Musings of the Technical Bard

Tyler Durden at ZeroHedge has provided a link to a very good article at Gold Switzerland:

With most of the world’s major economies as well as the financial system bankrupt, there is only one solution that can save the world economy. Like in the Greek tragedies, Deus ex Machina is now the only way that the world can avoid a total economic collapse. This would involve God being lowered down onto the world stage and miraculously saving the plot.

Let us return to the wise [Ludwig] von Mises to look at the options available now: “There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final or total catastrophe of the currency system involved.”

Whatever politicians, bankers, economists or others experts say, there is no solution to this crisis.We have reached the end of the road and are now staring into the abyss.

To stop the money printing and credit creation would be the only sensible way of ending the failed quasi-capitalist, socialist experiment which is in the process of destroying the structure of the Western world. For almost 100 years we have lived on a system based on debt. This has created a false prosperity as well as false values. The transfer of capital from private enterprise to government by massive taxation is approaching 50% in many countries (see table). The average for 18 industrialised countries is almost 40%. This means that on average 40% of the productive economy is transferred to a non-producing entity (government) which wastes most of the money in the process of redistribution. But not only that, since the state has taken over up to 50% of the economy in these countries, the desire to work, to strive, to take risk and to invent has been taken away from a major part of the population.

To any thinking individual, it is totally incomprehensible that governments and central banks believe that an insolvent world can be saved by debt issued by bankrupt nations and then bought by the issuers themselves as there is no other buyer. This is the perfect recipe for self-destruction and “total catastrophe of the system.”

The world is in a total mess and there is absolutely no solution to this unprecedented crisis. The hyperinflationary depression that we will experience in the next few years will totally destroy the majority of the credit based wealth that has been created in the last few decades.

Recently, the discussion in Europe about the need for austerity programs and higher taxes has continued to use the original Euro currency agreement, which allowed governments to run deficits of 3% of GDP.  This was foolish from the beginning, but is especially foolish now that the governments of Europe find themselves nearly bankrupt.  How does reducing government deficits to 3% of GDP help if the economy if only growing at 1% per year.  The debt continues to grow and government continues to take a larger and larger portion of productive economic activity and destroy it via redistribution.

Kate at SDA posted an EXCELLENT video explaining why more government is bad, and why higher taxes are not the solution to deficits:

The only solution to the debt problems is LESS government spending.  As Frederic Bastiat wrote over 160 years ago:

The state is the great fiction by which everybody seeks to live at the expense of everybody else.