A Crash Course On Our Bubble Economy

A quick public service announcement, brought to you by Grassroots Liberty:

We are still in a bubble economy.  If you or a loved one relies upon and trusts the state and the media; if you’re invested heavily in traditional financial instruments, if you’re betting your entire financial future on bonds, real estate, your wall street retirement account, and taking out more loans, then you may suffer from EPS – or economic propaganda syndrome.  Talk to your  economist today about CommonSense.

Okay, but in all seriousness, be wary of what you hear about the state of the economy. Despite what you might have heard, the economy has not really rebounded, in a rational, healthy way.  As Austrian Business Cycle Theory explains – the cyclical ups and downs we see in economies are not random, not merely caused by some law or deregulation, or by some abstract business “greed”. Recessions, depressions, booms, and busts are caused primarily by states and central banks attempting to carry out “monetary policy”.  When policies are put into place that make money unlimited, make it easy to access, and set interest rates too low – malinvestment takes place.  (There is also of course the insidious evil nature of this system, as it is set up to benefit certain people during both the booms and the busts.  Refer to my previous post on the Federal Reserve for more information.) Too much imaginary money is flowing all over and everyone thinks things are prosperous. Everyone takes out loans, buys houses, gets in the stock market – because all the numbers are bloated, and they think its all a big win-win game.  But since this spur of growth wasn’t based on saving and investing; it really is an illusion.

Money isn’t growth.  Money represents the value of goods and services.  It is used as an exchange mechanism for what people really want – valuable things.  So by merely pumping money into the world you aren’t creating any more value.  But, to the media, the talking heads, and the unquestioning masses, it would seem things are going great.  In the 19th century and before there have always been ups and downs, but they were never very serious or long lasting, because back then things weren’t centralized, controlled, and managed. We hear in our government history classes the terrible phenomena of crashes and “bank runs”, particularly in the 19th century.  We’re supposed to shiver at the thought and be thankful we have the Fed and the FDIC nowadays.

Well, in truth there isn’t anything inherently bad about a bank run.  It’s really just people deciding they’d like to withdraw their money and do something different with it – and usually for good reason; there might have been some fraud going on, some misuse of money, some new law passed, some scandal going on (take the recent episode in Cyprus as an example – the state created financial problems, decided they would steal money directly from peoples’ bank accounts, and there were mass withdraws and movement of value into things like bitcoin).  We’ve been conditioned into thinking it is a bad thing to get your money out of a bank.  Even up to today, banks have been known to ask people questions as to why they’re making a large withdraw.  So let’s put all this in perspective and step back from the mainstream narrative for a second.  To most people – it would not seem odd to withdraw your own money and find a better place for it.  Further, bank runs also wouldn’t be much of an issue if it weren’t for fractional reserve banking.  But since it is apparently okay for banks to lend out far more money than they hold, it’s understandable why someone would rush to get their portion of the holdings out. But this issue has been complicated and obfuscated by the institution of FDIC insurance.  Sold to us as a protection against banks, what it really does is insure the entire banking industry, from the global banks down to tiny local banks, that none of them will ever be threatened, the people will never want to withdraw their money, and they will never go out of business.

So, it’s obvious how the government wouldn’t like bank runs.  They need to control banks to create unlimited money and control everything else.  And it sort of makes sense how bankers feel about bank withdraws (they want to play with our money).  So we end up mythologized into believing that nothing can function if some people withdraw their money from a bank.  Bankers control things from behind the scenes and are intimately in bed with politicians.  Removing your money and deciding to do something different with it, to save in a different way, to transact in a different way, to finance in a different way, or with a different currency entirely is a mortal threat to the entire banking system, and to the lifeblood of the state – unlimited, legalized counterfeit money.  So of course we get legal tender laws, making it illegal to transact in anything other than Federal Reserve notes.  We get the FDIC, guaranteeing the existence of banks forever.  We get the Federal Reserve, creating a spigot of imaginary money to feed to governments, pumping  phony stimulus, and lending directly to big banks at 0% interest.  The entire system is entrenched and corrupt.  Are you catching on that this looks a tad like a monopolized cartel?

And of course back when we had bank runs, those events corrected rather quickly. Life went on.  Business didn’t stop, people didn’t stop growing food, or building things.  In a free market or even a relatively free market, things work themselves out pretty well.  For example, the very last normal crash to occur before the modern cycle of booms and busts was in 1921.  The stock market and the entire economy crashed deep and hard.  But, the difference with other events the media and government love to tell us about – the government and the Fed DIDN’T try to artificially correct it. It was a relatively hands-off recovery, and within a year people were voluntarily putting things in order and all was getting back to normal.  But by 1929 things would be a lot different.

In 1913, the entire world would begin to change.  Modern central banking was born.  Again, refer to my previous post on the Federal Reserve for more information.  So, by the 1920’s when the Federal Reserve has gotten into full swing, the cycle of Fed easy money induced booms and busts that are still occurring today would start to take shape.  We would get the crash of 29, the artificial growth during the war, stagnation in the 70s, an easy money boom in the 80s, a crash in the late 80s, an easy money boom in the 90s, a crash around 2000, an easy money boom in the early 2000’s, the crash of 2008, and now a reinflating of yet another easy money bubble now in 2014.  None of these events was mysterious, although everyone in the government and media will claim “no one saw it coming”, etc. Economists of the Austrian School have been forecasting and predicting every one of these events for a hundred years.  You have to understand that central banks, and banking in general benefits the state the most, so it is in their interest to protect and hide the fact that central banks are in fact doing the exact opposite of what they are intended to do: promote growth, stop inflation, provide stability.  That is why you’ll see the “court historians” and establishment economists continually developing and repeating myths about economic cycles, usually boiled down to some mysterious explanation, and the “no one saw it coming” line.

That brings us to today.  You’ll keep hearing positive numbers from the major networks, and mainstream radio and newspapers.  We hear “employment numbers” are improving – when in reality more people than ever have simply stopped looking for work, retired early, or accepted a part time position – thus not counting them in the government tallied figures anymore.  We hear housing prices are going back up, and “getting back” to their “pre-recession” levels.  That is the problem! [Edit: Update as of Sept. 2015 – The new housing boom has now outdone the early 2000s bubble.] We shouldn’t want them to go back up to their pre-recession levels.  These people haven’t learned a thing.  If something doesn’t make sense, well, it probably just doesn’t make sense.  Prices don’t just naturally “go up” on their own.  Value has to be added and demand has to be created.  House prices rising again just means a bubble is re-inflating.  They’ve created a student loan bubble, by perpetrating the idea for years that everyone should go to college, needs to go to college, even must go to college if they want to make it.  Then the government subsidizes college tuition to extreme levels, handing out money all over the place.  So what would you do if you’re an industry which the government is guaranteeing unlimited customers with unlimited money? – you keep raising prices.  There is also a bond bubble inflating.  And finally, the stock market is the obvious example.  Stocks are supposed to be the measure of how well companies and industries are doing.  Well with so many people out of work, more people in more debt than ever, companies closing locations, companies and cities going bankrupt – it doesn’t make sense why the stock market is hitting all-time highs.  And of course, it doesn’t make sense!  Its all illusory growth – which is worst of all, because billions of people for some reason trust the corrupt western economies with their savings, investments, and futures.  The growth in the stock market right now is artificial – most notably caused by the Fed’s pumping of imaginary money into the banking system every month.  The business world is diseased by fake money – and the people have caught the bug.

So back to the title.  I’m saying all this just to remind people, don’t get caught up in the hype.  Be cautious, conservative, and responsible with your money.  Don’t trust it all to establishment financial services.  Start thinking outside the box, and considering innovative ways to store and grow your wealth.  Don’t put all your eggs in one basket.  The bubble will inevitably pop, and it will be worse than in 2008.  But, the point of saying all this is not to spell out imminent doom for everyone.  It is to say, protect yourself and get creative now.  If people start to see the nature of the manipulated economy we live with – we can all be prepared for the correction.  And when their bubble pops, we will be fine, and the bankers, politicians, and bureaucrats will hopefully be left to foot most of the bill. Before 2008, most people were oblivious to this cycle and what causes it.  With every crash since 1929 – everyone was caught off guard – and was hit hard.  Its time we change, see reality, and take responsibility for our futures.  See it coming this time.

Consider fresh ideas like learning to grow your own food.  Try locally trading through farmer’s markets and other agorist style markets.  Discover the benefits of holding your own wealth in durable goods, gold, silver, etc.  Try learning some new skills, or new ways to use the skills you already have – so you’re not purely reliant on your dollar based pay check (sewing, music, candle making, arts, cooking, writing, teaching, self-publishing – could be anything).  Look into crypto-currencies like bitcoin and the entire blockchain based system of technologies – which can safely make possible banking, insurance, lending, contracts, and law – all without the state or other middlemen.  Look into alternative solutions to everyday parts of life like peer-to-peer lending, instead of bank lending; try decentralized online/holistic/unschooling style education, or new non-union apprenticeship programs that are popping back up.  Consider investments outside of the US.  Travel and get to know the global marketplace.  And of course, more than anything else – do not get into a “set it and forget it” money management routine.  Throwing your money in an investment fund, and forgetting about it will not pay off forever anymore. Throughout history, money manipulation has never lasted very long and it always crumbles on itself. The 20th century was the century of centralization, money control, and war – but things are changing.  We are slowly entering a time of decentralization, markets, and a renaissance of human health and happiness. Get active with your money and get active with your knowledge and skills.  Every person is an important piece of the global economy now.  No person should see themselves as a helpless cog in the machine.  We all now have the capacity to step up, speak our own minds, move, learn, innovate, and achieve as much as we choose to.  It is up to each of us to choose to act in our own lives to create a better world.

How and why the state controls money and banking – Tom Woods Show

Why the meltdown should have surprised no one – Peter Schiff