Re: Re: Ireland to tax private pensions.

[Guest guest]

Inflationary policy is meant to do the same thing, to force people to spend their savings to boost consumption. However, it is savings and investment that really stimulate the economy. Savings and investments provide companies with money to operate.

This leads to the failing of US economic policy though. Long story short, economic policy has been dominated by post-industrialists like Clinton's Reich. Reich was quoted as saying that US would focus on designing things and other nations would build them. However, design is only a small portion of the picture. Production is there the money really comes in, particularly the final touches on the item where the most value is added to the item. Of course, it helps to build as much of the product as possible. This is why a lot of manufacturing has gone to China. Now, much of the design work is going overseas to be closer to the factories as well.

Obama also has many post-industrialists around him who want to continue the de-development of the US. All that will mean is a slide into poverty for the masses and vast wealth for the handful at the top. The reason is very simple: the vaunted service sector jobs don't have the incomes of the manufacturing jobs, nor are there as many creative jobs and fewer creative people, as the post-industrialists claim. So, fewer people will be able to buy things at the level the government wants to keep up the debt-based currency. This is similar to what happened in the Great Depression when people stopped buying things and companies started to fail. This would not have been a problem as it had not been a problem in previous down cycles. What was different was the Federal Reserve which dumped money into the system to "soften the bump" and we know how that ended up. When people can afford to buy less, then the system will tank.

Now the Fed is at it again. Ever wonder why these asset bubbles are happening? Very simple: the trade deficit. Trade happens in three ways.

1. Items of more or less equal value at time of trade. This was the US policy for a very long time and under which we were the greatest industrial power on Earth.

2. Items are bought on by selling or trading assets.

3. Items are bought on credit, or the promise of future sale of items and assets.

The US has been doing the last two ever since LBJ screwed up Bretton Woods but devaluing the dollar through inflation. (Bretton Woods was a system of fixed currency exchange rates.) This is why the Japanese bought up property all around the US around 1990. It is why China is now snapping up US high tech and other companies and looting them of technical knowhow. Those dollars the post-industrialists say would buy US goods aren't. There aren't enough US goods produced to meet domestic demand let alone balance the trade deficit. So instead they are buying assets and companies and knowledge.

Now, the bubbles when assets are losing value. So, in order to boost the price, the Fed inflates the currency. Most people don't realize this is happening, but a fair amount of stock price increase, land value, gold's value, etc. are going up because of inflation. When one bubble pops, rather than take the excess money out of the system as should happen, the Fed throws in more to boost other asset prices creating the next bubble. Right now the bubble is likely in commodities and it won't last. Once that goes, there really isn't anything left to boost. The jig will be up.

In a message dated 5/11/2011 9:14:43 P.M. Eastern Daylight Time, no_reply writes:

The idea is to get people to cash out their pensions and get money circulating into the economy to prop it up. The problem is that it is a temporary solution to an ongoing problem.Administrator