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More Money Does Not Necessarily Equal More Wealth

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I am a billionaire. Well, I would be if I lived a little farther south in Zimbabwe. You could be as well if you moved to the south-central African nation. Once known as the breadbasket of the region, Zim. (as it is affectionately called in southern Africa) is on track to be the country in the world with the highest billionaire rate. You see, through government mismanagement of the economy and extensive exercising of the printing press by the central bank, inflation is in the millions of percent. The central planners answer is to continue to print more money in larger and larger denominations so people can have the currency to buy things like bread and beans. Of course, as all Austrian economists know, more money means even more inflation -– prices double about every day in the capital Harare. Unbelievably, the most recent note issued was a $10 billion bill – equal to about $20 USD on the black market. The problem is that through the policies of its central economic planners, Zim is becoming the poorest country on earth. This is proof that more money in the economy does not necessarily translate into more wealth.

This would be a lesson that our economic central planners should learn. Now to be sure, our Federal Reserve Bank is not increasing our money supply at anywhere near the rate of increase that Zim’s central bank has imposed on that economy. After all, Zim’s central bank is more like Bernanke on speed. But, Uncle Sam is spending a lot of money He doesn’t have on programs that are not working to reinvigorate the economy. Take the $161 billion stimulus package passed earlier this year by Congress. It hasn’t achieved its intended goal – consumer spending to induce economic recovery in the United States. Maybe it didn’t work because Americans spend 61 percent of their consumer goods dollars on imports. Or maybe it didn’t work because the American people are smarter than their leaders. They simply saved the money for the impending rainy day that is sure to come.

Then there is the $700 billion bank bailout bill hurriedly passed by Congress in October. In November over one million workers lost their jobs. Housing prices are still going down and Americans are still not buying from the Big Three automakers. The Administration can’t even decide on a definite plan to use the money. First it was to buy bad assets from financial institutions, then to liquidate banks balance sheets, then to buy bad paper from corporations, and now it is to bailout the automotive industry. Since, oil has plunged to below $34 a barrel maybe the petroleum companies could use some taxpayer funds to tide them over for a while.

Speaking of the automakers, Bush once again showed exactly what kind of a weasel he is -– the worst kind. He essentially threw $17.4 billion dollars of money we don’t have down the drain so that Chrysler and GM would not collapse on his watch. The automakers belong in bankruptcy court. They have no chance of restructuring into something that is economically viable. The President has given them 3 months to shape up. Give me a break. The UAW has already rejected even the mention of wage and benefit concessions that would allow the Big Three to be more competitive against foreign car makers. Even though he has run GM into the ground, Rick Wagoner has been allowed to stay on as CEO. Lastly, there is an impression among American consumers, rightly or wrongly, that American automakers produce junk vehicles. By simply changing car designs, this impression of quality will not change and sales will not improve. The Big Three will eventually fail or they will become like many banks have become, wards of the state. The Big Three bailout is just the latest example of policies that will not even bailout the recipients of the money let alone reinvigorate the economy.

To come will be President Obama’s stimulus package. It will be huge, probably in the neighborhood of $700 billion. It will include all of the things FDR was revered for -– public works, welfare payments, and other Keynesian spending. Just like the Great Depression, this spending will not work today either.

Zim’s problems began when President Robert Mugabe confiscated farms and handed them over to his non-farming cronies. Scarce resources were stolen from productive users and given to incompetent recipients. The U.S. government is doing the same thing right now. It is taking scarce resources away from productive individuals and businesses who are efficient and valuable to our economy, and giving them to banks, automakers and other corporations who through their performance are a drag on our economy and therefore must be liquidated. As Uncle Sam continues to spend money it doesn’t have on programs that will not improve our economy like Zimbabwe the United States will be poorer for it. The only question is how poor?

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About Kenn Jacobine

  • http://ruvysroost.blogspot.com Ruvy

    The Americans don’t want to read this kind of stuff, Kenn. The truth is too painful. For a while the American monkey at the wheel at the Bank of Israel, Stan Fisher, was buying up billions of dollars with shekels to support the value of the dollar here.

