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Guest Post: A Little Perspective On What Lies Ahead

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

A Little Perspective On What Lies Ahead

Eliminating Elites won't eliminate our structural problems or the reduction in phantom wealth we've all been relying on.

Many finance-oriented critiques start from the position that our problems largely stem from the financial/political dominance of Elitist cartels and cabals. Clearly, the malinvestment, exploitation, predation and disregard for the law that characterizes the rule of political-financial Elites in both developed and developing nations have wreaked havoc on societies and economies around the globe.

Implicit in this critique is a dangerously naive assumption: if all our problems can be traced back to Elitist cabals such as the Federal Reserve and the European Central Bank, then it follows that the subjugation or eradication of these concentrations of self-serving power would remove the cause of our problems.

Alas, that would be a welcome step in the right direction, but that alone would not resolve the structural causes of our devolution. Freeing ourselves of self-serving Elites would certainly create an opening for structural transformation that is currently impossible, but the transformation will require changing much of what the average citizen takes for granted as a "given" or even "right."

For a little perspective on what lies ahead, let's consider the structural problems that remain even if we were fortunate enough to throw off the yoke of the Fed, the corporate cartels, and the entire system of Elitist dominance.

1. We would still have mountains of debt that will never be paid and enormous losses to write off. It would be nice is we could place all the inevitable losses as phantom assets are exposed to price discovery on bankers and Elites, but the reality is that these assets are distributed throughout the economy: as these phantom assets vanish, pension funds, insurance companies and other bulwarks of non-Elite wealth/security will have to write off significant portions of their assets.

Citizens will ultimately find their wealth/financial security has been degraded, perhaps severely. It's tempting to think that a "debt jubiliee" on (for example) student loans would "solve the problem," but this is not a pain-free solution: the $1 trillion in student loans are someone's assets, and the "someone" is not necessarily a banker or billionaire: it might be the pension fund that is paying Mom or Dad's pension.

The unpayable debts are only symptoms of a deeply flawed system. To see the debt as the problem is to ignore the system which created the "need" for that debt: in the education cartel, that is the entire system of "higher education," which is fundamentally a "skimming operation" not unlike its partner in crime, the financial industry and central State that creates and enforces the debt.

In other words, simply writing off debt does not address the structural causes of the debt. That will require a massive revolution in our understanding and delivery of education, and a wholesale elimination of tens of thousands of "skimming" positions within the education complex.

That means tens of thousands of people will lose their high-paying jobs.

You see the point being made here: living within our means requires a massive structural downsizing of assets, employment and expectations. An economy that has lived on the creation of debt (phantom assets) cannot be transformed by the mere writedown of debt: the entire structure that created and enforced that debt must be torn down, and everyone who skimmed off a profit or livelihood from that reliance on the machinery of debt will experience a decline in their standard of living.

2. We would still have a global economy facing the constraints of higher-cost energy and commodities. As we all know, it's easier to create phantom wealth than it is to create real goods such as grain, energy, gold, etc. Phantom assets are ultimately claims on A) income streams or B) real-world assets, and so all phantom assets are ultimately claims on a limited resource, either a commodity or an enterprise.

You can "grow" phantom assets to near-infinity, but that near-infinite sum of money will still distill down to a claim on limited resources and income streams.

As I have often noted here (thanks to correspondents Bart D. and Harun I.), energy may well be abundant at a certain price; what will be scarce is the cash/income to pay for that "abundant" energy. Abundance of a commodity that has a high cost-basis due to real-world constraints does not lead to lower prices: if it takes one barrel of oil to extract and refine three barrels of shale oil, the cost of those barrels cannot drop below the cost of extraction, refining, return on the capital invested, labor costs, etc.

Sellers of oil below cost will rapidly deplete their capital and go bust.

Eliminating Elites is a first good step, but it does not magically eliminate the constraints imposed on a phantom-asset based system. Living within our means will require a massive reduction not just in phantom assets but in the income that has been generated by those phantom assets. It won't just be bankers and billionaires who will be poorer; everyone with exposure to the financial system and the real-world costs of the FEW essentials (food, energy, water) will be poorer in terms of purchasing power.

3. As Status Quo policies fail, replacement policies will become less predictable in their implementation and unintended consequences. Recognizing that a policy has failed is only a first step; understanding the structural causes and designing a policy that won't alienate all the vested interests while addressing the problem is politically impossible until the crisis has left the Status Quo no other choice.

But there is very little history that informs the confluence of crises we now face; the more replacement policies diverge from the mainstream, the more unpredictable their comsequences become. As the saying has it, the road to Heck is paved with good intentions, and policy choices that seem common-sense in crisis could issue disastrous results.

