Are We in a New Great Depression?
by Doojie

The present situation has been predicted for years by conservatives and libertarians who understood economic philosophy. It's summed up by TANSTAAFL: There ain't no such thing as a free lunch.

While I may not agree with James Jaeger on several subjects, he has a solid understanding of FIAT money.

"Fiat" means money is created out of thin air. It has no value until it is given value by placing an obligation on American citizens to repay the value of the "loan" in taxes.

All money created by the Fed is created out of thin air. It has no value of itself, and the American people must give it value by their taxes which comes from their labor.

Every dollar created does not represent wealth, but debt, a debt which we are expected to pay.

But what if you avoid credit and save your money so that you can invest in productivity through the banking system? Why should you be responsible for irresponsible banking practices? But you are.

It's easily explained. As more money is created, the increase in money supply cheapens the money and causes sellers to ask for more money to offset the loss they suffer from each round of inflation.

The price of oil per barrel, for example, goes up not only because of demand, but because a tremendous increase of dollars are created, not only to fund the "regular" economic system, but to fund the war in Iraq and Afghanistan. The two wars actually compete for a limited money supply, which means that the US can either raise taxes on the people to pay for the war, which won't work, because the people would soon demand that the war tax be eliminated and the soldiers brought home, or the US can simply present Treasury Bills to the Federal reserve, which "loans" us money at a rate of interest to create even more dollars to fund both the war and the regular economy.

This causes an unnatural increase in the supply of dollars, which cheapens the dollar and causes Saudi to demand more dollars for each barrel of oil.

This, of course, causes an immediate price rise in the US, as oil is the basis of our so-called free enterprise system.

It also puts pressure on our economic system as our system must compete with other currencies in world trade. Their products become cheaper, which means that Americans seek more foreign products than domestic products, which mean job layoffs in the US.

There ain't no such thing as a free lunch.

The Federal Reserve is caught between a rock and a hard place. If they raise interest rates to create sound money, even more people lose their jobs. And since George W. Bush is determined to prosecute the war, much of the money created will go to the war effort while depriving people of necessary money and jobs in the US.

So the Fed pursues the policy of paying for both "guns and butter". It makes money available using low interest loans, but as dollars increase, the money becomes worth less in foreign currencies. Foreign nations stop buying from us because the cost of our products are too high. We are forced to make demands on other nations. We tell them we are their protectors and they owe it to us to help us out. Since it may save them money if we use our wealth to supply a standing army to protect "free enterprise", they save billions by not having to fund such armies, so they agree to help out for awhile.

But you see, since we have so much invested n "saving the world from(I mean "for") democracy", it becomes necessary to create eternal enemies of "free enterprise' and "democracy" so we can continue to demand protection money from weaker nations, or we might just declare war on them. "If you're not with us, you're against us".

Mr. Putin of Russia is laughing at us, antagonizing us by invading Georgia, knowing full well that we can't afford a war with them on their turf. We're broke, just as they were when Gorbachev waved the white flag to us. Putin is simply doing to us what we did to them back then.

There ain't no such thing as a free lunch.

You think this is unpredictable, I've been predicting the collapse of this system for nearly thirty years, as thousands of other have.

21 September 2008

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