One Key Financial Chart

[BobK71]

http://www.economist.com/news/finance-and-economics/21713910-investors-may-be-too-optimistic-about-direction-which-world

You don't have to read the whole article; just look at the chart that looks like Mount Fuji -- interest rates going up for 35 years from World War II to the early 80s, and then spending the next 35 years coming down near zero today.

This chart screams 'Big Story.'

So I'll do my bit and explain it from my point of view.  The world is driven by the forces of financial inflation -- who form the 'winning alliance' to benefit from it, how financial bubbles are inflated, and how they burst, at each stage of history.

In the postwar decades, it was the alliance between Western politicians and voters that benefited from the inflation (by issuing Western currencies and public debt.)  No wonder, grandma still remembers those days fondly.  The narrative that drove the inflation was 'how great Western countries are.'  (Since, look, there was no poverty, as trade unions and government benefits took care of it.)  The narrative encouraged everyone to hold Western-issued currencies and debt.

(It is amazing how the public could be duped into believing opposite ideologies: in the first period a 'good country' was one that took care of its people, presumably by public spending.  In the second period a strong country was one that 'adhered to free market principles' of low taxes, low spending and low regulation, including over finance.  Both were good reasons to buy the country's assets!)

Interest rates went up in the first period, since central banks became the 'restrainer of last resort' in the wild party, and because debts were still low enough for the system to stand high rates.

Unsurprisingly, it had to end.  The dollar and public debt bubble deflated in the 'malaise' 70s.  Starting in the 80s, the politicians had no choice but to switch allies to bankers, to keep financial inflation going.

Interest rates went down, since central banks were forced to become the 'enabler of last resort'.  As the instability of a private-debt-driven financial inflation threatened the entire system, central banks had to increase money creation to keep it afloat.  (By contrast, money and public debts only became unstable over the long term, as Western governments were always trusted to honor their obligations.)

The constant throughout is that financial inflation must continue, one way or another.  This is not only because the top elites receive most of their power and wealth from it, but also because the economy is already distorted by decades of bubbles.  If the wealthy and comfortable among us stopped spending on things we don't really need, the entire world would come crashing down, as people invested time, money and talent into making and selling things we don't really need, while the bubble was inflating.

The overall picture is the elites painting themselves into a corner, in every way.  (A simple example is that they created the rising expectations by Western voters.  When those expectations were dashed over the last decades by actions needed to sustain the overall system, the voters rebelled, further limiting the range of options available to the elites.)

So, what now?  What is the next seismic phase for the fundamental drivers of world events?

The central banks have gone from having the strength to act responsibly to limit long-term threats to the system's stability, to being forced to act irresponsibly just to get some 'animal spirits' going to avoid a debt implosion, for now.  This doesn't bode well.

But the elites have a last trick up their sleeves, judging by history.  This trick is war.  Never mind the untold misery of it.  At this point in the system's life cycle, they can't afford the luxury of peace.

The basic idea is to stir up conflicts anywhere they can.  In any local conflict, back the weaker side, so when the two sides are more-or-less evenly matched, the Western powers become the 'balance of power' who can decide which side wins.  Conflicts create the demand for Western power and influence, and you can bet that the West will sell those dearly.  One way or another, it is hoped, the Western elites will gain the tools, on the global stage, that they will need to sustain the debt bubble, for now.

The trick for us, the public, is to see the war and conflict mongering for what it is.

[Idrisu]

The same Western politicians created most of the problem the world is going through right now. This people can create war in some countries, spend billions of dollars to prosecute it and turned back to said the rendering financial assistant for rehabilitation, restructure and feeding for those poor countries. Look at what is happening in Libya currently, the western power removed and killed momo Gadafi but today Libya is a country rule with two governments with untold suffered, poverty and high rate of inflation. Inflation and poverty are tools they using to penetrate into those countries. May God help us.

