The reason governments inflate their currency is to surreptitiously confiscate wealth from those individuals who store their wealth in that currency. If too many citizens shield their wealth by investing in gold, they nullify the entire scam. Inflation “works” because citizens are forced – by legal tender laws – to store their wealth in a medium controlled by the government. As a government counterfeits its currency, it sucks wealth from all of those people who hold that currency.
http://www.lewrockwell.com/latulippe/latulippe91.html

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I think my wife’s sister has it about right:

[I]t has been commented by some of my peers at this bank
that we really missed an “opportunity” by NOT making marginal or
questionable loans – because in the end we will pay the price for the lax
lending without any of the benefit of having collected interest at higher
rates and/or imposing origination fees at the front end.

I personally feel pretty strongly in a free market – my economics background
tells me that while a short term (and that may last years) penalty to the
country as a whole is probable – – government interference with the market
will last generations and in the end cost more.  Businesses are for profit
entities and they need to perform and earn profits or go out of business as
a penalty for mismanagement – – – this applies no matter the size of the
business (autos and mortgage backed securities).  The result of leaving the
market to correct itself will be new businesses, more efficiently run
businesses and real lessons (about risk management) learned.

I think the bail out is a crime, literally.  They are rewarding poorly
managed entities who, minimally were negligent in due diligence and in many
cases were knowingly, without regard to the outcome, mismanaging high risk
assets for an easy, quick profit – which is okay and in line with free
market concepts if the same companies fail and lose when the risk fails to
pay off.

JHK

16 November 2008

Here’s a little excerpt from the latest post by one of my favorite bloggers…

Presto Change-o

As the election campaign ground on like a 3000-mile race between a greyhound and an armadillo, the media kept harping on Barack Obama’s vague promises of “change.” We now know what the main promise was: regime change, right here in the USA, not in some place where the natives wear strange headgear. Mr. Obama’s victory was a moment of epochal exhilaration, not least because he appears to be a decent and intelligent person self-made from a humble background — someone who has personally bought tube socks in the K-mart, worried about money, and made many trips in a subway car.
The current occupant of the White House, however, has sedulously prepared for his successor the biggest shit sandwich the world has ever seen, and there is naturally some concern that Mr. Obama might choke on it. The dilemma is essentially this: the consumer economy we all knew and loved has died. There will be pressure from nearly every quarter to keep it hooked up to the costly life support machines even though it is dead. A different economy is waiting to be born, but it is nothing like the one that has died. The economy-to-come is one of rigor and austerity. It is not the kind of thing that a nation of overfed clowns is used to. Do we even have a prayer of getting to it, or are we going to squander our dwindling resources on life support for something that is already dead?
A case in point: the car industry. The Big Three, all functionally bankrupt, are now lined up for bail-outs from the treasury’s bottomless checking account. Personally, I believe the age of Happy Motoring is over. Many Americans have already bought their last car — they just don’t know it yet. The current low-ish price of oil is a total fake-out, having to do much more with asset-dumping in the paper markets than the true resource supply-demand equation. Most of the world (the media for sure) has ignored preliminary leaks from the International Energy Agency’s (IEA) forthcoming report which forecasts global oil depletion to be 9.1 percent in 2009. This is a staggering figure, very likely to offset whatever slack we see in global demand from the worldwide economic crisis. In fact, the global oil markets are poised for the most severe dislocations ever seen, meaning it’s a toss-up what happens first in the USA: a major leg back up in oil prices, or shortages, hoarding, and rationing.
For my money (literally) there are only two main reasons that any portion of the car industry should be rescued at the present time: one, because we need somebody to manufacture engines for military vehicles, and two, because we need somebody to manufacture rolling stock for the revival in passenger railroad service that will have to be a centerpiece of the future economy if we want to remain a civilized nation.
Even the progressive factions of the public may be in for much more “change” than they bargained for. The global economy as we knew it is finished (despite British PM Gordon Brown’s fatuous suggestion that we are ready to formalize it). The world is about to lose its “flatness” (sorry Tom Friedman) and get much rounder. For one thing, the racket of American “consumers” gobbling up the output of Asian factories in exchange for paper promises is over. For the moment, the Chinese are struggling with epic factory closures with the sudden prospect of a restive lumpenproletariet. The situation there is bound to get worse. Before long, these broke-and-hungry masses may actually challenge the present government. In the meantime, there’s no telling what the (unelected) Chinese government might do either to keep itself in power, or genuinely defend its country’s perceived economic interests. One thing is self-evident: we are not returning to the old racket of toys-for-treasury-bills. One thing China might do in economic self-defense is shed whatever US dollar-denominated paper is moldering in their vaults before it becomes valueless altogether.

URL: http://jameshowardkunstler.typepad.com/clusterfuck_nation/2008/11/presto-change-o.html