The ignorant, over-educated, bean counting central bank economy experts were, and are still wrong!!!Submitted by borisimo on Fri, 10/10/2008 - 13:37
The Case for Gold Revisited
by Boris in Miami
(FederalJack.com) - The ignorant, over-educated, bean counting central bank economy experts were, and are still wrong. What they are learning at their liberal universities about finance is not the field of economics, but the field of political policy, and what they believe the effects of government control over the real economy will be.
Real economics, as distilled in the classic school, also known to some people as the Austrian School, postulates that every government interference in the real economy will result in the opposite being achieved. It postulates that the real economy survives in spite of government controls, not because of it.
One could argue that the fancy titles some "economists" and "financiers" have are not that at all, but are degrees of high specialization in corporate governance, methodology, and intra and inter corporate transactions based on the national, or now global, regulatory climate at the time. Their understanding is restricted and biased to the belief that the regulatory zeitgeist of centrally controlled economies is effective in its control. It is within this bubble of understanding that they see the economy and the markets.
It is these "experts" who have missed the present trend, while people who have a basic understanding of classic economics have been predicting the currently unfolding events with incredible detail for a very long time. Two of the concepts of economics which have been studied and dissected the most, are the basic concepts of inflation, and credit expansion.
Within the context of a controlled economy, inflation is the injecting of more fiat currency into the market, particularly in large amounts; and credit expansion is a relaxing of lending norms above the needs of the market. Both of these result in over-investments in sectors of the economy in which they are not needed. This trends must eventually crash, many times bringing the whole economy with it.
Over the last years the result of central bank inflation and credit expansion has been the mal-investment in the housing and mortgage financing derivatives industry. The particularly scary part of the present crash, is not that the central banks and their bean counters at the top seem to not only have let it happen, but in all their elite glory, to have engineered it. It is to each of us to either believe that theory, or not. But, we are seeing a consolidation of financial power and a transfer of wealth from the "people" to the bankers via the bail outs through currency diluting inflation. An easy way to visualize this is to imagine the central bank producing wine, and then adding water to it to give a share to the bankers. The bankers keep their share at the cost of the dilution of the rest of the wine on the table.
The "bail outs" were forced to pass by the strong arm tactics of central bankers and their friends around the world. In the US, thus far non-controversial congressmen have commented on the record to have been told that unless the bail out bill passed they would wake up to martial law the next morning. Surprising? No. Shocking? Yes. It is this bail out with its accompanying *500 pages of regulations and trillion dollars worth of free money* to the connected bankers -which will surely again be mal-invested- and will restrict credit to the other real and productive parts of the economy, and the ensuing inflation that guarantee that this will not be a mere recession, but a deep and long lasting depression.
There is a lesson and silver lining in all of this; people are learning about the dangers of central banking and fiat currencies, they are learning that the only economies that work have been those based on solid metal backed currencies, they are learning that for a hundred years while the US had no private central bank, there was the longest period of growth, economic prosperity and near zero inflation.
Perhaps this will be the driving force the US and the world need to get rid of the privately owned central banks and the shills at the government doing their bidding, returning the money making power to the government...