? Aren't
these minimum-wagers of yours, _making_ something?
They're should be a net gain in wealth in there, somewhere. From my
reading of your plan, it sounds like values aren't getting multiplied,
so much as just getting shuffled around.
cr113
I found this interview of Peter Schiff. He says the underlying problem
is government interference. Without government interference there
would not be any large busts in the business cycle. The problem is
that the government creates artificial booms and this is followed by a
bust as the market self corrects.
Investor's Daily Edge Interview with
Peter Schiff
Dear IDE Reader,
Did government regulations contribute to the downfall of the financial
industry? Could those same regulations cause a massive bout of hyper-
inflation in the United States?
These are among the questions the CEO of Euro Pacific Capital, Peter
Schiff, answers in my interview with him at FreedomFest in Las Vegas,
Nevada.
Peter was one of the few people that predicted the financial mess
we're in now. And he also offers practical solutions to help keep your
finances growing, even while the economy suffers.
So without further ado, I present you my interview with Peter...
--------------------------------------------------------------------------------
This is Charles Delvalle reporting from FreedomFest in Las Vegas,
Nevada. Today I'm talking to Peter Schiff from Euro Pacific Capital.
His website is www.europac.net.
Earlier today, we saw you speaking a little bit on market manipulation
and the need -- or lack of need -- for regulation. Why don't you give
our readers an idea as to where you stand on market regulation?
Peter -- Well I believe that the markets should regulate themselves.
And I think that's the best way to ensure a favorable outcome. The
problem we have now is a function of excess government interference
and regulation both at the Federal Reserve level, in the Fed setting
interest rates too low, and at these government sponsored entities
themselves, Fannie and Freddie, securitizing these mortgages and
reselling them around the world with an implied government guarantee.
As a result, we had a speculative mania in real estate and a real
estate bubble that couldn't have existed absent this government
interference and now we're dealing with the aftermath of the bursting
of the biggest speculative mania in our history. And none of it would
have happened without government interference in money and in
mortgages
Charles - So are you saying that the Federal Reserve is interfering in
how they set rates?
Peter - Well sure the Federal Reserve is fixing interest rates.
Interest rates are not being set by the free markets like other
prices, like the price of a bag of potato chips or a pair of tennis
shoes. Those prices are determined in the market by the buyers and
sellers. But the Federal Reserve sets an interest rate. It determines
what interest rates should be, not the market. And it fixed interest
rates much too low.
It's no accident that we have all this borrowing and no savings.
That's because rates were so low that they encouraged excess borrowing
and punished savings. So we have this credit bubble because of the Fed
putting interest rates too low. If the free market was setting
interest rates, it would have set interest rates much higher and we
wouldn't have had the real estate bubble.
Charles -- So basically, what you are saying is because the Federal
Reserve tried to avert a recession, tried to avert the regularities of
a business cycle, they ended up setting interest rates too low,
created all of this massive borrowing and now we're paying for that?
Peter -- Exactly. And the Fed of course created the bubble in the stock
market, particularly the NASDAQ. When that burst, rather than allowing
the imbalances to be purged and a recession to ensue, the Fed tried to
create other economic activity to pick up the slack. And they did it
by bringing interest rates really low. And they ignited this property
boom and consumer spending boom where Americans took advantage of all
that cheap money and bought houses and remodeled the houses, and
bought furniture for them and plasma TV's and granite counter tops and
put SUVs in their driveways and took vacations and did all sorts of
stuff that they normally would not have done had credit been more
expensive. The price that we have to pay for postponing the recession
from 2001-2002 is a far greater recession that we have already entered
- despite the government's phony numbers - which is going to get
deeper and deeper as the years progress.
Charles -- And do you think this is a problem that could be solved by
giving Ben Bernanke the power that he requested earlier?
Peter -- No, not at all. The problem is the Fed already has too much
power. We need to take power away from the Fed, not give them more. If
they created all this havoc with the powers they have, imagine how
much more destructive they can be if we give them new powers.
Charles -- Clearly, that definitely makes sense. In this case, do you
see Ben Bernanke following the same path Alan Greenspan followed as
far as trying to avert a recession?
Peter -- Well I don't think he has the tools anymore. I think it's
impossible. I mean, Alan Greenspan never should have done what he did,
but foreigners went along with it by buying up all this debt and
loaning us all the money. But I don't think they are going to do it
anymore. I think it's become obvious to the world that we are not a
good credit risk, that we can't pay back our debts. And I think that
this whole phony economy, which is the whole premise of the book I
wrote, Crash Proof: How to Profit from the Coming Economic Collapse,
that was published in February of 07. I saw the collapse of this
phony economy that was based on American consumers borrowing money
from abroad and using the money to buy imported products. You can't
have a viable economy that is built on the foundation of consumer
credit.
