Disaster Ahead for the Humpty Dumpty Economy

Article posted on March 12th, 2015 by WhatAmIMissingHere

Titanic Sinking

By Monte Pelerin

Anyone with an ounce of intelligence should be able to see the disaster ahead for this country. It should be noted that the US is not alone. Other developed countries are heading for the same tragedy. Governments everywhere are little more than Mafia, draining their productive citizens dry.

Economics has not failed but it might as well have. It was co-opted by the Mafia Class and turned into Statist policies to exploit the productive. A pact between the financial classes and government created a myth about Central Banking that made the entire scheme possible.

To understand the full implications of the criminal takeover of government, the words of Thad Beversdorf are enlightening:

But we are failing to deliver on our obligations as Americans, that is undeniable.  We are allowing the political class to plunder our wealth, negate our freedoms and desecrate our Constitution.  Sadly we have become the immoral populace our founding fathers warned all future generations not to become.  As the ‘Founding Father of Scholarship and Education’, Noah Webster, put it in 1832,

“if the citizens neglect their duty and place unprincipled men in office, the government will soon be corrupted; laws will be made, not for the public good, so much as for selfish or local purposes; corrupt or incompetent men will be appointed to execute; the public revenues will be squandered on unworthy men; and the rights of the citizens will be violated or disregarded. If a republican government fails to secure public prosperity and happiness, it must be because the citizens neglect the Divine commands and elect bad men to make and administer the laws”

The duty and obligation is ours and so too then are the failures and successes of our society.  Unfortunately ours will be the first generation to have failed at being American.  Yet regrettably more unfortunate is that it will be the innocent generations yet to come that will bear the full costs of our failures.  We are 15 years in to what is absolute denial regarding the competence of our nation’s policymakers.  Their failures in taking us to a false war in Iraq, in making a mockery of our rights as Americans and in destroying our economic opportunities are our failures.  Yet here we sit, silent and indifferent to our own demise; so completely antithetical to the character of a true American.

Mr. Beversdorf article goes into detail to generously support his conclusion.

Humpty Dumpty Economics

Humpty Dumpty

Mother Goose authored a nursery rhyme about Humpty Dumpty:

Humpty Dumpty sat on a wall,

Humpty Dumpty had a great fall;

All the king’s horses and all the king’s men

Couldn’t put Humpty together again.

Statist economists may have forgotten this nursery rhyme but their harmful economic policies, begun almost a century ago but accelerated recently, have pushed Mr. Dumpty (the economy) off the wall. Hubris or academic goupthink coupled with government largess prevents them from seeing that Humpty is irreparable. The media don’t have the requisite ounce of intelligence nor the willingness to report the truth if it were explained to them. They are truly “all the king’s horses and all the king’s men” trying to put Humpty together again or at least hide the incident with Humpty and the wall.

After six years of proclaimed “recovery” accompanied by rigged statistics and Pravda-like reporting, it is apparent that there has been no recovery. The average man knows that things are bad and not getting better. However our governing intellectuals and their pawns in the media continue the propaganda about a recovery. There is none, nor can there be one with current policies.

The stock market has done well over this period. But that is a result of the Federal Reserve flooding the system with liquidity, most of which has inflated financial asset prices. This chart, from Zerohedge, shows the divergence between stock prices and GDP growth:

Stock Econ Divergence

Among the several charts in Beversdorf’s article are some that support the ridiculous over-valuation of the stock market. Here is one:

Stock Market Valuation

These markets are not based on your father or grandfather’s valuations. Financial markets can be looked at as akin to a Ponzi scheme. So long as liquidity continues to be added, they may continue to climb. Participating in this game where value is dependent on government schemes rather than underlying economic value is akin to playing Russian roulette. Unfortunately, financial repression (the holding down of interest rates) has forced many people into the stock market who should not be taking these risks.

Damage and distortion is not restricted to financial assets. Mis-pricing of interest rates and other price signals ensures improper capital allocation. When the tide recedes, these improper decisions will become apparent with abandoned projects, closed plants and bankruptcies.

Humpty Dumpty economics is flooding the system with liquidity and encouraging additional debt. This approach cannot avoid the tragedy it has already created, but it may be enable to defer the economic reckoning a bit longer. The pain of correction is avoided in the same fashion as more heroin works for the addict. Additional harm is inflicted to avoid the necessary correction. At some point death results.

Ultimately, there will be another Great Depression. The levels of debt are not sustainable nor serviceable. That pertains to both public and a lot of private debt. Debt will decrease, but it will decrease via massive defaults.

Whether we get the high inflation that the government is targeting (to have a surreptitious default on debt) is moot. The Mafia is truly desperate at this point. They have little control over the path to the Greatest Depression. There is a chance that their policies get out of control on the inflation front, producing a hyperinflation. Regardless, there is no chance of current policies returning the economy to normal. Regardless of the path, there is massive disaster ahead. Debt defaults and the Greatest Depression seem inevitable. Only the timing is difficult to predict.   (my emphasis)

By Monte Pelerin for Economic Noise

By permission Monte Pelerin



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