Archive for February, 2013

Inflate or Die


Selected extracts from a Charles Hugh Smith essay.


Link: Original Article.


The policies of central states and banks have led to one disastrous asset bubble after another over the past 15 years. This poses the question: is this serial bubble-blowing intentional, or are the bubbles merely unintended consequences?

The answer boils down to this: inflate assets or die. The only way to support consumption in an era of declining wages is to enable more borrowing, and the only way to enable more borrowing is to:

1. Lower interest rates to near-zero, so stagnant income can leverage higher debt

2. Inflate assets to create phantom collateral, that can then support additional debt.

Central states live off taxes skimmed from wages and profits. If wages are stagnant, the state needs profits and capital gains to rise to support higher tax revenues.  In other words: inflate assets or die.

The entire scheme of generating GDP [depends on] more and more debt.



And in related news…

We just had an item on the News yesterday about how foreign investors were buying residential properties here in NZ in large numbers, inflating the prices.

When asked about this, and about moves in Australia to limit foreign investment in housing, the Prime Minister said he doesn’t see a problem and he wont be doing anything about it.

So, there you go.  It has now been stated point blank.  The housing bubble will  be kept inflated by the government at any cost.

Because if housing prices collapse, then GDP, the economy, and the government go with it. Too much now hinges on over-inflated asset prices.

As has been stated elsewhere, no reforms are possible, because any reforms now would trigger a collapse of the status quo.  All governments now have as their sole priority, preserving the status quo.

That is doomed of course. The only thing that will allow us to continue to do what we are currently doing is for central banks to:  print money  -> inflating -> rising interest rates -> CRASH…

Same result, different route.




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Social Cancer

Cancer results from the inability of the immune system to suppress malignant growth…  this applies to society just as crucially as people.  Unless there are systems and mechanisms in place to deal with out-of-control parts of society, they will grow as malignancies until they too kill the host.

Under “normal” circumstances, society as an ecosystem requires all the component parts to work properly together.  However, what is healthy under one circumstance can transform under another situation.  Banks for instance, provide an important service in the operation of an economy.  But the tail must not wag the dog.  If they end up feeding too voraciously on the body politic/economic then they become, first a parasite, and then a vampire (or a Vampire-Squid, Goldman Sachs).

But it can come from any part of society.  If there is an opportunity to feed and grow, without proper limitations and controls, then social cancer is inevitable.

Some societies have the right protections in place to properly regulate social interactions. Albeit, invariably such controls will not manage to cover everything as it should properly.  And – the more inclined a society is to evolution and change, the less able will be it’s control mechanisms, particularly the more rapidly that change occurs.  Be it Government, Unions, Bankers, Telco’s, Corporations, Criminal gangs, whatever… if there is success (and money) to be had, and insufficient controls in place, you will get uncontrolled growth.  Windfall exploitation – because it can.  The Cancer analogy is a surprisingly good one.

The older, more stable, and unchanging(ossified?) a society, the less chance there is for disruptive and injurious development.  Because the controls are already in place to regulate(sanction) any  new growth or development.  And existing social structures will resist change also.

So there is a price to pay for being able to adapt and evolve quickly, you leave yourself open to cancer.  When do the benefits of change get overbalanced by the harm from change…?  When you have a Global Financial Crisis.

And unfortunately, I would also argue that “democracy” carries the seeds of its own demise in its DNA.  In a democratic system it is easier (and more profitable) to say YES, than to say NO.  But it is the things that we say NO to, that in the end are the most important.  Unfortunately Constituencies are won over by saying YES to them, even when it is a blatant lie.

Yes – we can afford:  to bail out Banks and other financial failures

Yes – we can afford:  to subsidize farmers

Yes – we can afford:  to pay for guns – and butter

Yes – we can afford:  to grow government

Yes – we can afford:  to “grow” the economy

Yes – we can afford:  to build more prisons

Yes – we can afford:  have super low interest rates

Yes – we can afford:  welfare for all

Yes – we can afford:  universal entitlements

And so the perverted organs grow.  As Charles Hugh Smith says, note how the areas of inflation are where government is involved.  As a though experiment, try swapping ‘cancer’ for ‘inflation’ whenever you hear it.  Our system of government is a cancer – and it metastasizes new malignant tumors throughout our economy and society.

That is its nature, and unless we find appropriate controls to regulate, manage and contain what would otherwise be normal healthy organs of society, The process will slowly but surely kill us.  Easier said than done of course, the whole of our history is essentially our failure to manage to regulate ourselves appropriately, the rise and fall of empires.  Without a proper immune system, we are doomed to a cancer cycle.

We finally need to get smart as to what we as societies need/have to be able to say NO to – and yet still retain flexibility, and openness to “good” growth and change.

Being Smart would be a good first step…  and a change.

I don’t really thing it is so terribly difficult theoretically or technically.  But there would be entrenched opposition from established interests(cancers).  We are not starting from a blank slate, the patient is already sick and the tumors well advanced.  Surgery(Recision) could need to be extensive and bloody.




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People have been doing cancer research for decades now.  And there is always some promising treatment – right around the corner.  Although, I can’t say I have ever seen any real change in treatments or outcomes.


So, there continues to be investigations into the nature of cancer, and the reasons why people get cancer, and here is now a pretty endless list of carcinogens and risk factors discovered.  Genetic predisposition’s and other biological influences etc.

The question always asked is – why do certain people get cancer?

Actually, I think that is the wrong question.  I think the question should be, why do certain people NOT get cancer?

On one level at least, we know that the most significant factor in cancer formation is “DNA repair” issues.

So, I think that what is actually happening, is that everyone is actually getting cancer, all the time… But some peoples body’s and biology’s are able to fight it off and cure themselves. Others are not so fortunate.

The question then would be, what is it that makes some peoples DNA repair and control mechanisms so much more effective than others?

If my body can fight off and suppress what would otherwise be runaway growth of malignant cells, and yours can not – and that really is the key difference (rather than exposure to some carcinogen for instance) – then what is it that I have that you don’t?

Looking for some causative factor in cancer victims would then be a futile exercise, because what you are looking for is by definition, not there.

What you want to be looking for is the suppressing mechanism inside those people who don’t develop advanced cancer.  I suspect the reality is that all of us have  small, low level, preliminary, “pre-cancerous” growths inside us all the time. But in some of us, our immune system will detect that and destroy it. In the rest of the population, it won’t.

It is the competence of our immune system that matters.  Not whether or not we have malfunctioning cell growth, that part is inevitable, natural and normal.  But so too is effective and efficient, cell and DNA repair.   But not for everyone… the question is, why not?

And I believe the answer will be found by looking at the people who don’t get cancer, rather then the people who do.

[well, it’s a theory anyway].



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Not much comment needed on this.  Ripped straight from Zero Hedge.   ~R


The Impossibility Of Economic Calculation In A Fiat World

The purpose of keeping accurate accounts is to quantify net worth at any given point in time – as well as the change from a prior date.

It goes without saying that the measure used, money, should be constant if comparisons over time are to mean anything. Only then do prices of capital goods, consumer goods and services truly reflect their changing values, giving important signals to business [or anyone for that matter].

With unstable fiat money, market signals lose much of their meaning…

[link to full article via the headline]


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