Economies need to be built on a foundation of savings and production,
the exact opposite of what we're trying to do. And so an economy that
is structured that way inherently must fail. This is what's happening
now. The bursting of a bubble, not simply a real estate bubble or a
stock market bubble, but a bubble that encompassed the entirety of our
economy. The recession that is going to ensue as we try to move from
this phony economy back to a real economy, and as we shut down all
these malls and try to replace them with factories, there's going to
be a lot of transitional pain. In the interim Americans are going to
see a collapse in their standard of living as all this cheap money and
cheap goods from abroad are no longer washing up on our shores. And
the politicians, of course, are resisting this transformation because
they don't want to level with the American public and let them realize
that there are consequences of their profligacy and that we're now
going to have to suck it up and roll up our sleeves and really work
for a change.
They're going to try to postpone the pain. And there is the real
danger because we could end up with monopoly money, with
hyperinflation, which is something that I envisioned as a worst case
scenario when I wrote my book. But I think people need to prepare for
that. And they need to reorganize their investments. People need to
get out of US dollars and any asset in this country and hope for the
best, which would not be hyperinflation. But even under the best
scenario, the dollar is going to lose a considerable percentage of its
value, which means all assets denominated in dollars are going to lose
value. Either way you have to get out of the country and you have to
invest abroad, and you have to own commodities and precious metals,
things that are going to retain their value as the dollar losses its
value.
Charles -- So the solution, as far as an investor is concerned, is that
in the end this recession is going to happen. You can't avert the
business cycle. You can't have a boom without a bust. It just doesn't
work that way. It's like hoping hurricanes don't hit Florida. They're
going to hit, eventually they're going to come.
Peter -- Well the big problem is that we don't have to have booms
because the government creates them. You know we could have a
legitimate boom that never busts that is based on real earnings, and
real productivity, and real savings. When you have real economic
growth based on those things, you don't have to have a bust. It's only
when you have a phony boom, phony economic growth, created as a result
of monetary policy that you have the boom and bust cycle. So that's
not an inherent flaw in capitalism, it's a natural consequence of
government interference with capitalism. If we can limit the power of
government like our founders tried to do, if we can have sound money
and get rid of all this government then we could get rid of the
business cycle and we can continue to grow and have prosperity which
is the natural bounty of free market capitalism.
Charles -- That's very interesting what you've come up with because
that's something most people don't talk about. They don't say that you
don't have to have an economy without a boom and bust cycle. And they
don't mention that the reason that it's like that is simply because of
government interference, that they're creating these fake booms, which
eventually have to bust. So the solution is, as an investor, to get
out of the dollar, and start going into these emerging economies that
do have savings and industrial production.
Peter -- That's not a solution to the underlying problem, it's just a
personal defense mechanism that we can use to protect our money. But
people have to realize that in this boom and bust cycle, it's the boom
that's the problem. That's where the mistakes are made. The bust is
where the market corrects those mistakes. That's the necessary part.
But unfortunately that's what the politicians want to prevent. They
want to prevent the medicine because it doesn't taste good. But if you
do that, you end up dying of the disease. And that's the threat that
we face. And if you don't want your own personal portfolio or your own
standard of living to die, then you have to look for salvation
abroad.
And that's exactly what I do at my brokerage firm, Euro Pacific
Capital. And on my website there is a lot of information about my
firm, I have a lot of my writings, I do my own radio show once a week.
You can listen to four or five years of archived radio shows. I have
two or three years of hundreds of clips of me on CNBC, Bloomberg and
Fox News, unedited. Everything I've ever written, every prediction
I've ever made is preserved in its original form. I don't run away
from my record, I embrace it. Because everything that is happening
today is something I predicted. And that's because I understand these
problems. I understand what created them and I understand the big
picture and how it's all going to be resolved, and where you have to
have your money invested if you want to come through this thing.
Charles - Well Peter thank you very much for the time you've spent
with us. I think some of the things you covered are definitely going
to help our readers out. And don't forget that you can see more of
Peter's writing at www.europac.net. He put out a new report on
international investing.
Peter -- It's The Collapsing Dollar: The Powerful Case for Investing in
Foreign Equities. And you can download that report for free on my
website and you can even sign up for my newsletter Global Investor,
which I also provide for free.
Charles - Well thank you so much Peter. This is Charles Delvalle,
checking out.
robertmaas
> > incentive either. I'll let you choose whether to argue that point
> > or not.
> That's how we got into this mess. Millions of busy bodies that just
> want to take a "little" bit of money for their schemes. Next thing you
> know the government is taking 50%.
I don't propose any "schemes". Rather I propose legitimate work
that people appreciate.
A few days ago I realized that I can unify the proposed
government-funded employer-of-last-resort at minimum wage and my
alterative "cooperative" economic system based on equal exchange of
labor-time per fixed-time contracts to the lowest bidder. Then the
next day I realized that the merged system also would allow other
sources of funding, such as charities who have restrictions on who
can "cash out" (convert labor-time into minimum-wage $cash$), and
retail-store companies who offer "gift cards".