Political expediency is a powerful force for unintended consequences. Even if we got rid of the Fed and various financial Elites, the losses trickling down to the Main Street economy would still be large enough to cause powerful vested interests (union and municipal pension plans, for example) to support Status Quo "saves" of phantom assets and the machinery of debt-creation.

Political expediency will not vanish along with the Fed; vested interests will still seek to impose self-serving policies that have not been thought out or tested in the real world on smaller scales. they will attempt to conserve their own wealth and power at the expense of the general citizenry or politically weaker rivals.


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Mon, 08/06/2012 - 11:29 | 2681772 Temporalist
Temporalist's picture
Monti Warns of Euro Breakup as Tussle Over Aid Hardens

Italy’s Prime Minister Mario Monti warned of a potential breakup of Europe without greater urgency in efforts to lower government borrowing costs, as a standoff over European Central Bank help for Italy and Spain hardened.

Mon, 08/06/2012 - 12:02 | 2681868 LongSoupLine
LongSoupLine's picture

Guest Post: A Little Perspective On What Lies Ahead


A liitle perspective on all the lies ahead (fixed it).

Mon, 08/06/2012 - 12:22 | 2681917 LowProfile
LowProfile's picture


2. We would still have a global economy facing the  constraints of higher-cost energy due to goverment induced scarcity

Fixed that one too.

Mon, 08/06/2012 - 16:12 | 2682692 Herd Redirectio...
Herd Redirection Committee's picture

So if everyone is poorer... Is anyone really poorer?  Because clearly the price of goods would have to go down in that scenario.  Its really a question of relative wealth, if we 'cut the head off' then its the Billionaires and Elites who LOSE THE MOST.  Which is the point, to try to bring things back to a  level playing field.

Why would there be a jubilee on student loans ONLY???  Wouldn't the point of a jubilee be to benefit everyone equally, so that those who over-borrowed would get the most benefit, but its quite inconsequential as no one is massively indebted afterwards, meaning its not like they planned on a Jubilee occurring, nor could they plan to take advantage of 'the next Jubilee' by borrowing up to their eyeballs AGAIN (Jubilees need to be something like 70 years apart historically to prevent repeat offenders and taking advantage of the system). 

Many people have been co-opted, but we can't deceive ourselves into thinking this was by accident, or as some kind of quirk of Big Gov't/Corporatism, it was the plan.  Keep the poor dumb and with a full stomach, teach them gov't is there to look after them, and boom, most chance of revolt is out the window.  Achieving critical mass support for change is severely curtailed once the poorest people feel their 'livelihood' of gov't dependency is at risk.

Mon, 08/06/2012 - 18:12 | 2683005 LowProfile
LowProfile's picture

The problem is that the cost of energy inputs to the USA are about to increase by 200-500%

Mon, 08/06/2012 - 21:43 | 2683468 Bringin It
Bringin It's picture

If that's what it takes to bring down this sick system we have - then bring it on.

Mon, 08/06/2012 - 16:15 | 2682705 Panafrican Funk...
Panafrican Funktron Robot's picture

"the losses trickling down to the Main Street economy"

I believe that about as much as I believe that the gains trickle down to the Main Street economy.

Truth:  Stock market crashes don't actually lead to reductions in standards of living for anyone that doesn't rely on stocks for "wealth" (and I agree that pensioners are on the hook for that).  The Publix grocery store near my house, they're still going to be in business if the SPX prints 400 tomorrow.  And if we actually get to gold backed money (which solves about 90% of the problem), I'll actually be able to afford good, healthy groceries due to my productive labor.

This article is frankly bullshit.  Earth to Charles:  The plebs have already taken the hit.  Do you really think we'd give a fuck if stocks were a tenth of their current value, if it meant we could live as free people?

Mon, 08/06/2012 - 12:05 | 2681873 Payable on Death
Payable on Death's picture

We have met the enemy and they is us.

Mon, 08/06/2012 - 12:20 | 2681905 Offthebeach
Offthebeach's picture

To the elites, muppets are the problem. Fat, dumb, slovenly, ghetto, rednecked, always mewing for more cheese, more cheaper for them colostomy bags, higher disibility farm price supports roads jobs .........and on and on.
There is no reform until ruin, and then the seed is planted again.

Mon, 08/06/2012 - 17:23 | 2682913 MillionDollarBoner_
MillionDollarBoner_'s picture

Monti can suck my salty balls.

Goldman Shill!

