WW2 was all about fiscal policy

  The massive mobilization of men, women and factories was because Nazi Germany and governments around the world were simply printing more money to fund the war effort. As stated before, WW2 ended the great depression starting with Hitler's Germany. The Nazis were printing so much money first for infrastructure and domestic projects that led to a huge decrease in unemployment. When Hitler began to focus on war making, then economy received a further financial boost from the state to mobilize the country towards war.

"The government should pay people to dig holes in the ground and then fill them up." 

                                                                               John Maynard Keynes

   The assumption that WW2 did not end the great depression or unemployment simply because it drafted the unemployed to be shipped overseas misses the entire point. That government stimulus could have been spent on anything. It could have been spent on roads, hospitals, and bridges. As long as it was spent. I am not suggesting that war is necessary to solve an economic crisis, but the massive fiscal stimulus the Nazis initiated was needed. Millions of people died, irreplaceable lives. No different from digging holes to only refill them again. Much like burying the dead. Yes, WW2 ended the great depression, but could you imagine if that energy and money was actually spent on something productive.

Today

  The money supply is unable to track neither gold or silver. The money supply expands far beyond any commodity reserve. Without a gold or silver standard, there isnt the same kind of monetary discipline seen during ancient times. Still, exponentially increasing the money supply is what makes people better off today than they were 100 yrs ago.

Absurdities

  There is no magical formula that gets the economy moving. The reason why the economy moves is very base. The assumption that government spending prolongs economic malaise is simply absurd. What difference would it make if the economy was fueled by private spending versus government spending. Both are derived from debt. Both are also based on government printed money to act as a reserve for those debts.

  Trying to squeeze more debt from businesses and consumers by pushing them to take out more loans, and use their credit cards in order to pump up private spending is no different from the government doing it. The only difference is that government spending is much safer since the government can print money while the businesses and consumers risk repossession.

  Historically, the money supply was always based on gold. Whenever gold reserves were unable to expand rapidly, the economy mimics that unless there was fractional reserve lending to fraudulently expand the money supply. The silver standard helped alleviate this since another set of commodities could be used as a reserve to expand the nation's money.

“The gold standard has slain tens of thousands.” He referred to “a struggle between ‘the idle holders of idle capital’ and ‘the struggling masses, who produce the wealth and pay the taxes of the country;’ and, my friends, the question we are to decide is: Upon which side will the Democratic party fight?” At the peroration, he said “You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.”

  Overproduction occurs when more goods are produced than there is money. So when goods and services exceed the money supply, the result is deflation. But businesses can not make profit if they work harder while prices continue to fall. So naturally, they cease working at all. The Silver standard would alleviate this since silver would also act as a standard to help inflate the money supply thus giving businesses the inflation they need to keep producing goods and services.

  An arbitrary increase in the gold supply would give the government the necessary means to arbitrarily increase the money supply. But if you know it is arbitrary, what does it matter how the money supply is increased. If you understand why the gold and silver standard was in operation, why even give a damn about how the money supply is expanded.

I disagree

  There was no benefit to China in the trade between China and the us. Why attempt to artificially inflate the value of the dollar through Bretton Woods after the Second World War? Why try to imitate the English Empire by trying to import the worlds goods and services in exchange for us dollars? If american policy was mercantilist why did roosevelt and truman not simply peg the value of the us dollar below all other currencies including the british pound, the Japanese yen, the Soviet Ruble, the German Mark, and French Franc?

Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944.
Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.
The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments.

  Bretton Woods so artificially inflated the value of the us dollar, the united states almost immediately began to post trade deficits the moment Bretton Woods was put into place.

  If Europe was also mercantilist why setup the euro? Why trade the euro at a higher value than the dollar? Why end Bretton Woods in 1971 by dumping usd? By continuing to support the usd, and subsidizing the fraud that was Bretton Woods. They could have continued to post record trade surpluses against the united states? Why did nixon freak out when europe dumped the us dollar. This was america's chance to start posting trade surpluses against europe.

  I have never ceased my position on this issue. China and no country in the world should continue supporting the dollar. Let the us post trade surpluses and the rest of the world simply sit back and print money. 

Military spending is good for the economy

  Military spending is good for the economy since it mobilizes unused labor and resources. Sometimes we are led to believe that a good economy allows for more military spending. But realistically, its harder to mobilize resources for war when the economy is good as opposed to when it is bad.

In macroeconomics, the guns versus butter model is a simple example of the production possibility frontier. It models the relationship between a nation's investment in defense and civilian goods. In this model, a nation has to choose between two options when spending its finite resources. It can buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both. This can be seen as an analogy for choices between defense and civilian spending in more complex economies.

  Civilian spending and military spending are in conflict with one another. If everyone is buying houses and buying cars, it makes it very difficult for the military to buy new warplanes and to buy new missiles. Its not because the military lacks the money to buy new warplanes and missiles if consumer spending is high. If people are buying more houses and cars, the government is most likely flushed with funds from all the transaction fees, sales taxes, and property taxes to pay for additional military spending. The problem isnt that it lacks the money to pay for military spending. It has plenty of money to pay for military spending. The problem is that regardless of how much money the government has collected in tax revenue, resources and labor are still finite unlike the state's treasury. Additional spending would only drive up the price of labor and raw materials making both labor and resources more scarce.

  However, if civilian spending is actually down, then military spending would not help drive up inflation since labor and resources are not being utilized anyways. Even if the government lacked the financial resources to pay for military spending, ironically, this would have been the best time to spend since real physical resources are left idle.

  As we had witnessed during the 20th century. The only thing that ended up the great depression was when Hitler initiated the second world war.

The massive rearmament policies leading up to World War II helped stimulate the economies of Europe in 1937–39. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilization of manpower following the outbreak of war in 1939 finally ended unemployment.^[8]

A response to the Layman

  What vitalizes the national economy is money. It does not matter who prints that money, so long as it gets printed and distributed. The state needs to get off whatever standard it uses to control its money supply since it is that very standard that restricts economic growth.

