17 May 2012

For Want of a Merkin...

As I, not alone but lonely, have written many times: the Euro can't work without a partner of fiscal policy. Just as the Blue States send $$$ billions to Red States (ingrates though they are), so Germany, France, etc. must have a de facto fiscal policy towards their poor Southern Brethren. Germany, in particular, has to face the music: the PIIGS took an awful lot of product off your hands. Just because you think you should still get full (unearned, largely) price for the effort, you won't. Get over it. Well, Ms. Merkel has shed her merkin. I'll suppose it was news everywhere; I happened to see it in my dead trees Times. Along similar lines (really), there is this story (from Time magazine, via Yahoo! News) that the Fed is responsible for Jamie Dimon's brown undies. The reasoning, to be generous, is that by keeping "the" interest rate low, banks et al were compelled to make money the fiduciary way since "the surfeit of dollars in the marketplace have nowhere productive to go." Read the quote again. Read it? Read it again. That quote is the crux of the argument of this endeavor: only through improved technology, which increases production and/or reduces cost, can capital "earn" a return. Putting capital only into fiduciary instruments, leads to the *need* for inflation, since without it, there's no source of $$$ to pay the return. Consider that thought again. If you've borrowed $1,000 to "invest", but you've no productive place to put that money, or you've lent it for residential housing, your $1,000 generates nothing new or increase in the economy. Nada. Zilch. Zippo. The only way to get more cash, to pay the vig, is if your other income(s) rises. For that, it's mostly wage push inflation. We don't have that. But more importantly, these "pundits" have said the words, but seem to be utterly ignorant of the import: "nowhere productive to go". Yet, these .1%-ers want 10% per year for the right to have some of their cash. The fact the JP Morgan, and all the others to be fair, would rather trade fiduciary instruments rather than build plant and equipment here in the Red Blooded USofA says about all you need to know. They've killed off the productive sectors of our economy, now scream bloody murder that the Devil made them do it. Fact is, capital isn't worth nearly what the banksters and .1%-ers want it to be. Welfare queens, yeah.

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