Sunday, October 11, 2015

These old Milton Friedman vids are priceless

Here's Friedman discussing how inflation works.  As usual, his style is clear and he makes his point eloquently.  Additionally, he gives the real implications which is that inflation is nothing more than taxation without representation.   That, readers, is why the US colonies decided to break from mother England!  It is thus a knife in the back of the foundation of the American experience.  So thank you Mr. Friedman, albeit posthumously, for telling the reality of it to current readers.

With that said, I want to add three things:
  1. The reason that taxation without representation was so hateful to the founders of the US that it is tantamount to slavery.  As in I don't give a shit what you think, just work some of your day and give the proceeds to me so I can go do as I please.  To be fair, that's really partial slavery since they do let you keep some of the productive output of your labor.  Perhaps some people are happy to be partially free.   Perhaps some people think they need a nanny in their adult lives.  
  2.  Friedman mentioned the printing presses as the source of inflation and that is correct but unfortunately it is not the full story.  In fact, it is only 10% of the story because we live in an environment of fractionally reserved banking.  This means that banks can take the newly printed money, put it in their vaults, and then lend out 10x as much credit/debt.  Even though it eventually must be paid back, debt spends like money and thus it competes with the currency (it's not really money) conjured up by the federal reserve to chase up the price of things.  Do you think a $600k to $2mn shoe box residence on the left or right coasts would go for that kind of money without the existence of cheap credit?  If so, pull your head out.  All that temporary money increased the money supply and when it is paid off or defaulted upon then prices will go down due to deflation.
    1. Understanding this is so important because this is the mechanism of the pump and dump economy which insiders use to ratchet up their wealth without having done productive work to achieve it.  Folks, new value or new wealth has to come from someone's labor.  So if someone who did not work to earn his wealth is in fact still wealthy then it's not a stretch to understand that it came from the labor of someone else.   This is how the pump and dump economy enslaves the masses who have zero idea what is going on.  All they know is that the rich get richer and the poor get poorer.
  3. There is one, and only one, realistic way to protect yourself from the long term rip off known as the business cycle AKA the inflation-deflation cycle and that is to store your long term wealth outside of that corrupt system.  The only way available to do this is with physical silver and gold coins in your possession.  If you store your excess value thusly instead of being baited into the 401k trap by the cheese called tax deferment then you will, over the course of a lifetime of saving, have plenty to retire on and without ever a worry or concern that some fucking bastard will, with the stroke of his pen, demand that your retirement take one for the good of the country.  In other words, your savings will be unaffected or perhaps even positively affected when government finally admits just how badly they have mismanaged our country's finances.

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