  The economic policies of the Third Reich were in the beginning the brainchildren of Schacht, who assumed office as president of the central bank under Hitler in 1933, and became finance minister in the following year.[15] Schacht was one of the few finance ministers to take advantage of the freedom provided by the end of the gold standard to keep interest rates low and government budget deficits high, with massive public works funded by large budget deficits.[15] The consequence was an extremely rapid decline in unemployment—the most rapid decline in unemployment in any country during the Great Depression.[15]

  For many Germans, the pain suffered during the hyperinflation of the 1920s, was overwhelmed by the pain suffered by the massive poverty and depression of the 1930s. Adolf Hitler criticized Wiemar's monetary policy during the Beer Hall Putsch, but when he became Fuhrer, he made it clear that his policy was to lead  record government spending.

   Gold is at best precautionary. You can use the gold to purchase back state issued money if the state feels that the currency is depreciating too rapidly. The same way a company may attempt to purchase back its own stocks.

  Purchasing back state money with gold is not a guarantee, but simply an option that the state may choose to exercise.

Increasing interest rates leads to false assumptions

  Increasing interest rates would lead to a slow down in inflation. But this is because it starves the economy from capital leading to consumers and investors with less money available to spend. Prices then fall creating the illusion that things have improved from lower prices. But it fails to recognize that the reason prices have fallen is because people are now poorer than before thus they are unable to purchase the same quantity of goods as before.

  Currently, demand stands at D1. If we were to assume raising interest rates do succeed in reducing demand and thus reducing prices. It is only because consumers are now worst off. D1 then falls to D2 thus reducing the price of goods from P1 to P2. But it also reduces the quantity of goods from Q2 to Q1.

  How consumers are supposed to be better off from a manipulated shortage of goods I do not know.

Technology spending creates inflation

  If the population is largely devoted to producing grain and I allocate half of which to start producing 3d televisions, that would reduce the country's grain output by half but also increase number the televisions produced. Grain prices would jump by half thus the production of new tv sets only leads to less food being put on the table.

  The only way to circumvent that is to increase imports to make up for the shortfall in grain. The same logic if we reversed it. If the population is largely devoted to producing tv sets and I allocate half of which to producing grain. There will be less tv sets produced and there will be more grain. The price for tv sets would increase, which can only be circumvented by importing more tv sets.

  The roaring 20s was not driven by technology. It was driven by cheap money.

  The value of the dollar plummeted during the roaring 20s. It was not until the great depression did the value of the dollar begin to claw back some of its original value. The great depression gave strength to the dollar because people will sell their children for a buck.

  Just to reiterate, the government decides the supply of dollars there are in the country. Thus they fueled the roaring the twenties just like they starved the country into the great depression.

With no scarcity there can be no profit

  Profit is derived from scarcity. If goods and services were infinite, no one would be able to make a profit and all businesses and jobs would collapse. Opportunity is exploiting some apparent advantage. But if there was an infinite number of flat screens, diamond rings, and gold bullion etc. just buy picking them up at the beach. Then why need dept stores or sales people, and advertising or any number of jobs and business institutions?

Rising food output would be terrible for farmers

  Incomes for farmers are fairly low to begin with and added output would only lower their incomes even more. If Shandong is producing at AS2 and a neighboring jurisdiction helps increase regional output to AS then income for farmers would then drastically fall leading to many Shandong farmers to be unable to pay back loans to their banks.

 While Consumers receive a windfall from added supply and lower prices, farmers on the other hand are suffering from a financial recession. In order to better reward farmers and consumers alike, the government needs to intervene by giving farmers fair price for their grain while still keeping prices reasonable for consumers.

 Thus you need to determine how much grain you want to grow. Is it 800 million tons per year? 1 billion tons a year? And estimate how much you would need to increase prices for farmers in order to give them the incentive to produce 1 billion tons per year.

Inflation maybe needed to increase output

    Greater demand leads to higher prices which in turn lead to higher supply. If grain prices could be scaled back, farmers would also scale back on production which would lead to a shortage of grain. If grain prices were to be depressed, farmers would choose to grow something else instead. They would prefer to grow more of whatever it is that is inflating in price rather than something that remains stagnant in price.

  Whether consumers shoulder the higher price or the government shoulders the higher price is irrelevant so long as the farmers get their price. The government could buy the grain at 10  RMB from farmers and resell to consumers at 5 RMB, so long as the farmers get their price. The farmers need that price to encourage them to extend production.

  I am certain people are already familiar with why budget deficits do not matter, so that I would not need to explain it in every article. 

Space based weaponry

  Even something very simple would be quite effective. Having satellites armed with warheads in space would give China quite the initiative. Use them to attack critical targets during the first round of any war. ICBMs and SLBMs would still be the Chinese staple but the space based weaponry would give China the means to deliver the first punch in the beginning of each fight.

  Its a relatively simple technology but rarely utilized for whatever reason. Reentry from space is something space faring nations have been doing for decades and they usually have no trouble having objects land on their predestined positions. And the task here would be very much the same. Instead of reentry vehicles, the goal is to drop warheads.

  As said before, ICBMs and SLBMs would still serve as the nation's workhorse, but space based weaponry would be that shot that is quickly fired from the hip.

The Internet Bubble

  The IT bubble cost investors 5 trillion dollars in losses. That technology stole money from people's purses. And the reason is because technology does not create money. Money is needed to create technology.
  

"Several communication companies could not weather the financial burden and were forced to file for bankruptcy. One of the more significant players, WorldCom, was found practicing illegal accounting practices to exaggerate its profits on a yearly basis. WorldCom's stock price fell drastically when this information went public and eventually filed the third largest corporate bankruptcy in U.S. history. Other examples include NorthPoint Communications, Global Crossing, JDS Uniphase, XO Communications, and Covad Communications. Companies such as Nortel, Cisco and Corning, were at a disadvantage because they relied on infrastructure that was never developed which caused the stock of Corning to drop significantly".

Many companies failed

"A few large dot-com companies, such as Amazon.com and eBay, survived the turmoil and appear assured of long-term survival, while others such as Google have become industry-dominating mega-firms".

