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Written by Charles Hugh Smith
How Private Financial Fiat Creates a Public Farce (guest post) (November 13, 2012)
Today I present a deeply insightful guest essay by frequent contributor Zeus Yiamouyiannis, Ph.D.
Nothing succeeds like failure when you are a big bank. We’ve already seen that. Too many articles have already been written about that.Heads, the big banks win through their hugely profitable derivatives and other fake wealth vehicles on the way up the phony growth curve.Tails, you, the citizen, loses as you are forced to redeem this toxic trash for real money in the form of government bailouts and Federal Reserve purchases as fake value collapses.“O, the inhumanity, O the injustice.”Hey, we get it. You can stop pounding the drums. Bring on Act II: “The current anti-capitalist farce and its riotous effects.”Capitalism turned on its headWhat happens to functioning capitalism when its core operating principles of value and money, risk, private property, profit, supply and demand, price discovery, transparency and accountability, productivity, and exchange of worth can selectively be erased on the whim of self-interested, politically connected players?What happens when every standard of the game is turned upside-down by rule-rigging fat cats and then cravenly excused by international governments, prosecutors, and regulators? You get a leaky economic charade riding on a sea of debt bailed out with “expert” psycho-babble, high-level cheerleading, and government assurances that sound more each day like sick punch lines to bad jokes:• “Deficits don’t matter.”
• “The recession has ended.”
• “The weak dollar is good for trade.”
• “Debt just needs to be ‘restructured.’”
• “We just need more government stimulus spending.”
• “Federal zero interest rate policies (ZIRP) help everyone.”
• “Unemployment is down.”Enough of the minstrel show and its official nonsense. Here is the real deal on the current corporate/government war against capitalism:Farce #1: “Market value” and “free markets” have become a joke.In order for “value” to have financial value in the free market it, 1) must have real worth to someone else, and 2) must be freely chosen. The whole point of a market is that people choose according to their desires and needs, not yours. No one is entitled to a profit.That’s what “market value” and “free market” mean. Other people, known as “the public,” interactively determine what your asset, good, or service is worth. You may think something is financially worth a lot. If others do not, it’s not worth squat.If you can merely create private fiat by assigning your own value to your “assets” and products and then force others to buy them, there is no valid market value or free market. It is simply financial dictatorship.Farce #2: Private, self-assigned, fake value is being traded for public money at 100 cents on the dollar.Even basic monetary standards for public exchange of value no longer apply. Now big banks have been given the executive go-ahead to self-assign value to their assets at any price they choose. This is called “market to model” (i.e. profitable lying with complicated mathematical formulas).This violation of capitalism comes not only in refusing to allow the market to determine price of assets, but in forcing the public through government capture to pay for “impaired private assets” with “real” public money at 100 cents on the dollar!This is nothing more than the exchange of publicly accepted money for worthless, private, counterfeit crap.Farce #3: Printed money is backed by nothing.However, what “value” does that public money have? What is the current U.S. dollar tied to? Nothing of worth. It refers to no credible public asset, good, or service. The Treasury and the Fed are just printing money, period.
There is so much more at his blog and the link is always on the left side "Of two minds."http://www.oftwominds.com/blognov12/Zeus-private-fiat11-12.html
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