And What's Wrong With Deflation?
by James Jaeger

Deflation is not necessarily bad. In business, all that's important is profit MARGIN. A company can make a widget for 100 and sell it for 95 netting 5 or it can make a widget for 10 and sell it for 9 netting 1. In the first case profit is 5% and in the second it's 10%.

The Horrors of an "Elastic" Currency:

The problem is not whether the money supply is large or small, the problem is when the money supply CHANGES (grows or dwindles) someone suffers and/or someone benefits out of proportion. It's thus the "elasticity" of the money supply, relative to the number of products in the economy, that's the problem. More EXACTLY it's the ACCELERATION (first derivative) of the money supply -- up or down -- that either DEpreciates or APpreciates everyone's purchasing power, respectively. When the Fed is injecting "liquidity" in to the economy its INFLATING the money supply. This causes prices to generally rise (unless people produce more as discussed by Ellen Brown in WEB OF DEBT) thus DEpreciating purchasing power. Unfortunately, this is not okay because the first people to get their hands on the new money get to purchase products and services BEFORE they rise in price. Thus THEIR purchasing power is disproportionately and unfairly higher than everyone else's. People in this class are as follows, but not limited to same: bank and financial services executives, bank and financial services stockholders, stockholders of Fed-member banks, agents, brokers and fiduciaries that work for banks and the financial services industry, the U.S. Congress, U.S. gov employees, U.S. gov agencies, US gov vendors (such as the "military-industrial complex" neoterized by Eisenhower.) All if these people and entities benefit from the INFLATION generated by "liquidity" and "easy" money while rank-n-file American citizens suffer. (See documentary film called, FIAT EMPIRE, at for details on how the Fed generates inflation and devalues the money supply.)

On the other hand, when the Fed removes money from the economy, by raising interest rates or increasing the fractional reserve requirement, they DEFLATE the money supply, causing a "tightening" of money and prices generally drop. But if prices drop on products, weak, flabby companies -- that can't or won't become more productive and sell more products -- generally lay off their workers. Since the banks they do business with think they are so special they deserve to have their INTEREST paid while employees get laid off, the owners and executives of companies -- especially major multinational corporations, being generally wimps and/or criminal apologists -- give their employees the AXE while their "relationships" with their bankers demand a continued wallowing in luxury. If this were Stalin's Russia, all of these people would have been shot a long time ago. But don't look now, there are probably 25 million Americans out there that are angry enough to shoot every banker and executive on Wall Street now that they got their lap-dog gov (in the form of Treasury Sec, Paulson, formerly with the Wall Street firm of Goldman Sachs) to dole out $700 billion -- with few questions asked -- yet the blue-collar community working for the Big 3 Auto companies is refused or gets 23 times LESS money and is laid out to rot. If God is a just God, we can probably expect a "correction" between Wall Street and Main Street sometime in the near future.

Thus, when the Federal Reserve Act says the purpose of the Fed is to create an "elastic currency" we can all roll over and laugh. This term is horribly funny, if not completely bogus. It's funny because it creates a technical problem for what amounts to a political expediency: make the public think that, after you EXPAND the currency to insane amounts, you can then DE-EXPAND it to sane amounts. But what they forgot to mention is an "elastic" money supply NEVER needs to be DE-EXPANDED because the world's products never DE-EXPAND. When was the last time there are FEWER products in the WORLD on Monday than on Friday? Sure after a NukeWar, when the population is reduced back to 200 million, you might need to DE-EXPAND the currency.

Economists Without Computers Are Almost Useless:

Old economists -- without spreadsheets, computers or Internet technologies -- have made little or no differentiation between PRODUCTS and SERVICES (aka LABOR or LABOUR). They usually even mention the two in the same breath: "products & services." But these two energy manifestations (products and services) are NOT the same or even similar. They even have reverse CAUSAL relationships (labor causes products, products don't cause labor). But almost all of Adam Smith is based on his theory of "labour." Again, labor is services and services create products. Products do not create services unless human labor is added, at least in the pre-AImachine era. Given these considerations, in an ideal economy, the cost of PRODUCTS would always go DOWN (deflate) and the cost of SERVICES (labor) would always stay the SAME or GENTLY go UP. Right now, because of the collapse of former soviet nations and China's experiment with "authoritarian capitalism," the West has been flooded with about 500 million or so slave workers so labor is currently being exploited by the "money-mentality" in their globalization scheme. (See DEATH OF THE WEST by Pat Buchanan) But eventually these laborers will be replaced by machines and, under the First Law of Thermodynamics, the first world labor force will expend its heat (higher labor costs) into the second and third worlds such that an equilibrium will be reached. Thus the cost of services will stay the same, or gently rise, for the entire world labor force. (See TOO BIG TO FAIL by James Jaeger at for more on how the First Law of Thermodynamics can be applied to economics.)

