Dear Friends,
It seems to me, Quantitative Easing, (QE), or in other words, monetizing debt, is the ultimate repudiation of welfare state economics. Greece, is the poster child for the failure of both the welfare state, (socialism by another name), and cronyism. Socialism has a long and storied history of spectacular failures, in both providing the essentials for the people, and in the atrocities visited upon them. Welfare state “capitalism” is only the latest incarnation to fail. Don’t worry though, the new class will never give up on their beloved socialism, if it fails, try, try again. Sadly, it is never the elite that really suffer for their idea’s failures, those who suffer are the average ordinary people, those who as Thrasymachus said, only want to live their lives in peace and so believe in justice… while the elite use “justice” as a tool to control the people. The large scale implementation of the welfare state has driven our planet into a global currency war like in the 1930s.
If the welfare state operated so efficiently it would not need a constant supply of printed money to pretend the economy is working. Every government that has gone down the welfare state “capitalism” path, is now monetizing their debt. Japan has a debt to GDP that dwarfs Greece’s, but that debt is held by the Japanese people, and so doesn’t threaten the wealth of the banking elite, but don’t worry, the Japanese people will not be bailed out like the banks. When Japan went into the “lost decade” it went full Keynesian. The government spent huge gobs of money to stimulate the economy. Instead of growing their GDP however they grew their debt. The utter failure of the Japanese to stimulate their economy through Keynesian policies fell on deaf ears. The global elite will not give up on their favorite means to prop up the welfare state.
Europe is now going QE and the European central bank is printing money and buying European government debt. Germany and Denmark have instituted NEGATIVE interest rates! Think about that for just a second… If you have forgone immediate gratification, and saved money instead, you have to pay the bank to hold that money! Talk about a negative incentive to save! Not one of the major economies in Europe has it’s debt to GDP ratio below the European Union’s debt threshold, England, Germany, France, Italy, Spain and Greece are well above the agreed upon debt limit. All because their economies are based on the welfare state.
Switzerland has also announced it is instituting a negative interest rate. When the Swiss National Bank unpegged from the Euro, it sent shock waves running through the international banking system, as well as the investment community. A few very large businesses went belly up, (but most have been quietly bailed out since then), the new class elite cannot be punished for their own failures, it is the job of you and I to bail them out. Now that the Swiss Franc has appreciated in value so much it is damaging Swiss exports… the Swiss are instituting a negative interest rate of 1%! Meanwhile, every nation’s central bank is repatriating their gold from the US and buying more. (Except for Ukraine who needs the capital to fight their war with Russia).
Russia is a net buyer of gold and Kazakhstan has made it illegal to export gold. China is buying gold at breakneck speed, judging by the volumes moving through the Shanghai gold exchange, (the Chinese government doesn’t divulge it’s gold purchases). No one, it seems, is willing to trust their gold holdings to the US Federal Reserve. Why? Probably because the US Federal reserve has printed so much money, to lower the value of the dollar so the welfare state can be shored up, they have endangered the US dollar’s reserve currency status. The US government has spent so much on stimulating our economy under Obama, the US debt to GDP ratio is now 104% and getting worse by the minute! Moreover, much of what is called GDP is actually government spending, which is not real GDP, but detracts from GDP! Lowering real GDP and raising the true debt ratio as much as 20%!
In 1900 the GDP per person of Argentina was the same as the US. Argentina went full welfare state while the US kept the market system for most of the 20th century. The result? Argentina has gone through multiple episodes of bankruptcy, hyperinflation and has hollowed out it’s middle class, while the US has built the highest standard of living in the history of Mankind. Every instance of hyperinflation has been the result of needless wars and welfare state policies. Now the US is following the path Argentina cut.
Why have governments done all this taxing, printing, borrowing and spending? To prop up the welfare state. Welfare state capitalism is nothing more than socialism with a capitalism tag line. It is redistribution, from those who would use that money to produce jobs, goods and investment, to keep a large segment of the population from working, thus lowering potential GDP. Jealousy is the theme of the redistributionist. Take from the rich to give to the poor. But that is not what they are doing, and they know it. The uber rich don’t pay, it is those who are trying to get rich who pay, own a hedge fund and your taxes are minimal, own a deli and you pay through the nose. The result is to place a glass ceiling over the heads of the people and a floor under the feet of the uber rich.
The scheme is not sustainable, so to give it the appearance of sustainability, the elite have to stimulate the economy to make up for the malinvestment, lack of investment, pernicious incentives and friction to economic growth, all of which the welfare state creates. Deflation, the normal paradigm in a market economy, cannot be tolerated because then all that borrowing would collapse the system. So the elite have to gin up inflation by devaluing the currency, and in doing so, they steal money from savers, cut the wages of workers and lower the economic outcomes of everyone, well, everyone but the uber rich and political elite. Quantitative Easing, Keynesian stimulus, negative interest rates for savers, bailouts for the too big to fail institutions and constant government stimulus are needed, to stave off the eventual collapse. Meanwhile, the new class elite forward the propaganda it is capitalism that is failing, instead of their own policies. Because they know the bubble will eventually burst, and when it does, they want us sheeple to be mad at a paper dog, instead of the real culprits, so they can institute their end game… world socialist government. The elite believe it will be a Brave New World, but it will actually be 1984 George Orwell, either way it is coming, and the welfare state is the means.
Sincerely,
John Pepin