And some of them survived to become national champions.

But all in all. The IT bubble ruined people's financial lives and cost them 5 trillion dollars in losses.




  The Stock Market Crash of 2000-2002 caused the loss of $5 trillion in the market value of companies from March 2000 to October 2002.^[14]

That is why Greenspan lowered interest rates. That is why he further expanded the money supply. To fuel another bubble and help people feel financially whole again.

Technology does not produce money

  Technology does not create money. Money creates technology.

How does a smart phone device or a home gaming console produce money? Do they come with a money printing option? Can you print money from your smart phone or from your video game console? No.

So how are you supposed to make money from creating little consumer gadgets like phones and video games? You have to sell it to someone in exchange for their money. But where does your consumer happen to come up with this money? Does your consumer have a money printing machine at home? No

So where does your consumer come up with this money? He has a job and a salary. Or a credit card (we will get back to that later). So his employer has a money printing machine? No.

So where does the employer come up with the money to pay for his employees? He has a credit line from the bank who lends him money to pay for his business. And where does this money that the bank has come from?
Well he gets it from his central government in the form of the central bank. Which he uses as a reserve to lend out to businesses and private individuals in the form of fractional reserve lending.

So we have finally discovered the source of all money. All money comes from the state.

If private enterprise truly had the power to create money. Money would look like this.

And not like this.

Maybe there are americans who want to subsidize China?

  If they want to subsidize China. Go ahead. If the us wants to make China's washing machines and flat screen tvs and give them away for free RMB. China will just move its factory workers to making DF31s or some other useful widget to maximize employment rates.

  If it was actually possible to flood China with goods and services, it would further feed and enhance Chinese growth. You starve a nation through embargo, you strengthen a nation by exporting to it. 

  So you have american slaves on one end making consumer goods to satisfy their Chinese masters. While these very same Chinese consumers are being utilized towards military spending.

Strengthening the RMB has no negative effect on China's economy

  China is not on a silver standard. China is not on any standard. So China is not obligated to have the RMB pegged to the price of silver. China does not have to manipulate its money supply in order to keep the RMB stable against the price of silver. Silver trades freely against the RMB. It can go up or down or in any which direction. Usually silver strengthens against the RMB.

  Strengthening the RMB against the dollar would create a variety of things. It would increase China's GDP, increase wages, make Chinese goods more expensive, and make imports appear more cheap. China could still increase its exports by subsidizing its export industry. But subsidizing any industry means they are recipients of higher incomes that they otherwise would not have received. And they will spend that added income on goods and services. A portion of which would be imports.

 Employment levels will still remain robust since subsidization and a loose money supply would continue to fuel employment growth.

I dont really think so

  Sometimes we focus on one factor instead of the other things that were not equal and assume that one factor was causation. Appreciation of the RMB would no doubt increase purchasing power and reduce inflation in China.

    But an even more important factor is that China's money supply is incredible. The Money supply in China and thus its GDP quadruples every 10 yrs? PBOC prints and lends an incredible amount of money every year. And that is why China experiences so much inflation. The other big contributor is that so many Chinese goods are exported instead of consumed at home, that while PBOC may increase the money supply, there is not an equal volume of goods and services to show for it.

  If China prints 10 RMB and produces 10 widgets as a result of that new money. That increases both GDP and stabilizes inflation. But if those 10 widgets are exported, there is no widget that can be used to suppress domestic consumer prices thus all you get is the 10 RMB and thus 10 RMB worth of inflation.

  I am not arguing against Chinese monetary policy. I demand China further accelerates its money supply. China has not fully maximized its production frontier, salaries are still undervalued globally. China would need 1000 % inflation just to catch up to western prices.

  The sooner China experiences inflation, the faster wages will rise and the more stuff China is able to produce. People respond to fiat money. If PBOC called me in the morning and said, I will pay you 150 RMB every day to come to work from Monday to Friday. Id say sure. And I will pay you an additional 150 to come in on Saturday. And I might say, I value my Saturdays. And the PBOC responds, how about 300 RMB to come in on Saturday. And I might respond OK.

  And businesses and corporations respond the same way. If consumer prices do not experience inflation, they dont have incentive to produce that additional widget. They have no incentive to upgrade, deploy new machinery or employ more people.

Macro vs Micro

 business is tough...



2. The Small Business Administration (SBA) keeps the stats on business failures and claims that more than half of new businesses will disappear in the first five years.


3. Statistics show that 8 out of 10 new businesses fail within the first three years.

  Its competition. There are 100 players and only one title. When a bank loans money to startups, they intuitively know they are loaning money to companies that will ultimately fail.

So why loan at all?

Because its public policy to fuel business growth. State sets the interest rate encouraging people to start new businesses or to encourage consumer spending. If interest rates are set high, its a message by the government that they dont want you to spend. When interest rates are set low, its a message from the state that people should go out and spend.

  Interest rates arent determined by the government based on success or failure of these companies. Success or failure is irrelevant. The state can bail out anyone they wanted. Only three principles drive the force for monetary expansion and contraction. Maximizing employment, Maximizing economic growth.  And making sure inflation remains controlled despite the monetary expansion that was used to fuel employment and economic growth.

  From a microcosm, success seems like a big deal to the individual business leader. But the state has over 200 years of experience seeing businesses crash and burn. So they dont care about success or failure. They deal with Macroeconomics, not micro. They just need to make sure employment rates are maximized, the economy continues to grow, and inflation isnt unbearable.

  You are making an assumption that success and profit is somehow in the state's interest. If three of the largest grain producers all colluded to set grain prices above market price, they would be making record profits and success far beyond their wildest dreams. But that isnt what the state is interested in. The state is to make sure that grain production sets records regardless of whether the sale of that grain is profitable or not.

    

  The classical economic principle was that profit and loss was important because it helps determine how resources are best allocated. Thus if grain prices were high, and grain production is low, so long as these firms are maximizing profit, the profit generated was evidence that this is how labor and resources are best allocated. So if 6 billion people starve save for 100 individuals, this is the best way to allocate labor and resources? Absurd.

