Common economic lies that Mark and Patsy believe

After hearing some people who read some headlines and thus began to actually believe that they know anything about economic truth I realized just how badly misdirected good common people have become. It's sometimes difficult to believe the level of gullibility but the indoctrination and training is constant because of the main stream media so I guess what goes in the ear so many times eventually sticks in the brain and then later comes out the mouth.

In any case, here are a few of my favorite mainstream economic lies.  I would call them "myths" but that allows the propagators of these untruths to get off without proper attribution for being the criminal traitors that they in fact are:

• Debt cannot be used as a sustainable mechanism for generating wealth.  In a large group, the first ones to use debt for this actually do appear to generate new wealth.  Factories are built, production capacity increases and people get to have more stuff (which is what we call wealth). What they don't tell you is that debt based production is not sustainable.  In fact, it is a system of steadily diminishing returns until the returns actually become negative.  In fact, it works something like a drug.  When you first take it, the effects are wonderful.  Over time you have to take more and more in order to get the same effects.  At some point you can't take enough to get the original effects.  In the end game, you are so addicted to the drug that you don't take it to get high, you take it in order to not feel bad.  Even then you feel worse and worse and the drug eventually kills you or so dampens your spirit that you kill yourself.
• There is a real economic mechanism at work when applied to economics.  The use of debt essentially pulls demand forward, thus stealing it from the future generations.  The current generation racks up a bunch of debt and then leaves the system for the next generation.  At some point the debt is so high that nobody will loan more money to you and whoever happens to be living through it gets the withdrawal pains whether or not they got any of the early euphoria.
• I recently wrote a post to this link of an interview of Jim Rickards.  I strongly suggest to watch the video even though it is an hour long.  Rickards keeps it fast paced.  But if you can read faster than you can listen, go to that link and then close the window.  A pop up will ask if you want to stay on the page.  Choose that option and you will see the transcript.  In that, Rickards states, "During the boom years of the 1950s and 1960s, every dollar of debt that was created, we got $2.41 worth of economic growth. So that was pretty good bang for the buck. But by the "stagflation" of the late 1970s that relationship had actually collapsed. So now for a dollar of debt in the late 1970s, we were only getting $.41 in growth, so, obviously, that's a huge drop-off. So we're piling on the debt, but we're getting less and less growth. As the trend goes from $2.41 to $.41 to $.03… It's soon going to go negative." So you can see the actual data tells us that debt based production is a game of diminishing returns.  At some point, you can't borrow more but all the debt either remains or you default on it (and then you get to experience your own version of an Argentinian shit hole collapse).
• The reason that it works like this is simple.  The economic books call it the power of compound interest.  Normally this is applied to savers who receive interest on their savings at a certain rate.  Well, compound interest is an exponential function.  If you start with $100 and get 3% per year for it and then add that 3% to the nest egg and get 3% on $103 next year, this is compounding your interest.  The result is an exponential function.  It starts off slow but before long you have that hockey stick curve.  It works the same way no matter if you are the lender or the borrower.  The only difference is whether you are gaining or losing exponentially.  Debt means you are the borrower and so you are losing exponentially.  Look at the numbers that Rickards quoted above in blue.  $2.41 of growth in the 50s became $0.41 in the late 70s and it is now 0.03 today.  That is an exponential decline in the amount of growth that is bought with debt over time.  The reason is that the interest payments begin to cut into the production numbers until at some point you are working all day and night but still cannot create enough spendable value in order to survive.  At that point you get what those running the system choose to give you.  It is no different than how slavery works where the slave owner gets all the productive output of the slaves and tosses them some old meat each night - just enough to cover the needs of life so that the slaves don't die off.

