no third solution

Blogging about liberty, anarchy, economics and politics

The Tea Party Does Not Understand Inflation

November 5th, 2011

I saw this picture on Facebook today. It is a very simple explanation of a very complicated problem: how inflation robs all of us, predominately by destroying the purchasing power of accumulated savings and fueling an unsustainable debt-cycle.  The other side of this is Malinvestment, which when coupled with the effects of inflation, destroy an economy from the inside-out.

Unfortunately, the comments were full of fail: Once you buy in to the propaganda known as the American Dream, there is virtually no limit to the bullshit you’ll apologize for.  I hate to paint with a broad brush, but it seems like people apologize for capitalism because they’ve bought in to the propaganda and they honestly do believe that one day if they just work hard enough they will also succeed. And although some people do succeed, these are exceptions rather than the rule.

Oh, the lulz. Except they're serious.

John: Good for you. You took an opportunity that most people don’t have. Maybe you had a good idea that others didn’t think of. Maybe you had some capital saved up that many people don’t have. Maybe you just got lucky. Just because you were raised to believe something doesn’t make it true. Lots of people work their asses of and still struggle to make ends meet. A generation ago families could (and often did) live comfortably middle-class lifestyles on a single income whereas today it takes 2 parents working full time to scrape by. The most important part about a free market is the freedom. If you’re working 80 hours a week to get by, you’re not free, you’re indebted to an exploitative system.

You are working 80 hours a week non-stop just to “do alright”.  Is this the sort of world you want for future generations? Should it be this hard to put food on the table and a roof over your children’s heads?

Ruth: Try to read your words with someone else’s brain, preferably not John’s because you’re making the same mistakes. You believe that the 1% normally acquire their wealth through honest hard work, frugality and ingenuity, the fruits of which labor is passed from generation to generation. This ignores a great many people who succeed only insofar as they can exploit a system of privilege to their advantage. It is not a level playing field and success is not determined predominately by merit.

There are a million fucking reasons why we’re not free and we don’t have a free market, and each of these distortions has a ripple-effect of consequences that further distort the array of opportunities available, the choices we are presented. You’re forget that most of the people who play in to this game will never make it, most will fail somewhere along the way, thus the “1%”. Is this the sort of world that you want?

Bill: You’re making a common mistake. Maybe you believe that the bastardized “market” that we have is a near-enough approximation of what a really free market would look like just because we get the illusion of choice in some areas of our lives. The rich are rich because they work hard and the poor are poor because they’re dumb and lazy. Way to blame the victims. Do you really believe that Goldman Sachs isn’t rigging the game? Is this the sort of world that you want?

Donald: You are a beacon of light in an otherwise regrettable thread.

The rest of you, you need to pull your heads out of the fucking sand and understand the problems we face for what they are. People are protesting because they want to work and can’t find jobs. They’re protesting because at every level, their governments and elected “leaders” have let them down. They’re protesting because they’ve realized that the illusion of meritocracy is just an illusion, we don’t live in a free market or anything remotely resembling one, success is an exception rather than the rule, and it is becoming increasingly difficult to get by and to plan and save for the future.

These people aren’t lazy, they’re fucking fed up.

The Recession is Officially Over

September 21st, 2010

Yesterday when I got home from work I flipped on the TV and heard one of the talking heads say that the recession is officially over.  And not only is it over, it’s been over, for over a year.  They said that the official end of the recession was June, 2009. Lolwut?

A catastrophic implosion of a magnitude never-before-seen, is over and nobody noticed it except the bow-ties at NBER after they had a year and a half to study, clean, analyze and massage the data?  Yeah, right (and monkeys might fly out my butt).

But look, it’s right there on the graph!

NBER-recession-overPretty sure I dropped an f-bomb or two.

What happened was that the fraudulent system persuaded or blackmailed the government in to bailing them out on the backs of the working class by theft and extortion writ large.  And guess what? The working class is still working, they’re still poor, they’re still living paycheck to paycheck, and most of them are struggling to regain whatever sense of security they might’ve held before the economy went belly-up.

If you want to pick nits and say, “Well the NBER defines a recession’s end as the low point”, I’m not going to get in to a semantic pissing match with you. The fact of the matter is that for most people, this hardly registers as an end to the recession because for most people things haven’t gotten better, they aren’t about to get better any time soon, and it will take years to get back to wherever they were prior to the implosion.

Many forecasters estimate that output needs to grow over the long run by about 2.5 percent to keep the unemployment rate, now at 9.6 percent, constant…

…The broadest measure of unemployment, including people who are reluctantly working part time when they wish to be working full time and those who have given up looking for work altogether, also was at its highest level since World War II. [NYT]

I don’t know how you interpret that, but 10-percent unemployment rate (one that is considerably higher if you account for underemployment) hardly strikes me as an end to a recession. As long as 1 in 10 people looking for work to pay their bills are unable to find work, something is terribly wrong. Until the economy has in-fact “recovered” it’s still a goddamned recession in my book.