China-Cuba trade

  Fidel Castro needs to open up his markets to foreign suppliers. Most Chinese companies dont care about how deep in debt the nation they are trading with happens to be. So long as they continue to act as consumers for Chinese exports. So if Fidel opens up his consumer market to Chinese goods, Chinese can flood enough goods into Cuba, causing Cubans to start living american lifestyles.

Blah

  Having lived through both outcomes, high inflation and high wages vs low inflation and low wages. I prefer to pick the former. At least I can outwit the market with proper investment and timing while with the later, no such opportunity exists. What are we going to do? Short the market to zero? Investors do not want to see the RMB strengthen against their personal assets. That only happens during depressions. They want to see their personal assets strengthen against the RMB meaning that their homes, their equities, their gold and silver rise in value. And that value is measured in RMB.

  Contracting the money supply changes the ratio between RMB and personal assets. Thus the price of personal assets fall. Even though people still own the same quality and quantity of personal assets before monetary contraction, psychologically, these people feel ruined. 

  Interest rates should always be kept low and the money supply loose. All booms and bust cycles are man made, and it makes no sense to intentionally sink your own economy.

Absurdities

  The reason asset prices rise is due to money supply, and the reason asset prices fall is due to money supply. Property values in China have no where to go but up because the RMB supply isnt being controlled. The few ways to crash the housing market besides making home purchases illegal is to contract the money supply by increasing interest rates, decreasing loans, and preventing grants from being able to be used towards the purchase of real estate.

  But without such a policy coming from the People's Bank of China, new RMB will continue to enter the money supply thus chasing after limited housing supplies, raising the price of real estate. The Central Bank of China continues to operate a loose monetary policy. Asset prices can go no where but up.

  The only institution that can crash market value is PBOC. No one else wields that kind of power and influence.

Government money vs Private sector money

  All money is government money. Every single dollar in every wallet and bank account across the country is government money. Clearly emboldened with the statement, Federal Reserve Note. The private sector can never create M0 wealth, only the government can.

  What the private sector can create however is the M2s, the M3s etc. Meaning they are able to take government printed money, and leverage them into other forms of money, equity, checks, promissory notes,business loans etc.

   The us gdp is 14 trillion dollars. Only around 1 trillion of that is in the form of physical and digital currency. The rest of the 13 trillion is just fractional reserve lending and other financial devices. Which is pretty consistent with the 1 to 10 ratio demanded in banking circles.

Economic growth and trade deficits

 

  Economic growth is deeply related with the trade deficit. Economic growth helps increase the trade deficit while both 21st century financial collapses helped reduced it.

  Without trade deficits, economic growth could not occur. The Fed can not pump money into the economy unless inflation can be controlled. If inflation expands beyond an acceptable level, the Fed must increase interest rates and turn off the money supply. So long as inflation is controlled from cheap imports, the Fed can continue to increase liquidity.

A deficit is a debt

  Deficits are essentially a debt. A budge deficit is a government debt owed to its own central government bank. A trade deficit is a national debt owed to foreign nations.

  So if a government does not have enough tax revenue to pay for government spending, it must borrow additional funds from its own central government bank. And when a nation does not export an equal value of goods compared to the goods it imports, it must borrow additional monetary units and export it as payment.

  I would not worry too much about deficits. Most countries and its people are not very intelligent. They do not even know what their interests happen to be. Either I am left in the dark about secret backroom diplomacy or foreign leaders are very stupid.

Clintonomics

  I found an article that mirrored my view but for the first time I saw someone actually put it into written words. Its proper economic form that whenever the economy improves, and employment levels are high, generally, there are high levels of inflation. Likewise, whenever the economy suffers, and employment levels are terrible, generally, there are low levels of inflation.

  The author then goes on to state how clinton however managed to dodge this particular bullet during the IT bubble. And I think the author understands that high employment, high economic growth, and low inflation was masking something that was not being discussed. The sudden explosion in the trade deficit.

   When employment and wages rise, so does the price for goods. The baker is making more income because the butcher must pay the baker more. The butcher is making more income because the baker must also pay him more. But there was not that much inflation during the IT bubble. And as the above chart suggests, its mostly attributed to the trade deficit. Low priced imported goods help reduce the impact from monetary expansion led by greenspan. Since the foreign countries were not interested in buying american goods, they were unable to ship the inflation right back to the united states. That money most likely ended up in some kind of foreign reserve system, being held up as IOUs. For americans, the us dollar is legal tender. For foreign countries its a national debt. A promissory note indicating the us will one day repay in the form of goods and services.



Greenspan turned to a policy of easier credit in 1995; in 1996, he resisted pressure from some Federal Reserve Board members and refused to raise the Fed funds rate..Greenspan’s contribution to the economic boom of the late 1990s was that between 1996 and mid-1999 he barely raised interest rates at all, despite a rapid increase in the rate of growth and a falling unemployment rate. By 1999, the unemployment rate had fallen to nearly 4 percent. Two years earlier, most economists believed any rate below 5.5 percent would produce inflation. Greenspan openly and even aggressively defied the conventional wisdom.

	Fed makes surprise rate cut  January 3, 2001: 5:04 p.m. ET Cites signs of economic slowdown; cuts fed funds rate to 6% NEW YORK (CNNfn) - In a surprise move, the Federal Reserve slashed short-term interest rates Wednesday and signaled it is ready to make further cuts to keep the U.S. economy from sliding into a recession.

Greenspan's Speech Focuses On Deflation, Not Inflation

By EDMUND L. ANDREWS
Published: December 20, 2002

WASHINGTON, Dec. 19 — Alan Greenspan, the chairman of the Federal Reserve, warned tonight that deflation, a general decline in prices, could be more damaging to economic growth than inflation...
  The Fed's benchmark interest rate on overnight loans between banks is now at 1.25 percent, its lowest level in 41 years and within striking distance of the ''zero bound.''
In both his discussion of deflation and his cautious assessment of the economic outlook, Mr. Greenspan reinforced the impression among many economists that the Fed did not plan to tighten monetary policy soon.

