Seeding Inflation: The Economic Cure

 The illusion of complexity is merely a device of concealment used to deflect the obvious and common sense. 

The great drama of Politics has become so detached from economic realities that it no longer views fiscal matters in terms of fundamentals but in terms of temporary resolutions or transient and soon forgotten consequence. One moment saving Wall Street from certain collapse and the next crafting meaningful and insightful pandering policy while few seem to take notice of the great charade taking place; all in the name of saving a dying economic paradigm. 

Key to this hopeless process of saving a dying economic paradigm is the synthetic process of economic activity; Seeding Inflation as an Economic Cure. Why and How this happen is actually quite simple: 


In the absence of economic wealth creation capacity, which only occurs through durable output (fungible and exportable), the only means to create expendable economic activity to simulate it; the only way to simulate economic activity is by artificially expanding money supply (known as fiat currency); the only way to transmute this expanded money supply into the fiat economic cycle is by creating an exchange: Debt. 


This entire process occurring seeds a deeply flawed economic cycle whereby increasingly worthless fiat currency mutates through a simulated economic cycle giving the appearance of economic activity and in order to keep the process ever-occurring (so goes the fiat economic theory) all that has to occur is to continuously seed more and more fiat currency into the simulated economic cycle. The consequence of this entire process taking place is Inflationary Spiraling and what many falsely associate as a consequence of Capitalism, Boom & Bust Economic Cycles when in fact it is Monetary Policy that is to blame.  

To make it more conspicuous consider this simple comparative illustration: $1 in 1960, when fully adjusted for a true inflation rate (not published by Bureau of Labor and Statistics) today is worth approximately $.07. An alternate approach is to think of it in this way: A product in 1960 that cost $1 would, priced in 2012 dollars, cost $15.50.  The problem with this Fiat Inflation Mythology is that Incomes haven’t kept pace, not even close, with the rate of inflation. In 1960 the Medium Household Income (MHI) was $5,620 per year; to keep pace with inflation thru projected first quarter rates of 2012, current MHI would have to be no less than $78,680. Current MHI, adjusted for inflation, is approximately $44, 310 and this comparison clearly illustrates the effects of Debt-Funded Wealth Creation.   

Consider, as an example, Wall Street and the much herald Financial Markets that reside there. In 2008 the public was told that without a Bailout the System would have collapsed but none ever asked the most obvious of questions: If the Money was coming from the Taxpayer via the Federal Reserve then why place these funds in the hands of a failed system that creates nothing but merely consumes? After all, the money that was infused into the system didn’t come from the system at all, it came from the Fed printing presses. This fact should tip one further into one last question: When the more appropriate option would have been to simply infuse capital into a legitimate and fully functional Banking System, and realizing this is not what happened, then is it not the case that all that happened was to simply fund the continuance of a fully broken and dysfunctional system? Well, that’s exactly what happened and it will, soon, occur again and why you might ask: Because all that Wall Street does is to compress Talent-Better-Applied-Elsewhere (in the Creation of Productive Output) into finding newer and more invasive mechanisms for extracting Fiat Wealth out of the System; again, simulating an economic cycle by way of a transaction for which the Wall Street Firms generate revenue (transactional income).   

The Economic Cure: 

Government has become intoxicated by this very same mythology; it has fed the march to globalism, the means by which neo-colonial exploits are funded, and is the very reason why no single politician dare speak of addressing this Nations oppressive debt problem. The reason for this is that they have bought, as a matter of political convenience and survivability, into the Fiat Inflation Mythology; they have taken sides with both the Keynesian Theorists and the Central Banking Theology that seeds the Inflationary Cure for all that Economically Ails the System; this of course excludes American Households. 

The mind-set is built upon expanding revenues whether in the form of Transactional Income or Tax Revenues. As prices rise so do transactional incomes and tax revenues; all this occurring while producing nothing, absolutely nothing at all; the Grandest Illusion of the last 100 years and here are a few examples of the Mythology at play: 

–        From 2008 thru 2011, the largest U.S. Banks Net Worth has increased by $1.1Trillion.

–        From 2008 thru 2011 (2.5 years), these same banks have recorded incomes of
$83 Billion. By
 comparison, from 2001 thru 2008 (8 years), it was $77 Billion.

–        Crude Oil, in 2008, was $55 per barrel. Currently a barrel of oil trades in the vicinity of $107.

–        U.S. GDP for 2011 was $15.04 Trillion. $3.3 Trillion was in Productive Output the
balance was in government spending or services. BLS states that this was an annual increase
of 1.5% over 2010 however if you adjust this number for the effects of inflation (2011 annual
real rate of 6.4%) then you quickly see that the Economy actually contracted, in real terms,
for twenty-one 
year in a row.   

Now then consider these metrics applied to the dynamics of government-policy:  

–        Inflation, from the government perspective, is most welcome from the vantage point of tax
revenues; of course they ignore the fact that inflation also drives prices up and along with it

–        Crude Oil prices should also be of interest particularly if one considers that there is and has
never been a crude oil supply problem; only the created or manufactured illusion of one. The
Globalization of Crude Oil
has been quite deliberate; it is a magnificent funding mechanism
for all sorts of economic adventures and a case in point is Libya: What better way to fund the
reconstruction of Libya than to raise the price of oil? The converse is true as well and the case
in point, in this instance, is China: What better way to compress Chinese economic muscle
than to raise their energy costs? The dynamics work for the Government (Federal & State) as
well; rising prices generate more Tax Revenues. One of the great ironies of this syndrome
relates to Iran: Rising Crude prices generate more revenue for the Iranian Government; so
much for the validity of Sanctions and the Iranian Nuclear Threat

By this point if you’ve concluded that American Households are shouldering a dominant share of this Economic and Policy Mythology’s financial thrashing you would be correct and this is due, in large part, to the manner in which the U.S. Tax Code shifts the revenue generating burden onto Individuals Active Incomes and away from Passive Incomes, so-called Non-Profits and Corporations which either escape the tax burden entirely or they simply shift income recognition off-shore through various tax treatments or accounting techniques.  

Still there is a greater cause for all of this and it is sheer ineptitude on the part of politicians who are simply grotesque in their incompetence and complicity; making mistakes is one thing, persisting in their reoccurrence is quite another. To be sure, the system will continue its efforts to save a dying paradigm by continuing to Seed Inflation for their own reward and in part as an Economic Cure however as history has shown, this will only lead to further deprivation and economic warfare against the American People as the System scours the countryside for an ever-diminishing supply of table scraps.  

This is not doom and gloom prognosticative hyperbole; it is merely the fundamentals of economic reality evidenced by the growing wealth-disparity being caused by the vaporizing of Middle-America. You can’t cure a terminally-ill patient by treating it with more of what ails; likewise you cannot salvage a terminally dysfunctional economic system by seeding it further with its fundamental flaw. Judging from the fact that Mr. Romney appears to be sailing toward the GOP Nomination is proof that the American People are simply not yet willing to face the truth.  It seems that for those who are alert to the risks it appears that we will have to wait until the next great crash for the opportunity and hope that incompetence will give way to fundamentals. 

“Fascism is Capitalism in decay.” – Vladimir Lenin 

Curtis C. Greco, Founder

This entry was posted in Geo-Finance, On Point and tagged , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *