economic babble

ECONOMIC BABBLE
I want to thank everybody in the comments section for trash talking Rawles for me. It saves me time and makes me look caring and compassionate that I'm not the one saying it. But seriously, let's not forget a few things. He may not be much of a writer, but he is a heck of an editor. Unlike my site, random splatterings of drivel you can't find, you can find information over at www.survivalblog.com with a simple search. I don't remember what I wrote about or when. Also, I am pretty much a one trick pony, subject wise. Over there you get a variety of experts on different subjects. I disagree with Rawles over his philosophy, I don't dislike him as a person. I just like to keep the record straight. I think I'm a better writer, and I think I show The One True Way, but you must out of fairness acknowledge the good points of others.
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Now that I've proven what a swell guy I am, I can disappoint you with random ramblings of nothing very new or original. If you had tuned in for the last article at http://www.oftwominds.com/blog.html you could have read a great analogy on the economy and the Titanic sinking. He pointed out the four engines of our economy that are shutting down as the sea water level rises to extinguish them. They are debt, rising assets, government borrowing and rising employment. Obviously all are in big trouble. Debt worked wonders in the economy, from corporations borrowing to buy their competitors consumers at the cost of interest payments to home owners paying mortgage rates on credit card and auto loans. That was possible through rising assets. If the stock price of a company goes up, if the equity of a home rises, the collateral for cheap loans magically appears, no actual effort or value added needed. Government borrowing substituted for taxes, freeing up capital for businesses and consumer spending on consumption. And all of that was possible, more debt and more consumption, through rising employment. Who couldn't afford a NINJA home loan when both spouses worked?
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Well, as Zimbabwe would have been happy to tell us if we had just asked, you can have a great party off of the historical economic capital you pillage but sooner or later that runs out and you need to start printing worthless money to keep things going. You would have thought that after almost a hundred years of pillaging the once gold backed dollar and collecting hundreds of billions of dollars a year in interest just from the Federal government alone, the bankers would have been content with their golden goose. But, no. They didn't want to wait for the next egg, they started thinking about the whole animal baked with a honey glaze. Okay, I can sort of understand. Honey glaze really does spruce up a meal. But eggs are for months and goose is for one meal. Any five year old listening to Aesop's fables can tell you not to eat the damn thing, honey glaze or not. Of course, to be fair, perhaps generations of blue blood inbreeding didn't make them all stupid and enough realize that with the global decrease in affordable oil the game was over and done anyway and they might as well be the last generation to live in splendor and style.
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The debt engine is sort of hard to run during a global credit contraction. Banks are forced to restrict lending, so that ends company acquisitions and buying a way overpriced home. Or, I should say house. Home is were you live, a house is an instrument of debt. This means that suddenly, assets start to fall rather than rise. Stocks take a battering and homes turn upside down in value. As the economy starts contracting, there is no more money to park in government treasuries. As I write this I am filled with a perverted and twisted glee, recalling that the Chinese have pulled back their purchases of US government debt 95%!! I guess we did need them more than they needed us. With governments in trouble, all the tax money they threw into the economy starts to shrink, which stalls the other engines even more. And of course, unemployment is rising. Not only does this translate into less consumption, it also means less debt is complied or even paid back. Going from a two income household to one means, first, no more Starbucks, then no more second SUV at $600 a month payments, then no garage to park the remaining vehicle. All of these working together, fueled by debt which was fueled by cheap energy, grew our economy even though we produced nothing anyone wanted. Now, all those factors are working together against us. The perfect storm. It sure looks pretty, like a meteor storm right before a rock lands on your head at high velocity.
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