  Greenspan is orchestrating a boom and bust cycle and its responding to him almost like clockwork. But currently, even at near zero percent interest rates, the economy is still terrible.

Zimbabwe

  I never quite understood why Zimbabwe could print so much money and still maintained high levels of unemployment. I am sure someone with more knowledge about the country could explain it better. But hyperinflation in Zimbabwe did create one thing. The worlds best stock market when viewed from a return on investment perspective.

 
  The Zimbabwe Stock Exchange (the ZSE) is the best performing stock exchange in the world, the key Zimbabwe Industrials Index up some 595% since the beginning of the year and 12,000% over twelve months. This jump in share prices is far in excess of increases in consumer prices.

  I suppose more money was used to drive up stocks than it was used to invest in the real economy such as infrastructure and jobs. 


  When Germany experienced hyperinflation, unemployment fell nearly to zero percent. So much money was coming off the press that everyone and their grandmothers all found work.


Industrial output increased by 20 percent within a year, unemployment fell to below 1 percent in 1922, and real wages rose significantly. The "lubricant of inflation," as economic historian Carl-Ludwig Holtfrerich put it, breathed new life into the private sector.

The post-war boom was all the more remarkable because the rest of the world economy was sinking into a deep recession. The United States and Britain stabilized their currencies even though it put up to a fifth of their respective working population out of work. The governments of the Weimar Republic took the opposite approach, buying themselves an economic upswing and full employment at the cost of catapulting the mark to dizzying heights. Although it would probably be unfair to suggest the politicians in Berlin deliberately drove inflation forward, they didn't exactly try very hard to rein it in.

  Wages were increasing so quickly that the German Mark itself lost any significance as a monetary value. 

Why dont we pay off the national debt?

  Because the economy would crash. You would need to increase taxes and cut spending in order to reduce the national debt. That means increasing taxes so people have fewer money, and you need to lay people off to cut spending. Which will always lead to a financial collapse all other things being equal.

  Paying off the national debt will just create one big sucking sound. 

Income is just money supply

The average annual salary of an American worker in the year 1920 was $1,236. The '20s are generally regarded as a prosperous time for the U.S. economy.

Read more: The Average Salary in 1920 | eHow.com http://www.ehow.com/facts_7426286_average-salary-1920.html#ixzz17w0Ip3i5

 The daily salary in the 1920s was 3 dollars and 40 cents. This is because there just had not been as much money printed during that period. In 1880, the daily wage was 2 dollars, so a lot of money was printed in 1920 comparatively to 1880. Today, numbers like that are considered to be laughable. 

 The money supply has grown a lot these last 100 years, so 3.40 would never be considered acceptable today. Incomes generally track the amount of money we print or create through loans. So, the faster we print or loan new money, the faster incomes are expected to rise.

This is not about diplomacy, it is about truth

World Opinion

  I do not think anyone really has much of a problem with China supporting or not supporting North Korea. As long as it is meant to confront the united states, the world would see it as China playing a positive role. If there was an honest poll on the subject, I am sure there are more anti-Americans in the world than there are anti-North Koreans.

 

Fiat Currency

  I love fiat currency. It gives the state infinite flexibility. A gold standard makes it impossible to execute policy. However with fiat currency, the sky is the limit. The government and its people can practice fiscal policy without restraint. Instead of 35 miles per hour on the back of a scooter. With a printing press, we can now go 1400 miles per hour at basically mach 2 speed.

  The technologies we can expand, the amount of goods we can produce. It is all financed by printing money. Military spending, consumer spending. With PBOC at the helm, anything is possible.

Gold reserve

  The gold reserve in the united states is irrelevant. Either it does not exist, or it does exist but he does not care to show it to you. Either way it is the same as being non-existent.

  Even after Roosevelt confiscated gold from americans, the gold standard was still left somewhat intact. It was illegal for americans to own gold until gerald ford. But the us dollar was still backed by gold if you were non-american. All americans must obey the dollar, its law of the land as executed by Roosevelt's Executive Order 6102. But that executive order is groundless to a non-american who doesnt trade in us dollars. Roosevelt can pounce down your door and take your gold so long as you are american. But Roosevelt cant do that to the Soviet Union or China or any other foreign country. So an incentive must be created to give the dollar credibility outside the united states. And the federal government promised all foreigners one ounce of gold for every 35 dollars they carried. Trade deficits could thus be funded by exporting dollar bills since in theory, the dollar bills could be exchanged back to the united states for gold at 35 dollars per ounce.

  The us dollar was attacked in 1971. European investors and European Central Banks sought to exchange the dollar bills they had accumulated from the us in exchange for american gold reserves. After a few shipments of gold, the us finally threw its hands up in the air and said: no more gold.

In 1971, the U.S. government again printed more dollars (a 10% increase)^[1] and then sent them overseas, to pay for the nation's military spending and private investments. In the first six months of 1971, $22 billion dollars in assets left the U.S.^{[citation needed]} In May 1971, inflation-wary West Germany was the first member country to leave the Bretton Woods system — unwilling to deflate the Deutsche Mark to prop up the dollar.^[1] In order to prevent the dumping of the Deutsche Mark on the open market, West Germany did not consult with the international monetary community before making the change. In the next three months, West Germany’s move strengthened their economy; simultaneously, the dollar dropped 7.5% against the Deutsche Mark.^[1]
Because of the excess printed dollars, and the negative U.S. trade balance, other nations began demanding fulfillment of America’s “promise to pay” - that is, the redemption of their dollars for gold. Switzerland^[1] France, in particular, repeatedly made aggressive demands, and acquired $191 million in gold, further depleting the gold reserves of the U.S.^[1] On 5 August 1971, Congress released a report recommending devaluation of the dollar, in an effort to redeemed $50 million of paper for gold in July.protect the dollar against foreign price-gougers.^[1] Still, on 9 August 1971, as the dollar dropped in value against European currencies, Switzerland withdrew the Swiss franc from the Bretton Woods system.^[1]

August 15, 1971, President Nixon imposed a 90-day wage and price freeze, a 10 percent import surcharge, and, most importantly, “closed the gold window”, ending convertibility between US dollars and gold

  The government is not willing to trade its supposed gold reserves in exchange for your dollar bills at 35 dollar bills an ounce. So there is no stability in the value of the dollar. One day a single dollar can purchase .8 grams worth of gold. And the next day, 1 dollar can only purchase .00007 grams of gold. So what difference does it make if that gold reserve exists or not.