    But the value of the dollar is falling again.

    I guess one plan is to run the dollar into the ground and then distribute “ameros” at a dime or penny to the dollar. A truck burst open near an FDIC facility in the States filled with the bills. A friend sent me an e-mail with photos of the new money for North America.

    But that may not be the only plan for the massive impoverishment of the United States of America. There may be others in the works as well.

    Merry Christmas!

    P.S. Is Santa going to be coming up from South Africa to drop coals in everyone’s stockings this year?

  • Cannonshop

    Good article. Unfortunately, it’s going t’be read by US instead of by the people making these boneheaded decisions.

  • http://ruvysroost.blogspot.com Ruvy

    For a while the American monkey at the wheel at the Bank of Israel, Stan Fisher, was buying up billions of dollars with shekels to support the value of the dollar here. But the value of the dollar is falling again.

    Apparently, the American monkey at the wheel at the Israel Bank is buying dollars again. It’s trading up from last week. My neighbors who rely on their pension funds (paid in dollars) will breathe easier….

    What Cannonshop said, Kenn….

  • bliffle

    Too true. too true.

  • http://biggesttent.blogspot.com/ Silas Kain

    Is the solution to these damn financial mess that hard to figure out? Here’s the Silas Kain 5 part plan:

    1. Make it law that all government bui1dings must be “off the grid” and energy self-sustaining by 2016. All public housing financed by HUD grants and Section 8 vouchers must be energy self-sufficient by 2020.

    2. Any provider of electricity must invest 80% of their profits into research, development and implementation of “off the grid” technologies until 2020.

    3. Chrysler folds and factories are retooled to manufacture wind turbines and other energy-efficient, energy-producing technology.

    4. Cut all Congressional salaries in half. Give a bonus based upon Congressional performance in keeping within budget limitations and restraining fiscal spending that are not paid out until after Election Day depending on the outcome of the election.

    5. Labor Unions must be registered and treated as political parties unto themselves and may no longer contribute to other political parties. And Union Officials should not be allowed to receive more than 150% of the average yearly wage of a rank and file union member.

    Oh, and if none of these are adopted, I suggest we petition Queen Elizabeth to take us back because our leaders just don’t have the collective intelligence to make change for a 99 cent purchase paid with a dollar.

  • Doug Hunter

    Why is inflation bad?

  • bliffle

    Actually, inflation is not so bad. Inflation is the friend of the young family that is a dis-saver, heavily in debt for house, babies and cars. Inflation alleviates the debt.

    But inflation is the enemy of the rich and secure because it drives their money out of banks into investments, which are risky and require effort and intelligence to administer.

    So the rich are dead-set against inflation. Since they own the government, we have an official anti-inflation policy.

    But that doesn’t stop them from spending too much money on schemes to enrich the powerful. So, given fiscal irresponsibility that would ordinarily lead to inflation, we have invented monetary policy, administered by the Federal Reserve, which attempts to restrain inflation by manipulating interest rates.

    And it works, for awhile. And then the dam bursts.

    Through his irresponsible fiscal spending, GWB, in the service of his masters, has created enormous pent-up inflationary pressure which has been partially masked by monetary gimmicks from the Federal Reserve.

    But they used up all the tricks.

    I’m sure they intended the final catastrophe to occur just after GWB left office so it would be blamed on his successor, but, in his usual way, GWB blew it.

    He was hoping to sneak out of town without getting caught.

  • Cannonshop

    Bliffle, you must have a job (like, government maybe?) where your wages keep up with inflation enough that you aren’t working harder, earning more in raw numbers on your paycheque, yet having less actual purchasing power.

    I’m effectively living at the same financial level now, that I was twelve years ago at slightly less than half my current listed wage.

    Inflation SUCKS.

  • http://ruvysroost.blogspot.com Ruvy

    Inflation SUCKS.

    Cannonshop,

    Any unasked for change in the value of money, upwards or downwards, sucks. But if in the last dozen years or so, you’ve had to deal with a mortgage, its value has been driven down some even as you have had to tighten your belt to get by.

