Muck’s Minute #14

A small review of Economics 101

The failure of (almost all) Economists to understand Economics and why they are all full of BS.

Think this is a tough subject to tackle?  Think about it.

Almost first of all, we must define a few terms such as economics, trade, interaction between nations  and all interactions of the  absolute lowest level of human existence.

Before we even do that, do I have to convince you that is absolutely no way on for anyone (or group of anyones or anyones with massive brain multiplying computers) on earth to manage every interaction between every human being at all times?  I certainly hope so because it is obvious to even the most disinterested and ignorant observer that making an attempt to give permission, or prevent the trading of goods and services between every Government, company, individual, organization and the individuals within these organizations, or individuals as such, much less manage successfully to pull the strings so supplies of everything used and consumed in the world exactly matches the amount produced is in the realm of total and complete fantasy and is an absolute, ABSOLUTE, impossibility.

Who tells you to go down the local hardware store and obtain a new valve for under the sink?  Do you need permission for this? What if you didn’t have anything to give the hardware store owner in exchange for the valve?  Maybe you could talk him into taking a chicken you had grown in your back yard for it. Barter.

The question remains:  How long would our world last if we each had to have permission to exchange a good or service between consulting adults? The answer, I’m afraid, would be as close to zero as you could calculate.  Everything – EVERYTHING – would come to halt.  Don’t forget!!!! Flea markets,bartering and group selling, buying gatherings would be forbidden and you must ASK permission to exchange each and every time you wanted to obtain something from someone else or get rid of any personal possessions.

Simply put, it wouldn’t work at all except on an extremely primitive level where you made whatever you had to have from those natural resources available to you for free (and were not controlled by another individual – who you’d have to have permission in order to get it).

Now this is taking trade to its’ extreme lowest level which, today, only exists in the most primitive pockets on mini-civilizations.  Ever since a humanoid who had konked a ‘Horker’ on the noggin met another who had a chunk of ‘Bull Netch’ and the later had been told by Mama to bring home a Horker, very probably a trade occurred.  An no one was asked to provide permission and I doubt it occurred to either of them to try and steal what the other had..  They just swapped and went their ways….

And now we come to the dividing point where economists screwed up free trade.

They thought BIG.   Would you like to know how good Keynes really was? He changed the economic thinking of several generations and didn’t have a correct or original idea of his own.  See Henry Hazlett’s “Failure of the New Economics)  Even Keynes couldn’t shrink his overly narrow, high IQ and self-centered mind to grasp a trade between two individuals. No.  He waited around in the stream of time until he could be born with those other ‘economists” listed above(Ricardo, others?) please forgive me for leaving out such as von Mises who knows how it really worked (right) and others who stir the pot at every opportunity for people to ask permission to trade anything between each other.

Keynes didn’t happen to be born until such time as “governments”were formed and trade was done by millions of individuals.  Now this, he could get his teeth into because of the sheer volume of the number of transactions of the trades that took place and the smoke and fog that surrounded current economic thinking in his era.   Mediums of exchange was invented hither and thither – gold, cowrie shells, round stone thingies with holes in them from Yap, silver, anything that was hard to come by (or difficult to make or dig up or find) that could be exchanged for something else with the reasonable expectation that what was received could be exchanged further down the line for something else.  Still, no one had to asked for permission to swap a dozen cowrie shells for 3 coconuts.

But Governments and the development of “money” and specialization changed all that and that was Keynes and his ilk were waiting on.  For as the public accepted a common medium of exchange, those Governments (and those who advised them – at great profit to themselves) devised methods of limiting trade imports and export, thence how to tax things going both ways to enrich ruler and advisor alike and to use transactions (each and every one an economic transaction – remember) to the maximum benefit of themselves and at the cost to each citizen as much as could be squeezed out of him without causing an uprising.