[yugo23]

You know, coming on this forum is sometimes increadibly depressing. There are so many retards believing that they're the most intelligent beings and that all that happensIt bad in this world is related either to Muslims or to socialists (or libtards...). It's like those people aren't even able to think straight, to see who gets the power and who really benefit from this situation.

But sometimes, I see people making threads like you, and that's really pushing my moral up.

I'd say that you're right in nearly everything. Capitalism and communism have both failed at the same task: creating an economy based on growth. And for a very simple reason: our world is limited and we can't grow indefinitely. But because communism failed first, people tend to believe that capitalism is the right answer. Problem of capitalism (at least the one we know, because it's a large world that can have multiple different systems) is that in the end it makes the rich richer and the poor poorer. Appart from the moral problem, it means that it concentrates the power in a few people, preventing innovation and questions on the system.

And we're going to touch the limits of this system. The only question is are we going to touch them by crashing on them like a plane in a tower, or are we going to slow down to just bang a wall strong enough that it hurts bu doesn't kill us.


Anyhow, thank you for the data and your explanations. It was interesting.

[LoyceV]

... this forum is sometimes increadibly depressing ...

Idiots with bad topics don't depress me. This thread on the other hand makes me worry. I fear the Economist, BobK71 and you are right in your analyses.
The lack of responses in this thread compared to the number of responses in the bad topics makes me fear most people don't even care.

Western Europe has been stable for decades now, but the way politics are going, I fear this stability won't last. Europe has a long history of wars, and I fear we're heading into the next one. Politicians' actions seem to aim at destabilizing society. Playing power games with Russia. EU wants to grow, but the population doesn't support it. QE as "solution" for debts. Not protecting its borders leading to more and more terrorist attacks. The crazy idea that printing more money leads to more prosperity. Growing inequality leading to the destruction of the middle class and "the working poor". Destroying solidarity by forcing society to diversify. Political correctness instead of real correctness. More recently: social justice instead of fair justice. Divide and conquer!

[Xester]

Well good topics such as this one needs time to read and comprehend, thats why people who does signature campaigns skips topic like this one so they wont get headache. But I like reading topics such as this that has substance and sense.

What I agree with your line is the that war and money comes together. The Unites States of America will do everything to get profit to get inside their side. Just like what happened to Saddam Hussein when he disagrees to the terms of the US oligarchs, US orchestrated that Sadam has nuclear weapons and with their power over the media they convinced the public that what they say is true. And after which US started bombarding Iraq but that they were after was the control of oil and the gold deposit of Sadam. US Army even has selfies holding gold bars in Sadams tunnels.

[mOgliE]

Thank you for creating such a nice topic. As most people can see, contrary to other topics in the economy section this one doesn't get spammed as hell by sig spammers, it's long, complicated and gives precise point of view. So it's a good topic.

I'm more or less in a perfect agreement with what have been said here. Especially the consideration you make about war. War is the pump of the elites scheme, no doubt about that. But I'd like to attract your attention on the fact that it is currently use! Though you're not stating it explicitly, we could think that the elites ARE GOING to use war, but fact is that they are doing so right now. Not in Western countries but FOR western countries. You know what happened after war of Iraq? Well IMF have granted huge loans to the country so they can rebuild themselves. Wanna know who has the jobs of rebuilding the country? That's right, no company from Iraq! In fact elites go around, destroy countries then make them pay for rebuilding it after granting them loans.

Beautiful isn't it?
Problem is that again, it's the population who will pay for it. Terrorism is just the start.

[BobK71]

The same Western politicians created most of the problem the world is going through right now. This people can create war in some countries, spend billions of dollars to prosecute it and turned back to said the rendering financial assistant for rehabilitation, restructure and feeding for those poor countries. Look at what is happening in Libya currently, the western power removed and killed momo Gadafi but today Libya is a country rule with two governments with untold suffered, poverty and high rate of inflation. Inflation and poverty are tools they using to penetrate into those countries. May God help us.