Sour Grapes

  The Test Chinese Schools Still Fail - WSJ

  The Chinese school system is fine. If I was given the reins, the system now is probably the same system I would intuitively design. Its not the same system I would like to be subjected to. But it is the same system I would like to condition future adult citizens. 


  The system creates young adults who can exceed in math science and other skills they may never actually use. (HA) But I don't understand the article's claim that China's educational system has failed China from an entrepreneurial standpoint when the economy grows in the excess of 10 percent a year. 

  Of course, as I said in previous articles. The economy is not based on a nation's educational system. Otherwise, I would have given it much more emphasis in previous articles. A nation's economy is based on the central bank and its monetary policies.  

  It is nice to know that a pool of talented individuals are available to be recruited from. But first and foremost, I need liquidity. And that can only come from the state. 

What it takes to be a global power

  Leaders lead, they dont follow.

Interest rates and the economy

  President carter presided over some of the worst economic conditions in the united states. His biggest concern was tackling inflation. Thus interest rates were in the double digits to help reduce inflation. But such measures were terrible for the economy.

  In contrast, interest rates were reduced to the single digits under president reagan. The national debt was tripled during reagan's 8 year term however the economy improved remarkably because of it. Lowering interest rates help reduce the cost of borrowing. Whether that borrowing is to fuel the IT bubble or the real estate bubble. Without lowering interest rates, people just would not have money. Without a national debt, people just would not have money.

  In case people do not understand. Interest rates are set by the government. Private sector does not create money, only the government can. The only things the private sector can create is fractional reserve lending, shares and equities, and goods and services. But they still cant create money. No private sector is able to create wealth. Only the government can.

Of course nuclear war is justified

  Why go through the trouble of building of them, if you wont use them.

man is in critical condition after he was shot while attempting to break into a home Tuesday evening

Trade has little to do with jobs

  As a more proper venue to discuss this subject, it needs to be realized that job losses or gains have little to do with trade. There is this assumption that if we no longer have jobs producing a product then we will no longer have jobs at all. This is largely a misleading concept. The united states produces almost no product. Like Hong Kong, Luxembourg, Saudi Arabia, Switzerland its hard to find a product that is ever made domestically. Despite all this, there are still jobs. Japan can not even produce enough food to feed itself and relies on foreign farmers to meet Japan's annual caloric intake. And despite all this loss in agricultural work, Japan is not suffering from massive unemployment.

 Jobs are simply a result of the money supply and nothing more. If the money supply contracts, then jobs will contract until people can renegotiate to work for a smaller sum of money while renegotiating with their landlords, their banks, and other institutions to reduce the amount they owe. This is generally understood as deflation.

  When the money supply expands, businesses hire more employees as employees, businesses, and consumers continue to renegotiate for higher prices and higher wages. This is generally understood as inflation.

 This is why a sudden jump of unemployment did not take place during the opening of NAFTA or any other trade agreement. The sudden jump of unemployment occurred when real estate prices fell and collapsed in 2008. Because the money supply was no longer expanding for the purchase of real estate. Banks were giving out less loans. Consumers and home owners were taking out less loans. And this retraction of the money supply ultimately leads to unemployment. Even prior to 2008, the IT bubble also led to a huge jump in unemployment as the money supply ceased to expand because investors and banks refused to create and hand over new money for new tech expansions.

The "dot-com bubble" (or sometimes "IT bubble"^[1] or "TMT bubble") was a speculative bubble covering roughly 1995–2000... The Stock Market Crash of 2000-2002 caused the loss of $5 trillion in the market value of companies from March 2000 to October 2002.^[13]


On December 30, 2008 the Case-Shiller home price index reported its largest price drop in its history.^[1]foreclosure rates in 2006–2007 among U.S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank^[2] In October 2007, the U.S. Secretary of the Treasury called the bursting housing bubble "the most significant risk to our economy."^[3]


 While an argument can be made that some kind of strategic security is involved in being able to manufacture goods such as steel, food, and machinery. That still has nothing to do with jobs.

Deficits are archaic

  All money today is legal tender. There is nothing backing the money you hold in your wallet. In 1933 when the us government ran budget deficits to finance the New Deal, americans rushed to their local banks to exchange their dollar bills for gold. The government gave one ounce of gold for every 35 american dollars to american citizens. A concept that is completely foreign to modern people today

  So many people rushed to get their gold that in 1933, Roosevelt refused to deliver gold in exchange for usd and passed an executive order confiscating gold from people's homes. Today, americans have no clue how the monetary system originally or was intended to work. The gold price today isnt 35 dollars an ounce. Its 1300, 1400, or whatever investors and speculators want the price to be. The government does not care if the price goes up or down. Because the government is no longer obligated to give one ounce of gold for every 35 dollars. The government is not even obligated to give you gold for 1400 or any price. So long as you keep using legal tender for your daily transactions, the state does not need anything else from you.

 There is no incentive to treat government notes as money unless the government was willing buy back those notes with ounces of gold. But that relationship has not existed for almost a hundred years. Today, the only reason you accept government notes as money is because its the law. And thus, budget deficits are an archaic concept leftover from the glory years when only gold was money and nothing else.

Spending cuts and taxes are bad for the economy

  Spending cuts weaken the economy the same way taxes weaken the economy. Its about the pool of money or the money supply. Government spending helps inject money into this so called money pool. And taxation helps take that money back out. Thus if the purpose is to increase our supply of money, neither spending cuts or taxation should be encouraged.

