John Maynard Keynes once stated that the markets can stay irrational longer than investors can stay solvent. While this statement has proven to be true, it is really not aboveboard. What Keynes didn’t want to disclose to the public is the fact that markets stay irrational longer than investors can stay solvent because market mechanisms are fraudulent, and there have been no free markets and no capitalism at work since Central Bankers assumed the role of setting interest rates in global economies. A more accurate statement that should replace the oft-quoted Keynesian saying is below:
“A fraudulent monetary system that engages all economic forces on the side of destruction can create an illusion of wealth and economic health for irrationally long periods of time but eventually will implode and result in the great destruction of the economic security of a nation.”
Last year, we received that illusion of wealth as the world’s central banks returned greater amounts of significantly devalued currency to the people via their artificially engineered rise in stock markets. Unfortunately, most people don’t understand that they must discount any gains in the stock market by the percentages by which Central Banks devalue currencies to calculate their net gain in real wealth. This number is always far less than what the people think it is.
On occasion, I’ve seen the US stock market gains charted in terms of a stronger currency such as the Euro to illustrate just how insignificant last year’s gains really were, but the fact of the matter is that fundamentally, the Euro suffers from all the problems of the US dollar and is likely to weaken significantly throughout 2010.
The global economic problem we faced in 2008, despite the delusions of our world’s political leaders and bankers, was not fixed in 2009. If the mainstream media ever gave any airtime to the true roots of this crisis – a fraudulent monetary system – then the public-at-large might finally understand that Central Banks across the world in 2009 replicated the very actions that created the economic turmoil we experienced in 2008.
It is impossible to solve a problem by taking the exact same actions that created the problem. It is patently absurd to believe otherwise. But this is what politicians and bankers are calling for us to believe. A debate today on whether last week’s steep drop in US and other global markets mark the beginning of another crash is moot because when bankers re-inflate a stock-market bubble that was already weak to begin with, a crash, not a correction, is inevitable. Thus, planning for a crash in the imminent future is the only thing we can do because bankers have baked this event into the cake.
As I’ve always found it easier to explain economic concepts in simple, if imperfect analogies, one can compare global rising stock markets in 2009 to a dam and the world’s financial health to the large village that lives beneath the dam. Consider in 2008, that glacial runoff was so high during the annual spring melt, that water levels behind the dam grew too high for the dam’s strength rating. Consequently, the water’s force crumbled the top 10% of the dam, flooding the valley below and killing 20% of the village.
After the disaster, the government met with engineers and learned that the dam crumbled because of miscalculations about the required dam width to withstand the force of rising water levels that would occur every spring. When the water level eventually receded, in response to the villagers’ anger, the government decided that reinforcing the dam's width was far too costly. In response, they chose to reconstruct the top 10% of the damaged dam at the same width and raised the dam’s height an additional 50 meters at the same width to build the confidence of the villagers below. At a very minimum, the government concluded, this would solve the problem for a couple of more years.
Of course, such a solution only compounded the original danger because the dam would be sure to crumble again at some point in the future, with even greater water volumes crashing into the village due to the additional height of the dam. The next spring, when glacial ice melted again, the villagers that lived in the valley below the dam felt safe. Even though the water levels rose higher than the previous year’s dam height, they still remained 40 meters below the new dam’s height. Unbeknownst to the villagers, however, was that the new water levels were now creating hairline fractures in the dam’s structure.
Month after month hairline, fractures developed in the dam’s structure but because they developed below the waterline and out of sight from the villagers’ eyes, all villagers believed that they were safe. When next spring came, and water levels rose to just 20 meters below the top of the dam, the villagers marveled at how great the government’s solution was. Then 30 days later, the dam crumbled and instead of 20% of the village dying, 100% of the villagers met with death or financial ruin.
In 2009, all world governments took the path of building a weak dam higher. That weak dam was the world’s monetary system. Instead of fixing the fraud inherent in the world’s monetary system, fraud that has been building up for nearly a century now, bankers and governments decided to raise the water levels (stock markets) to prove to the world that the dam is structurally sound.
The structural problem that existed in 2008 that burst the top level of the world’s major stock markets still remains out of view from the majority of the world’s citizens. However, cracks are multiplying with increasing frequency out of the view of the public-at-large. Just as the dam in the above analogy burst, it is only a matter of time before the monetary system, with all of the fractures it received in 2008, bursts again. And the catastrophic event that will be analogous to the death of all the villagers will be the death of the middle class as their wealth is wiped out. Though most of the public cannot see these fractures, they are clear to anyone willing to dive below the surface.
I’ve listed evidence of just a few of the many many below-surface fractures here:
(1) Almost 100% of the gains in the US stock market since September 14th have been manufactured in after-hours trading with enormous purchase of market futures. Strong circumstantial evidence points to this large buyer’s identity as the Plunge Protection Team.
(2) The secret, out of the public eye, purchases of US Treasury Bonds by the US Federal Reserve to prevent the US Treasury Bond market from defaulting.
(3) Abnormally low daily trading volume in all major world markets since this fall that indicates a dearth of retail buyers in the world stock markets and a preponderance of computerized trading programs trading against each other to rig stability in the markets.
(4) A monetary system in which NOTHING prevents Central Bankers from printing unlimited monetary supply out of thin air.
When the dam bursts again and the second phase of this global economic crisis starts, it will be far worse than anything we experienced in 2008. Among the most egregious acts committed by bankers in collusion with world governments in response to the second phase of this global economic crisis will be direct money grabs through a slew of additional tax measures. This means creating hoaxes like the carbon emission based global warming theories to tax the people if necessary. This means new taxes on miners like the proposed flat 40% tax on mining profits in Australia. There can only be one thing that we can be sure of and it is the following – governments and bankers would collude to rob the wealth of its citizens through increased taxes and new punitive legislation when we enter the inevitable second phase of this monetary crisis.
When the second phase of this global economic crisis hits, and it will, we’ll hear all the same familiar excuses we heard back in 2008 from our favorite financial industry CEOs, our favorite Harvard and Princeton educated, Keynesian economists, and our favorite politicians – “Nobody could have predicted that we would suffer such a significant relapse. Nobody.”
Sadly enough, however, the truth is that there is a mountain of evidence right now to predict the onset of a second, more severe phase of this global economic crisis. It is a mountain that just exists below sea level out of sight of the public-at-large. As one of the inevitable outcomes of the inevitable second phase of this global economic crisis will be the destruction of the middle class, it is time for the middle class to act now before it is too late. You can find two of my favorite sites that provide strategies for the middle class to fight back against the reckless monetary policies of banks at Move Your Money and Sound Money Now!