If you have been reading my posts you will know I follow some financial commentators. Probably the most interesting is the Australian one Daily Reckoning(DR) because it has multiple contributors who often, even on the same email, contradict each other.
For example recently on gold some are saying it is in a pull back but will shortly go higher, others say the pull back will be big (gold under US$1,000, silver US$15 is what one commentator has said though not on DR) before going much higher. So you have to do your homework to make up your own mind as to what is going to happen & how to benefit.
In the last few days though there have been interesting commentary across all commentators I follow.
First many are starting to say what I have in that economic woes will lead & in fact have now led to the otherthrow of governments, increased violence & crime. The current conditions are those prior to the French revolution & Hitler coming to power. This time though it is a world wide issue.
As governments try to find ways of fixing things they actually make it worse.
Now the DR has commented on Austrian Economics which it describes as having the philosophy "Governments cause, rather than solve problems".
Take Tunisia as an example. By the US government listening to & letting the Federal reserve 'fix' things through quantitive easing it is causing inflation. The Federal Reserve says it isn't because it is not monetising debt. Well actually it is as it is using this to buy debt(government bonds, CDO's etc)it monetises the debt.
In other words debt that has been created out of nothing is purchased by currency created out of nothing meaning there is more currency around lowering the value of the US dollar in this case causing prices to rise(inflation).
An Introduction to Austrian Economics
Since the US dollar is the international reserve currency in which trade is conducted it meant despite the best efforts of the President of Tunisia the price of food kept rising resulting in it triggering his overthrow.
This accounts for what China has been up to lately. First it has been quietly getting rid of its US debt that it has bought. Next it has said it is looking to buy 5000 tonnes of gold(though how they are going to achieve that unless another country such as the US puts gold privately on the market as it does to keep the price down.
More recently China has started to enter into negoiations(successfully) with India then Russia & lately directly with some US businesses. This has the very real potential of collapsing the US Dollar much earlier than was expected.
Then to give it some breathing room I belive China is now buying European debt. This keeps the Yuan down in value meaning it can export more but also prolongs the slide to the collapse of the world financial system whilst China prepares & can buffer the worst effects from its people.
Already in the US things are much worse than are been generally acknowledged. There was talk of a clip on a news programme of a person with two masters degrees who had a good job but now can only get employment sweeping floors.
It is people like this that will struggle as it is predicted the middle class is about to be wiped out.
Those at the very bottom will get by as they always have & they know how to survive. It is those that have had these good jobs who are really going to struggle not just with balancing the budget but the mental side. It is here that you will not only see the increase in crime but violent crime as the stress gets to them.
This will give the governments the excuse to introduce a greater transfer of power which will make things worse. Tunisia is just the tip of the iceberg. There are likely to be many governments overthrown in the coming years, rise in crime, violence & even civil wars.
The Theory of Money and Credit
But any actions taken by a government will worsen the situation especially whilst the central banks, which are privately owned, are the ones 'printing' the currency not the government.
Now Austrian Economics is of the point of view the less government is better. Or as the DR quotes from Jefferson(whom I take to be US President Jefferson)"a little government is a necesary evil".
But there are issues with this.
First the world has implimented social benefits of which people are reluctant to let go as demonstrated by the riots across Europe at Austerity measures.
Austrian Theory of the Trade Cycle and Other Essays
Then you have a country like New Zealand where the government needs to play a greater role since we just don't have the population to maintain good economic competition.
In fact the privatization of some government departments or requirement for others to act in a commercial manner(SOE's) have been an abject failure as few if any have had the promised benefits.
Everything has become more inefficient & other issue is change in 'culture' has meant government departments are no better. Any real competition is quickly snuffed out.
Economic Science and the Austrian Method
What is worse is governments are advised by economists who are not even really aware of the Austrian Method. DR asked recently if anyone knew of a teritiary institution who taught or even mentioned the Austrian Method. The replies they got pointed to the fact that only one in Australia did so.
So how can these guys advise when there is another whole way of looking at economics that is never even brought into the equation. That is why they can't see the destruction of the financial system that is coming.
At present governments around the world are looking to cut billions from their budgets. Best way they can do that is make government more efficient. I twould cut billions overnight. Instead their answers tend to be increase government employees to deal with the larger numbers unemployed. So increase the most unproductive part of the economy.
Governments just increase the problems. Right now in New Zealand we have the poor response to the earthquake in particular in Christchurch, the poor response to Pike River mine disaster & rising food prices due to inflation(despite what the manipulated CPI says) whilst earnings drop, all possible triggers for actions such as crime, violence & riots.
An Austrian Perspective on the History of Economic Thought (2 Vol. Set)
What the government need to do is take the risk of supporting ideas that will increase employment even if they don't tick all the little boxes. Do that & it decreases crime. Not all will work but they only need a percentage too.
It was what Sir Robert Muldoon was looking to do in the late 70's early 80's with DFC(Development Finance Corporation) the last time the situation was similar to now.
This time it is much worse. Thing is Academics & bureaucrats didn't understand it last time & unless they are kept out of it they would not understand it again. Real progress is only achieved by those who do not stick to the little boxes.
http://www.foxhoundsecurity.co.nz
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