  If government spending is equal to taxation, then there is no change all other things being equal. All we are doing is redistributing wealth, neither creating more or less. Government spending should be regulated the same way interest rates are regulated. To keep track of inflation.

  Increased spending, low interest rates, tax cuts all help boost the economy. All three also have an effect in increasing inflation. Decreased spending, high interest rates, and increased taxes all help weaken the economy, but also helps control inflation.

  The traditional understanding of inflation is simply more money chasing after fewer goods. In actuality, inflation also encourage businesses to produce more aggregate goods. Government spending, interest rates, and taxation all have a real effect on the money supply.

  The financial contraction of 2008 helped reduce prices for goods and services across the globe. The lower prices reduced incentive for businesses to even produce.

Korean tensions

  North Korea has destroyed a South Korean warship and now killed two South Korean marines. And the united states is unable to offer a meaningful response. The saber rattling through military exercises is an attempt to save face. If they really wanted war, they would attempt an eye for an eye. Meaning they would also destroy a North Korean warship and kill two North Korean marines. But such an act would amount to a war.

  If the united states wanted an excuse for a war, killing 45 sailors and 2 marines is much better than any excuse formed during the gulf of Tonkin. If the us thinks it can win a war here, why not strike when the iron is hot? You going to wait a year after they sink the maine or the lusitania? If it is not going to happen now, it is not going to happen ever.

  North Korea executes activities that would amount to a war, but the united states is unable to respond using activities that would amount to a war. The most it can do is military exercises in order to give a show a force, as opposed to doing anything with real substance.

How taxation should be understood

  Historically, taxation was a necessity because it was the only way the state could acquire revenue for government spending. With the advent of Central Banking, taxation is no longer necessary. The government, save for local offices, would not need money from its citizenry. It would simply acquire the revenue needed through fiat.

  In a way, many governments around the world have already realized this considering how they run budget deficits continuously throughout the decades. However, they are still stigmatized by thought of no taxation. Perhaps it is due to some kind of classical mess. So the goal is simply to print or spend more money than they collect in tax revenue with the stated goal that they will collect enough tax some day, although they never do.

 How the tax system should really be applied is the same way Central Banks set interest rates. To encourage or to discourage spending. Setting high taxes discourages people to go out and spend thus helping to slow inflation. Lowering taxes help encourage people to spend thus helping to increase inflation but also to boost economic growth.

 Taxes can also be applied to set social policy. Engineering the populace to engage in one behavior, but not the other without being too heavy handed.

 With Central Banking and Legal Tender being the norm, the need for tax revenue is largely archaic and unnecessary except to promote social and economic goals through monetary engineering.

Taxation is always bad for the economy

  The only reason to tax the rich is to create some level of income balance between the income classes. The other reason, which is largely an archaic one is to help reduce the budget deficit. Other than those objectives, taxation is always a hindrance to the economy.

  The economy thrives on inflation. And whenever money is taken out of the system, whether it is through taxation or paying back loans, that creates deflation. And deflation is understood to be largely bad for the economy.

  But I suppose the purpose of taxing class A wont reduce the money supply since it will go towards government spending for class B. In that case, its neither bad or good for the economy but simply a redistribution of wealth. We are not creating any new source of wealth through this spending. We are simply taking X from class A and redistributing it to class B. Thus the aggregate amount of money still remains the same. 

I doubt thats an aircraft

On North Korea

  The best policy is to continue the path that had already been taken. Forty five sailors were killed during the Ming Submarine incident. Two marines and two civilians were killed in the most recent shelling. The united states and South Korea respond with saber rattling in the Yellow Sea. But neither have the courage to attack North Korea as a result of these incidents because they are fully aware of the irreparable consequences from such a move. So ignoring these two is largely inconsequential.

 North Korea could shell out Seoul and occupy it. And the consequences involving war with China still remain just as great.

 If South Korea thinks it has the military capacity to fight North Korea. Just out of curiosity, it might be interesting for China to even sit back and watch. China did not fight the Korean War until the united states invaded North Korea.

  And I am personally interested in knowing whether South Korea even has the military means to win a war with the North. Chinese can choose to intervene after the united states gets involved. There has not been a war between two conventional forces in a very long time. Not where armies drive opposing armies out of chess board like spaces.

Wikileaks

  The current release of wikileaks appear mostly to be disinformation. Whether knowingly or unknowingly, much of the information released appear to be another round of false advertising. It appears to be incorrect information being released under the guise of data falling into the wrong hands.

  I doubt the Chinese hacked google. I doubt there was any discussion about North Korea as described. Most likely concepts created out of thin air. A right wing ploy pretending to be left wing.


If you wish to strengthen a lie, mix a little truth in with it.

Zohar

Blah blah blah

  There was nothing to negotiate.

Fiat Money

  The Russian Federation would not even sell some uninhabited islands to the Japanese for 2 trillion usd. And Japan did not even have 2 trillion usd. What does South Korea possibly have that is worth all of North Korea? No one in the 21st century is willing to give away land for fiat money. Because fiat money has not been backed by anything for almost 50 yrs.

http://www.youtube.com/watch?v=-yblvWycttA&playnext=1&list=PL687AC3A449258F82&index=31

  Even negotiating an exclusion of us troops from South Korea after reunification would not be good enough. Without a pro-Chinese government, they could easily re-invite american forces back in and this time China would not even have a local ally to rely on.

  How many Warsaw Pact states have now fallen under the influence of the united states?

Why would China need the us?

  Exports depletes China the fruits of its labor and only leaves China with inflation.


We cannot eat, wear, or enjoy the goods we send abroad. We eat bananas from Central America, wear Italian shoes, drive German automobiles, and enjoy programs we see on our Japanese TV sets. Our gain from foreign trade is what we import. Exports are the price we pay to get imports. As Adam Smith saw so clearly, the citizens of a nation benefit from getting as large a volume of imports as possible in return for its exports or, equivalently, from exporting as little as possible to pay for its imports.