All economists today deal in BIG NUMBERS.  Friedman said that “All inflation is a function of the quantity of money in circulation.”  No if’ and’s but’s or whatever about it.  He’s right too. he just didn’t live to see the day when the Fed could buy all outstanding Treasury Debt and sequester it deep inside the Feds computers and the Fed’s owner banks and other bookkeeping whizz-bangs to “sanitize” the ever growing money supply.  He anticipated the currency would enter circulation immediately and cause imbalance between supply and demand to cause rising prices as demand outstripped supply.

He’s right too!  It’s just that smart Ponzi Operators at the Fed and Treasury have figured out ways to d-e-l-a-y the final blow off – hopefully until they are dead and gone and it’s someone elses problem.

Very Bad Things will still happen, but in  much bigger and uglier way than he anticipated.

Keynes  firmly believed two things:  One, that if Supply out-stripped demand and prices fell, the Central Bank (FED) should increase the supply of money by lowering interest rates to allow banks and individuals to borrow more and more more to expand demand to equal out too much supply..  Vice Versa, if Demand outstripped Supply and prices started to rise, higher interest rates by the Fed were called for to discourage more borrowing by the banks who, in turn, were supposed raise their interest rates on loans to business men and entrepreneurs to increase costs of production thereby suppressing demand for various goods and services until things were back in balance.

Way oversimplified but boiled down, during a business slump, Keynes way was to have the FED print more money, cut interest rates and flood the market with it to supposedly “increase demand”. If prices of goods and services are rising too fast, do the opposite – raise interest rates, make borrowing more expensive and put the squeeze to things (higher unemployment et al) to slow things down.  The only problem was that ever since 1913 and the Birth of the Fed., 1933 death of the internal gold standard and 1971 death of the international gold exchange standard, politicians saw to it that money kept expanding, borrowing kept expanding and spending kept expanding regardless of the condition of the economy because a Ponzi Scheme always require more and more money coming in (Printed money and Credit Instruments are both fiat money) to keep the merry-go-round whirring.

In time of crises i.e. WAR or other world busting event, the FED could issue as much “money” (never forget that credit is identical to money and always had been) as needed to finance whatever the insanity of the day happened to be.

Unfortunately, things didn’t work out quite like Keynes  “ideal” had pictured in that since Politicians , as a whole, are as greedy and crooked as the worst Mafia leaders.  When or if the countries economy smoothed out, the excess funds, instead of being retired, taken out of circulation, or used to pay back old debt, were merely diverted from the fading emergency into the pockets of these politicians and their cronies (particularly the Military/Industrial Complex), new “Crises” were invented and the Ponzi Wheel kept right on turning.

Until it stops when sellers no longer trust the “money” they are given and most importantly, when consumers incomes prevent them from expanding demand from the ever rising prices that is the result of expanding debt.

The end comes quickly thereafter as the Ponzi collapses, debt is wiped away forcibly as businesses collapse and the Ponzi fed income steam to citizens dries up and blows away.

Just wait for it.  This time around is no different and will eventually have the same awful results..

End

Author: MuckAbout

Retired Engineer and Scientist (electronic, optics, mechanical) lives in a pleasant retirement community in Central Florida. He is interested in almost everything and comments on most of it. A pragmatic libertarian at heart he welcomes comments on all that he writes.

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Back in PA Mike
Back in PA Mike

Well said Muck. Nothing like a little macroeconomics. When do we raise rates to discourage borrowing again??

bb

The Jewish debt monetary system along with Fractional Reserve banking and compound interest are the problems.

Hitler took back control of the currency from the central bankers ( who were Jewish )in Germany.Then issued the money as value ( debt free ).The jews declared war on Germany in 1934 .This was the real reason for WW 2

Germany under Hitler became a world power is less then 10 years simply because of his economic policies. Germany was once again Great.

card802
card802

Damn, and if we add in all the bailouts as well, a new twist Keynes probably never dreamed of?

bb

Muck ,there would be no need for all economic gibberish if we had a sound money system. Get back to the basics.

God says Gold and Silver is / are the only real money that exists.But what does God know ? Right Muck ?
The Russians and Chinese seem to agree with God.But what do they know? Right Muck?

llpoh
llpoh

Thanks Muck. People always think this time is different and it cannot happen here.

card802
card802

We are all Japanese now.

