From Elastic Economics To Elastic Money: The True "Economic" Underpinnings Of The Status Quo

Tyler Durden's picture

Wonder why the premise of a Gross Domestic Product is bunk? Wonder why politicians care first, foremost and only about bailing out banks, with little thought put to actually saving that core driver which according to economic canon is responsible for 70% of GDP? Wonder why the status quo is more threatened by a gold, or any kind of standard, that limits the potential of infinite dilution of nominal concepts? The Privateer's Bill Buckler expains, in three short paragraphs, the great lies that are Elastic Economics and Elastic Money, and why everything else is noise.

From The Privateer

Elastic Economics?:

 

It is routinely stated in the US that the bulk of all economic activity is provided by what is called “consumption”. For at least two decades, the claim is made that consumption is the most important driver of economic “growth” and contributes anything between 65 and 75 percent of that “growth”. Nobody has ever bothered to explain how a nation which consumes more than it produces can be enjoying economic “growth”. There is, of course, a very good reason for that. It cannot be explained. As any individual knows, the road to the poorhouse is paved with consumption in excess of production. It cannot and never has been otherwise, no matter how “elastic” economic concepts have become.

 

There is only one essential sector left as far as those tasked with “running” the economy is concerned. This is the financial sector - specifically the banking sector and the financial assets markets. The rest of the economy, especially the dwindling part of it that actually produces goods, has been utterly sidelined.  When it comes to regulating production, anything goes. The elasticity shown here is all but infinite with no principles whatsoever involved in the avalanche of rules, regulations and restrictions routinely churned out by government to “protect” the consumer. But when it comes to the major facilitator of this government control, the financial sector, there is only one rule which has no “give” in it at all. That rule is that the financial sector will be propped up no matter how stretched out of shape the “real” economy becomes in the process. The reason is clear when we look at the ultimate in “elasticity”. 

 

Elastic Money!:

 

This is and always has been the object of the exercise. Every advance in “the art of the possible” in both politics and economics has been underpinned by it. According to the “theory”, money is the one economic good which CAN be created out of thin air. Indeed, the “money managers” go further than this. They claim that money MUST be created out of thin air if they are to go on “running” the economy. Here they are right. A market economy works by means of voluntary trade and for this, an unchanging medium of exchange is vital. A command economy is justified on the premise that those being commanded are getting something for nothing. That requires a money stretched to fit what they deem “possible”.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Careless Whisper's picture

The Careless Whisper Sunday NY Times Update And Threadjacking

NYTimes Reports GoldmanSachs Rushed To Sell Stake In Online Underage Prostitution Company When Reporter Started Asking Questions

http://www.nytimes.com/2012/04/01/opinion/sunday/kristof-financers-and-sex-trafficking.html?_r=2&hp

GM's OnStar Lets You Track Your Spouse

http://wheels.blogs.nytimes.com/2012/03/29/in-soho-onstar-stages-a-show-for-helicopter-parents/?ref=automobiles

 Groupon Discloses "Material Weakness" In Financial Controls

http://dealbook.nytimes.com/2012/03/30/restating-earnings-groupon-discloses-accounting-issues/

 

 

Cursive's picture

@Careless Whisper

I love your news filter.  You really need to be a regular contributor to avoid the threadjacking.

Careless Whisper's picture

Thanks for the compliment. The threadjacking part isn't meant to disrespect the author of the post. I think of it as grafitti art.

economics9698's picture

The reason for fiat and central banks is simple.  It allows a selected group of elites to counterfeit money and outbid the peasants for any production that is desired by the federal government and Wall Street elites.  War machines, corruption, wealth beyond the average peasants’ wildest imagination.  It is a system of indentured servitude for those not connected to the counterfeited cash.

A gold standard and individual banks issuing their own currency forces the federal government and Wall Street to live within their means without the assistance of counterfeited cash.  It means that these people have to produce goods and services that society wants.  It means that they have to balance their books or go bankrupt, see 1907 Knickerbocker financial melt down.