To put this all in proper context, we need to juxtapose the fact that 1 in 10 people are unemployed and probably 1 in 5 people are underemployed, with the slave-like systematic dependence on Wall Street, NBER and their respective oracles (who throughout the years have done absolutely nothing but engineer the sort of monetary collapse we recently lived through).

This is the paradox of modern capitalism: masses of people are out of work, fighting to keep their homes if they haven’t already lost them, starving, dropping much-needed expenses like insurance policies, or prescription medications, etc., in order to stay financially afloat…

All of these people still need food, shelter, warmth, leisure, whatever. Everyone still wants goods and services; everyone still wants stuff, and those needs can only be satisfied by production, which requires people [doing work and getting paid for that work]. [link]

It is this way because they want it this way.They want it this way because this is how they maintain control: convince the masses that they can’t take care of their own, convince them that they can’t survive, convince them that they need the government or the multinational corporations of the world to “provide” them with “jobs” and paychecks, convince them that there are powers at work which are infinitely beyond their comprehension.  And every once in a while you stir up some shit, or fail to take the appropriate preventative measures, or maybe go a little (or a lot) overboard.  For a few years everything goes sideways and upside-down.

But it’s enough to remind those working idiots that they aren’t in control, there are things they don’t understand or can’t comprehend, and reinforces the illusion that they do need the parasites.

They don’t.  But until they — we — can wake up and shake the cobwebs out of our collective brains, and systematically withdraw support for such an abomination, it’s going to continue.

This concludes today’s lesson in futility.

Economic Optimism: Reading Between The Lines

October 20th, 2009

In the mainstream media, we are peppered with optimistic economic forecasts and reports of any positive changes in leading indicators.  For example suggestions that the U.S. economy is on pace to grow at an annualized rate of 2% or 3% during Q4-2009. This is reported as an “annualized” rate in order to hide the massive contractions[1] of Q1 (-8.6%) and Q2 (-2.3%).

Curiously though, even as the Federal Reserve continues to sustain the Zombieconomy by massive injections of liquidity and/or monetization, The Chairman insists that “The United States must increase its national savings rate.”[2]

I say “curiously” because, if this insistence is meant for the American people at large (i.e., he is urging Americans in the individual capacities to save money and/or pay down outstanding debt), this is at odds with the FOMC’s decision to keep nominal interest rates at or near zero per cent.  All else equal, higher interest rates encourage savings, and lower interest rates encourage debt. When the nominal interest rates are nil, and real inflation is rampant, there is little incentive to save money (other than the precautionary motive, a classic “leakage”), and it is savings in the form of investments that spur real economic growth.

As a matter of policy, if Bernanke wants to reduce or slow the growth of the national debt, he simply needs to put the brakes on the processes which enable the Treasury to sell (i.e., increase) the national debt. The Fed would need to stop buying debt, sovereign or otherwise, and the adjustment and restructuring would probably be quite painful, but hopefully short-lived.

Federal Reserve Balance Sheet

But actions speak louder than words ever do, and since the beginning of the year, the Fed has increased its holding of mortgage-backed securities 100-fold [3]—becoming literally the only player in the market. Reining in the national debt will prove exceedingly difficult as long as the FOMC attempts to maintain a Fed Funds rate target of approximately zero (0-25bp) “for an extended period” in order to “boost a week recovery that has yet to create jobs.”[2]

Not only has the “recovery” failed to produce jobs, the unemployment rate has practically doubled in the last year. Consumer prices show no threat of inflation [4] because jobs are being destroyed which means people are cutting back.  Meanwhile, those of us still punching the clock every morning are trying to pay down existing debts.  Taken as a whole, there is less present demand for consumption which keeps prices from rising in the short-run.

Unfortunately the only way the Fed can maintain interest rates at historic lows is to continually increase the money supply, which is inflation by the classical definition of the word. Whenever all that new money makes its way off of the banks’ balance sheets and into the rest of the economy in the form of credit, the inevitable consequence will be rising prices, or “inflation” in newspeak.


  1. GROSS DOMESTIC PRODUCT: SECOND QUARTER 2009 (THIRD ESTIMATE) (BEA) The numbers for Q3 are not available until October 29
  2. Bernanke Says U.S., Asia Should Reduce Distortions (Bloomberg)
  3. A Look Inside Fed’s Balance Sheet — 10/07/09 Update (WSJ)
  4. Fed on Hold as U.S. Consumer Prices Show No Threat of Inflation (Bloomberg)

no third solution

Blogging about liberty, anarchy, economics and politics