And this makes sense because, each worker provides services, but only has a burn-time defined by his or her telomeres. In the absence of stem cell cloning, humans can only remain alive until their telomeres unravel and they expire after x years. This pretty much fixes the number of human hours of useful labor to a given world population, at a given technology and date. Of course, since the cause and remedy of death are now well-known in the bio-tech community (see THE IMMORTAL CELL by Michael D. West MD), we can expect genetic engineering and augmentation to start pushing longevity towards 150 and 200 years over the next century. But as global education levels increase, we should continue to see a reduction of population (especially in the West), especially as machines take over production. Thus human labor should have an easy time maintaining its unique value because, no matter how intelligent or able machines become, they will probably not be able to produce the same kind of quantum/analog intelligence biology as been able to accomplish after 3 billion years (see ALIEN INTELLIGENCE by James Martin). So human services may sustain great value and become a commodity with a stable, or gently rising, price against other products manufactured by machines. The products manufactured by machines may eventually cost ZERO because the are made through the process of NANOFACTURING. (See ENGINES OF CREATION by Eric Drexler.)

The Value of Labor:

The good news is: while we are human we are all basically equal in providing labor. No ones labor is more valuable than any other person's labor. The idea that I went to school and studied for 5,000 hours to be a doctor or accountant no longer cuts the mustard as far as value is concerned because in order for doctors and accountants to even EXIST, they must be supported by garbage-men and sewage-cleaners and one of the reasons one BECOMES a doctor or accountant is so they can AVOID garbage and sewage. Thus, no ones labor is ultimately more valuable to the infrastructure of society than any other person's labor because all labor forms a phylogeny for the modern world. Of course you will never hear this argument from those that deal in a commodity known as "money."

Another nice argument for the idea that "I'm more valuable than you" or "My services are worth more than yours" is the idea of how many "dependents" one has compared to another or the amount of "power" or "responsibility" one person has over others. The strange thing about power is: it runs itself. Thus that executive that becomes CEO of a successful multi-billion corporation has one and only one thing to actually "do" to "run" that corporation and "earn" his $10 million pay check: do nothing. Put the boots on and don't walk. As soon as he starts walking -- changing everything -- he crashes the corporation because the corporation was doing something supremely RIGHT in order to get where it is. Thus any changes on the line will inevitably crash it. The law of entropy almost assures this. It's always working to destroy and reduce. It's always against executives AND huge, successful enterprises that ONLY have heuristics to depend upon for their success. Thus, the mathematical probability that an executive will actually thwart entropy AND supersede the natural speed and luck of heuristics is almost ZERO. Do ANYTHING except put the books on and DON'T walk, and that executive will CRASH the company. A perfect example of this is the U.S. car companies. They were in power until they changed their MO (from powerful, well-designed, cool-looking cars that weren't too expensive and lasted, to anemic, poorly-designed, crappy-looking cars that are over-priced and always break down). They thus paid executives hundreds of millions to destroy their companies in order to MAKE MORE MONEY. But that's the ONLY thing a top executive CAN do if he changes a successful operation for greed or anything else.

Conservatives and Constitutionalists understand all this. Liberals do NOT and cannot, by definition.

BUT change IS necessary -- you just don't want to CHANGE a successful operation, especially just to "MAKE MORE MONEY" as Wharton and Harvard business schools are teaching the morons they graduate these days. (See "MEAD-HEADS IN SUITS" by James Jaeger at

You want to START more NEW operations that will make new and different products and compete with the already existing powerhouses. You don't want a greater DIVERSITY of the SAME product, you want a greater diversity of PRODUCTS, period.

Today we live in a world with one product that comes in a million colors.

In this light, the multi-million dollar executive is NO MORE VALUABLE than the know-nothing start-up wanna-be, for it's the know-nothing, start-up wanna-be that can actually DO something and CHANGE something and actually improve the world -- BECAUSE he isn't supposed to put the boots on and stand still. This is why s/he is JUST as valuable and should get PAID just as much as a fat, white guy running a multi-national.