Mon, 08/06/2012 - 11:30 | 2681774 Duke of Con Dao
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"You didn't build that Nazi Party," sez Obama. "Someone else Koch-ed it up for you."

el Dukerino


Mon, 08/06/2012 - 12:22 | 2681915 boogerbently
boogerbently's picture

If anyone saved the article from yesterday I'd appreciate you posting the link.

It was a "book review" on a book about grassroots revolution being the only way to take back our govt.

Mon, 08/06/2012 - 17:02 | 2682854 New World Chaos
New World Chaos's picture

You can also get it by clicking "contributors" to see old articles from the top of the page.  It's like a whole nuther website.

Mon, 08/06/2012 - 11:30 | 2681776 vinu02
vinu02's picture

Everyone will hire partime instead of full time and payroll will show high number of job added. VIX will drop to all time low.

Mon, 08/06/2012 - 12:09 | 2681884 Payable on Death
Payable on Death's picture

It's true. The first response to Obamacare in the restaurant business, at least, appears to be to convert as many EEs as possible to part time (<30 hrs.). The cost of providing health care to all employees exceeds the profitability of the restaurant sector.

Mon, 08/06/2012 - 11:30 | 2681778 Stackers
Stackers's picture

We're fizucked

Mon, 08/06/2012 - 11:30 | 2681779 SheepDog-One
SheepDog-One's picture

Meh....whatever, the sheeple love their masters.

Mon, 08/06/2012 - 12:04 | 2681870 CH1
CH1's picture

the sheeple love their masters.

Yes, and THAT is the problem. All others derive from this.

Mon, 08/06/2012 - 13:21 | 2682103 Vagabond
Vagabond's picture

Debt based money, and fractional reserve banking are the problem.  Sheeple loving their masters prevents this problem from being solved, but that doesn't make it THE problem.

I could convince a retarded guy that touching women's fun parts is okay... is it that retard's fault if he starts groping women inappropriately, or is it my fault for tricking him?

Most people don't understand the global financial system.  That doesn't make it their fault that it has been designed to put them at a disadvantage... although it certainly doesn't help.

Mon, 08/06/2012 - 16:19 | 2682713 Herd Redirectio...
Herd Redirection Committee's picture

Exactly.  People lose faith in their fellow man because of the huge ignorance (and apathy towards educating themselves) the majority display.  But is it people's fault they have been lied to?  They are victims of fraud, not ignorant by nature/choice.  It starts with fractional reserve banking, the power from which was used to take control of the media (which is post-school education for the masses) and turn the education system into an indoctrination system.

Whats NOT on school curriculums?  Anything re: money, banking, finance, history (which we are taught is 'boring), logic, the types of appeals used to persuade...

Mon, 08/06/2012 - 13:56 | 2682220 Totentänzerlied
Totentänzerlied's picture

It's many things - ignorance, resignation, laziness, servility. But, I just call it a public school indoctrination.

Mon, 08/06/2012 - 11:32 | 2681781 SWRichmond
SWRichmond's picture

Once we shed the elites and the regulatory state, we can begin once again creating wealth.

We cannot move forward until we shed the regulatory state and the elites who created it and whom it serves.

The problem highlighted by the author remain unsolvable while we turn away from the above steps.  Once we do those things, a path to the future opens.

Mon, 08/06/2012 - 11:45 | 2681829 duo
duo's picture

Once the FIRE economy is returned to the 10% of GDP from the 40% that it is now, the living standards of the productive worker can be increased.  All of the producivity improvements from the PC, semiconductor, and internet/web eras went directly into expansion of FIRE and government.

What CHS doesn't mention expliceitly is that if financialization is removed from our economy, 40 million people are going to have to find something else to do.

Or, we could end up like E. Germany, where one third of the population spies on or guards the other two thirds.

Mon, 08/06/2012 - 11:57 | 2681856 Cognitive Dissonance
Cognitive Dissonance's picture

"Or, we could end up like E. Germany, where one third of the population spies on or guards the other two thirds."

Ummmm....didn't I just see a stat somewhere showing that direct and indirect US Gvt (local, state and national) spending was 40% of US GDP. Mission Accomplished!

Wait. There's more coming.

Mon, 08/06/2012 - 16:21 | 2682721 Herd Redirectio...
Herd Redirection Committee's picture

If people have more free time and use it to raise their kids properly that isn't exactly a bad thing, either...

Mon, 08/06/2012 - 14:04 | 2682268 Totentänzerlied
Totentänzerlied's picture

"40 million people are going to have to find something else to do."

Something that is productive, within a truly comptetitive labor market, within an unfettered free market system? HAHAHAHAHA! Former bankers, equity analysts, economists, lawyers, politicians, lobbyists, and MSM faces can be employed as target practice with live ammunition - it's a temp job but there's huge demand.