    That is Bliffle’s point. In the non-inflationary nineties, when we owned a house in St. Paul, the value of our mortgage did not go down, and in spite of my wife’s well paying job with the Feds, (including COL pay increases and bennies), and my job managing a BK, we still had to watch every dollar. But at least money was coming in!

    With job losses in the States, on the other hand….

  • Kenn Jacobine

    Doug and Biffle,

    Inflation is bad and Zim is a perfect example as to why. On TV here we daily see people eating out of trash bins because there is no food in the markets. The cholera epidemic has come from people drinking dirty water from the street. People stand in line all day to get money out of the bank just to buy a loaf of bread. Others have resorted to eating giraffes and other big game. The rich do not necessarily hate inflation. Mugabe and his cronies aren’t suffering. They have foreign investments and bank accounts. They are doing just fine in this catastrophy, thank you very much.

    For more reading on what is really happening in our economy today I would refer folks to http://www.lewrockwell.com and http://www.mises.org for a different take than what is portrayed by the shallow, pissant, derelict “mainstream” media.

  • Doug Hunter

    I can see that hyperinflation is bad. When money is worthless it sort of puts the brakes on a modern economy. What I’m asking about is the 8-15% range.

  • http://ruvysroost.blogspot.com Ruvy

    But Kenn,

    You’re a billionaire!! At least I know one.

    And you didn’t even have to go on a game show to answer “who was Holofernes?” Do you have a million or two to spare?

    Seriously. Deflation and inflation, both have their downsides. Mild inflation can ease credit debt. Deflation worsens credit debt. What you’re talking about in Zimbabwe is not inflation – it’s an entire collapse of the monetary system, surpassing even what happened in Weimar Germany in the 1920’s. I still have a 10 million Reichsmark note from 1923, part of my collection of (worthless) coins and currency.

    We got a Christmas holiday card from a friend in Western Minnesota.

    This is what she wrote us:

    “I am grateful that our man Obama won the election and that I’m still employed. The next few years could be scary and interesting all at once.”

    This is a lady who generally tunes out the things I write….

  • http://lovesliberty.tripod.com Kenn Jacobine

    But while mild inflation is good if you have debt, that ignores the bigger picture – depreciation of savings, negation of other investments, and generally higher prices. So while you are paying back debt with money that is less in value than money you borrowed you are using that same money to buy things.

    Also, in the early 2000s Greenspan lowered rates down to nothing to avoid recession because of dot.com bubble and 911. He did it for several years and in 2005 began to bump up the rates to fight inflation. If you look at real inflation numbers, not the bogus ones the gov’t publishes (they don’t include food or energy) he didn’t really prevent inflation. But my point is the fear of inflation caused the Fed to raise rates which then contributed to the housing bubble bursting. All those inferior borrowers that got artificially low rates because of Fed policy now saw their rates rise. So inflation, or the fear thereof indirectly and partly caused the housing bubble to burst.

    When the Fed prints money, banks and other businesses get it first before the increase in dollars causes inflation. We have been socialized to believe inflation is o.k. even good in some circumstances. Politicians can spend trillions financed by the printing press to get reelected. Banks and businesses can use it to make huge profits before inflation kicks in. The average school teacher and journalist don’t know the difference. The journalists that do have sold out to their corporate masters in order to further their careers.

  • http://ruvysroost.blogspot.com Ruvy

    Kenn,

    The Americans are suffering the necessary consequences of being a debtor nation. When you shake the charity box in everybody’s face while beating them in the head with your military, you do not win any brownie points.

    The United States could not afford the war it stared in Iraq in 2003. It needed to go in, knock off Saddam Hussein, and get out. In addition, it needed to go in, knock off the Saudi cash cow for terror (by murdering off all the Saudi princes and the Wahhabi mullahs) and get the hell out, financing the Jordanian king as the new Arabian monarch. They could have even (by murdering off the creditors in Arabia) canceled a lot of American debt.

    That would have solved a whole lot of problems in terms of world stability and would have preserved the United States as top dog for a decade or so longer.

    Instead, well you saw what happened instead. And now the USA is set for a fall of monstrous proportions.