Analysis indicates that most people will get a better deal
continuing to circulate their earned credits back into the system
rather than "cash out" even if they are elegible to cash out, thus
a small amount of "seed" money from some funding source should
support a very large Gross Barter Product.
.
robertmaas
> > useless stuff just as a "duty" to get their pay. I'm proposing
> > hiring people to do actually [useful?] things, either for
> > common-infrastructure such as building/repairing highways and
> > sewers, or for common-defense such as monitoring CCTV systems to
> > watch for crimes in progress . . .
> Oh, I'm loving this.
> > . . . There'd be an immense gain in productivity by hiring 30 minimum-wage
> > part-time workers, otherwise not employed at all, in return for 1%
> > increase in tax rate for super-high-income people.
> Huh?
> I don't get it.
> If they're so _productive_ -- then why does the money have to
> come from somebody else who has already produced, and been
> compensated? Aren't these minimum-wagers of yours, _making_
> something?
They aren't minimum wagers right now, they're *unemployed*. Most of
them are only *potentially* productive. Most of them are doing
totally non-productive labor such as scanning job ads and
cold-calling companies and begging people to help them find a lead
on a job and re-writing their resume and posting their resume
repeatedly on resume boards and and and and ... If somebody would
offer them minimum wage and specify what to do to earn that minimum
wage, they'd be ever so much productive of their time. Very few of
the unemployed people are actively working on unpaid productive
labor as I am. Even I just don't feel like doing unpaid labor much
of the time. Even I would be more productive more of the time if
somebody gave me some financial incentive to be productive.
Right now with millions of people unemployed, much of the labor
those people *could* be doing is not being done. If all those
unemployed people could be employed instead, the total amount of
productive work would increase greatly. The key is to provide
incentive for *everyone* to do something productive, instead of
providing incentive for only about 80% of the adult population, and
leaving the remaining 20% with no incentive to do anything
productive.
> They're should be a net gain in wealth in there, somewhere.
It depends on what you mean by "wealth". Gross domestic/whatever
product will increase if the employment rate increases from the
current 80% to something over 95%, maybe very close to 100%. Also
with everyone employed, the rate of anti-productive work, such as
murder, robbey, vandalism, rape, assault/battery, and terrorism
will decrease, reducing the need for "productive" work to include
defense against anti-productive work.
> From my reading of your plan, it sounds like values aren't
> getting multiplied, so much as just getting shuffled around.
What do you mean by "values"?
.
David Buchner
[ . . . There'd be an immense gain in productivity by hiring 30
minimum-wage part-time workers, otherwise not employed at all, in return
for 1% increase in tax rate for super-high-income people. ]
> > If they're so _productive_ -- then why does the money have to
> > come from somebody else who has already produced, and been
> > compensated? Aren't these minimum-wagers of yours, _making_
> > something?
>
> They aren't minimum wagers right now, they're *unemployed*. Most of
> them are only *potentially* productive.
Alright. I'll keep that "potential" in mind...
>... If somebody would offer them minimum wage and specify what to do to
>earn that minimum wage, they'd be ever so much productive of their
>time.
As long as somebody tells them what to do. Aw, geez.
> Even I just don't feel like doing unpaid labor much
> of the time.
No shit? Welcome to the club.
> Even I would be more productive more of the time if
> somebody gave me some financial incentive to be productive.
Oh, Christ on a Cracker.
No, I think you've missed my point. If you were to put them to work
under your scheme, which you say gives this immense gain in
productivity, welllll... If they're gonna be so "productive"... why
would their wages need to be paid for by confiscating it from somebody
else?
If they're producing something of value, then that should be more than
enough to pay for your project. Right?
If this supposed "productivity" needs to be underwritten with money
snatched away from other production, then it's fake. Right?
> It depends on what you mean by "wealth".
Uh-huh.
>Also with everyone employed, the rate of anti-productive work, such as
>murder, robbey, vandalism, rape, assault/battery, and terrorism will
>decrease, reducing the need for "productive" work to include defense
>against anti-productive work.
Okay. So. The population you want to "employ," and pay with MY FUCKING
MONEY is the murderers, thieves, and rapists. Neato.
( Alternate response: apparently, rapists rape and robbers rob and
terrorists terrorize and vandals vandalize, and batterers,
battery-ize,... just because they're out of work, and... bored? What? )
> > From my reading of your plan, it sounds like values aren't
> > getting multiplied, so much as just getting shuffled around.
>
> What do you mean by "values"?
Indeed.
(sorry - that would have been clearer, though, if it read "value isn't
getting multiplied," meaning actual wealth being created. So, don't try
to call it "stimulus" if people are buying plasma TV's with money they
get at a government-created job, paid out from tax money grabbed from
someplace else. That's just moving it around, not creating it.)