Milton Friedman 1980 

  We have 50 percent of the world's wealth, but only 6.3 percent of its population. . . In this situation we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will allow us to maintain this position of disparity. We should cease to talk about the raising of the living standards, human rights, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better.

George Kennan 1948

  There is no benefit in exporting to the united states. The only product they can ship back in return is IOUs.


 

China's interest to support NK is absolute

 I doubt the current wikileaks are real. There is nothing interesting in the diplomatic cables that is remotely damaging similar to the videos showing helicopter gunships attacking journalists in Iraq. The current wikileaks discussions are just trivial points similar to that of a tabloid. X civil official consorts with busty woman, Sunnis do not like Shiites. There is nothing useful being provided. For somebody who is trying to retaliate against the united states for trying to arrest and imprison him for the video releases, the current diplomatic cables do not seem to incriminate the united states one bit. The type of information released seem like something dreamed up by a insurance salesman turned novelist.

 Supporting North Korea since the Korean War was the single greatest event to ever give China any ounce of credibility. If China never sent troops to force the us to retreat back into South Korea, there would be no independent Vietnam. The united states lost no battles against Vietnam. Unlike the Korean war there were no 50 mile retreats or floods of american marines fleeing the battle zone. The us lost no battle against the Viet Cong.

The onslaught of hundreds of thousands of Chinese troops forced the Americans to make a desperate retreat. As American forces were nearly overrun, they engaged in the largest retreat in U.S. history. By December of 1950, the Communists recaptured Pyongyang. In January, Seoul fell as both sides dug in at the 38th Parallel.


  Since China had not demonstrated any precedence to intervene in a war on its Asian Borders, the United States would have rolled into the North Vietnamese capital of Hanoi with tanks and armored personnel carriers and completely overtook the northern half of the country, effectively ending the Vietnam War.

 Such a military policy was impossible solely because of the precedence set during the Korean War. The united states was forced to fight the entire Vietnam War in South Vietnam with one arm tied behind its back because if the us did pursue Viet Cong forces into North Vietnam, that would have been an invitation for the Chinese to enter the war.

 Any reunification would have to come under North Korea or a Pro-Chinese state. A unified Korea under a South Korean government is unacceptable. An extension of South Korea is a retraction of Chinese influence in the Peninsula and an expansion of anti-Chinese sentiment.

Nuclear policy

  The goal of the nuclear forces is not simply to inflict damage. We do not simply pursue a nuclear arsenal that is to create a credible response. That is just bad policy. We do not know how far a nuclear war can escalate thus we do not pursue a nuclear policy that simply assumes a limited nuclear response. You pursue a nuclear policy that achieves unlimited nuclear response. We do not know what X is, but we should be maximizing our production frontier to best be able to reach it. The closer we are to X, the more peace of mind we are able to acquire. And a self awareness of how less vulnerable we have become.

  Officially, the Russian Federation is the world's largest nuclear power. I find it hard to believe China would not have a nuclear arsenal larger than all of the nuclear powers combined. This issue is just far too great to ignore.

Economy

  The economy is driven by demand. Whatever kind of demand. Whether it is consumer demand or military demand. And it is that demand that fuels the economy. And it is monetary policy that helps us shape demand. By giving consumers the financial means to consume, they help shape the economy towards one where consumer goods are produced to meet consumer demand. Likewise, if we give the military the financial means to consume, the economy is shaped to produce military goods to meet military demand.

  So its not necessarily a question of if we produce too many warships, we wont be able to produce more cars. When you have an economy as massive as China's, what else are you going to do with 550 million tons worth of steel making and 55 million tons of shipbuilding per year? Because industrial output is so massive, millions would find themselves without work if military demand were to evaporate. The production frontier is where it currently stands because there is state demand for goods and services. If state demand were to contract, so would the economy and jobs along with it.

  The second world war did not cause global economies to contract. In contrast it caused, the greatest economic boom ever seen in the 20th century. It effectively ended the Great Depression. Nowadays, whenever we admire a nation's economic growth. We make statements like, the greatest level of economic growth ever seen during peace time. This is because it is still pale compared to economic growth normally seen during war time.

Another call to reason

  I am hoping it has become abundantly clear that a lot of how the monetary system operates is irrelevant. And that the only thing state planners should concern themselves with is maximizing production, and achieving national objectives. Thus the recent military spending booms that China is experiencing is a godsend. And increasing that spending by multiples would be even a greater godsend as it helps increase jobs and improve productivity. I am not suggesting that China should start a war. The economy does not need a war in order to create a healthy economy. It only needs to prepare for one. War mobilization even when ultimately, there is no war to fight, is the greatest stimulus package you can give to the economy.

Just focus on Productivity

  The National Central Bank should ignore things like profits and let the speculators, the investors, the old guys who stare at the Shanghai Index all day worry about that. Your primary goal is productivity and objectives. Because profit and loss is all imaginative. None of it is real. The only profit and loss that people care about is the legally binding one. Meaning the profit and loss stated in the value of their national currencies.

  It does not matter if the value of my profit depreciated 99 percent against cotton, gold, iron, or nickel. All that matters is that I still reported a profit in fiat money. So a Japanese only cares that he reported a profit in Yen. He does not care if he reported a loss if that value was converted to Euros. Likewise, a European only cares if he reported a profit in Euros, he does not care if its actually a loss if converted to RMB. Because the only obligations he has to worry about is paying his employees and being able to deliver tax to his state. And both are legally obligated to accept payment in fiat money.

 Even if the contract demanded that payment be paid in some physical or tangible good. The courts are willing to accept payment in the form of fiat money, because that is the law.

 

  Ultimately, it is the state that becomes the arbiter of whether or not the economy remains profitable or becomes unprofitable. And that can be achieved by controlling the money supply. Thus when the government operates a loose monetary policy. Running almost any business would appear profitable. However when the government operates a tight monetary policy, profit seems to escape everyone. This is because if A wishes to report a surplus, B must report a deficit with A. However if the money supply remains loose, both A and B can report a surplus because new money is being created out of thin air.