Mon, 08/06/2012 - 12:29 | 2681925 HardAssets
HardAssets's picture

What often gets lost is the opportunities that going a new & different way would provide. This was the reason that America was considered such a threat to the entrenched European aristocracy at her founding. - - If we actually followed those founding ideals (tossed away very early in our history) the release of human creativity and energy would be tremendous. China got a very little taste of this on a very limited and controlled basis - - and look how that country was transformed economically.

The American ideal (with its foundations in past societies) is very threatening to oligarchs and dictators.  Thats why they want to destroy the small remnant of this ideal that remains.

Mon, 08/06/2012 - 15:03 | 2682466 Things that go bump
Things that go bump's picture

This is true, SW.  For instance, I have my mother's recipe for banana cake from scratch with brown sugar boiled frosting and for chocolate maraschino cherry cake and several other such goodies.  It is a a bit labor intensive, mashing those bananas or chopping those cherries, but well worth the effort.  A little slice of heaven as opposed to artificially flavored cake mix.  I would like to sell cupcakes from a cart downtown.  I think my product would compete well.  I think I could turn bananas figuratively into gold, but regulations make what should be a simple undertaking into mission impossible and the startup would require a significant outlay of bananas exchanged for the privilege of being taxed to death.   

Mon, 08/06/2012 - 16:21 | 2682719 Panafrican Funk...
Panafrican Funktron Robot's picture

This is probably one of the most convincing arguments, that starting a business is such a complete fucking pain in the ass, and it's very challenging to get any reward from it.  4:5 businesses fail in the first year.  That is undeniable proof that we have a very fucking stupid system for businesses.

Mon, 08/06/2012 - 19:25 | 2683136 mjk0259
mjk0259's picture

Maybe it's proof that 4/5 people are too stupid to run a business?

Mon, 08/06/2012 - 11:31 | 2681782 A Lunatic
A Lunatic's picture

Damned if you do............Damned if you don't.

Mon, 08/06/2012 - 11:32 | 2681788 SheepDog-One
SheepDog-One's picture

Meanwhile ObaMao is found to be a prime pumper and dumper of Facebook stock and no one says a word, except Max Keiser.

Mon, 08/06/2012 - 11:33 | 2681792 buzzsaw99
buzzsaw99's picture

wrong and lacking any substance whatsoever. not even worth correcting.

Mon, 08/06/2012 - 11:36 | 2681798 Jim in MN
Jim in MN's picture

What Lies Ahead?  That's easy.  The political and financial classes and their lapdogs.  They always lie.

Title is a bit of a Freudian slip on this one.

Mon, 08/06/2012 - 11:44 | 2681810 NidStyles
NidStyles's picture

This article states that the problem could be partially solved by eliminating the institutions that exist, but then says it wouldn't solve the problems that are actually created by those institutions in the first place for them to justify their existence to the masses.


Sounds to me like this is an article that is meant to test someone's intellect. I see many are already failing above me here. You don't ask the failed institutions for advice, or listen to what they say the problems are, because if they truly knew, they would not be failed institutions. 


#1. That debt belongs to those institutions, not the rest of the public. Keeping them around isn't fixing that problem.

#2. It's called Inflation, the rest of this community understands why costs are rising, why the fuck can't the authors of these articles understand this?

#3. The reliance on institutions and policy setters created this situation in the first place, when the fuck are you morons going to learn?

Mon, 08/06/2012 - 11:54 | 2681848 Spacemoose
Spacemoose's picture

regardless of the institutional causes, the REAL problem is that we have been, are currently, and will in the future, be consuming more than we produce.  this cannot continue.  we must either (1) consume less and / or (2) produce more.  this is the ONLY long term solution to the problems we are experiencing today.

Mon, 08/06/2012 - 12:06 | 2681878 NidStyles
NidStyles's picture

What is this "We" shit you are so found of talking about? If "You" are consuming too much, then "Your" extranious costs will devour "Your" savings and "Your" revenue, problem solved genius. It's called letting the market work, rather than devolving into barbaric price controls and centralization. Quit trying to force "Your" problems onto everyone else, and get "Your" own shit straight. Problem solved again.

Mon, 08/06/2012 - 12:25 | 2681922 Spacemoose
Spacemoose's picture

say what???  wow.   maybe too much coffee this morning?   i'm merely pointing out that, as a nation, our aggregate consumption outstrips our aggregate production and this is the root cause of our aggregate problem.  you seem to have read one hell of a lot more into my comment than is there.  do you often "read between the lines" like this?  i'm not certain my comment means what you think it means.    

