Capitalism, Socialism And Democracy - And Common Sense
Monitoring financial and political news has become a very depressing task recently.
While the USA enjoyed a short fairy tale period between president Obama Barack's election and his inauguration,
the staccato of catastrophic news has accelerated into a crescendo of crisis since January. Financial TV gushes with appearances of the global top brass, united in the goal to fend off the consequences of 22 years of highly expansive monetary policy, free market gospel and excessive leverage on public and private levels, but
clueless how to achieve this.
Europe fares still worse. What looks like a nosedive in American economic activity evokes images of a freefall in the old world at close range.
Overindebted consumers, now also fearing the increasing possibility of losing their jobs and tightening the grip on wallets thinned by rising public service fees, overshadow the progress in the East.
China's exports hit a roadblock in January with no signs of an improvement and India has to sober up from a credit financed shopping spree, now that the demand for online personal valets is on a steep decline and endangers many a call centre.
Daily closures in the Western hospitality industry clearly mirror a new mindset of frugality among consumers.
Eastern Europe is the ticking time bomb in the backyard of the Eurozone. The region currently wakes up to the devastating effects of forex borrwoing to finance consumer goods. Now the local currencies languish close to their record lows.
Major forecasters offer no relief. The World Bank, the OECD and many other institutions expect the global economy to shrink for the first time in ages. Deutsche Bank recently warned that the German economy could shrink an unprecedented 5% this year. This may still be optimistic given the recent halving of German machinery orders.
"They" Don't Have a Clue
While first being overwhelmed by the fastest contraction in economic activity in recorded history, hanging on the lips of central bankers and politicians in order to get an idea about the future, I have rescinded from this time-wasting procedure for a simple reason. "They" don't have any clue how to handle the rapid disintegration of the world's financial fiat currency system.
Memorializing financial history the current crisis finds multiple precedents. All economic crises in the western hemisphere have rooted in excessive monetary expansion that is only possible under a fiat currency system.
One cannot blame politicians for their preference of a monetary system that allows to catch voters with perks and benefits that will have to be paid for by future generations. But how could I cast a vote for them when they ultimately hang on to economic theories that have never proven to work in the last 4 centuries??
It is a fact that the purchasing power of all unbacked fiat currencies has always been wiped out by inflation. Floating currencies don't float. They only sink at different speeds.
This leads to the ultimate crux in the enduring discussion how to mitigate and solve the crisis. This is not a problem of the acting persons but a problem of the domineering theories where the supremacy of fiat money does never get questioned in the first place.
The global big-wig elite comprised of central bankers, bankers and CEOs, finance ministers and other government members, clings on to a bizarre mix of empty free market phraseology that stands in deep contrast to recent nationalizations on both sides of the Atlantic, and Keynesian attempts to jumpstart the economy with new debts on top of those that have become unbearable already, leading to the current disastrous environment.
Plunging stock markets may be a good indicator that investors correctly mistrust public promises that those in charge have a plan other than to echo the fallacies of John Maynard Keynes, who preached anti-cyclical government intervention to revv up the economic engine. But they conveniently forget the other part of Keynes' model. Keynes also talked about government savings in the fat years in order to finance the deficit spending periods.
At the same time the government's share in the economy rests well above the 40% threshold, hardly a proof that capitalism has developed according to the slogans of promoters from all political camps.
Conservative and progressive political camps apply the old standard fare. Hypocritical calls from the right that demand to let markets work their way through this crisis of epochal proportions are nothing but empty words, given the string of nationalizations initiated by comrades Henry Paulson, Britain's Alistair Darling and Germany's Peer Steinbrueck, all with a strong conservative background.
Capitalism, Socialism Converge in Their Late Stages
Current events disclose a remarkable convergence of capitalism and socialism in their final stages. A privileged few cronies enjoy the perks of power and money while the other 95% have to come to terms with policies that are beneath contempt to the true interests of the average citizen/consumer.
It is not in my interest to prop up ailing banks with my future tax payments who steered themselves into unsustainable profit expectations by rejecting common sense for years.
Peer pressure adds to the systemic problem that no banker can forego profits made by all others.
The above story is the opinion of the author only and it does not reflect
iStockAnalyst opinion. Further, the author is not personally advising you
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