GuidoWorld

Deflation, Globalization and Depression: Part 2

Economist’s have talked about the business cycle for well over a century. Every cycle has a boom period and a bust period. The boom times are periods of growth in productivity, wealth and the standard of living. In each business cycle there are periods of slow growth, stagnation and even times of recession where the economy actually contracts. Some economic theorists even speak of a long cycle which is comprised of many business cycles. These long cycles are often referred to as having  four seasons, an economic spring, summer, fall and winter. It is in the winter that economies enter into a severe recession or depression.

Since the business cycle is accepted as true and that most economists expect downturns, recessions and the occasional depression it would make sense that some prepare for and even look to benefit from depressions and economic winters. Let’s take a look at some of the reasons why some very powerful people may actually want a deflationary period and even an economic depression.

In my last post I mentioned that the irresponsible lending habits of our financial institutions eerily resembled that of the International Monetary Fund and World Bank. I also mentioned how those institutions routinely overwhelmed developing nations in debt only to forgive the debt through gaining ownership of the debt laden countries assets. For a more detailed look at how our financial institutions might be using this strategy to profit off the middle class and increase their overall wealth through increased ownership I suggest you read my post of August 1, 2007. This post is entitled The Debt End Game. While in review mode you may also want to read A Fed Opportunity dated September 19th, 2007 and some of my other posts of economic issues I wrote in June and July of last year.

Even if those of economic wealth and power did not plan on exploiting or destroying the American and European middle classes through unserviceable debt, they still may desire a well managed deflationary period.  Let’s take a look at how the efforts at globalization might benefit by a period of deflation.

Let’s start with a quick review of the differences between inflation and deflation. In times of inflation the following are common occurrences; prices and wages rise, as do interest rates, and the purchasing power of the dollar decreases. In deflationary times, prices decline, unemployment rises, wages fall and interest rates decline. Since inflationary times often accompany economic growth and deflationary times bring economic hardship, we commonly try to avoid or minimize deflationary periods.

There has been a trend in modern capitalism to shift a greater amount of wealth into a fewer number of hands for decades now. The disparity between the rich and the poor has grown exponentially over the last 20 or so years, so that the majority of the nation’s wealth is horded by the top 1/2 of 1% of the populace. A good portion of the exceedingly wealthy appear quite comfortable with this arrangement as they continue to strive to increase the disparity. This is one of the natural outcomes of a competition based free market society.

Since the late Reagan and early Bush 1 years we’ve heard increased discussion of the birth of a global economy referred to the New Word Order. Notice that it is not referred to as a global economic society, but a global world order. This language emphasizes a hierarchy while minimizes the idea of an equal sharing community.Now, for a wealthy individual looking to maximize wealth and power through a global world economic order there are some obvious payoffs for helping orchestrate a global depression focused in the US and Europe.

One of the goals of globalism is to have one world economy. This would work best if all the workers on the planet had the same wage scale for similar labor. Yet, at this point the workers in the US and Europe make far more than those in developing nations.  This is why the US has lost so many manufacturing jobs to developing nations who have a far lower wage scale. So, true globalism is difficult to achieve until the US wages come down to meet the poorer nations as they continue to raise their workers wages along with their standard of living.

Yet, if the US and Europe were mired in a lengthy and severe deflationary depression then the US workers wages would come down solidly and thereby quicken the pace of having developing nation’s wages come up to ours. Not only does deflation accomplish this but it also causes many businesses to fail allowing even more wealth and ownership of assets and resources to flow into fewer hands.

Don’t you think the truly wealthy understand this, especially since many of the wealthiest families made their money during the last Depression, or were well positioned at the end of the last Depression? Is it shocking to learn that many large corporations have slowed investment down and instead are sitting on record amounts of cash? Wouldn’t this be advantageous if you were expecting deflation? The extra cash would be great for lean times and it allows you to purchase things at incredible prices (pennies on the dollar) when the deflation has wrung out all excess out of the narketplace.

Well, that’s enough for today. Any thoughts?

