The Illusion of Control, Part Two

The coming chaos

Part One

The US government has gone all in on taxation, redistribution, spending, expansion of its power, ever more intrusive laws and regulations, the increasing curtailment of liberty, debt funding, and debt-based “money” it and the Federal Reserve produce at will. The coercion and fraud implicit in these measures have been poisons on American political culture and are destroying the US economy and way of life.

Control, illusory or otherwise, requires resources. Government produces nothing, so the resources must be taken or borrowed. The economic grave it’s digging for itself is the greatest threat to the US government’s control. Taxation discourages production. Regulation throws sand in the economy’s gears and can stop it entirely. Steadily mounting debt and its consequent debt service exact an increasing toll. Most US debt funds consumption, which generates no offsetting return, not production, which potentially does. Prime Deceit: What if ... Gore, Robert A. Best Price: $10.98 Buy New $10.81 (as of 11:05 UTC - Details)

Monetary flim-flam—the central bank using its created-at-will debt to buy the government’s created-at-will debt—is embraced in some particularly deluded quarters as a panacea, but it’s really a perpetual motion snare. Nothing is created or produced, so it’s tempting to say the central bank-government fiat debt exchanges have the same economic effect as two people exchanging twenty-dollar bills.

Tempting, but wrong, because the $20 exchange is harmless, while the central bank-government shell game produces identifiable, substantial financial and economic harms. Central bank machinations drive down interest rates—now into negative territory across much of the developed world—encouraging borrowing and discouraging saving, the foundation of future growth and progress. They keep zombie companies alive far past there free market sell-by dates. Negative interest rates are the ultimate absurdity—savers paying borrowers to lend them money!

Of course, few actual savers bite on this one, it’s mostly speculators hoping an absurd situation will become even more absurd. Debt so saturates the planet that even when borrowers are paid to borrow, the demand for funds is insufficient to promote the economic growth that cheap, free, or remunerative borrowing is supposed to promote.

Trend growth rates around the world are on a downward path, and in Japan and Europe, where debt and central bank giveaways have become ingrained features of the economy, growth is zero or less. The US hasn’t had 3 percent growth since the George W. Bush administration, and average growth under Trump, not withstanding the stock market he so frequently touts, has been about what it was under Obama. The disconnect between the real economy and financial markets is yet another consequence of monetary flim-flam and it will prove disastrous.

How do you take any government’s growth figures seriously when no provision is made for the debt that was used to fund that growth? If the US government borrows close a trillion dollars this year and growth of the entire economy amounts to $600 billion, has there been any growth? The question is not academic; those figures are pretty close to where borrowing and growth (best case) will come in.

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