16 June 2012

What a difference a few weeks makes.  

I don't think much has changed fundamentally.  Spain and Italy, the countries, are still in a lot of trouble with very high yields on their bonds.  Yes, there was some a baby bailout for Spain's banks, but I expect we'll see with time that it was not enough.

Although large amounts of paper currency can temporarily fix balance sheets, no amount of money freshly lent into existence money will fix a societal problem.  The European nations are not the only ones that promise life, if we want to call blind consumerism that, with minimal in return.  I also am tired in reading how people want to get back to the "good old days" while referring to bubble years or years leading to a bubble.  The aftermath we are dealing with now is because of that bubble.  It caused many to lose their jobs, lose their homes, and the worst, lose hope in something they truly believed in...American "Capitalism."

In the end, we found out it was all a big lie.  On top of that, we wasted tons of natural resources building all the homes and malls which are now overgrown lots and vacant stores that are driven by with frowns.  Imagine if we used that money to build things that improve life.

I don't think enough is written about the negative effects of credit creation.  I frequently am told that "banks create jobs by funding opportunities," "they provide funding for small businesses," or that "they lend to the government."  Yes, I guess those are all true.  But those are the seen effects, what of the unseen effects?

Funding opportunities by inflating the money supply might cause someone else to go hungry or have to keep the thermostat a little lower.  It might cause revolutions over food prices in third world countries.  It might starve more Africans than were already starving.

Funding small businesses that should not be funded causes misallocation of capital and human labor..it might even cause someone to overestimate their ability to open a business.  After spending all of one's lifes' accrued savings on a bad investment, but the bank agreed to make the loan as they had no risk (banks create the loans out of nothing), imagine the destitution this leaves.

Think of all the kids with huge student loans that will not be able to pay it back.  These loans were the result of easy credit.  The high tuitions and tons of university structures wouldn't exist without this credit.  Think of the governments promising what they can't deliver causing an entire generation to forget how to work or even forget what is productive work.

Think of all of those who can deliver something useful to society, but have been conditioned that all they need to do is be alive.  And here we are at the last gasp...the funding was there to keep people placated, buy votes, and make them think there was such a thing as wealth without labor.  The promises are undeliverable. The piper needs to be paid.  It will be paid with defaults or by extreme inflation.  There is no such thing as a free lunch in a world with fixed resources.  The ending of the current banking system seems to be a naturally occurring evolutionary death.  Maybe easy credit is not needed for non-developing nations.