Posted Jun 21, 2015 by Martin Armstrong
The whole idea of a one world government that began in Europe with the Treaty of Rome was based upon the idea inside Europe that a single government would end war. They never considered that there are two sides to that coin – international war and internal war – that we call revolution. As Thomas Jefferson said: “I hold it that a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.“
The ECB’s policy of negative interest rates was supposed to create rising inflation by forcing people to spend. They cannot understand that raising taxes is the offset. You cannot spend what you do not have and you will NOT spend as long as you lack confidence in the future outcome. Draghai’s policy is a fool’s dream and the collapse in bond markets demonstrates that those who think they can manipulate society are just out of their minds.
The difference between those in government and the private sector is monumental. The private sector, no matter how big the corporation, seeks to stimulate sales by providing what people want at the lowest cost to sell more, gain market share, and increase profits. Government functions precisely opposite, as they seek to manipulate society with the big stick, always threatening to punish, never reward.
The private sector, lacking the guns and tanks, no matter how corrupt the conspiracy theorists portray them, realize that they must stimulate more business only with the reward model. Even Henry Ford raised wages to $5 a day (when a Model-T was priced at $260) to try to stimulate a higher living standard. He recognized the higher the standard, the more cars he would sell. Of course there are the assholes who claim Ford’s idea wouldn’t work, citing Boeing as an example because the people do not buy its products. They stop shy of the fact that it costs less to fly, and that generally the price of an air ticket is 50% tax.
Nevertheless, governments never learn this lesson for they always grow larger with each crisis, always pretending to be the solution. They took Keynes’ advice that they should move to deficit spending in a depression (not every year) and lower taxes during a recession, which they never do. Right now, we are watching government raising taxes in the middle of an economic decline; they think punishing people even more with negative interest rates will offset their budgets that are out of control.
It does not take a genius to do a simple correlation. Do interest rates rise or fall with inflation? Gee whiz, they rise! Why would that be? Because if the purchasing power of the currency declines, then the lender would be a fool to hand you a pile of cash that would buy a house today, only to get back a pile with interest that will only be enough for a down payment. Interest rates rise with inflation for they normally should be higher that the inflation rate to provide a profit to the lender. Hello! Just do the math. Yet we have bubble gum analysts and economists on TV saying precisely the opposite, that raising rates is somehow bearish for stocks and the economies. Unbelievable. ALL BOOMS unfold with rising rates and ALL DEPRESSIONS/RECESSIONS unfold with declining rates. What is so hard to understand?
Yes, lower interest rates imply deflation, not inflation. Interest rates must rise, not decline, to ensure any hope of normalization in the economic environment. Government does not want higher interest rates simply because they are the LARGEST borrowers in the system that NEVER pays anything back. DAH!
Until there is someone with some real world experience in trading that step ups here, there is zero hope that these people will do anything right.