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Thread: theory for the tolerance

  1. #1

    theory for the tolerance

    First off, I enjoy learning around here. I have a theory of why the bailouts have been accepted. Now, I know we don't accept it, but a lot do.

    The value of our dollar, as we all know, has been in a steady decline for decades. Dr. Paul makes this point frequently about how this situation is destroying the value of one's savings.

    So when we can't put our money in the bank and expect it be worthwhile, the people look for other places to put their money. I don't know the exact figures, but I am inclined to think that is the past 30 years or so there has been a dramatic increase in the % of the population that invest there money in the market. Not only do individuals do this, but employees in the workforce are lured into this opportunity in the form of 401K, IRA's, and the like. In short it is not just available to the affluent anymore. I would also guess that the career minded middle class investor is most likely having their money by and largely invested in mutual funds. Chances are they do not know in what particular area or companies their money is residing. For all they know, it could be supporting the MIC and big medicine that is strangling our liberty as we speak. I digress.

    The baby boomers have all of their savings tied up in this conglomerate of mutual funds and along comes 2008. We know the story. W Bush and Paulson come out and say, "We must save the financial system". And in all of the minds of the middle class that have their retirement plans tied up in Wall Street said, "Yes, Yes we need to save it". And seriously, put yourselves in their shoes. You are a few years away from retirement and the notion of losing all of your "wealth" is tragic. It might even make your principles reach.

    And here we find ourselves. Wall Street being directly linked to the hopes of millions of Americans in the idea of a broke or luxurious retirement. Catch-22

    If this is a reasonable analysis, then we must ask ourselves, "How do we fix it?"

    If its not, please say so.

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  3. #2
    That's a very big reason as to why the bailouts were not met with violence.

    The irony, is that the boomers have a pittance of the "wealth" they believe they have. That fact is going to come to roost sooner, rather than later.

  4. #3
    Quote Originally Posted by FrancisMarion View Post
    And here we find ourselves. Wall Street being directly linked to the hopes of millions of Americans in the idea of a broke or luxurious retirement. Catch-22
    We have to ask to whom that Catch-22 rightfully applies. Bailouts are a form of wealth redistribution which forces everyone into a risk pool, whether they benefit or not, which makes it tantamount to conversion, or embezzlement.

    Catch-22 is a case of damned if you do, damned if you don't. For those whose wealth is tied into Wall Street, it is not a Catch-22 at all. It is a case of great for them if we do, damned for them if we don't.

    For Currency holders and taxpayers who don't own any property, and have no pensions or retirement plans, or Wall Street investments, who are not parties to any of the rewards, it really is a Catch-22, as they have no promise of rewards, but are made parties to all the risk during a bailout, since their wealth, and future purchasing power, must be tapped/taxed in order to prop up someone else's illusion of wealth.

    Oh, and some might argue that currency holders and taxpayers who have no Wall Street based assets are somehow indirect beneficiaries based on their jobs, but I reject that completely, because it is the very value of their currency, their savings, their holdings and future wages, that were tapped into in order to fund the illusions. Under a sound monetary policy, all such would have been "sticky" over time. But is there a "French Connection" element to it, given the number of wage earners who are made dependent on a form of fiscal heroin? Certainly. But even there comes a direct rub, and it is a nasty one, because everyone debates whether to bail out auto companies, but mom and pop based enterprises can all go take a powder. So it is not a question of whether to "protect jobs", unless we constrain the definition of "jobs" as meaning only those jobs tied to a firm that is large enough to get noticed. Winner: big malinvested corporate jobs - Losers: everyone else.

    I also don't accept the premise that there is a "luxurious retirement" in place as a viable alternative, once the underlying fundamentals a proven not to support it. This is kind of like saying that had the housing market not collapsed, everyone would be sitting on real wealth in the form of assets that are properly valued, and not overvalued (which millions actually viewed as retirement plans). The reality eventually sinks in during a collapse that the value was never real in the first place. It was nothing but an illusion, a bubble driven by buyer speculation, without an infinite supply of buyers willing to pay more in the future.