Lincoln fought a civil war for corporate welfare and the privilege of the elites to counterfeited money and he won.  McKinley was assassinated because he believed in hard money. 

When the fiat collapses remember these elites, who they are, show them no mercy.  Let them hang…slowly from the nearest tree.  

 

WmMcK's picture

McKinley was assassinated because he believed in hard money.

Yes, but they did put me on the $500 bill (and Kennedy on the '64 half dollar)

lemonobrien's picture

dead presidents, strange fruit.

Gully Foyle's picture

Careless Whisper

I've been looking at Ford trucks. They have tracking software as part of some work package.

Makes me wonder if it only applies to trucks abd not anything running software in a Ford.

A couple of years ago it made the news you could track the wifes or kids cell. Something like $12 and supply the cell number.

There are also a number of apps that allow you to use your tablet or phone to spy on people.

Then again SCIFI authors for years have been proclaiming that technology brings about the death of privacy. I was troubled by a recent CSI episode that tried to state that public knowledge shames people into being better citizens. Even here the up and down votes act as a means of social control. The herd likes what you say you are popular, they don't you are expected to be shamed into following the herd.

Although that approach doesn't work with those who just don't give a shit, feel no guilt, or a don't wish to be part of the masses.

It's a strange fucking world where the children will call you a troll for posting shit, no matter how coreect, they disagree with.

The tech driven generations deserve every mistreatment they get. They decided that popularity is more important than truth. That being manipulated is more important than being a free thinker. That the illusion is more important than concrete reality.

http://theeconomiccollapseblog.com/archives/everything-is-going-to-be-al...

Everything Is Going To Be Alright?

Below, I have compiled a list of things that I have entitled "Everything Is Going To Be Alright?"

It is composed in the form of a song, but it really isn't meant to be sung.  It is probably actually more of an economic horror poem than it is a song.  What I have tried to do is to point out the absurdity of what we are all being told by our politicians and by the media.  Hopefully you will enjoy reading it as much as I enjoyed writing it....

-----

Yahoo is going to be laying off thousands of workers starting next work.

Don't worry about a thing - Barack Obama says everything is going to be alright.

Best Buy has just announced plans to close 50 stores.

Don't worry about a thing - JPMorgan Chase CEO Jamie Dimon says everything is going to be alright.

The mayor of Los Angeles has announced that the city will be laying off "a large number of employees".

Don't worry about a thing - Barack Obama says everything is going to be alright.

Baltimore is so broke that it has decided to look into selling off some of the most famous historical landmarks in the city.

Don't worry about a thing - the mainstream media says everything is going to be alright.

The city of Costa Mesa, California is so broke that is has decided to sell off its police helicopters.

Don't worry about a thing - Barack Obama says everything is going to be alright.

The city of Trenton, New Jersey is so broke that it has decided to indefinitely postpone buying more toilet paper for city buildings.

Don't worry about a thing - Joe Biden says everything is going to be alright.

The capital city of Pennsylvania is so broke that it has decided to start skipping debt payments.

Don't worry about a thing - Barack Obama says everything is going to be alright.

The state of Nevada has a 12.3 percent unemployment rate.

Don't worry about a thing - the pretty people on television say everything is going to be alright.

Total student loan debt in America has now passed the 1 trillion dollar mark, and about 270 billion dollars of those loans are at least 30 days delinquent.

Don't worry about a thing - Barack Obama says everything is going to be alright.

The savings rate in the United States has fallen back to pre-financial crisis levels.

Don't worry about a thing - Harry Reid says everything is going to be alright.

Home prices in the United States hit a 10 year low in the month of January.  They are now down 34.4 percent from the peak in 2006.

Don't worry about a thing - Barack Obama says everything is going to be alright.

The average price of a gallon of gasoline in the United States is rapidly approaching the $4.00 mark.

Don't worry about a thing - Anderson Cooper says everything is going to be alright.

Median household income in the United States is down 7.8 percent since December 2007 after adjusting for inflation.

Don't worry about a thing - Barack Obama says everything is going to be alright.