From Michael Darda, chief economist at MKM Partners about the Fed “saying” they will start to raise rates in December:

“We have the prospect of the Fed starting to tighten on Dec. 16 into the teeth of credit stress, a big decline in market-based inflation expectations and a slowdown in nominal growth. It may work out OK, but to me it’s a risky setup.”

Wait, the $18 trillion U.S. economy, the world’s largest, can’t withstand a 25 basis point increase in its overnight interbank rate?

It may not sound like a lot, but Darda provides some perspective.

In 2000, the Bank of Japan raised rates once by 25 basis points. Result: “deflationary recession,” he says. The BOJ repeated the escapade in 2006-2007, raising rates twice by a total of 50 basis points, with the same result. The Japanese economy is in recession once again with its benchmark rate at 0%.

Gupatii
Gupatii

Leopold Kohr in his book, Breakdown of Nations: “If there is a problem, It’s too big”

OutLookingIn
OutLookingIn

The current credit crunch has inherent similarities to what occurred in 1999 and 2008, just before the markets crashed. The current cheap credit cycle has now ended.

The average BB rated bonds are now at 5.85% the least risk.
The riskiest CCC bonds now average over 15% from a low of 8% just last year!
Cheap debt is now dead.

Most US corporate debt has gone into M&A (mergers and acquisitions) which is up 55% from just last year at over $2 trillion. The new global record for corporate M&A is $4.2

Next stop???

Tucci78

Writes Card 802, quoting Darda: “We have the prospect of the Fed starting to tighten on Dec. 16 into the teeth of credit stress, a big decline in market-based inflation expectations and a slowdown in nominal growth. It may work out OK, but to me it’s a risky setup.”

Wait, the $18 trillion U.S. economy, the world’s largest, can’t withstand a 25 basis point increase in its overnight interbank rate?

Do bear in mind that in these United States, governments (at every level) are debtors and will be out in the credit market selling debt instruments (bonds particularly) as part of their budget plans for decades going forward. An increase of 25 basis points imposed on existing and projected “sovereign” debt – particularly in those instances where municipal instruments have fallen to “junk bond” status – will do more than just bankrupt these political entities. Plenty of them may collapse, and the federal government may directly or indirectly repudiate some or all of its debts.

Oh, yeah. Ludwig von Mises was Jewish. It wasn’t just because he was perhaps the world’s foremost critic of socialism (his 1922 book Socialism is still in print, and still giving European socialists shit fits) that he had to flee the National Socialists of the Third Reich when the Nazis overran Western Europe.

bb

While you guys are babbling about all this economic language tell why any of this would be necessary if we had sound money with value added monetary system?

Montefrío
Montefrío

Econ 101: Paul Samuelson’s textbook, back in the sixties. Econ 201 for the serious: Graham and Dodds, also way back when. Econ 301? Throw away the textbooks and try it on in the real world! Econ 401? CYA!

gm
gm

@ bb you are correct sir .
That history lesson from 1934 should be more well known .

All 3 of your posts cut very close to the core of this particular onion.

Everything else is just theatre to support the bureaucracy that has grown from the obfuscation of what you stated. Hidden history ? Yes, and who does it serve?

This is exactly, what part of, stucky’s post on lies , lies was about . Or at least the part of fake money.

Damn near everything is a lie .

I think I’m going to change my screen name to cynic lol . But shit , that would mean I have no hope .

But without hope we fall into despair , and I have had a bitter cup full of that . So no , I will remain
gm, , just a cook .

With some HOPE. Maybe an action plan to go along with it ? To accomplish what I hope for ?
Crap it worked for oblamo lol whatever lol

bb

GM ,it took me much time and research on the internet to find out the truth about our monetary system , the true causes of so many wars and why this whole system will fail again. You and Stucky are right. Almost everything I thought I knew has turned out to false or outright lies. Special thanks to Admin for helping me understand this crazy world a little better.

I have hope but not much for this world.

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