• You cannot use exports as a sustainable mechanism for generating wealth.  Since not everyone can be a net exporter the concept of "first to do it and last to do it" applies. The first to do it appear to be getting rich in the deal.   They export a bunch of stuff and get real stuff in return. We call that trade and it is a good thing.  But at some point everyone wants to get into the act and the net exporter exports more than the importers can afford.  And so the exports are paid for with markers for future production by the importers.  We call these markers "debt".  If the net importer has to resort to paying with debt then he can't afford it and never will be able to.  So the exporters will eventually get stiffed for what they owe.  German corporations, owned by the people in their retirement accounts, will get defaulted on in their vendor finance scams.  They will either BK as a result or take massive write downs which will collapse the share price.  So the industrialist con men get all the high pay and big bonuses of being net exporters for decades but at some point all the bad debt has to be paid by someone and that is mainly the shareholders.  In some cases, governments bail out the corporations with tax dollars (or more public debt) so that the systemically important company won't BK and lose jobs.  So if you do the math, the people ended up paying for all those exports even though they did not get the benefit of consuming them.  This is the economic truth of the matter that Keynesians and other con men will not tell you even though they have endless praise for the value of exports to economic growth.
• Consumer spending is not an engine of economic growth.  Economic growth is the act of creating more production.  Consumer spending is consumption, the polar opposite.  When you spend to consume, capital is consumed.  Does going to Disney land on an expensive vacation with the kids lead to greater wealth the following year?  I think not.  This is not to say that consumption is bad!  Humans need consumption in order to live with good quality of life.  But if you consume all of your seed corn in the winter then don't expect to have any way to plant a crop in the spring. Savings, investment, and production are the real engines of economic growth.  Now, for a while, consumer spending appears to be economic growth but at the end of the day the spending collapses because there is nothing on the shelves to buy.  The productive capacity was all consumed.
• Growth of the money supply is not real growth.  Inflation based gains are real for awhile but mainly for those with first access to credit.  At some point, the cost of goods rises faster than salaries and inflation produces negative growth.
• There is such a thing as the right amount of inflation and, properly managed, inflation is not only good but necessary.  This central banker lie is almost universally believed.  The story is that central bankers are good and honest people who only want a chicken in every pot and a good paying job for every person.  Of course, like everything else they tell you, this is backwards and upside down.  Bad is good, Ron Paul is a flake and Obama is a saint, etc. etc. etc.  The truth is that knowledge builds upon knowledge at an exponential rate.  Knowledge is the basis of all production and so our lives should be improving at an exponential rate.  But they are not and there is a reason: inflation is stealing our productivity as fast or faster than we can create it.  All of it funnels to the very few which is why the wealth gap is so ridiculously large.  Inflation always benefits those with the first and the most access to the new money (or credit in the case of credit based inflation AKA TEMPORARY INFLATION).  The new money is spent from the top, trickling down into the hands of the workers.  However, by that time it has already chased up the prices of the stuff that workers want and need to buy.  So the elite get the new money for free and they get it first and they use it first and then everyone can have access to it.  Is it really so difficult to see in a fraudulent, corrupt, scam ridden system like this how the top 1% own so much of the available wealth?
• Everyone should participate in ownership of stocks because on average they go up.  That makes them a wonderful investment.  In this way, your money works for you to provide a plush retirement.  There are three big lies in there:
• Stock market participants make money in three different ways.  Inflation, dividends, and via greater fools.  Inflation runs up the dollar value but does not change the actual buying power of your account.  All it really does is generate a taxable event as if you made new value when in fact, the numbers just got bigger on both the earning side and the cost of goods side of the equation with no net benefit to the participant even though they think they won something (something for nothing scam).
• Stocks go up on average as long as the credit environment is on the rise.  When it turns into a deflationary crash then most people lose everything.  Did we learn nothing from the stock crash '29-32?  All the gains are temporary because most of the gains were driven by rising amounts of debt used to buy the shares.  When cheap credit is no longer available, the use of debt to buy shares is curtailed and the deflationary spiral crashes the whole thing back down from whence it came.
• Your money does not "work for you".  Never has, never will in a monetary system consisting of fiat currency and fractional reserve banking.  You might win some gambling bets but that is not the money working, that is a zero sum game where someone else lost that money that you won.  Only people can work and the associated output is controlled by the effort put in multiplied by tools (which is another word for knowledge) and energy.

IMPORTANT NOTE: There is a common theme running through the examples above.  Did you catch it?  The theme is simple but incredibly important because it speaks to the entire nature of the thing: In almost every case, the first to participate in the stupid act actually appear to be smart. They get ahead just like they were told would happen.  Debt can buy growth for awhile.  Being the first net exporter can make you personally rich.  The first people into and out of a pyramid scheme or Ponzi scheme can get rich. All of the lies seem true for awhile until they finally collapse under their own corrupt weight but by that time that happens, everyone has gotten dirty with the con.

This is the very nature of a confidence game.  As you play you get sucked in deeper and deeper but the game is fixed in the favor of the con operators as they, like carnies running a fixed game, continue to urge you to participate with ever larger sums of money.  The more money that is put into it, the richer the con men get and the more the fame of the con spreads.  Once everyone is fully invested (cough cough boomers cough cough), the trap is sprung, Bernie Madoff admits that the money is not really there, the massive serial daisy chain domino defaults begin etc. etc.

Bottom line: the con men play on human greed.  Some of us can do math and we know the real score, others of us can do math but want to believe in fairy tales. But most people simply cannot do math and do not possess the critical thinking skills in order to understand the magick trick that is being played on them.  These people will shout down anyone who tries to explain it to them and they really will not listen to anyone except their brainwashed id which haunts their subconscious.  They vote into office those who reinforce their corrupted belief system so that we are all actually in the same boat to some degree even if we know what's going on.  The best we can do is stand near the life boat and to be ready to defend ourselves when the other passengers lose their minds in a panic.