When Barack Obama first took office, the number of "long-term unemployed workers" in the United States was approximately 2.6 million.  Today, that number is sitting at 5.6 million.

Don't worry about a thing - Nancy Pelosi says everything is going to be alright.

The BRICS countries (Brazil, Russia, India, China and South Africa) are publicly declaring that it is time to move away from the U.S. dollar as the primary reserve currency of the world.

Don't worry about a thing - Barack Obama says everything is going to be alright.

One out of every five Americans will be 65 or older by 2030 and nobody has any idea where all the money is going to come from to pay them the benefits that they have been promised.

Don't worry about a thing - Rachel Maddow says everything is going to be alright.

More Americans are dependent on the government right now than at any other time in all of U.S. history.

Don't worry about a thing - Barack Obama says everything is going to be alright.

The number of Americans on food stamps has increased by 14 million since Barack Obama became president and is sitting at an all-time record high.

Don't worry about a thing - Hillary Clinton says everything is going to be alright.

The U.S. government will add more to the national debt in 2012 than it did from the time that George Washington became president to the time that Ronald Reagan became president.

Don't worry about a thing - Barack Obama says everything is going to be alright.

The U.S. national debt is currently increasing by about 150 million dollars every single hour.

Don't worry about a thing - Federal Reserve Chairman Ben Bernanke says everything is going to be alright.

The Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.  This is a Ponzi scheme that will completely collapse at some point.

Don't worry about a thing - Barack Obama says everything is going to be alright.

Kayman's picture

Gully, if everyone agrees with everything you write, then you've got nothing to say.

Thanks

RafterManFMJ's picture

As soon as this becomes an option for new cars, I'm buying one. 

http://www.youtube.com/watch?v=ZIGzpi9lCck

flip a switch and ... gone.  'Course you'll need an app to find your car should you leave it engaged.

Neo1's picture

A Banksters worst nightmare, forced to Return to Real Money.

The real reason you pay an income tax, is for the privilege of using a private currency.

Also known As A:  Federal Reserve Note

Demand from your bank or brokerage, lawful money and the tax goes away, with a tax exemption on lawful money, all of your money is yours.

http://www.21silver.com/?show=merrill&read=federal_reserve_act_remedy

http://stormthunder.com/federal-reserve-act/

Tax Exemption: http://stormthunder.com/federal-reserve-act/#ixzz1pOYzDgEm

 Web search these three different phrases:

Redeemed in Lawful Money  or

Redeemed in Lawful Money Pursuant to Title 12 USC §411  or

deposited for credit on account or exchanged for

non-negotiable federal reserve notes of face value  

Silver Bug's picture

The status quo is scared to death of gold, because it would force some sane disipline on them.

 

http://silverliberationarmy.blogspot.ca/

Shocker's picture

From the article above

"There is only one essential sector left as far as those tasked with “running” the economy is concerned. This is the financial sector - specifically the banking sector and the financial assets markets. The rest of the economy, especially the dwindling part of it that actually produces goods, has been utterly sidelined."

 

So spot on, the main core of the economy - Production, even the retail sector has been all but gutted. With propping up the bank idustry while letting the other sectors fall, may be great short-term but will create problems for many years to come.

http://www.dailyjobcuts.com

AlaricBalth's picture

Just another example of Goldman Sachs doing Gods work. (sarc)

DavidC's picture

Colombian Gringo,
The way things are going it will end itself. It is already leveraged up at over 50 to 1, all it will take is for the market to demand higher rates (and it will come) and the Fed is toast.

China, Russia, India et al. must be sat in their armchairs LAUGHING at what the Fed (and the ECB) is doing, all they have to do is WAIT.

DavidC

Cursive's picture

@DavidC

I'm now at the stage where I'm trying to understand the events that would flow from any scenario.  How do you envision that scenario playing out?  What comes after the Fed implodes?  I'm thinking that if the money is no good, that would imply martial law...unless maybe the UST steps in and converts us to real fiat money (chartalism).

zerotohero's picture

Cursive I too am at th..is stage - lots of "what if" scenarios and how do I best prepare for it.

francis_sawyer's picture

What "happens" is that you wish you'd have bought an extra hundred pound bag of rice...

Arnold Ziffel's picture

I hope not Fuki rice, or rice from central Cali.

ZH (I think George Washington) posted a thorough article here the other day that showed the Fuki plume and the LA area coated with 300% times the normal radiation level.

 

Western's picture

Wow.

 

Well my post weathered a tornado induced internet outage so I can post this; what the fuck is wrong with you people, junking posts related to radiation on the west cost. It exists, and it's here.

 

These psyop wolfpacks are disturbingly active, but at least I can confirm what the media is blacking out.

alexwest's picture

why do people try to make things appear more complex then they really are..
#
Nobody has ever bothered to explain how a nation which consumes more than it produces can be enjoying economic “growth”. There is, of course, a very good reason for that. It cannot be explained
##

what's the problem ?

yes USA consumes more than produces, difference is being IMPORTED..
WHERE DID MONEY CAME FROM to fund purchases ?

partly savings , where did rest of money come from? BIGGEST PART OF EXPORT IS american money : debt/ mbs/ raw currency /etc

well , another source of money is FED.. its been biggest source of money.
where did FED get the money? nowhere.. it creates from thin air..

proof of hypothesis - look at overall USA debt, fed gov DEBT, Fed balance sheet ..

WHAT IS IT SO HARD TO UNDERSTAND?

alx

I am Jobe's picture

Are u asking alOgical question ? If so, you are not too far off. Nothing short of stupidity of sheeples consuming to nth degree.

GenX Investor's picture

I think we are missing an important point of what money is? It isn't anything other than a store of value or a promise. If you create more promise or dilute the value of that store, you are not creating anything out of thin air, but rather you are stealing from the aggregate as we know they are deliberately trying to do in order to write down debt not directly but inadvertently. It is governments oldest slight of hand. Who owns the debt, well mainly banks, and they are backed by those same assets. So this is all a process to protect stock prices of banks while simultaneously not needing to impair their assets (loans are assets to banks). We also know that debt is both an asset and a liability or Dr and Cr on someone's balance sheet. So someone is being harmed in the magic "thin air" concept? No free lunch! No free lunch! No free lunch! Make banks write down their balance sheets. The FED is deathly afraid of debt deflation, which is exactly what they are fighting, nothing more nothing less.

Kayman's picture

Precisely.

And this is why the money multiplier has dropped so much in the past five years. Bernanke has shored up the rotten loans on the Banksters balance sheets. Printing electronic money to fix the past not the future.

Unfortunately for the self-appointed "expert" on the Great Depression, the Quantum of Debt matters as much as the Quality. We are stuck for decades of underperformance because Bernanke saved his pals, not the economy.

Money should be the stable connection of the present to the future. Bernanke has created more uncertainty.  

riley martini's picture

 GX Money is labor , money has no value without labor . The only exchange of money is for labor . Devaluing money devalues labor .

masterinchancery's picture

Fiat money isn't a store of value, in any long term sense, because it always declines toward, and eventually reaches, 0. So the US population is a little cleverer than we think when they spend their fiat rapidly, though it doesn't do them much good to spend it on useless toys and transitory consumption.

Getting Old Sucks's picture

Yup, we sell dollars but you can't buy much here.  God help us when the carry trade is in the buying country's own money.  We don't have very much to sell.  Perhaps then we'll start to make things again.

Kayman's picture

"an unchanging medium of exchange is vital."

Bernanke is paddling as fast as his short little legs will let him; to keep up the appearance of stability. But the rot has set in.  A nation that manufactures nothing cannot maintain a tradable currency. Death by a thousand cuts.

efiniti's picture

But how can we survive without the Booooomss??

Total Collapse's picture

Chart of Gold price vs debt ceiling:

http://goldsilver.com/re/common/images/images/Debt_vs_DollarLoss.png

 

 

The issue of whether or not to buy gold or silver now, is the issue of whether or not you believe politicians will be able to cut the 1.3 trillion dollars in deficit down to zero, which would be the only way to stop the U.S. debt's inexorable rise. 