It's a good thing you bring up the Middle East.  Thank you.  The ME is in the middle of a 'world war.'  The bloody bits of the aftermath of the 'Arab Spring' were really driven by US and allies supplying the 'rebels' in Libya and Syria.  (Where else can these 'rebels,' mostly jihadists really, get their money and arms to fight their regimes?)

Whatever you think of Assad, life in Syria is now much worse than when his regime was stable.  (Ditto Libya.)  Spreading democracy is the reason given by the West for supporting 'rebels,' but the Western elites knew democracy is never really going to work, from day one.

On the other hand, ISIS and al Qaeda affiliated groups of jihadists are probably really being kept alive by the US and its allies.  They have proved useful for toppling or putting pressure on regimes the US didn't like, i.e. Qaddafi, Assad, and Maliki of Iraq.  Of course, the US will never say it supports ISIS -- the truth is that the US could crush ISIS any time, but it imposed the 'no ground troops' straitjacket on itself, and somehow all of its allies have given up their loudly professed goals of defeating ISIS (Saudi Arabia, Jordan and Turkey, while it was a US ally) -- and there were no consequences.

In fact, while Turkey was a US ally, it supported ISIS by buying its oil and letting fighters through to ISIS territory, and there were no consequences from the US.

The US has admitted that it is difficult to tell who are 'moderate rebels' when supplying armed groups.  That is for sure an understatement!

The vast majority of workers in the US government are probably sincere, or at least fully convinced by their self-interest that they are.  The imperial system doesn't work by having secret committees discussing how to rob and kill people.  There's no need for that.  It works by 'spreading democracy' and punishing 'evil' regimes (as identified by the elites, of course,) and scaring the other regimes into helping it.

The important thing to understand is that the state of the financial bubbles today gives the Western elites no choice but to pursue violent strategies.  This is the part missed by most people who don't think the US is capable of supporting ISIS, et al.

[BobK71]

I'd say that you're right in nearly everything. Capitalism and communism have both failed at the same task: creating an economy based on growth. And for a very simple reason: our world is limited and we can't grow indefinitely. But because communism failed first, people tend to believe that capitalism is the right answer. Problem of capitalism (at least the one we know, because it's a large world that can have multiple different systems) is that in the end it makes the rich richer and the poor poorer. Appart from the moral problem, it means that it concentrates the power in a few people, preventing innovation and questions on the system.

Thanks for the encouragement!  I love this stuff.

I see communism and 'capitalism' (i.e. 'free markets' as practiced in the real world) as being essentially similar, with communism being the more extreme and obvious version.

Both allocate resources by state power rather than individual choice, with 'capitalism' doing it more subtly, at a deeper level, by controlling money and core finance.  (There are free markets at the more superficial levels.)  So, essentially, both become equivalent to feudal systems where power and wealth are based on family and connections, rather than individual merit, at least when major power and wealth are concerned.

Both say one thing and do another.  The sales pitch is 'give us the power and we will do right by the people,' whereas the truth is that human beings can't possibly avoid being corrupted by that power.

Both will 'fix' the problems caused by power concentration by grabbing more power.  Any other solution to the problems would awaken the public, one way or another, and destroy the legitimacy of the system.

Both fear the truth, so the mainstream media and 'experts' must toe the party line, one way or another.  (When did you last hear of Austrian economics, even in the offbeat media?)

And I would agree with you that, from a macro point of view, both will ultimately require unlimited resources to keep the facade looking good.  Since 'capitalism' depends on the trust in the financial claims issued by the elites, and they always have the incentives to issue more, there must be constantly increasing production of real goods and services to justify the value of the mountain of money and debt, or the system would implode.  For both systems, since the elites always want and get more, they end up endangering their own golden goose, in one way or another.   Then it's time to put the masses to work!

Ultimately, the only hope is that the public understand enough to keep the power out of the hands of the elites.  The management of money and debt needs to be prohibited of the state, in addition to other Enlightenment rules against the state.

[maku]

Another great thread by BobK71! Bravo. What can I say... I agree with everything you presented.

