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The Economic Insane Asylum

Economics / Economic Theory Sep 05, 2010 - 10:44 AM GMT

By: D_Sherman_Okst

Economics

Best Financial Markets Analysis ArticleIn a Nutshell: Our economy is really an insane asylum run by lunatics.

Common Sense: No problem can be fixed before a solution is formed. No solution can be formed until the underlying problems are clearly identified.


The officials in charge of fixing the economy have not articulated the underlying problems. Worse, many of these officials - directly or indirectly - created or contributed the underlying problems.

It is shear lunacy to expect that the people who screwed up the economy have any chance at fixing what they destroyed.

Identification of the  Underlying Problems

Income: Average Real Weekly Earnings, (read: incomes adjusted for inflation), are below what what what they were in 1973. Income wise the average American family is worse off now than they were 37 years (4 decades) ago.

The Dollar’s Value: And it isn’t like we have a stronger dollar now. If we did perhaps we could get by with less money. No, Uncle Buck is worth 95% less than he was 84 years ago when the “Creature From Jeckyll Island” (read: the “Fed”) came into existence.

Money is supposed to be a store of value. When you boil economics down to its core you are left with one law: Supply and demand. Increase the supply of anything and it’s value goes down. Our monetary system is flawed because if it isn’t expanded it collapses and when it is expanded the store of value is obliterated. The Fractional Reserve System is another example of a moronic idea created by greedy lunatics, It was doomed to failure upon inception. Debasing a currency only creates an addiction to debt.

Employment: In 2008 there were about 150 million workers. Today (U3-U6) unemployment is at 22%. Plaguing unemployment is the fact that most of the jobs lost were jobs that were created because of consumers binging on credit. For instance, in 2008 Americans tapped their home equity for stupid purchases. The best example of this is from Jim Quinn's 2008 article: Consumers borrowed $9,000,000,000.00 (9 billion dollars) (from home equity loans) JUST to blow it on 4 dollar coffees at Starbucks, which has since closed 900 stores. Debt to expand a business or debt to purchase a home is sound debt for an economy. Debt to buy expensive coffees at “Fourbucks” won’t be economically sustainable (as proved by 900 closed stores).

We had a booming economy that was built on a foundation of sand.

Drof/Globalization: (Read: packaging up factories and off-shoring them and the manufacturing jobs that went with them) equated to workers here competing against some poor individuals who make $2 bucks a day in some emerging country that has no work rules or standards). Globalization was an asinine idea. A blueprint for lowering standards here and raising standards there. We can capitalize the “a” in asinine if we consider the ramifications of high oil prices caused by Peak Oil (read: 80 - 150+ dollar a barrel oil).

Backwards: In 1914 Henry Ford helped spur the middle class by paying Ford workers $5 bucks a day (double what the average wage was then). Ford increased the demand for what he was manufacturing by creating a class of workers (read: the middle class) who could afford his product.

Drof: Ford’s plan spelled backwards. Drof is globalization. Removing manufacturing jobs. Borrowing from China et al to replace the lost manufacturing surplus and sticking the tab (read: tax bill for the deficit) on the class you are screwing all while blasting wages backwards by four decades and expecting to have any semblance of a strong economy is an entirely moronic idea dreamed up by loons.

It is absolutely insane to think you take the blueprint for what created prosperity turn it upside down and expect prosperity. If these lunes were architects they would have built buildings upside down butting roofs underground and basements at the peak of the structure.

Lunatics and we are paying for their insanity now.

Massive Government: The government doesn’t produce anything. Government, while necessary, has an associated cost. The larger it is the greater its cost. Our government is now the largest that it has ever been. In no way, shape or form is this efficient.

Corporatocracy: In a nutshell: Corporatocracy has replaced capitalism. I wrote about this in my last article “Why We Are Totally Finished”. Corporatocracy has permitted corporations to influence (bribe and control) the government which then rewarded select sectors for criminal activity. Fraud that led to our economy blowing up. The sectors which literally blew up the economy in 2008 were saved when they should have been left to fail. TBTF translates to not regulated correctly to begin with. Nothing holds a gun to our head. Too big means too unregulated to be permitted to grow too big.

Resource Scarcity: As we approach a population of seven billion every resource from water to oil will be taxed to its maximum. The driving thrust of www.ChrisMartenson.com‘s "Crash Course" is how economies mine the earth for resources and sell them. Growth of 2-4% per year compounds exponentially proving the economic model of the world unsustainable.

Enron Accounting: Really that isn’t fair, the accounting our government uses would actually make an Enron accountant blush. Our off balance sheet liabilities dwarf our federal debt. All together we have: 13 trillion in public debt, 18-19 trillion if you count the GSE debt (and you should), another 109 trillion in off balance sheet liabilities. 128 trillion between the two.