  • Brunelleschi

    Ruvy-

    Why did the US need to knock off Hussein and get out?

    That would defeat the real purpose for the war, which was to make Iraqi oil private for western interests to benefit from. The troops were never going to leave just because they caught Saddam. They can leave when the “Oil Law” is secure.

    The US is only going to use it’s military machine when there is better business afterwards-otherwise, what’s the point?

    :)

  • http://ruvysroost.blogspot.com Ruvy

    Actually, Brunelleschi, the only reason the States should have gotten rid of Saddam Hussein would have been to do penance for backing him in the first place.

    Other than that, there was no reason at all. He was just another evil prick making life miserable and unstable in the world.

    The place the States should have sent troops was Arabia, again to undo damage that American and British businessmen had done in putting the Wahhabi in power there.

    Businessmen still haven’t learned that instability is not good for business, and that supporting prosperity for the large number of people will make them not only rich but beloved. When they are beloved, then idiots like Mugabe don’t ever rise to power to ruin countries. And anarchists and syndicalists like me do not have a market for our ideas.

    The fools in the CFR, who have infested the American government like cockroaches, see the world as a zero-sum game where they use their power to make sure that only they have the sum and everybody else has zero.

    Wake up, look around you and see their sad, miserable idea of a world. Zimbabwe is just a running sore without a bandage. The rest of the planet is sickened by these bastards as well, and now the whole structure is toppling with Terror and Panic running rampant.

  • Brunelleschi

    Ruvy-

    Those businessmen you speak of are working in a system that draws a tight circle around itself and they only have to answer to stakeholders.

    That’s avoids philosophies of good government. Who cares about the greatest good for the most people? They have a fiduciary responsibility to only make money for themselves and stockholders, blah blah. You have heard it I’m sure.

    In the US, government is a fight between people who follow 2,000 year old political writing (gospels) and people who follow 250 year old political writing. All are struggling with globalism and private power. There is a need for a new philosophy of government. Anarchists are people who see this but just give up.

  • Mark Eden

    New ‘philosophies of government’ will emerge as new ways to organize production take hold. Knock and be dismissive of the privatized profit motive all you want, but, without a counter proposal of an organizing principle that is equally ‘rational’, complaints amount to nothing.

    The basic problem with profit maximization as organizing principle is that it requires business cycles for feedback. To date, large scale attempts (both ‘communist’ and ‘fascist/corporate’) to implement centralized planning in order to get around these cycles have resulted in economic collapse themselves. To me this is one piece of evidence that implies that government is not the needed fulcrum for change.

  • http://ruvysroost.blogspot.com Ruvy

    Those businessmen you speak of are working in a system that draws a tight circle around itself and they only have to answer to stakeholders.

    The businessmen do not have to work in that tight system. Syndicalism provides a means of avoiding that system, and yet preserving the competitive impulse which leads to progress. But those businessmen who avoid being trapped in that cycle of control by stockholders and stakeholders can avoid being forced to change their operations to a syndicalist system. There is such a thing as enlightened self-interest. Those businessmen displaying enlightened self-interest usually do far better then those who don’t.

    Anarchists are people who see this but just give up. I leave Mark Eden and Cindy B. to dispute this. Mark Eden has already begun to.

  • http://ex-conservative.blogspot.com Glenn Contrarian

    Ruvy –

    Except for the parts about us going into Iraq and Saudi Arabia, I can’t find anything at all to disagree with in your last three posts.

    Something’s wrong here – there’s got to be something I can disagree with you about!

    Ah! ‘America’s set for a fall of monstrous proportions’. Maybe. Depends on whether Obama can pull off a secular economic miracle…and if the Republicans will put the good of the country ahead of their faux patriotism and allow Obama to do what is necessary to keep America – and the world – from falling over the edge of the economic cliff.

    The IMF is already warning of the possibility of worldwide depression….

  • http://ruvysroost.blogspot.com Ruvy

    Glenn,

    I think you saw Roger’s article on the Obama Stimulus Plan. I substantively agree with Roger that whatever Obama wants to do will not work. This again, is not said to be nasty, but because it appears that Roger is right.