Mon, 08/06/2012 - 13:34 | 2682141 NidStyles
NidStyles's picture

No the problem is that idiots like to make their problems belong to all of the people rather than just taking care of their shit themselves. 


We are not a fucking Nation. We are individuals within imaginary lines. I don't know you, and you don't know me. You are not working for my benefit, and I am not working for your benefit. This notion of "We" is part of the fucking problem. 


Quit telling the rest of us what the fuck you think our problems are, and then everything will be fine. Can you understand that, or do we need to go into more detail here? Your perception issues aside I think you are making great progress once you learn to quit telling everyone else what their problems are.

Mon, 08/06/2012 - 14:12 | 2682298 Totentänzerlied
Totentänzerlied's picture

You fail to grasp the primary assumption of all Western economic and sociopolitical thought. It is a valid assumption as shown by all of human history since the Paleolithic, and in a wider sense the history of biological life. Oh well, I'm sure it's spurious and you know better.

Mon, 08/06/2012 - 17:52 | 2682965 NidStyles
NidStyles's picture

It's your problem that "You" believe these assumptions "You" have latched onto as being true and have faith that others are going to take care of you. In the end you are nothing but a bag of flesh, and what use is one bag of flesh over another to those people that you so willingly give your alleigence to? If you want to know how much those people value you, join the Military and find out first hand.


Human history has taught me one thing, and one thing alone, that no matter how many times people make the same mistakes over and over again, they are going to repeat them until they are dead. 


The rest of your comment is Dialectic nonsense, just like the rest of your BS assumptions.


Mon, 08/06/2012 - 12:28 | 2681937 Clampit
Clampit's picture

Problem is, We have a currency.

Mon, 08/06/2012 - 13:35 | 2682146 NidStyles
NidStyles's picture

Nope, The Federal Reserve has a currency, I have gold and silver. 

Mon, 08/06/2012 - 11:40 | 2681812 Cognitive Dissonance
Cognitive Dissonance's picture

Na na na na na na na.....I can't hear you!

Too much Cognitive Dissonance in this article. It's those bad guys over there that are the one and only problem, not me. My assumptions and expectations are just fine bro.


Mon, 08/06/2012 - 12:06 | 2681875 NotApplicable
NotApplicable's picture

I quit reading when he started ascribing his own implied assumptions onto his readers, then deconstructs "their" argument.

This guy writes some decent stuff from time to time, but clearly has no clue about how to reach his audience.


Mon, 08/06/2012 - 12:08 | 2681882 NidStyles
NidStyles's picture

Step 2: Do not insult their intelligence either, that gets them worked up even faster.

Mon, 08/06/2012 - 11:43 | 2681814 Dr. Engali
Dr. Engali's picture

Yes there will be some pain, and a lot of phantom wealth will be destroyed. But we will be better off in the long run as a nation who goes back to actually producing things instead of consuming everything the world has to offer.

Mon, 08/06/2012 - 13:25 | 2682111 RiverRoad
RiverRoad's picture

Agreed.  Big reverse split coming for sure.  And why should phantom wealth be perpetuated?  The phantom debt that created the phantom wealth shouldn't be serviced either. 

Mon, 08/06/2012 - 11:43 | 2681816 Bluntly Put
Bluntly Put's picture

I don't quite get the point here. Is Mr. Smith saying that libertarians who call for an end to the fed think as much of magical unicorns as the current bulk of the financial industry? I'm pretty sure we understood from the bulk of writings here and elsewhere the system is flawed, and usustainable with current instability the rises exponentially every year.

The better question then is, what happens to fringe internet bloggers that correctly identify the problems and inherent risks once they become popular. Do they upgrade their bug out spots with higher voltage solar panels and equipment, maybe even and electric pump for their well? Or do they buy a more posh home in the burbs with a 3-car garage and loft from which to pen end of the world prognosticians?


Mon, 08/06/2012 - 11:43 | 2681821 slewie the pi-rat
Mon, 08/06/2012 - 11:44 | 2681822 Lohn Jocke
Lohn Jocke's picture

Someone is calling delivery on their paper.

Mon, 08/06/2012 - 11:52 | 2681842 adr
adr's picture

The only answer is unglobalization, decentralizing government.

30 years ago each city was made up of hundreds of self sufficient neighborhoods. You didn't have 250k sq ft mega supermarkets. You had a little corner grocery store, a corner drug store, a hardware store, and an appliance store. You knew the owners and they took care of customers. What was created during the best times of this country started to be damaged in the 70s, was blasted in the 80s, and absolutely eradicated in the 90s.

