Economy is about getting free lunch, it is only the privilege is reserved now to the elites...
I don't mean suggest the same outcome, but this exact brainless attitude of the central banks at the beginning of the every crisis that popped the bubbles, I say "brainless" because it is their very irresponsible monetary policies that FORCE people to take highly leveraged mortgages SIMPLY because the rush to the hard assets at the beginning of every hyperinflationary monetary policy quickly made them UNAFFORDABLE. Now that the retail is loaded up with these assets, they talk about fiscal responsibility while their adjustable rates reset one by one. NEVERTHELESS, they inflated even more during this crisis, it is only the free money has not been made accessible to the majority like before.
Let me tell you that it is this double standard that these institutions employed for decades that these entities must be forever closed, just like the many other jokes of the economic machinery. When the US Presidents resisted to the foundation of the central banks in the 19th century, they got shot since the European interests have always been huge while only a group of smart people like Livermore managed to manipulate and profit from the markets. When these institutions got founded, the power shifted from the "smart" market manipulators to a "mob" of political manipulators.
These are actually pretty dumb manipulators, but they have become the new elite eventually, while Livermore and similar became bankrupt on the way up. You give me the control of the money supply, I can manipulate an entire country. It has been so ultimately and the result on the way down have not changed either so far: the average investor who bought into one inflationary blow off after another always paid the price.
So how come the system is still working? In the global sense, it is actually not working, it is the addition of the new labor due to the population growth that's managing to keep the inflated prices for decades stable and in fact still inflating in the absence of a major resource shortage. In the macroeconomy textbooks, the resource shortages are assumed to be temporary and the economies are assumed to find the substitutes albeit it could happen at a different price balance.
The real threat is actually the saturation in the productive labor, it will certainly come in about 30-40 years when the world population doubles and the growth rate start to decelerate. In the mean time, whether there will be the cental banks or not, keep in mind that the entire concept of economy is about getting a free lunch, it is only who is getting it or how is getting it that matters, but the obvious remains about who is paying for their free lunch...
- kisa
Edited by kisacik, 12 September 2007 - 10:29 AM.