    Frankly, I think the luck of the Americans has run out. There is just no other way I know how to put it. Well, there is. It’s found all over our Prophetic Books in the Bible – but you probably don’t want to know about that.

  • http://ex-conservative.blogspot.com Glenn Contrarian

    Ruvy –

    On prophecy, while my own religious beliefs are anathema to most of mainstream ‘Christianity’, and while my religious practices might be seen by many as fundamentalist, I’m not so quick to denounce the holy books of other religions.

    I put a lot of effort into research for a book that will probably never be published. The plot of the book demanded that I research the Qur’an, and I happened to notice a few verses in it that were disturbingly close to modern reality. If it were not for the strength of my faith in the Church of which I am a member, I might have been tempted to convert to Islam.

    But there are prophecies, and there are prophecies, not all of which come from God. IIRC, nowhere does the Bible say that those not of God cannot prophesy truly. That’s why I am not so quick to denounce others.

    Please forgive me for the following rant, but religion is one of my favorite subjects, like Judaism and Islam, the Church of which I am a member believes that Jesus was – and is – not God, that He was man and only man. We believe – as you do – that trinitarianism and all its accouterments are perversions of the true Faith. We differ from you and from Islam in that we do believe that Jesus is nonetheless our Savior.

    The protestant trinitarians believe that the Hebrews/Jews were trinitarian themselves for thousands of years since the time of Adam and Eve, yet all of a sudden while Jesus walked the earth, they switched to ‘non-trinitarianism’ in the space of three years. I find such a concept…unrealistic.

    The Catholic trinitarians believe (if I understand their doctrine correctly) that trinitarian doctrine was slowly ‘revealed’ to the Hebrews in the OT…but the flaw in this reasoning is that every nation and culture from the Indus to the Pyrenees worshiped a trinity in one form or another…EXCEPT the Hebrews, so such a doctrine would demand that all those pagan nations better understood the Nature of God than did the Hebrews!

    I’ll leave you with this (which I strongly suspect you already know) – one of the official religious titles of Julius Caesar (nearly two centuries before Christ) was Pontifex Maximus of the Roman trinity of Jupiter, Juno, and Minerva.

    Honor and health to you, friend!

  • Brunelleschi

    Mark-

    Well said, agree.

    The system we live under is waiting for some clever philosopher to write a new critique of and inspire something better and more current than constitutions that pre-date even the industrial revolution.

    Right now you either get outdated structures and ideas, or 2,000 year old gospels and people still pushing those to run government!

    Maybe I will work on it after Christmas….

  • http://ruvysroost.blogspot.com Ruvy

    Glenn,

    Rant?

    What rant? It was an absolute pleasure to read your post. If you are like others I know, you don’t do the Christmas thing. One fellow sent me an e-mail saying that Jesus was born around the holiday of Sukkot (Tabernacles) based on what he had read, and I’m assuming that you might have similar views.

    Around here, since the vast majority of the Christians are of the Orthodox variety, they follow the Julian calendar or something similar, and do not celebrate Christmas till mid-January or so.

    The Christian new year is called “Sylvester” for reasons that escape me.

    And it is cold here, so I’m getting off. I need to be under the covers.

  • http://ruvysroost.blogspot.com Ruvy

    To bring this round to the topic at hand, I ran into this little gem at Global Research, about Ponzi schemes. Enjoy…

  • swinehunter

    Why the financial interests of the world are given hundreds of billions of dollars to retain their power while workers and homeowners are spit on:

    “It is essential therefore for us at whatever cost to deprive them of their land. This object will be best attained by increasing the burdens upon landed property – in loading lands with debts. These measures will check land-holding and keep it in a state of humble and unconditional submission.”

    “What we want is that industry should drain off from the land both labor and capital and by means of speculation transfer into our hands all the money of the world.”

    “What we have to get at is that there should be in all the States of the world, besides ourselves, only the masses of the proletariat, a few billionaires devoted to our interests, police and soldiers.

  • Cindy D

    Let’s stop them swinehunter. Every day, let’s do something to stop them.