    Asking "How do we fix it" is not meaningful unless we accurately describe what "it" is, as well as what we mean by "fix" (and hopefully not in the form of "the fix is in"). Are we talking about how to fix the rules so that it doesn't happen in the future, or how to "fix" the current system, meaning "reconcile" it, so that everyone can have their non-existent paper cake and eat actual cake?

    In the case of MF global, the proposed "fix" is that you acknowledge that a complex form of theft occurred from systemic corruption and practices in the absence of a rule of law - which leaves us without the ability to trace it to a single thief. Afterward, however, you just steal allocated holdings from parties who weren't in it for the risks, and use that wealth to prop up the illusions of everyone who knowingly took risks. After all, goes the mush-brained reasoning, we're all in it together. And that's the basis for systemic theft - view everything in the aggregate, pay no attention to who will arbitrarily, artificially win and who will lose. In the case of FDR and the debauched currency that led to bank runs, you just call those who didn't take risks "hoarders" - steal their allocated holdings, collectivize and pool all the risk, so that the banks get get off scott free and winners and losers are decided between parties who should never have been lumped together, placed at odds with one another with bogus, irreconcilable counter-party claims in the first place.
    Last edited by Steven Douglas; 02-11-2012 at 01:26 AM.

  5. #4
    Steven, thanks for the insight. You did point out what was lacking. Yes "luxurious" was the wrong word without having "perceived" in front of it. When I put quotes around "wealth" I thought that I made it clear it is a matter of perception.

    I just tend to think that if you spend 42 years in a career building your "wealth" you are going to be dis-enchanted by the fact that someone is going to tell you that your "wealth" is of no value. You would even fight it so much as to go along with the whole farce of it, even if you knew it.

    If you can convince people to not invest in these funds, then I think there would be no allowance for anymore bailouts. The "fix" I think would be to save the dollar. Subsequently people would not have to invest in the previously mentioned scenario. Then to "big to fail" would become history.

    I don't know, its late and I might not be doing a good job of making sense.

  6. #5
    Quote Originally Posted by FrancisMarion View Post
    You would even fight it so much as to go along with the whole farce of it, even if you knew it.
    Definitely, self-preservation combined with normalcy bias leads to heavy rationalization and cognitive dissonance.

    That really is the tragedy of it all, when principles are substituted for equivocation. Anything that threatens what someone is dependent upon is going to be attacked, while anything that appears to support it is going to be defended. Likewise, anyone stuck holding the bag with a bogus counter-party claim will tend to want to shift blame, deny responsibility, and just be content with whatever will save their wealth, even if the solution is a form of outright theft. Comes the attitude, "Don't blame me, I didn't cause the problem, and somebody has to pay. I just want what's rightfully mine!"

    That's the most terrible tragedy in all of this, I think. The more we think in collectivized, aggregate, socialized, institutionalized "pooling" terms - like "the economy", or "economy-wide" and "the money supply", without considering WHOSE economy, and WHOSE money supply, the easier it is to ignore ethics, common sense morality and principles that govern most people's lives. The more we are able to insulate ourselves from humanity along the way, the easier it is to behave unwittingly as a sociopath. After all, you're not stealing from your neighbor, "the government" is "providing".

    If you can convince people to not invest in these funds, then I think there would be no allowance for anymore bailouts.
    I don't think that is a tail that can wag the dog. So long as there are bailouts, there are inducements and incentives to invest. Security, normalcy bias, self-preservation. The best way to convince people to not invest in these funds is to have no allowance for bailouts - and that really is our Catch-22, as the tyranny of the puppeted, proxied, fully dependent and completely addicted majority will always vote to kick the can down the road, and transfer burdens to others, or to future generations, without a second thought. As long as they got theirs, wipe your brow with a sanctimonious "there but by the grace of whatever go I". That leaves us with the end game only, as those who finally do get caught, who might desperately want to kick the can down the road, finally realize that they cannot, as they are the ones who finally did get caught, with little understanding and few remaining options.