To me, it appears that with more wars prompting new printing, and expanded healthcare programs prompting new printing, on top of the $1+ trillion in more spending than is taken in annually, the hope of reducing debt is merely that, hope.

Weren't we just sold a ton of hope?  I suggest shorting hope and going long physical precious metals.

 

 

Getting Old Sucks's picture

Yes, but when our gold is all that's left, I just know they're gonna take it from us one way or another.

Careless Whisper's picture

@TotalCollapse

Thanks for the link. By the looks of that chart, if the correlation is true, then gold should be about $2400/ounce, sans manipulation.

A82EBA's picture

Cast your gold into bullets and hide inside your special last stand 'clip of last resort'

WmMcK's picture

Thanks, printing to show anyone who can still read a graph.

smiler03's picture

Print the chart including the price from 1980, much more revealing.... as ever it has conveniently been omitted.

Just a reminder, somebody who paid $850 per ounce in 1980 had to wait 27 years for the price of gold to reach the same price again.

Junk away.

akak's picture

Fuck you and your disingenuous, cherry-picking, hopelessly stale and specious argument against gold, junior Nadler.

What about all those (who are almost infinitely greater in number) who did NOT buy gold at its all-time price peak in early 1980, but who bought gold say, a year or two earlier, or a year or two later, or at almost ANY other time than late January of 1980?  Quite a different story in THOSE cases, isn't it?

Oh, and remind me how those who bought stocks in September of 1929 had to wait almost FORTY YEARS for their investments (those which did not go bankrupt) to get back to the same level in real terms?  Or those who bought Japanese stocks or real estate in 1989, who are still over 80% underwater on their investments over 20 years later?  Two can play your same cherry-picked, anecdotal data game, dipshit.

What is that God-awful stench I detect?  Oh yeah, I recognize it now: roasted troll.

By trying to use such a ridiculous, anecdotal, intellectually dishonest argument, you would have instantly earned a permament "Ignore" status from me here, if only ZH would allow us that option.

Damn but I hate you anti-gold trolls every time you trot out that discredited canard.

Jena's picture

If we can ever get you to come out of your shell and say how you really feel sometime akak... but for now, I guess we can put you down on the pro-gold side.

 

Nice chart, Total Collapse.  I think it's pretty safe to bet that we're not going to get any leaders in Washington that will bring financial sanity any time soon.  Therefore, gold remains a prudent hedge.

akak's picture

LOL Jena! 

I was perhaps a bit more diplomatic in my early online days, but after having had to read and discredit the exact same tired, nonsensical anti-gold nonsense from insincere, dishonest, pro-status-quo trolls for the 14,000th time, one tends to becomes a bit snappy.

I'm really a very nice guy in person!

Jena's picture

We'll have the last laugh later on.  I have no worries about my stack even when the prices fluctuate.  I saw my parents invest in gold both pre-1980 and later on, and that is seeing them through their retirement.

I'm sure you're a very nice guy in person, as you are here.

akak's picture

We'll have the last laugh later on.

Indeed --- although it will probably not be a time for much laughing in general, to be honest.

Your comment about your parents' PM holdings is very apropos as well.  Thanks.

I am Jobe's picture

Buy More Smart Phones dip shit sheeples.

alexwest's picture

#the $1+ trillion in more spending than is taken in annually,

sorry pal, reality is even worse then official figures..
annual intake is around 1.6/7 yrln$, outlays are closing up to 4 trln$

you do the math

alx

trip kitchen's picture

If you can't put something in a container and ship it to another country, how can it really add to GDP?  Anything else is just sovereign housekeeping.  You building my roads and me cleaning your teeth is just keeping the place tidy until it gets auctioned off.

A82EBA's picture

That's good..we need to get back to USA first instead of USCorporation first

smiler03's picture

"If you can't put something in a container and ship it to another country, how can it really add to GDP? "

Ask Apple. How much cash do they have in the bank?