Jim Guido

Deflation, Globalization and Depression: Part 1

Some time ago I wrote a couple of blogs outlining how the great US debt and mortgage fiasco appeared to be duplicating the practices of the World Bank and International Monetary Fund. In those posts I pointed out how these entities routinely overwhelmed emerging and third world nations with debt under the pretense of monetary assistance. Once a country was obviously unable to pay off their debts or even the interest on their loans the IMF or World Bank would offer to forgive a portion of their debt if they handed over ownership of their major assets to the US government and corporations. These assets could be the nation’s oil supply, or major exports such as fruit, minerals, etc.

Some years back it began to appear to me that , the US banking/financial industry was flooding its own citizens in debt and unpayable mortgages. Well as the real estate and credit situation worsens it appears the US government must “bail out” bad debtors the way they use to bail out insolvent nations mired in unpayable debt.

Since the World Bank and IMF have always benefited by their poor lending practices, one would have to wonder if they purposely swamped nations in debt in order to acquire ownership. After all having more and more money in fewer and fewer hands has been a hallmark of modern capitalism. It would not be outlandish for the Federal Reserve to help in orchestrating a means of quickening the process of globalization while lining the pockets of themselves and their friends. This makes sense when you consider the fact that the Federal Reserve is a private banking cartel and not a federal agency. As other banks are failing the Federal Reserve is becoming more powerful and better positioned in their industry.

For every default and loss of ownership their is someone there to capitalize on some sweet deals and increase their holdings for pennies on the dollar. In a depression many lose and few win, but those who win, win very big.

In the following posts I plan on discussing some of the possible reasons we may be heading towards a fiscal depression and how this may make some people remarkably powerful and wealthy. Likewise, I’ll offer some possible explanations of how a severe depression and monetary deflation will quicken the process of globalization.

I realize this post was pretty abstract, but please be patient with me. In each successive post the picture I will paint will be more defined and clear.

More on this hopefully over the weekend.

Jim Guido

Supreme Court Jesters

I find it both amusing and disturbing that the US Supreme Court’s decisions are so often 5-4. Aren’t they supposed to be interpreting the US Constitution and defining the law of the land?

Many people consider the US Constitution to be one of the finest documents ever written. If it is so well written then why is it so hard for the greatest legal minds in the land (Supreme Court Justices) to reach any agreement on its meaning, intentions and objectives?

The number of close decisions made by the Supreme Court indiciates one of three or fourt things regarding the Constitution. It is either vague, impossible to understand, or inconsistent. A fourth possibility is that it can be adapted to anyone’s personal agenda.

If any of the above conclusions are true it would point to a need for the Constitution to be rewritten. If the above conclusions are not true then it means that the Supreme Court is a sham and the justices are ignoring the document and making their decisions based on political and religious agendas.

Laws are not something that should depend on which people are reviewing them. Our laws shouldn’t depend on which president selected them. Our laws should be relatively politically party nuetral.

The laws of nature, physics and math are not so arbitrary. The is no 5-4 decision amongst teachers that 2 + 2 = 4, or amongst scientists that gravity exists. Now, there is always room for exceptions to rules such as the limits of Newtonian laws of physics in specific macro or micro environments, yet by in large these rules exist because of the general concensus regarding their truth and utility.

Laws should be based on clearly defined terms and on the bulk of evidence currently at one’s disposal. Laws can change when times and information change. When the bulk of psychological studies showed that various forms and amounts of corporal punishment cause significant harm to the recipients of these physical interventions, then laws were passed prosecuting those who abuse others. Until future studies refute or disprove these conclusions then the laws should stand.

One would think that 5-4 decisions are more a sign of opinion and not a matter of law. Laws should be about issues of general importance and agreement.  If the most respected legal minds in the country can not reach concensus then should their decision be considered law? Shouldn’t they consider that for something to qualify as a law it should be an agreed upon truth and not an arbritrary decision that nine other respected legal minds would disagree with?

How well would a football team function if 6 of the players left the huddle expecting a running play and 5 a pass?

How can a nation claim to be a leader or even a sane participant and have its most fundamental and important decisions be so arbitrary and politically based?

To reduce laws to politics and opinions is an act of absurdity and cannot be defined as a sign of intelligence and stability. And if laws are not intended to insure stability and consistency then what are they designed to do?

The Supreme Court is functionally a joke, it is an insult to its intention and purpose and has become a source of division and confusion rather than the creator of order and safety.

Jim Guido