The reason why the economy worked and the middle class boomed was because the bulk of commerce was done outside the publicly traded space. You didn't shop at publicly traded retailers, you didn't buy groceries that had prices set by a commodity exchange. A pharmacist actually mixed drugs from formulas instead of just taking big publicly traded pharma bulk drug X out of a box and putting it in a bottle.

Just as the idea of centrally planned publicly elected government destroys society, so does the centrally planned publicly traded stock market.

The idea of buying a piece of paper that represents something physical, that is somehow supposed to be worth more later on, is fundamentally flawed. The design of the system from the get go was to reward and enrich the creators of the system, not to make those living under that system more prosperous.

The establishment of the United States broke this system for a short while. Ever since the founding of this country, the world has been trying to put what America broke back together. Obama was the last piece of the broken vase of global subjugation.

Mon, 08/06/2012 - 11:58 | 2681861 fuu
fuu's picture

One of the minds is missing in this article.

Mon, 08/06/2012 - 12:08 | 2681883 Jack Sheet
Jack Sheet's picture

So what is your point exactly ?

Mon, 08/06/2012 - 12:18 | 2681901 nottoolatetolearn
nottoolatetolearn's picture

New reader here. I thoroughly enjoy the articles and commentators.
Some of you are a hoot, and I am learning A LOT!. I, like many others,
have really botched my financial picture thru ignorance. As to this article IMHO none of this will work/happen until more folks progress thru Maslow's hierarchy of needs from knuckle dragger to caring and sharing human
that can see the big picture, and be happy with less. (And yes, knuckle
draggers can and often do wear nice suits with Presidential cuff links.)
And that can't happen, sadly, because of the human condition.Working
nights in the ER trashed my thinking that people were basically good
and just needed the right conditions to flourish.

Mon, 08/06/2012 - 12:21 | 2681907 fuu
fuu's picture

Hi Vic, welcome back I guess.

Mon, 08/06/2012 - 12:22 | 2681913 csmith
csmith's picture

Could've said it in two words:

Deflation works.

Mon, 08/06/2012 - 12:33 | 2681914 SWCroaker
SWCroaker's picture

Actually, simple minded approaches should work just fine.  Just focus on the "real" institutions upon which our parasitic patronage clubs make their living.

  1. We need sound money, under control of mother nature, not human nature.  Money should serve society, not be twisted to enslave it.  Governments have amply demonstrated that they can't be trusted with the keys to the printing press, so move to a system where there are no printers.
  2. End the legalized theft racket known as fractional reserve banking.  Expose derivatives as outright gambling rackets.  But don't regulate either of these into oblivion; instead remove the myriad requirements that keep the sheeple from using/opting for alternatives that *aren't* inherently rigged.
  3. Points 1 & 2 collectively go a long way to remove the boom-and-bust incidents we've been afflicted with.  Yes, inflation and deflation are both still possible, but the primary causes (human greed and fraud, insanely leveraged multiples via FRB and the like) are removed and we're left with less violent sources such as changes in productivity, population and supply changes in the supply of a natural currency.
  4. Terminate *all* government backing and guarantee programs, and let the financial "innovators" (and their gullible marks) fail big time when exposed as frauds.  Interest rates and fees will likely rocket back to reality, deals will merit much more inspection and monitoring, and a lot of shysters will likely be hanged. The age old role of the con artist will fall in scale and scope back down to levels that actually serve to keep a society healthy and wary; our current parasitic load is bleeding the patient to death.
  5. Government should limited to a % GDP cap on revenue (say 5%), and forced to go back to being an essential service rather than universal-spanning-provider-of-all-to-purchased-voters. (Bribing an official is useless when that official doesn't have the authority to dispense favors to bribers).
  6. Fiat currencies are a joke, therefore Forex and currency exchange rates are a joke.  Sane countries/businesses will likely move to goods-and-services exchange and avoid the currency trust issue completely.  Fools can continue to take paper for tangibles if they really wish.
  7. Finally, the entitlements promised in countries across the world, (including the US of A), have been revealed to be frauds.  The trust funds are empty, the asset pools are really just claims on spreadsheets, the thieves got away with the goods long ago.  We need to admit it, and discuss how to deal together with the issue.  People can *choose* to pull together and help neighbors who are victims of theft, but I don't think any government has the right or authority to mandate such generous behavior. We have *all* been stolen from, regardless of age.  Pity party if you wish; the real crime is to allow the theft to continue once awareness dawns.

