The Real ‘Goldilocks Economy’, Part II (GLD, SLV, TZA, IAU, FAZ)

Jeff Nielson: In Part I, we were presented with a mythical “Goldilocks economy”; a contrivance of propaganda where B.S. Bernanke attempted to portray the U.S.’s worsening economic collapse as representing some sort of Golden Age. We were also presented with a legitimatedefinition of a Goldilocks economy: steady growth, stable employment, and muted inflation. However, back in the real world we saw a U.S. economy which literally exemplified the exact opposite of all those characteristics.

The purpose of Part II is thus to first expand upon this definition which was presented in Part I, and then to point readers toward how such an economic dream could be achieved. The best way in which to accomplish this is to look at the three facets of the Goldilocks paradigm individually.

With respect to the propaganda myth of “steady growth”, understand that as a matter of the simplest arithmetic that this is impossible with any/every economy which embraces the suicidal Keynesian doctrine of perpetually rising debt-levels. Obviously if you begin with an economy which is spending 1% of each dollar of revenue paying interest on debt, then 5%, then 10%, and now 25% to 30% (as Europe’s Deadbeat Debtors prepare to default) you can never possibly have steady growth.

Rather, as the Albatross of debt around the throats of these economies becomes heavier and heavier and heavier, it is an inevitable proposition of arithmetic that growth will become more and more anemic as a greater and greater percentage of resources is wasted servicing debt. Inevitably these economies become so saturated with debt that further “growth” is impossible. This is the point at which our Western economies are at today.

We thereby arrive at our first Goldilocks Principle: steady growth requires a solvent economy, and (at the least) a balanced budget. Here it’s important for readers to realize that even after the massive “Debt Jubilee” which rapidly approaches for our debt-saturated Western economies that this will not restore solvency.

Thanks to the relentless (and unprecedented) transfer of wealth from the bottom-80% to the top 5% (and most particularly the top 1%), our tax-base has been destroyed. Those on the bottom have nothing left to tax, while those at the very top refuse to pay taxes. Without a viable tax-base, immediately after Debt Jubilee we would simply begin a new debt-spiral – and then (literally) mortgage the future for the succeeding generation.

I’ve explained the dynamics of taxation in previous commentaries. Any/every income taxation system is inherently parasitic; creating reverse-Robin Hood economies which relentlessly suck the wealth out of the pockets of the bottom-80% and transfer it to the wealth-hoards of the top-5%. Income taxation is roughly revenue neutral for that portion of the affluent in between those two groups.

Wealth taxation is always the optimal form of taxation for any economy. However, in the obscenely top-heavy Western economies of today – where the ultra-wealthy hold (hoard) a larger percentage of total wealth than at any time in history – wealth taxation (i.e. a flat wealth tax) is literally the only possible path to solvency. It is the only form of taxation which fully restores the tax-base to previous levels (i.e. back when our economies were solvent and prosperous).

Even this, however, is not enough to assure the balanced-budget economies necessary for steady growth. It ignores the political reality that the reckless children who run our governments have proven that they cannot be trusted to engage in sound fiscal practices.  For them, nothing less than the Golden Handcuffs of a gold standard will suffice. I’ll revisit the necessity of a gold standard later in this piece.

As demonstrated in Part I, our economies represent the complete antithesis of “stable employment”. Structural unemployment is at an all-time high. The size of our labour forces are rapidly shrinking – despite population growth. Wages for the average worker have been steadily declining for four decades (in real dollars), and that rate of decline has actually accelerated in recent years.

What is critically important here is that both the shrinking labour forces and our plummeting wages are both direct consequences of this massive, permanent structural unemployment. This extreme-and-permanent glut of workers simultaneously drives down wages according to the simple dictates of supply and demand, while it steadily drives people out of the workforce due to the futility of attempting to find employment.

It creates an economic death-spiral which must ultimately manifest itself through all of our economies disintegrating in the same manner we see Greece’s economy disintegrating today.Friedman Austerity has both accelerated and intensified that downward spiral, but even without that economic sadism all Western economies are devolving along precisely the same path.

For 200 years our governments have known only one solution to the perpetual plague of structural unemployment. Ever since the Industrial Revolution, technology has always eliminated jobs faster than it creates new job-opportunities. Thus by the middle of last century, the work week had already shrunk from the original 7 days a week, 12 hours a day work week to less than half that: a five-day, 40-hour week.

