Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Zombie Parasites vs. Productives, Turning Argentine

Economics / Inflation Apr 03, 2013 - 01:33 PM GMT

By: Bill_Bonner

Economics

Here in Argentina, most things were closed on Monday for the Easter holidays... and are closed again today, too.

What do these Argentines think they are? French?

We wandered the streets. Here in the Palermo Soho neighborhood of Buenos Aires, where we are staying, there were thousands of people window-shopping, eating in restaurants and drinking in outdoor cafes.


Inflation is running about 30% per year. The government is proposing to use citizens' pension funds to pay off its creditors. You get 50% more for your money if you trade your dollars for pesos on the black market. And experts are predicting another big devaluation of the peso after the October elections.

"The Argentine economy has been supported by strong farm sector prices," reports the local paper. "High agricultural prices should help support the peso and the Kirchner government."

Eager to Spend

People on the streets seem to have money to spend. And they are eager to spend it.

"Are you kidding?" said an Argentine friend. "Nobody wants to save pesos. You get them. You spend them."

"I've seen this show before," said another friend. "I was here in Argentina in the 1980s, when we had inflation of 1,000% per month. And I was in Moscow when the Soviet Union fell apart. Inflation hit about 800% there in 1993. I see signs of a big takeoff in inflation again. Watch out."

But for well-to-do Argentines, the quality of life here must be among the highest in the world. There are dozens of restaurants within a five-minute walk. You can sit outside. The weather is nice. And prices are cheap, if you convert your money on the black market.

But the quality of life is more than just sitting in outdoor cafes sipping a café con leche. Being able to work is important too... and so is being able to keep your money. You need to be able to save money... and then you'll have enough money to be able to hang out in outdoor cafes!

The world is a rich place. It is so rich that it can afford more and more people who don't have to work and more and more people – such as Ben Bernanke – whose work reduces standards of living for practically everyone.

The waiter who brings your morning coffee is providing a valuable service. The plumber who makes sure your water flows is also giving you something of value. So is the autoworker who welded together your automobile.

All increase the real wealth of the planet.

But Bernanke? Is there any evidence that any central banker from the dawn of time until April 2, 2013, added a centime or a farthing to the wealth of the world?

Not that we know of!

Instead, Bernanke fiddles with the monetary base... jiggles interest rates... and generally diddles the economy.

You might say, if it weren't for his jiggling and diddling and so on, that the "crisis would be worse" or even that "we would have had a depression." But you might also say that if he hadn't been diddling and fiddling with it, we wouldn't have had a financial crisis in the first place!

Subtracting Value

How about Nancy Pelosi or Lindsey Graham? Do they provide a useful service? Do they make the world richer... or better... in any way at all? Are they productive members of society or bloodsucking parasites?

It seems obvious here: Argentine politicians do not add value. They subtract it. They spend money that is not theirs and sap wealth they never created. They drain away the real wealth of the world by transferring money from those who earn it to those who consume it. Then it is gone.

Is it any different in North America?

"You get what you pay for," said Milton Friedman. You pay for zombies, you get all you want – and then some.

What about tax lawyers? People on disability? Defense contractors?

Aha! You will say that defense contractors provide a useful service. Without their work, the U.S. would be attacked and invaded.

In the 1930s, major industrial nations were on the march... and there was at least some remote danger that they could march against the USA. Japan bombed Pearl Harbor, but it never posed much of a threat to the continental U.S. And Nazi Germany couldn't even conquer Britain, let alone America.

Back then, the U.S. spent 1% of GDP on defense, which was probably more than enough.

Today, the Pentagon consumes nearly five times as much. There are no hostile, aggressive nations endangering the peace of the world – as far as we know. So, for our purposes, we assume that the Pentagon wastes an amount equivalent to about 4% of GDP.

That is to say, it takes wealth from the productive sector and destroys it. Maybe worse. By overspending on "security," the U.S. armed forces may make Americans less secure.

But wait – we're not going to spend our time complaining about the zombies. Instead, we're going to come to the point...

Which is, no matter how rich a place is, it can always be impoverished by careful government planning!

Argentina is a rich country. It has boomed in spite of itself. Thanks to a productive agricultural sector, it earns enough revenue to keep the economy functioning and the government supplied with payoff loot.

But as revenues rise, so does the number of people who want to be paid off: unions, the poor, the rich.

No matter how much they get, the authorities will find ways to spend more. This is how they caused a disaster in the 1980s... and again at the end of the 1990s.

Is Argentina ripe for another financial crisis? Maybe.

The U.S. is an even richer country, but not so rich that a determined government cannot ruin it. Maybe it already has.

Bill Bonner
Bill Bonner is a New York Times bestselling author and founder of Agora, one of the largest independent financial publishers in the world. If you would like to read more of Bill’s essays, sign-up for his free daily e-letter at Bill Bonner’s Diary of a Rogue Economist.

http://www.lewrockwell.com

    © 2013 Copyright The Daily Reckoning, Bill Bonner - All Rights Reserved
    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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules