In the pre-1971 economy, it was Main Street that produced
wealth and accumulated real dollars. After 1971, it
was Wall Street that controlled access to the new counterfeit money – and made
sure it captured much of it. The new system gave the feds the
“flexibility” they were looking for. But it
completely changed the nature of our money and our economy.
….
$300 Trillion in Debt
After our trip
to Las Vegas, we spent one night in Baltimore and then got on another
airplane. Standing in line, unpacking bags, getting zapped by X-ray machines –
it has all become so routine we almost forget how absurd it is.
While armies of TSA agents pat
down grandmothers and Girl Scouts, ex-soldiers take aim at the police… nutcases
run down tourists with delivery trucks… and a fellow with a grudge against gays
nearly wipes out an entire nightclub.
According to our friend
Richard Duncan’s latest estimate over at Macro Watch, world debt has climbed to
$300 trillion. That’s up from roughly $200 trillion before the 2008 financial
crisis. In the world’s five major economies, it has doubled since 2002.
Now, the whole shebang depends on debt. All of this debt
is calibrated in “money,” which is the most extraordinary thing of all. The key
to understanding today’s economy is to realize that money isn’t wealth and
today’s dollar isn’t even money.
See graphic “G10 DEBT
DISTRIBUTION” AT: http://www.acting-man.com/blog/media/2016/07/1-debt-distribution-1024x747.png
G-10 distribution of debt as a percentage of GDP (note
that a lot of UK debt is financial debt, which is partly a result of London’s
importance as a global financial center) – click to enlarge.
Real Limits
Normally, money is just a way of keeping track of wealth.
It’s like a clock. A clock isn’t the same as time; it just measures it. The
Parasitocracy – led by central banks – pretends that adding more money to the
system will make people richer.
That’s why they have lowered interest rates to zero and
below: to make it easy for people to borrow money. But adding money is a scam.
It’s like slowing down the clock to make the day seem longer.
“There are real limits… real laws, that cannot be
modified,” said economist and author George Gilder in Las Vegas over the
weekend. “The most important is time.”
At least, the old, pre-1971
dollar was real money; it was anchored in the reality of time. It takes
time to build real wealth. You have to work. Save. Invest. And most important,
learn. And it takes time to dig gold out of the ground, too. And gold – like
digital currency bitcoin – becomes harder and harder to get as time goes on.
The easy surface deposits are
mined first. Then, if you want more gold, you have to go farther and
farther, deeper and deeper, at ever greater expense in resources and time. The
only real wealth is knowledge, says Gilder. And the only real growth is
learning. Anything else is a fraud.
Real Money
In 1971, President Nixon – aided and abetted by economist
Milton Friedman – cut the dollar off from its natural limits. No longer
tethered to gold, the gate was flung open… and the horse ran off.
“Gold is part of the real
world – limited by time,” Gilder
explained. Gold is real money. But this new money was different. It
was “unmetered,” says Gilder. And it was very popular with the feds, the Deep
State, and the world improvers.
Unlike the old money, the feds could control it and decide
who gets it. And they could use their cronies in the financial industry to
distribute around the economy – as they wanted.
Before 1971, the feds had their
hands tied – by real money. They couldn’t create gold. And they
couldn’t print too many of their gold-backed dollars. They had promised to
redeem foreign central banks every $35 they created with an ounce of gold. They
didn’t have an infinite amount of gold. So, they had to be careful.
The system was self-correcting.
If Americans spent too much money on foreign goods, too many dollars would
travel abroad. This put our gold stock at risk if foreign governments decided
they preferred U.S. gold to U.S. paper money.
Gold was the base of the world monetary system, so a
reduction in the gold stock was also a reduction in the money supply. Money
responds to the law of supply and demand like everything else. As the money
supply fell, the price of money (interest rates) rose. Higher interest rates
then reduced spending, bringing the economy back in balance.
In the pre-1971 economy, it
was Main Street – productive U.S. industry – that produced wealth and
accumulated real dollars. After 1971, it was Wall Street that controlled access
to the new counterfeit money – and made sure it captured much of it.
The new system gave the feds the “flexibility” they were
looking for. But it completely changed the nature of
our money and our economy. Instead of rewarding the people who
produced wealth, the new economy gave its hugs and kisses to the people who
mongered debt and shuffled financial claims.
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