2009 Shock and Awe

I read this a few minutes ago from yesterday’s DailyReckoning.com.  It’s an excellent article by Doug Casey.

I’m going to quote a few paragraphs from his article (linked above) and highlight a few items which tie into my diatribe about savings yesterday.

The things they’re doing are not only unproductive, they’re the exact opposite of what should be done. The country got into this mess by living beyond its means for more than a generation. That’s the message from the debt that’s burdening so many individuals; debt is proof that you’re living above your means. The solution is for people to significantly reduce their standard of living for a while and start building capital. That’s what saving is about, producing more than you consume. The government creating funny money – money out of nothing – doesn’t fix anything. All it does is prolong the problem and make it worse by destroying the currency.

Over several generations, huge distortions and misallocations of capital have been cranked into the economy, inviting levels of consumption that are unsustainable. In fact, Americans refer to themselves as consumers. That’s degrading and ridiculous. You should be first and foremost a producer, and a consumer only as a consequence.

In any event, the government is going to destroy the currency, which will be a mega-disaster. And they’re making the depression worse by holding interest rates at artificially low levels, which discourages savings – the exact opposite of what’s needed. They’re trying to prop up a bankrupt system. And, at this point, it’s not just economically bankrupt, but morally and intellectually bankrupt. What they should be doing is recognize that they’re bankrupt and then start rebuilding. But they’re not, so it’s going to be a disaster.

And that’s just a few paragraphs.  Read the rest of it.  If you happen to think that our government is doing the right thing by propping up bad companies, you’ll most likely not agree with Mr. Casey’s article – but hopefully it will open your eyes a bit to the fact that Keynes didn’t get much right after all.  Maybe it will allow you to think about production vs consumption, and enable you to learn something.

gk

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One Response

  1. I must say this is a great article i enjoyed reading it keep the good work 🙂

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