F Dominicus Blog

It seems a financial tsunami is building up.

Just some things about Europe: http://www.zerohedge.com/news/2013-01-09/20-facts-about-collapse-europe-everyone-should-know

It surely shows how the credit expansion break down, leaves many hopeless people. Yes central banks can print money, but they can not make every one "rich". Just those near the central banks and those getting the new printed money first gain. So the biggest gainer up till now are the states.

Anyway that does not help really. Because there is one barrier no-one can get around. In the end you can just distribute what you have. The fed can of course distribute new money. But that does not make "more" produced goods. So it's clear the money de-evaluates against any good. Of course there are speed differences. And that makes it impossible to see the real effects on all the money printing. You just can see it in the figures of falling prices and falling output. The crisis we have are a direct result on all this distribution, and lies.

Take Greece as an example. Let us assume the money supply for the last few years would just be constant (no credits from the EU to pay the debts of the bonds hold by european banks) and assume that the production really has lost somewhere between 10 - 25 %. Then there is less to buy but the money still is there. So the prices of the most needed things must raise and in the end that means things for eating and housing. Now assume you have lost your job also, that means the money you used to earn not there, but it's somewhere else, how much harsher is it getting for you then?

The US are in another death spriral, because they can not even nearly pay there bills without new debts. So the US state needs the FED to give them credit. And the FED delivers. It's the biggest holder of new issued debts in the world. So the cycle is the FED accepts bonds as "security" gives out now money for them, and the states distributes it. And again those getting the state money first (that are of course the receiver of payments from state) do get fresh money first, but they do not produce anything. So they can buy more than the less lucky non state workers and so they are "loosing" against them.

And now we have another problem, private debts for all kind of things, which means more and more must go deeper and deeper into debts. The most prominent example are the debts for a university training. And guess what happens now the state wants to give them the money to pay for the debts. But of course for every $ they hand out another 0.33¢ of new debts has to issued, and again the winners are those which get the new money first and those getting it latest are even more squeezed"

The situation now get more problematic by the way. More and more are dependent on state payments, the state needs more and more money for that, and must make new debts and those getting the new money first profit and on the other end the dependence on state payments raises.

We know this can work for a while, but you also can see that this can not hold forever. We the Germans know what this can do to an economy. And even from Mises has phrased it clearly: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

I'm more and more convinced, that the total catastrophe is more desirable then stopping credit expansion. Because I can not see any really effort to stop the credit expansion. Currently it seems the money is just "going" around in the system and we use credit to pay for other credits. It's impossible that this can work....