If the Euro is to survive, then the Germans must pay to support it. If the Euro fails, then the former Euro countries return to their domestic currencies, which will then revalue to appropriate levels, and thus decimate the current German export market, both from a cost and an affordability perspective. In truth, the only soution is the hard medicine of reality, tempered by temporary (and that means temporary) actions [...]
by Charles Hugh Smith from Of Two Minds
Counterfeit Money, Counterfeit Policy
What is the difference between printing money and counterfeiting? There is none.
Counterfeiting is illegal because it is the false creation of value. The counterfeiter takes low-value paper and turns it into high-value money, which is fundamentally a claim on the real productive value of the economy that issues the currency and recognizes it as a proxy means of exchanging that productive [...]
by Charles Hugh Smith from Of Two Minds
The ‘Baseball’ Economy: The Fed Strikes Out
The Fed’s game plan is to pitch low-cost credit so borrowed money will flow into the productive economy. But the Fed’s own policies insure that the borrowed money goes to speculative bets and unproductive reserves.
The Federal Reserve has been playing a perverse version of baseball, and unfortunately it has struck out. Here’s the [...]
Comparing Germany and the United States:
Germany’s population is one quarter the US, yet they have amore productive economy, they export more goods, their citizens don’t work as hard, they get free college andfree health care, they have lower poverty rate and they haveless crime.
1. EXPORT SALES:
2. UNEMPLOYMENT RATE:
3. AVERAGE HOURS WORKED PER YEAR
Germany: 1,436 hours
US: 1,804 hours
4. COST OF EDUCATION, AVERAGE DEBT ON GRADUATION
Germany: $0 (College is free.)
5. AVERAGE [...]
This failure is manifested not only in the defacto default of public debt by the European Periphery but also by chronic underemployment and corrosive young adult unemployment; decreasing global competitiveness; declining innovation; and a steady compression in the long term capacity to create real wealth.
The Euro is an obvious fraud and the social overhead and transfer payments imposed by the Eurocrats has led to stresses on the productive economy that [...]
The upper class economy always benefits from inflation and the lower class economy either does not comprehend inflation’s effect on buying power or has quasi-indexed transfer payments or relies on crimes against property for income.
Combine middle class inflation and chronic and high underemployment( and falling labor force participation rate) with record low levels of net new business formation and a real estate [...]
Caught in the vice grip of BIflation engineered by the Fed, your assets, income and retirement benefits will shrink but your cost of living, home ownership, and doing business will rocket.
Another way of putting it: everything you own will deflate, everything you need will inflate.
Business margins will erode further (they are already if you’re paying attention) and the ability to earn more income will disintegrate as the offshoring of [...]
The effective purchasing power of the Western middle classes, when measured against real stores of value, is declining. Bad Debt, fake currencies and corrupt, collectivist Regimes are slowly suffocating the West.
China is increasingly reliant on a massive real estate bubble, bad debt and resource imperialism to propel growth even as it fails to innovate, expand freedom and address its fatal demographic imbalances and its impending but inexorable working population decline. [...]
There was a time when the financial services sector was a source of impressive innovation, economic value added and highly efficient resource allocation. It was customer-centric, honorable and generally worthy of trust.
Then…financial services mutated into financial engineering.
The sector became increasingly self-centric and the house account become the reigning idol to be worshiped all day, every day by men and women of truly astonishing greed, vanity, dishonor and rapaciousness.
Customers, especially Main [...]
1. Regime Economy: which is an economy of occupation by the top 1%, consisting of Big Govt, Big Money ,Big Media and the next 3 to 4 % consisting of the Regime’s clients, sycophants, cronies and relatives. This economy is booming and amassing more wealth, resource control and decision making power by the day.
2. The Productive Economy: where a majority of the middle class [...]
mostly card carrying members of the US Regime; continuing prosperity or ignorant money illusion for another 10% that live off their connectivity and vassalage to the US Regime; a deep and worsening recession for about 65% of Americans and a despairing and bewildering depression for the remaining 20%.
For a decisive majority of Middle class Americans, who work in the Productive Economy, the economic reality is one of declining real net [...]
It has failed because instant gratification and entitlements have fatally converged with vanity and collectivism.
As a result, California has an entrenched, very rich but tiny elite , a rapidly expanding Parasitic Economy that exists only to consume the substance of a swiftly shrinking Productive Economy and an imploding but fragmented middle class that no longer has the numbers, will and unity to even defend itself much less rebel and regenerate.