Raise a child in a bubble, and that child will likely die the first time he/she is exposed to the reality of a germ filled world.  In a similar way, we've tried to pretend that individuals don't need to be informed, do their own due diligence, choose their counter-parties wisely, or provide for their own well being.  This will prove to be especially "dumb" as our various protective bubbles burst one after another in a domino chain of fatal impacts with reality.

Mon, 08/06/2012 - 14:27 | 2682354 Totentänzerlied
Totentänzerlied's picture

"Government should limited to a % GDP cap on revenue (say 5%), and forced to go back to being an essential service rather than universal-spanning-provider-of-all-to-purchased-voters. (Bribing an official is useless when that official doesn't have the authority to dispense favors to bribers)."

Who's going to enforce that cap? Government has a legal monopoly on violence, by definition, and owns the courts, by definition. Citizen's posse? State militias? Let's be realistic: no one.

Bribing an official pays for itself when that official's masters can arrogate for themselves and their underlings any and all conceivable authorities, privileges, rights, duties, charges, and means - because they have an enforced monopoly on law. Which is what government does. Always. By definition.

Minarchism is an oxymoron. The history of the US - from smallest to largest modern Western government in 200 years. Shrinking the government to, say, 35% of it's current size (at every level) would simply buy us a few decades or maybe a century, then we're right back where we are today. Sure, it's a step in the right direction. It's still unethical and rather childish.

Mon, 08/06/2012 - 15:22 | 2682525 SWCroaker
SWCroaker's picture

There was a time in US history where the concept that government derived its powers from the consent of the governed was embraced as fundamental, by both the people and those in office.  For some 90 odd years, it wasn't assumed the "government has a legal monopoly" on war, or dictating how people lived, or on arbitrarily subjecting the masses to discriminatory taxation.

The Federal Government in the US was created by the States, for the benefit of the States, and the option to walk away and leave this voluntary union was implicitly assumed to be each State's right.  Our Revolution was just such a demonstration of a belief that a people need not bow to a Government that egregiously oversteps its role.  Prior to the Civil War, there were two actual instances where secession was openly considered and pursued, and in both instances the Federal government collectively acknowledge the right an properness of States to do so if they wished.  The people had the final say, not the deliberately weak construct of a Federal government that was created for the State's convenience.

The Jeffersonians (proponents of small government and individual freedoms and rights) fought the Hamiltonians (proponents of a strong central government with all of the possibilities for political patronage and favoritism that that entails) for about 90 years.  That fight became overt in 1861 in the "Civil War", where the champion of the Federalists, a Republican named Lincoln, laid the pattern for next 150 years of our current "American" system: the Ends Justify the Means, Say the Correct in Speech to cover the Dirty Deed in action, The Constitution is a relic that a Dictatorial President Need Not Obey, Might Makes Right and the Federal Government Takes First and Dares anyone to protest.  (Talk about the victors writing history: I was raised to believe that Honest Abe was a model of the best of America.  When I read his actual words, orders and deeds, I come to the conclusion that he was worse in behavior on every count when compared with King George.  Sigh).

Point being, we had it right for a bit.  We let a wonderful system of personal liberty and freedom be usurped by a power grab.  A defeat, at a point in time, doesn't necessarily mean extinction of a better form of governance, or that what replaced it will go on in perpetuity.  Don't assume that what is must always be...


Mon, 08/06/2012 - 12:29 | 2681940 grid-b-gone
grid-b-gone's picture

To prevent the public sector from bleeding out the private sector over time, public sector pay, benefits, and health care contribution percentages must be tied to private sector averages.

This would reduce the ability of politicians to use debt to buy public sector votes.

It also would give public sector workers incentive to support private sector activity that would be a pre-requisite for eventually getting their next raise.  

Private sector pay and benefits do not increase as a company's prospects or results weaken, but that is exactly what is happening in the U.S. and what has largely happened in Europe in the public sector.

Mon, 08/06/2012 - 12:33 | 2681949 reader2010
reader2010's picture

another piece of 100% bullshit. 

Mon, 08/06/2012 - 12:36 | 2681955 Gunga
Gunga's picture

Support locally ownned businesses. Starve the corporate beast.

Mon, 08/06/2012 - 12:53 | 2682005 FreedomGuy
FreedomGuy's picture

The analogy I like is that a FREE economy is like rain forest, incredibly complex and unmanaged by definition. Government interventions are like dropping fertilizers, weed killers and other chemicals from 1000 feet. Whatever they help, they kill as much on the other side and they change the make up and complexity of the forest. Certain plants become dependent on certain fertilizers and the suppression of their competition. Over time the rain forest becomes something else.