    The "fix" I think would be to save the dollar.
    I think the exact opposite, based on how the dollar is now defined, created, and the level to which it has been debased, with counter-party claims that can NEVER be reconciled. Even if I thought it was possible to save the dollar, and I do not, I do not think it is desirable or wise. The entire dollar is equal to nothing but DEBT, and there are enough debt claims to the dollar to take all existing dollars in existence completely out of circulation many times over. The only way to create more of them is to create more of the same kind of debt that got us exactly where we are now - and there is the biggest Catch-22 for everyone concerned.

    So no, I think the "fix" would be to get as many competing currencies (LIFE BOATS) into circulation as quickly as possible, from as many NON-CENTRALIZED sources as possible, so that we are not reduced to the impossibility of barter as the currency fails - and let that god-forsaken dollar naturally self-destruct, never to raise its ugly head again. Or, let it compete freely, like any other currency. Those who have faith in it can be free to do as they please.

  7. #6
    Quote Originally Posted by FrancisMarion View Post
    "How do we fix it?"
    What's wrong with free market? What's wrong with INDIVIDUAL responsibility?

    In a TRULY free market, INDIVIDUALS make profits & they also bear the losses so there'd be no "regulations" like "corporate personhood" & "limited liability" that allows people to make wrong choices, lose other people's money & YET pretty much go scottfree

    The "fix" is to get back to free markets & therefore separation of government & economy (ala separation of Church & State) which'd mean that those companies who've gone bankupt, not only the company's assets are liable to pay off the debts but also PERSONAL PROPERTY of the INDIVIDUALS running those companies.
    So these people make huge money thru salaries & bonuses, etc when the inflationary economy is booming but aren't held liable for the losses? Are you kidding me? That's the problem.
    We need free market & get rid of government-protections like "corporate personhood" & "limited liability" which protect people running the companies from being held liable for the losses!

    Quote Originally Posted by FrancisMarion View Post
    The "fix" I think would be to save the dollar.
    Nope, "dollar" is now a meaningless term backed only by the "Trust & Credit of US government" (guess how much that's worth ) so we need to move on to kind of money that can't be created out of thin air, it could be gold, silver (or anything that people VOLUNTARILY choose to trade with) & because it can't be created out of thin air, it won't lose value like toilet-paper-money, it'll retain purchasing-power & thereby people are able to save for themselves & the thing is that the supply of gold increases slowly which means that every unit of money that you save today will buy MORE goods & services in the future (under paper-money, it's exact opposite where your money is less & less valuable over time)

    I agree with Steven that we must move towards DECENTRALIZED currencies! Just like we don't depend on the government to provide shoes or TV or whatever, we shouldn't depend on the government to provide money either Money was a product of the market which evolved out of barter & then governments took over & monopolized it because guess what "issuing money ishella profitable!"

    Here's Ron Paul would most likely do if he can muster enough support to do it -

    Quote Originally Posted by Paul Or Nothing II View Post
    This is NOT how Paul or any realistic Austrian would want to do a gold-standard with stupid FIXED-EXCHANGE-RATES, NOOOOOOOOOOO! Been there, done that! IT SUCKS! The govt sets $X = GX, then they & banks "create" more money & devalue then they re-fix $Y = GX & so on. NO!

    What Paul has proposed like many Austrians & what he'd probably do is ask US Mint to start minting gold & silver coins DENOMINATED IN GRAMS & OUNCES (NOT in "dollars", a term which lost all meaning ages ago), he'd probably allow private mints to mint & put their own coins in circulation as well & we'll probably have private banks who might start deposits/loans in gold/silver & so on & obviously as he's proclaimed many a times, he'll repeal tender laws & repeal all taxes on gold & silver so that people could freely use it as money

    Again, we're NOT going to go back to OLD "gold-standard", which was merely a PRICE-FIXING SCHEME anyway, where govt would move the proverbial "goal-post" the way wanted & manipulated there's no question of Chinese or anything, US is obligated to pay them in "dollars" & as there'd be no fixed-exchange-rates, there's no question of "draining our gold" or whatever

    Again, he does NOT want a "gold-backed-dollar", he just says that because it's easier for people to understand that but as you can see in the following video - 2:00 onwards - he says he does NOT want to "go back" to gold-standard but to "go forward" to a better gold-standard.
    There is enormous inertia — a tyranny of the status quo — in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable
    - Milton Friedman

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