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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
May 29, 2009
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May 29, 2009

With national Treasuries around the world in a seemingly mad contest to see which one of them can get to national bankruptcy first through deficit spending and additions to debts, it is easy to overlook what their purpose in doing this is really all about. Their real purpose is to try to stop this real monetary deflation (measured by the BIS at 22 percent annualised) in its tracks - and then to re-start the credit expansion.

Budget Deficits And The Burden Of Government:

Figuratively, it is as if the Treasuries are trying to push the sky back up to where it was before while ignoring the real economic ground which has fallen out from underneath them. That real economic ground has already fallen a long way. This can be directly observed by the massive fall in the tax revenues of most nations. The lower these tax revenues go, the worse off the private economy which provides them is becoming. If the tax to civil earnings "gearing" inside a national economy was 20 percent taxes and 80 percent earnings, then the real burden of government on the civil economy is 25 percent. After all, government is an economic cost….

The global bank credit money deflation is now rolling at an annual rate of contraction of 22 percent as stated in the BIS report. The real economic effect of this (though it will vary from country to country) is that the global price mechanism has to flex downwards to reconnect to the lower total stock of money.

If prices do not follow the monetary deflation down, the result is that many economic goods will not clear the market, factories and businesses will close and mass unemployment will climb across the world.

When Both Monetary Deflation AND Recession Hit:

Worldwide, we are all stuck in two gigantic economic situations. There is a fast developing world recession AND a global credit money system deflation. These two economic situations are, of course, acting on each other, in effect they are intertwined. All major central banks are holding their official interest rate at or below 1.00 percent and engaging in direct money infusions into their banking and financial systems. On both counts, they are acting contrary to any possible solution. They have negated the action of the monetary saver. Without a voluntary return of the monetary saver - there is NO solution!

The return of voluntary savings in the form of money requires two things. It requires REAL market interest rates which reward those who save. Even more important, it requires a better quality of money which can be relied upon to retain its purchasing power. Ultimately, it requires a SOUND (Gold) money.

It Is Futile To Try To Replace The Saver With More Credit Money:

In reality, eating the cake means that it is no longer there. In basic logic, there is such a principle as irreversible logic. Modern economists and politicians simply do not understand this.

It is the existence of the factory, apple orchard or any other productive entity which gives value to the money it represents. It is NOT the other way around. That is an irreversible. It does not work in reverse. Remove the factory or apple yard from reality and from the context of basic logic and there is nothing there for money to buy. What is the "value" of that sum of money when there is nothing there to buy? This simple example of basic logic has not stopped modern economists and politicians from standing in front of a television camera to proclaim that they have supplied immense sums of new "capital". What is this capital? It is newly created credit money, Treasury handouts and subsidies of all descriptions.

There Is No Monetary Or Credit Money Magic:

Take these claims of the provision of new "capital" literally. What they amount to in reality is someone rolling up with a truck filled with newly printed paper money (or new credit money created in the account of an official lender) and announcing to the adoring throng that: "We are all saved! I have brought new capital. Let there be new factories here." The Privateer hopes that none of our subscribers would be surprised in the slightest that six months later, that same politician or central banker is still yelling out his message while the fields around him are as empty as before. The plain and simple mistake the politician has made in his mind is to put an "equal sign" between money and capital. There is No such equal sign. In plain physical reality, new capital - new factories, orchards or anything else - are made possible by consuming less than what is currently being produced and using part of the unconsumed physical goods to create new buildings, place productive tools and machinery inside them, and only then produce goods.

The Root Of Good Economic Thinking:

It starts when applied to a basic barter economy. Nothing at all fundamentally changes when that economy switches over to indirect exchange with the introduction of money except that in a money economy, savings which were real goods are now held in the form of money.

So what are our modern economists and politicians fundamentally deluded about? They are deluded by their assumption that by increasing the quantity of paper money and credit money in current circulation, they can conjure REAL PHYSICAL savings out of thin air with NO reduction in consumption.

In reality, whether one lives in a barter or direct exchange economy or a money or indirect exchange economy, real physical savings MUST precede renewed investment in capital goods, the centre ground of true capitalism. "Money" can be created out of paper or, in the case of credit money, out of thin air. Capital can not. To equate money with capital leads to capital consumption, a real, physical contraction in a nation's total stock of capital. Capital consumption can always be observed in the form of aging factories and acres of factories already shut down. The Privateer holds forward as real evidence for this the current state of the entire US manufacturing sector. It is this attempt to equate "money" with capital (or REAL wealth) which dooms the Obama administration's attempt to "kick start" or "stimulate" the failing US economy with its gargantuan budget deficits and the Fed's zero interest rate policy and gargantuan "money infusion" into the banking system. NONE of this will increase savings.

We Can't Plant - We Ate The Seed Corns:

The US economy today is, in industrial terms, like a once very prosperous farming area in which the farmers were persuaded by mountebanks and other fakers that the road to even greater prosperity was to consume the entire present farm output today and then borrow more worldwide and consume that too. A point is now near where the US cannot plant in industrial terms. It has consumed its seed - its capital.

Ó 2009 – The Privateer

(reproduced with permission)


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