If you stop all intervention there will be huge changes and visible losers. It will take time to return to balance. If plants could vote you would have powerful lobbies to continue intervention as they will perish.

This is the problem with an economic reset. I agree with the author that it is not automatic that we will improve our situation.

Mon, 08/06/2012 - 13:30 | 2682130 aerojet
aerojet's picture

You guys are dreaming.  Get rid of the elite and the Fed?  Get real.  We end up with WWIII and massive depopulation before the elite ever go away.  Also, what is the timeline for all this drama? 

Mon, 08/06/2012 - 13:57 | 2682226 MSimon
MSimon's picture

It is all going down and much of elite control with it. Read the Lame Cherry bit for a precis. CA Fitts for the full story.

Mon, 08/06/2012 - 13:59 | 2682239 MSimon
MSimon's picture

And just to jack you around hard Larouche (I detest his politics) was right. The Queen deals drugs.

Mon, 08/06/2012 - 13:39 | 2682158 treasurefish
treasurefish's picture

"Sellers of oil below cost will rapidly deplete their capital and go bust."




Horrible, crappy article.

Mon, 08/06/2012 - 13:59 | 2682235 Manipulism
Manipulism's picture

Oh my,

Horrible, crappy comments.

On a long enough timeline the intelligence rate of this Site drops to zero.

Mon, 08/06/2012 - 14:22 | 2682334 YC2
YC2's picture

Seriously.  All the self proclaimed smarty pants are not realizing that they missed the point entirely, that they have not decoupled from the financial system, and that they are much more a part of it than they think and we are all on the recieving end to varying but not insignificant degrees if the SHTF. 

However, I think finding a new game to play is also potentially naive.  My guess the best we get is a partial reset, not a new renaissance of ice cream and unicorns.  Luckily, it isnt Mad Max either, speaking as someone who lived through Argentina 2002.

Mon, 08/06/2012 - 14:00 | 2682242 MSimon
MSimon's picture

I'll lower it some more:


Follow the money.

Mon, 08/06/2012 - 14:35 | 2682381 monad
monad's picture

What do you mean 'we', quimosabe?

Mon, 08/06/2012 - 14:39 | 2682396 MSimon
MSimon's picture

Well there is a link. And links at the link. Take your time - there is a LOT to digest. Clue: follow the money.

Mon, 08/06/2012 - 14:45 | 2682416 Fishhawk
Fishhawk's picture

Wrong, Nid.  The United States government has a currency.  The Federal Reserve peddles debt as a money substitute.  Experience is starting to show, again, that debt does not work as money, because the counterparties always default.  Gold is still the best money, because it contains the real work required to mine it, thus cannot be inflated by counterfeiters.


Mon, 08/06/2012 - 22:07 | 2682478 Jake88
Jake88's picture


Mon, 08/06/2012 - 15:20 | 2682520 spooz
spooz's picture

If mom and dad's pension are invested in bad assets, that is too bad for them.  Free markets demand risk not be propped up for some while others take losses.  Allowing the corrupt financial ponzi to continue looting wealth in the name of propping up pensions is no different from TARP bailouts to prevent Armageddon. If you invest in bubble assets like loans made to those who may not be able to repay them, you took a risk that others who left their assets in boring FDIC insured accounts did not.


Mon, 08/06/2012 - 16:42 | 2682787 Herd Redirectio...
Herd Redirection Committee's picture

No shit, and probably 20% of the student loans are owed to 'Mom and Pop's pension fund, while probably the remaining 80% is owed to Billionaires and Corporate shells (owned by... Millionaires and Billionaires )...

Mon, 08/06/2012 - 16:01 | 2682639 madcows
madcows's picture

Let's see, between keeping our current system with its bankers and Corrupticians, I'm willing to take the risk.  Kill the bankers and corrupt politicians, and let's see where society goes.

Tue, 08/07/2012 - 04:36 | 2683999 toomanyfakecons...
toomanyfakeconservatives's picture

I love to repeat myself... That will only occur after the MASS ARRESTS and subsequent ENEMA OF EPIC PROPORTIONS cleanses the system and sees the Constitution restored...

Mon, 08/06/2012 - 22:15 | 2683527 AurorusBorealus
AurorusBorealus's picture

Maybe we need less public "policies" and more good-sense government with useable, useful, and enforceable laws that protect basic rights.

Tue, 08/07/2012 - 04:35 | 2683998 toomanyfakecons...
toomanyfakeconservatives's picture

That will only occur after the MASS ARRESTS and subsequent ENEMA OF EPIC PROPORTIONS cleanses the system and sees the Constitution restored...

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