Wednesday, September 28, 2011

The Truth has to be a Hoax

The stock markets were down again today as were commodities (especially oil) and this is widely attributed to a “lack of confidence” in the economic outlook. Well duh, the economy is circling the drain and the Republicans and their billionaire masters just keep tripping the flush handle.

The big, really big thing to fear in an economic downturn is deflation. This has been a problem ever since humans started using money. The thing that defines bankers throughout history has been their ability to use the twin phenomena of inflation and deflation to separate people from their money. The founding fathers warned against bankers and gave the power exclusively to Congress to establish the value of money. We all know how that’s turned out.

Most of us think of inflation in terms of the Consumer Price Index but that’s really just a survey and it’s been heavily manipulated over recent years to eat away at the standard of living. For example every time computers or cell phones have improved, this improvement has been counted as a price reduction.

There is a more relevant measure of inflation that is used by investors. It’s not perfect but it measures the expected rate of inflation over the next 30 years by the difference between Treasury Inflation Protected Securities (Tips), and the regular cash government bonds. It‘s dropped as low as 1.85% in the past week down from 2.73% last month. The idea behind this measure is that investors know what the money supply is really doing as they cast about for some place to put their trillions. The big boys in fact employ a lot of really smart people to figure out what is going on, but they never, ever tell you what they know. They tell you what they want you to know.

This inflation number revealed as “truth” by the movement of billions of dollars is way below what the Federal Reserve wants to see for inflation. This means that you can expect more cash hoarding. Corporations are already sitting on 2 to 3 trillion dollars and the rich still more piles of cash. This means no investment and no spending which ultimately drives the deflation cycle, think 1929 times a thousand.

It doesn’t really matter if the bond traders are right or wrong because they represent such a huge overwhelming force that the economy will conform to their opinion. Up will be down, black will be white. This is what happens when you let the “invisible hand of the market” control things instead of having  national policies for manufacturing, trade, banking, energy… well you know, all of those things Republicans don’t want regulated because it lets them steal from you.

The predators rarely tell the truth in public but the rare exception was a previously unknown trader named Alessio Rastani appearing on the BBC who said, “… that governments don’t rule the world, Goldman Sachs rules the world…”. He also elaborated on what a money making opportunity the Great Depression was and how he has been dreaming for three years about the coming collapse of the Euro and the markets. [the video is available at]

The interviewer was rather shocked and said “jaws were dropping in the studio”. When it was pointed out that his candor didn’t really provide any help for the rest of us, he responded by saying that anyone could do what he is doing to prepare by moving into the USD, US T-bonds, putting money into hedge funds and such.

The reporter didn’t point out that all this money he was going to make would come from other peoples’ pockets, and it certainly wouldn’t occur to this trader that this might be wrong. The entire financial services industry revolves around picking other peoples pockets but they constantly pretend that they are “creating wealth”. In reality they’ve never created a dime and never will.

The response from the Right was that this was a hoax from the group The Yes Men who regularly protest greedy bankers and corporations. Subsequent investigations by other reporters as well as the BBC claim the guy is real. Certainly everything he said was true. But this is a truth never spoken, the “official” truth is spoken instead: Wall Street makes money, the invisible hand of the economy knows best, we have a flat earth economy, black is white, down is up, conservatives are patriotic and above all they are your friends, you can trust them.


Anonymous said...

Goldman Sachs ruling the world is better than govt. ruling the world. .. at least Goldman is trying to make money. Govt. is all about spending money it doesn't have. Plus, Goldman has no army to station troops in 90 countries around the world and fight wars. Finally, I don't have to deal with Goldman at all if I don't want to. I can easily stay away from them. Govt. is everywhere in my pocket all the time. .. More Goldman, less Govt. ....

Anonymous said...

"The reporter didn’t point out that all this money he was going to make would come from other peoples’ pockets ..."

That is how everyone makes money. Who has any money and doesn't make it from someone else by working, providing a product or service. I have no idea how you make any money and survive without other people.

Anonymous said...

So, you believe all financial services should be free? How about free food, too. Free housing, Free cars, Free clothes. ... Free? Nothing is for free. Someone has to pay for everything. .. Greedy bankers and corporations? Free, give me free. Who exactly is greedy with that line of thinking?

prairie2 said...

All three of these talking points came from the same ISP account, I wonder if he gets paid for each one? They are such stupid comments that I won't bother responding to them but I felt like being a "job creator" and let them through.

AdamSmith said...

Goldman is trying to TAKE money, not MAKE money, silly.

P.S. Here's more of the "invisible hand" quote from Adam Smith himself:

"By preferring the support of DOMESTIEK to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases, led by an INVISIBLE HAND to promote an end which was no part of his intention."

Funny that "domesteik" part is usually left out.