Tuesday, January 22, 2013

History's Greatest Ponzi Economy, No Comparison

My greatest frustration with the Idiocracy is its ability to get most of the facts and data right, yet leave out the key fact, thus arriving at the altogether wrong conclusion. This is in fact the signature of the Idiocracy. This technique allows otherwise self-nominated "smart" people to continue to tell us how smart they are, while still clinging to their overriding comfort-seeking requirement for self-benefiting outcomes. It's dungeons and dragons for boy men.

Today, when I read this article on ZeroHedge about "Keynesians and Ponzians", I agreed with most of it, except the author only indicated two potential outcomes - austerity or inflation. Conveniently leaving aside the highest likelihood outcome - deflation...

Again, to summarize, I agree with most of the key points:

1) We are attempting to prop up an unsustainable standard of living 

2) All credit booms are temporary and lead to even bigger busts

3) This is likely the largest boom ever 
My comment: No. In fact, this is by far without comparison the largest boom ever, aided and abetted by technologies and leverage previously unavailable. The notional value of derivatives is measured in the quadrillions - an amount only made possible by the powerful computers of this age.  The money supply, again is measured in multiples of the total size of the economy. 

Of course, the article also includes the obligatory swipe at the welfare state, because we need to blame the people who have been crushed into oblivion for this crisis versus the robber barons at the top who created and benefited by the Ponzi scheme all along. Greed is never the culprit - only "socialism" and welfare states.

Then the article quotes Mises a second time, saying we have two paths either volunatarily abandon this scheme aka. austerity, or the currency will implode, which implies inflation. Deflation is never mentioned.

Queue the gold advertisements. Buy gold now.

Unfortunately, again, the article misses the key point in all of this equation, which is that today's policy-makers are attempting a strategy never before attempted in history. They are attempting to prop up the lenders, NOT the borrowers. And in doing so, they are driving a massive disconnect between the prices of financial assets and their underlying sustainable value.

This obviously asinine strategy, to my knowledge, has never before been attempted, likely because it's just too ludicrously stupid to have been attempted in the past. More importantly, it has no way of leading to inflation, because even as they make life easier for the robber barons at the top, via the wealth effect, with each passing day, they make life more and more unbearable for the people at the bottom.

And that's something you won't hear the clueless out-of-touch creators of this clusterfuck ever mention, nor gold-addled bloggers who are wedded only to an outcome that has them making millions of dollars while the masses at large lose everything.

It's also why this shit show won't go on for as long as everyone seems to think it will...