In Short:

  • Retro wages four decades
  • Rob the currency of 95% of its value
  • Take thirty three million jobs away (removing as many consumers)
  • Do the exact opposite of what built this nation’s economy
  • Make workers work eight months to pay for a bloated government
  • Allow lobbyists to remove voters' rights 
  • Replace capitalism with corporatocracy
  • Collapse the debt that people had access to use as a bridge between what two incomes bought in and what they need 

and you can forget about any economic recovery.

Fugetaboutit.

The Fix

The fix is amazingly simple: In a nutshell our elected officials must wake up to the fact that fudging unemployment numbers with bogus Birth Death Models, not counting U6ers or hiring temporary enumerators doesn’t inject money into the economy through consumer spending. Lying about GDP or keeping off balance sheet debt doesn’t fix anything either. And relying on the lunes that created the mess to fix the mess is even more insane.

They need to fire those who created the mess. Pigs will fly before Larry Summers, Ben Bernanke, or Turbo Tax Cheating Timmy Geithner fix anything and everything they broke or failed to regulate.

Then admit we are broke: Everyone but the nitwits on CNBS know this. We spend more than we take in and can borrow put together. Devalue the currency with an official: "Bring us 10,000 old dollars and get one new dollar". All foreign, domestic, public and private debt would be wiped clean.

Use our problems to create our solutions: Create a Manhattan Project and determine how best to use our remaining resources like oil especially and how to transition to energy sustainability and resource sustainability. Get people like Dr. Chris Martenson, Dr. Al Bartlett the pioneers of this phenomena and put them on the project. Bartlett was literally on the actual Manhattan Project. Put people to work creating or producing solutions here not in China or Indonesia or India. Globalization was a failed plan modeled 180 degrees opposite of what built our country and made it great.

Shrink government: Stop creating entitlement programs in exchange for votes. Stop looting Social Security, turn it into Fannie and Freddie, let renters become buyers, let buyers pay Grandma’s Social Security - that’s how you fix the funding gap between fewer workers and more retirees. Stop spending half of our budget on the military industrial complex.

Back of the envelope scratch: Social Security in 2009 had fifty three million people receiving benefits. Thirty six million retirees, ten million disabled workers and six million survivors. About 156 million people paid Social Security taxes during the course of the year and $686 billion in benefits were paid out. There are about seventy million primary homes. Let’s say that fifty million of them want a mortgage, and or a HELOC. If the debt service averaged $1,500.00 a month that would bring in $900,000,000,000.00. If they needed more for other entitlements they could generate credit cards.

If you are going to indebt us when money is created then at least have that debt go to paying student educations and or grandma’s social security. We don't need to be paying communist China interest. We don’t need to be taxed like we are. We spend about eight months working to pay taxes. Want more money in the economy? Want to increase employment? Give consumers more than four months of earnings to spend on themselves.

Both the mortgages and the interest on consumer credit cards could be at low rates. Dismiss the banks, they dismissed the economy in 2008. The Federal Reserve system is a failure, responsible for the boom to bust yo-yo boom to recession nightmares, theft of our stored value in dollars and an unconstitutional disaster. America should not tolerate failure to make a few people richer than God.

Can the lobbyists: Implement term limits. Restore capitalism and democracy. Bribing politicians is not democracy. Also, politicians need to eat what they bake. No special retirement accounts. There are those who (Ron Paul and Paul Ryan and the few like them excluded) can loot our pension fund with no legal ramifications. Also, the entire election process needs to be democratized. Politicians should only be able to blog. We need election spending limits so we can get servants (read: not bribed whores) elected.

Stop teaching Keynesian economics in all but two universities: It’s wrong. Dead wrong. That is why 99.9999% of the economists didn’t see or hear the locomotive coming. Heck, they didn’t even recognize the train tracks. If my kid had Bernanke in Princeton for economics I’d be on the dean’s door demanding a refund.

Change the accounting, put everything on the books: Off balance sheet accounting should have been put to death with Enron.

In Summary: Letting lunatics run the asylum called an economy will have one result and one result only. We will find ourselves living in a loony bin. Calling it a capitalistic democracy won’t change what it is.

Disclosure: I wasn't an English major. Thanks to "MM" for the edit and apologies to the butcher job I did on the English language.

By D. Sherman Okst

Bernardston MA USA
davossherman @ gmail.com

I'm an ex-airline captain with about 15,000 hours and am amazed at all the BS we are taught. Most of my friends still in the business were also taught the wrong aerodynamic principles with respect to what makes planes fly. Aviation or economics, Keynes to Austrian - Bernulli to Newton we've been sold bad goods. It's amazing anything works as backwards as we do things.

© 2010 Copyright  D. Sherman Okst - Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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