We live in a strange world where people feign freedom under ever expanding surveillance and nations pretend to be ruled by democratically elected governments.
Our current economy system is paper thin. I think that we live in a neo-capitalism where oligarchs and corporations are real puppet masters behind the scenes.
I agree, to save economy our masters need war. But I am more inclined to say that it won't be old school all-in war, nations are gearing more towards Orwellian Permanent War (at least for now).

[BobK71]

... this forum is sometimes increadibly depressing ...

Idiots with bad topics don't depress me. This thread on the other hand makes me worry. I fear the Economist, BobK71 and you are right in your analyses.
The lack of responses in this thread compared to the number of responses in the bad topics makes me fear most people don't even care.

You never know, man.  I believe the no. of responses to this thread is pretty good, for this kind of topic.  If you can make just one person understand a bit better, that person might pass it on to some other people, and those will pass it on...  Like I said, you never know.

That is what keeps me going.

[BobK71]

Well good topics such as this one needs time to read and comprehend, thats why people who does signature campaigns skips topic like this one so they wont get headache. But I like reading topics such as this that has substance and sense.

What I agree with your line is the that war and money comes together. The Unites States of America will do everything to get profit to get inside their side. Just like what happened to Saddam Hussein when he disagrees to the terms of the US oligarchs, US orchestrated that Sadam has nuclear weapons and with their power over the media they convinced the public that what they say is true. And after which US started bombarding Iraq but that they were after was the control of oil and the gold deposit of Sadam. US Army even has selfies holding gold bars in Sadams tunnels.

Thanks for the encouragement.  The imperial system depends on dollars and Treasuries being artificially propped up by governments, so the system must try to keep all governments in line.

Did you notice there are very few Islamist governments in the world (Iran being the only real example.)  Most of the Muslim world is ruled by secular or Muslim-in-name-only regimes friendly to the West.  Even though, in many countries, the only government that can be stable long-term would be an Islamist one.

Afghanistan has shown that the US prefers decades of bloody civil war to a stable, Islamist government.  (Same for a stable, non-Islamist government that's unfriendly, e.g. Libya, Syria, etc.)  Yes, Islamist governments discriminate against women and amputate thieves, etc.  I don't condone these actions, but I suspect, if we asked if we ourselves preferred civil war to this kind of misrule (which the West takes every opportunity to demonize), I wouldn't be surprised if we would prefer the latter.

[BobK71]

Thank you for creating such a nice topic. As most people can see, contrary to other topics in the economy section this one doesn't get spammed as hell by sig spammers, it's long, complicated and gives precise point of view. So it's a good topic.

I'm more or less in a perfect agreement with what have been said here. Especially the consideration you make about war. War is the pump of the elites scheme, no doubt about that. But I'd like to attract your attention on the fact that it is currently use! Though you're not stating it explicitly, we could think that the elites ARE GOING to use war, but fact is that they are doing so right now. Not in Western countries but FOR western countries. You know what happened after war of Iraq? Well IMF have granted huge loans to the country so they can rebuild themselves. Wanna know who has the jobs of rebuilding the country? That's right, no company from Iraq! In fact elites go around, destroy countries then make them pay for rebuilding it after granting them loans.

Beautiful isn't it?
Problem is that again, it's the population who will pay for it. Terrorism is just the start.

Another pattern you see in recent wars is that the US often goes in to knock out or destabilize a regime, either directly or indirectly through allies or by arming rebels.  But when the country is broken and its population are living under civil war and/or a failed state, the US disengages because the costs of properly rebuilding a country is too high.  This was the case in at least Afghanistan, Iraq, Libya, Syria and Yemen.

So, the advertised reason for intervention was the welfare of the local people.  But after we overthrow their government and make life even worse for them, oops, we messed up, but we have to leave.  And it's really too bad that we never learn this lesson, since we do this again and again.  Oh, and the motivation for initially going in is to uphold human rights and democracy half way around the world.  Believe me.

It think it really has to do with propping up US money and debt.  For details see my recent post.