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| Joined: | Mon Nov 21st, 2005 |
| Location: | California USA |
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Bill Bonner:
Everywhere we look, things are out of kilter, like a house of mirrors, where nothing quite looks the way it should. We have to check our glasses to make sure it isn't us.
Comment:
I think that Bill needs to look in the mirror without his economic professor glasses on. His glasses are filtering out his extreme prejudice.
Actually, the relationship between East and West is not so much imbalanced as it is parasitic. One side makes; the other side takes. One saves; the other borrows. One grows rich acting poor; the other grows poor believing itself rich.
Saving is a curious concept like punishment. What is the return on investment? One invests; the other invests too. One grows rich investing wisely; the other grows poor investing in savings and investing in punishment. One can see the rate of return growing; the other blames other's for not saving, and so an investment in punishment commences, while the rate of return on such foolish investments dwindles.
In the West, people live beyond their means and expect to continue doing so at least until the Second Coming. Their top economists tell them that they have nothing to worry about, no day of judgment. Savings? Who needs that? We have something better – credit!
In the West, people invest in punishment when they could be producing energy, and expect to do so until Dooms Day. Their top economists blame Dooms Day, a self-fulfilling prophecy, on other's who don't save and who, according to them, will be punished. Credit? Who needs that? We have something better - debt!
But where does the credit come from, without a pool of savings from which to draw? Well, it comes from the East – where people do save. Here, the Wall Street Journal weighs in with some facts. Developing nations already hold reserves – mostly in dollars – of $2.9 trillion. China, Russia, and Saudi Arabia are laying in huge supplies of capital – earned from the export of oil and manufactured goods. Most of this money was once owned by Americans; now, it is owned by foreigners. Every day, more than $2 billion, net, shifts further from one end of the teeter-totter to the other – from the chunky spenders down to the skinny savers.
But where does the debt come from without a huge military generating profits, in the business of punishment, and the collection of debt? Well, it comes from the East - where people do invest by crediting those who produce.
Developing nations pay the ransom demanded by the punishers even though that debt is a bad short term investment, never to be collected, rather it is a long term investment banking on the failure of the stupid nation mired in false economic principles based upon debt and punishment, based upon destructive power used to take more destructive power from principled people who invest in crediting producers who create constructive power used to make more constructive power.
The money is empty paper promises known by all with a brain and only used as a means to pay the ransom demanded by the most powerful false god wanabe's who will destroy themselves eventually and hopefully not bring everyone down with them.
The chunky spenders aren't spending anything but the products of the skinny investors who credit each other just enough to stay alive while the power remains, falsely, held by the debt enforcing punishers.
China, Russia, and Saudi Arabia may not be the world's most developed nations, but they weren't born yesterday. And, what they don't know between them – about mismanaged economies, political corruption, incompetence, and worthless paper money – is probably not worth knowing. Sitting there, surrounded by trillions of dollars, they are likely to wonder what each one is actually worth. And then, they are likely to turn their gaze to the country that issues them – and wonder again.
China, Russia, and Saudi Arabia may not be any different than any other system of economic despotism however; the people living within those boarders are managing to cap the destructive power somehow despite the growing threat of the last absolute dictator nation on the planet. And what those people do know is that crediting productive people must happen if productive people are to produce any constructive power leading to actual value. Surrounded by debt notes, recording the long term investment costs, those people are busy crediting each other toward a prosperous life despite the obvious stupidity, and wonder, of the debt collectors.
"What is behind the dollar?" they will ask themselves. Just faith, comes the answer. But faith in what? Is it in the financial future of the United States? Talk about unbalanced; no nation in the history of the world has ever had such a big gap between what it earned, and what it spent. U.S. public and private finances are out of whack, and on the evidence, becoming more and more out of whack with each passing day. What faith can you have in its paper currencies? Its notes? Its bonds? And then, the foreigners turn to the Middle East and wonder even more.
"What is behind the dollar?" they wonder. Trust in investing soundly toward the fall of a obsolete system of economy that can only produce greater falsehood and more violence. Trust in paying the ransom long enough to allow the behemoth to die and whither away; so long as it doesn't take the rest of humanity with it. Talk about unbalanced; no people in the history of the world ever produced anything of value without the trust required to credit each other with the expectation of producing greater wealth from raw materials. What faith can you have in debt and punishment? Its notes? Its bonds? And then; people turn to the Middle East and expect the debt/punishment system to die as it tries to punish and collect its last debt there.
In Mesopotamia, the Americans' war against "nobody-in-particular" is also lopsided. The Untied States is the world's only superpower, and probably the most powerful nation that ever existed. Against the most sophisticated fighting force ever assembled, the "nobodies" on the other side can launch no planes, field no tanks, assemble no armies, and dispatch no ships. An estimate from the Pentagon is that they have no more than 10,000 partisans, most of them neither seriously armed, nor seriously trained, nor seriously led.
Around the globe, the most destructive system of economic imperialism, debt/punishment, interest/punishment, interest/profit, and debt/profit, is a super destructive power based on enforcing lopsideness to the ultimate destruction of all human beings. That is the super duper destructive power that has always existed also known as legalized/crime. Against that mire of falsehood and violence no indivdual can run or hide so long as it remains a super duper power.
Still, it is an incredibly expensive war – but only on one side. The United States will spend about $120 billion this year alone; the enemy, whoever he or she may be, spends peanuts. Yet, despite the imbalance, "nobody-in-particular" seems to be winning.
The super duper interest/profit destructive power agents have little interest in counting bodies, especially when those bodies no longer pay debt, and when their punishment is executed to the fullest. Yet, despite the imablance of credit flow the dead may not have died in vain for the agents responsible for the carnage may soon find themselves needing some credit.
That these imbalances will eventually be resolved, we do not doubt. But they are likely to be settled more or less as they were created – by agile individuals and flat-footed official intervention.
That these imbalances will eventually be resolved, I do not doubt. Nature will demand as much. Human beings suffer only so much damage to conscience before turning in their membership cards, putting down their debt notes, their instruments of punishment, and moving on in the business of using contructive power to make more constructive power.
We approve of "rebalancing, " but the world economy is not a wheel. You can't put it on a rotator and rebalance it by adding lead weights. Instead, it is made of millions of individuals, who have made financial decisions based on what they saw before them. When the going was good...they went. Americans took advantage of loose credit conditions to go deep into debt. Rebalancing requires them to end up less in debt, which means they will have to do something that will be unpleasant for most of them – reduce spending.
The world economy, as with any living organism, requires energy. Using energy as constructive power - ensures the survival of one individual organism. Using constructive power to make more constructive power is a measure of world economy and it can be accelerated by adding credit, by investing, in anyone on the planet who does manage to use that credit to make more credit. Taking from one by debt and punishment, interest or profit, unbalances the wheel and is destructive power used to invest in more destructive power until the self created wheel wobbles enough to get pitched off it's own axis.
Cutting consumer spending will also turn out to be unpleasant for America's policy makers and officials, for it will mean a slowdown in the U.S. economy...possibly a very severe one.
What will people do? Where will they turn?
They will look in the mirror and salvage what conscience they have left after having invested their credit in such a destructive power and turn a corner in human destiny toward the investment of their credit in their fellow human beings in the use of abundant energy for constructive power making ever greater supplies of constructive power until ultimately the individually controlled power reaches oversupply and will therefore be nearly costless; leaving human labor, both intellectual and physical, to reach the credit and value deserved - individually.