What Governments Already Know and Do:

Nevertheless, the largest variable is PRODUCTS, not SERVICES. With more humans and machines constantly making more products and more machine/tools, the world supply of PRODUCTS will ALWAYS rise, thus, again, an "elastic" currency is ridiculous unless it ONLY stretches larger in quantity.

Ironically, governments (and their apologists) know all of the above instinctively. This is why they endlessly create wars. Wars serve several purposes exclusively for governments. First of all they serve the purpose of making the population feel that they provide "protection" in a "dangerous" world and therefore they are "indispensable." This is, of course, is ridiculous because the world is 99% LESS dangerous than government propaganda makes it seem and we know this by the observable FACT that there are so FEW crimes happening all over the country and world that the mainstream MEDIA has to report the same crime(s) on ALL channels, over and over, otherwise there would never be enough "news" to go around. Thus the "dangerous" environment you see on TV is ALL there is out there! Even though the Earth has over 196,940,000 square miles of surface area, ask yourself this question: How many square miles does the average "news" report cover on TV? Answer: usually less than 1 square mile. Thus each "dangerous disaster" you see spewed on the gov-infested media represents no more than 1/196,940,000ths of the potential disasters on each square mile of Earth's surface. In other words, the media shows you maybe one or two "disasters" per day, or say 548 disasters per year. That's 548/196,940,000ths of the entire Earth's potential disaster area or .0002965% of the Earth in disaster. This means that .0002965% of the environment accounts for "dangerous" areas that the gov needs to "protect" you from whereas the other 99.9997035% of the planetary surface area is NOT dangerous.

Contrary to what governments and their police/militaries say:

99.9997035% OF THE WORLD IS SAFE.

Wake up, human Being! YOU are being raped and pillaged for support of govs and their enabling technologies, weapons, banks, debt, media propaganda, interest, taxes, and money.(1)

Secondly, governments create wars to simply weed out PRODUCTS -- created by their citizens' SERVICES -- from time to time. The deal is, Gov Q says to Gov Z, you weed out my population's products and I'll weed yours and we'll refer to each other as "enemies" so we can keep the masses off our backs as we enjoy our Champaign and padparagias. If, as discussed above, PRODUCTS were to multiply too much, as they naturally would, i) their "price" would be unsustainable, ii) it would eventually be impossible for stratification, both wealth AND military. This means, if every regular-Joe has access to all the hardware and luxuries that governments and their plutocracies have, there would be no difference between the two and thus control and domination would be impossible. You can only get a slave to work when he desires "MORE." Thanks to technology, the world is moving towards this condition right now and there is nothing the powers that be can do about it except nuke the entire planet or label everyone in their sites "terrorists" -- the last cry of the psychotic as s/he goes down in a heap of molten insanity. The bankers, media and military-industrial complex, serve the government in its quest to "justify" its existence, but, as the financial system, based on the plutocracy's debt-banking and fractional money system crumbles, the government and its arms, tools and apologists will inevitably crumble as well. And if the raging masses don't get them, the AI machines will.

The Question of Our Time:

So the salient question of our time is really this: What system is next?

To this I can only propose a DIRECTION to go, the actual SYSTEM will have to be created by many human minds and AI models -- out in the OPEN -- in order to be perfected, planned and programmed. We will know, however, we are headed in the CORRECT DIRECTION when the following are happening:

A. Price/Cost of PRODUCTS continue to decrease towards zero;
B. Price/Cost of human SERVICES remain stable or SLIGHTLY increase.

If A and B aren't happening, you can be sure the Global Plunge Protection Team is in there covertly twisting the "free markets" and global economy around to their totalitarian advantage, as they are now doing with the current stock market from off-shore accounts and major New York Banks, such as Goldman, Citi and BofA.

A of above is caused because technology makes further produces AND technology more possible under the LAW OF ACCELERATING RETURNS as promulgated by Ray Kurzweil in The Singularity is Near. Thus in a closed system (and Earth IS a closed system until we commence off-world commerce), economics is relatively easy (unless obfuscated by government- or banking- employed "experts").

