Posted Feb 26, 2015 by Martin Armstrong
There is a debate going on that tries to paint the economic crashes as due to capitalism and we should all follow Marx and eliminate wealth handing 100% of all power to government. There are really a lot of people who think communism was correct and the problem is capitalism thanks to greedy bankers. To make it perfectly clear, we are not facing just another cyclical slump that will be overcome with some new legislation. Many are welcoming this crisis of European capitalism as an opportunity to replace it with a better system of more socialism and communism by sheer force.
This is why I am doing the Solution Conference NOW. We are going to turn down hard this time and there will be a huge demand to hunt down who done it as if this were some mystery movie with Agatha Christie. This is more than trying to survive with gold coins. Everything could be thrown in the air as the table is just overturned.
This economic crisis we face centers upon the question of money. Marx argued it was labor. The Physiocrats argued it was land and agriculture. Smith argued it was the total productive forces of society. This is critical, for the difference between Marxism and Smith revolves around what is money and who produces it. IF it is the state, then Marx wins. However, IF money is created by society, then Smith wins with a hidden element. he implies that government is not a producer of wealth but a consumer – the black hole that sucks in everything until society exists no more.
If everyone worked for government, then there would be no international capital flows for there would be no reason to invest in a land where there is no ownership – i.e. German Hyperinflation amid Communist German Revolution of 1918. Money became worthless because there would be no private property. There was no confidence in Communism and people watched in horror what unfolded in Russia the year before. The simplistic sales-promoters use the German hyperinflation to mislead people into thinking the USA will end up there by simply printing money. They do not comprehend it was a collapse in CONFIDENCE – not simply printing money. The money supply expanded as a RESULT of the collapse in confidence – not the other way around.
We are not headed to a hyperinflation nor a gold standard – we are headed into electronic money because these people are dead broke. They BELIEVE their fiscal mismanagement has nothing to do with our economic crisis – it is all our fault because we do not pay enough in taxes. This is the way all governments historically destroy themselves through massive deflation and we are plagued by lawyers who think all they have to do is write laws without any comprehension of how society functions.
A lot of readers have been sending in emails quoting various officials among central bankers who appear to be quoting me such as Yellen just stating that there will be deflation before inflation. True, central bankers have attended our World Economic Conferences. They are more likely to see the handwriting on the wall than politicians.
There are a lot of people blaming central banks as if they are the sole problem. These people are caught up in this crazy theory that inflation is linked to money supply and expect that to function on some mythical one-to-one relationship. What they fail to grasp is the economy creates its own money through lending and the velocity of money, which truly drives inflation. The amount of money need not increase but if everyone spent whatever money they get the same day, the VELOCITY of money would rise and that would be inflationary. This one-dimensional idea of inflation and money supply being tied together cannot be supported by any study whatsoever excluding everything else. There is also a lag so QE1-3 failed to produce inflation just as the expansion of money supply in Europe will NOT stop the deflation. The contraction in the real world is far more than the amoung of money being created.
It was not that the supply of money increased that broke Bretton Woods, it was the fact that the money left the domestic economy and then foreign holders tried to redeem it. Increasing the money supply domestically where it could not be redeemed for gold would have had no impact upon Bretton Woods. It was the fixing of gold to dollars under Bretton Woods and then the exportation of dollars to pay for the military expansion that broke the back of Bretton Woods.
So at the Solution Conference, we will look at critical issues and are there solutions from history that worked. We FIRST must understand the problem for if we cannot grasp the driving mechanism, we stand zero chance of coming up with a Solution to save our children from what will be a far more darker world of authoritarianism.
It is one thing to survive and make money. But what if your gold coins can buy nothing in a land totally controlled by government where any wealth is hunted and taken over your dead body as Stalin did to the Russian people?