The mislead country

The USA’s (and many other developed countries) current economy is built on a phony foundation of borrowing and debt. The economy should not have grown so much in the first place. In fact, the growth in the USA’s GDP has largely been contributed by borrowing more; its not due to production and savings. And this is not sustainable. No amount of government spending is going to rectify the situation. It will only lead to inflation. The government is already in deep debt and has no savings from which it is stimulating the economy. It is doing so by taking more debt and assuming that the economy will stimulate enough to get more revenue from future taxes in order to pay off the debt.

It is generally assumed that the future will always be larger than the present and that there will be capability to pay for the current debts in the future. This is an extremely flawed assumption given the crisis that we face due to the inevitable depletion of the fuel with the most ‘surplus energy’, crude oil.

The right thing for the USA to do right now is to take the pill of recession, cut the huge government spending and let the private, more efficient companies use the capital to produce goods.

‘Systemic Risk’ is all nonsense

“The failure of big companies causes Systemic Risk” is all nonsense. There are a lot of companies who did the Right Thing & who should be allowed to benefit from the collapse of the big companies. But the government is not allowing this to happen by supporting people who behaved recklessly. Companies which have taken too much risk & have made bad decisions must be removed from our system.

This is of course not the end of our system.  Other companies who have been waiting for this to happen will come in and will have the chance to increase their market share and recruit people.

Prediction of the US economic collapse

Recently I came across this article – http://www.naturalnews.com/019659.html. If the date on this article is to be believed then, the author has amazing predicted the many events that have already occurred. Others like Peter Schiff had also predicted the current collapse.

The article talks about the Fed buying the Treasury bills when no one else is willing to buy it. This is what exactly happened about 2 or 3 months ago when the Fed declared that it will be buying $1.2 trillion worth of T-bills.

According to the article, hyperinflation is the most probable exit taken by such crisis since printing money to pay off debt is the easiest way for the greedy governments. This is what happened in Germany in 1923 and this is what will happen in the USA now.

Government stimulus never works in the long term

Government stimuluses never work in the long run. They could work in the short run. But whatever they do is not sustainable in the long run. Its fragile. Its too much dependent on them. It is something that is imposed from the top to bottom rather than something that takes shape using the free market economy from the bottom to the top.

Growth, growth, growth! Why is growth so important? Its because we have a debt based economy. If there is no growth in the economy, the interest payments for the already loaned money cannot be made. Money equivalent to at least the amount of interest on the total debt has to be introduced into the system. This may not necessarily be accompanied with an increase in the value in the economy and may lead to inflation.

End of Fed rally

Optimism

Image from “The Big Picture” blog.

Stimulus, Crisis

I like this sentence quoted from here -

“The truth is that the more taxpayer money is dumped to try to fill the abyss, it may become marginally shallower, but only at the expense of it getting wider.”

Peter Schiff’s Analogy

Another good analogy by Peter Schiff at 3:55 minutes offset in the following video. He says that we (the Federal reserve) has created too much paper money in the last few months. We haven’t seem to have too much inflation yet in the USA. But that doesn’t mean that we don’t have to worry about it. Money supply is out of control. Its like smoking a cigarette and saying that I don’t have to worry about smoking since I don’t have a lung cancer.