B of above is caused because, with more products and especially more tools, humans are able to manufacture the necessities and extravagances of life with INTERNAL energy not external energy (i.e., internal capital formation, not external debt). The money that employers would have to otherwise pay out to interest payments, can and will be distributed to labor: hereby defined as workers, crew, staff, cast, talent, executives, board members and, yes, STOCKHOLDERS. I maintain stockholders ARE labor because they actually WORK for their money by i) actively researching the best business opportunities and then ii) INVESTING (not day trading) their real money (money, not fractional/fiat account-money derived from banks) into those business to VALIDATE their existence and expansion. By this new definition of LABOR and SERVICES I hereby hope to unify the interests of both so-called CAPITALISTS and WORKERS. Part of Marx's strategy was to bring down Capitalism by dividing and conquering WORKERS and OWNERS. I maintain, WORKERS and OWNERS -- EQUITY owners, not people that own equity purchased by as a result of borrowing or lending -- have similar interests, and the undisclosed Third Party that has been eroding them for centuries is Bankers.

When stockholders invest their sweat equity or sweat money into a business they are WORKING and providing SERVICES to that business. They are providing the "means of production" to that business no MORE and no Less than the WORKER that provides "human means of production" to that business. Both contributions thus increase capital formation and denecessitate borrowing money from the parasitic network of banks that create money out of nothing (by monetizing debt and fractional reserve) and therefore deserve to OWN nothing. The Marx-infested bankers that counterfeit money (hence the energy of labor) haven't WORKED for that money, yet they expect to be PAID back in first place and, even worse, garner interest are the undisclosed third parties that have destroyed capitalism. Banks that lend fiat/fractional money do NOT deserve to even be PAID back, let alone given interest.

So, the absolute ideal scene is for A to gently decrease and B to remain rock stable and eventually even DECREASE as well. When this happens, we will see a situation whereby technology evolves the OBSOLESCENCE of MONEY in all its forms (debt, credit, gold, silver, paper, tally, etc ad nausium). In other words:



Heading in the Correct Direction:

In a world headed the correct way, products will get cheaper and cheaper (this is already happening). A product costing 149 Federal Reserve Notes will eventually cost 100, then 50, then 25, then, 10, then 5, then 2, then 1, then 0. Meanwhile the labor that makes those products will earn 149 FRNs, then 149, then 150, then, 150, then 151, then 151, then 151, then 152.

Thus: when products (durable and non-durable goods) get cheaper and services remain the same, people will experience GENERAL WELFARE and WEALTH. Employers will be able to pay higher wages for two reasons: money they would ordinarily have paid for DEBT service will go to HUMAN service and it will cost them less for capital expenditures. In other words, products such as tools and machines (i.e., the MEANS of production) will cost less. This is also money they will be able to share with labor (and as defined, stockholders). So labor (services) will increase or stay the same because hard products (the cumulative embodiment of PAST labor through the allocation of ENERGY into MASS) will expand.



Such activity will provide the Frontier Shock that caused Western Civilization to flourish and prosper the past centuries. (See ENTERING SPACE by Robert Zubrin for details)

On the way to this goal, the humans that are creating systems or technologies that inhibit progress need to be re-programmed (educated) or removed from the equation (not by force, because it's only ignorance that causes them to act the way they do).

Eventually, debt, banking and money itself will give rise to the evaporation of governments and their waste and harm to further civilization. Governments were probably once necessary -- when humans were struggling and at each others throats -- however, in the future, their utility will be inversely proportionate to the general welfare of the planet and directly proportionate to the danger in the environment (which we saw above is quite small). People who are well-fed, healthy, clothed, nicely-housed, doing jobs they enjoy, producing an abundance of products they get to own and share, and having the leisure and time to explore the Universe and existence on all its levels are HAPPY, SECURE and PEACEFUL and do NOT need external crutches. Govs only represent the temporary lack of happy, secure and peaceful people as the human race passes through its adolescence to a Class II Civilization. (See Glossary at

(1) Facts about how "dangerous" the environment is propagandized to be are also related in the so-called terror statistics. To wit:

Number of people killed by international terrorism per year: 1,907
Number of Americans killed by terrorism per year: 70
Number of people that die from peanut allergies per year: 140
Number of people that die from coronary heart disease per year: 450,000

Amount of money US Gov spends on "War on Terror" per year: $162 billion
Amount of money US Gov spends on "War on Heart Disease" per year: $3 billion


6,600 times more Americans die from coronary heart disease each year than terrorism yet the U.S. Government spends 54 times more money to save 70 lives than to save 450,000 lives each year.

So given these facts, why is the government spending so much money on the "War of Terror." Could it be that the environment isn't "dangerous" enough to justify its existence?

Source of data: National Counter Terrorism Center and Government Accounting Office.


27 December 2008

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