There the work week has remained frozen ever since, with the employment carnage which has followed being as predictable as it has been horrific. Understand that this catastrophic economic harm which has been inflicted upon the Average Worker has been intentional. One of the Oligarchs’ own Servants blurted this out a quarter-century. At a press conference in the mid-1980’s, former Bank of Canada Governor Gerald Bouey articulated the most-evil doctrine to have ever been embraced by Western democracies when he said “We are fighting inflation with high unemployment.”

Let me explain/translate this, so that the despicable dynamics involved here are explicitly understood. The spiraling price-inflation which our governments lie about, and pretend does not exist is a direct consequence of real “inflation”: inflating the money-supply any and every time the bankers crank-up their printing presses yet again.

Thus the plan hatched by the Banking Oligarchs, and implemented by their political lackeys was to create permanent wage deflation for the Little People – the unimportant bottom-80% of our population – in order for the bankers (and those close to them) to benefit the most from all of their money-printing. The wage-deflation imposed on us by our own governments counterbalances (at least partially) the price-inflation created by the banking cabal, delaying the inevitable collapse in value of these paper currencies.

This is economic slavery. Period. It is a crime that our own governments have (silently) pursued this evil agenda, against the interests of their own people, to serve the small-but-privileged minority. In some respects, it is an even greater crime that none of the charlatan-economists even understand this dynamic – let alone have anything to say about it. At this point, nothing less than an immediate transition to a four-day, 30-hour week could restore balance to our labour markets and health to our economies; and provide the “steady employment” (i.e. full employment) necessary for any kind of Goldilocks economy.

Here is should also be noted that a precondition of solvency (which in turn is a precondition for steady economic growth) is something approaching “full employment”. Again, as a matter of the simplest arithmetic, if you have an economy with too many passengers and not enough ‘oars in the water’ then you will still be unable to achieve solvency – except through more draconian levels of wealth-taxation. If we want to have prosperous economies we must have efficient economies.

Providing the third component of a Goldilocks economy – muted inflation – is the simplest proposition of all, once we strip away the bankers’ mythology, parroted in the mainstream media’s propaganda. In that fantasy-world, inflation is some mysterious, exogenous force: a Monetary Dragon which the (valiant) Knights of the Central Banks engage in eternal battle, but are never quite able to slay.

The truth is (shall we say) somewhat opposite. Inflation is money-printing. Inflate the money-supply and we dilute the money-supply. Dilute our money and it loses value. When the cost of a loaf of bread doubles; when the price of gasoline triples; when the value of an ounce of silver soars by a factor of ten; all of that “inflation” is a direct and inevitable consequence of the money-printing of the bankers.

When these same bankers publicly claim that they are trying to “control inflation”, this assertion has all the validity of a crack-junkie – claiming that he’s trying to “control” his drug use. Inflation is the creation of these monetary junkies, it is steadily worsening, and the junkies have absolutely no intention of ever, voluntarily curbing their “habit”. Enter the Golden Handcuffs.

Much like a gold standard makes it impossible for our children-politicians to engage in the fiscal suicide they have pursued with increasing zeal for the past three decades; a gold standard also curbs the excesses of the junkie-bankersA gold standard holds the bankers and politicians financially accountable for their actions over the short term.

Governments can’t spend money they don’t have. If they want to finance particular programs, they must raise the revenues to pay for them. Central banks can’t simply “print money out of thin air”. A government which wishes to issue new money must have new wealth with which to back that money (what a radical concept!).

Every day, and many times every day; two themes are paraded before us again and again. We cannot trust politicians. We cannot trust bankers. What do you do with members of society who have demonstrated repeatedly and unequivocally that they can never, ever be trusted? You place them in Handcuffs.

While Part II of this series has illustrated “the real Goldilocks economy” in terms of its integral components, there is a single economic paradigm which literally personifies a Goldilocks economy: the Middle Class. In Part III we will examine the nearly infinite virtues of this endangered species.

Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), Direxion Daily Small Cap Bear 3X Shares (NYSEARCA:TZA), iShares Gold Trust (NYSEARCA:IAU), Direxion Daily Financial Bear 3X Shares (NYSEARCA:FAZ).

Written By Jeff Nielson From Bullion Bulls Canada

Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada He has a personal background in law and economics. Bullion Bulls  Canada provides general macro-economic and political commentary,  since the precious metals markets are among the most complex (and  misunderstood) in the world.

Bullion Bulls Canada also provides basic coverage of Canadian precious metals mining companies. Canada is the global leader in mining exploration, and Canadian-listed mining companies (on the Toronto Stock Exchange and Venture Exchange) are responsible for the majority of the world’s most-promising discoveries.

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