Trusting The Liars
November 14, 2011 by Bob Livingston
If you’re going to take someone’s advice, who would you choose: the person who had been consistently right or the person who always got it wrong?
Or, to put it another way, if a person had a history of consistently making statements that proved inaccurate, would you continue to put faith in anything that person said?
The obvious answer is that you would choose the advice of someone with a proven track record of being correct. To do otherwise is pure folly.
Yet the American people continue to follow the foolish path. In so doing, they act against their own best interests.
For instance: Why do people continue to believe that following the advice of Federal Reserve Chairman Ben Bernanke — or his predecessor, Alan Greenspan, for that matter — will lead us to the end of the economic malaise in which we currently languish? Greenspan’s easy-money policies created the housing bubble that burst in 2008. Bernanke, who replaced Greenspan in 2006, continued Greenspan’s policies through the crash and beyond. And the housing crash and ensuing Great Recession (which is really a depression) blindsided him, if he’s been telling the truth.
As late as mid-2007, Bernanke said he thought the economy was behaving perfectly and would continue to expand and prosper.
But there were many who recognized otherwise.
In 2007, Peter Schiff published his book Crash Proof: How to Profit from the Coming Economic Collapse. He obviously saw what was looming on the horizon.
In the December 2006 issue of my newsletter, The Bob Livingston Letter™ I wrote:
The U.S. housing market is the largest market in the world. You can imagine what economic madness lies ahead.
The housing bubble was created to burst. It is a mess and the whole world is holding its breath. Hot air will not support anything, but this is the foundation of the housing bubble.
And as far back as March 4, 2003, Ludwig von Mises Institute adjunct scholar Frank Shostak wrote on mises.org:
If the pool of real funding is in trouble at present then this is likely to undermine various markets including the housing market. Moreover, the more aggressive the Fed’s loose stance is, the worse it is for the productive capacity of the economy. This in turn raises the likelihood that the liquidation of past excesses is likely to be imposed in earnest this time around.
Observe that the likely burst of the housing market bubble is on account of the decline in the pool of real funding and not a tighter stance on the part of the Fed. This contradicts the popular view, which holds that as long as the Fed keeps interest rates at low levels the housing market will remain strong.
And Congressman Ron Paul, who is the only Presidential candidate who warned of the coming bubbles and has preached against inflation and in favor of sound money for 30 years, also saw it coming.
So what gives? Why were the elite “experts” surprised?
The truth is, they weren’t. Some may have been, but certainly not Greenspan and Bernanke. They just want you to believe they were “surprised” by the events they orchestrated. In truth, they have overseen the greatest criminal enterprise to ever exist.
Through its money-printing policies, the Federal Reserve has presided over the theft and plunder of the wealth and savings of the American people that is unprecedented in history. Their masters love them because they have transferred trillions of dollars of wealth from the American people to the money creators through devaluation of the currency.
Last week, I made an effort to explain the Federal Reserve and how it came to be to the 95 percent who do not understand it. Now, I’m going to try to explain inflation.
This is something that probably not one in a million people understands, yet is an issue that is of utmost importance. Your financial health and well-being rests upon this understanding. When you do understand it, it will affect every financial and political decision you make.
Some consider inflation rising prices. That is incorrect, rising prices are simply symptomatic of inflation.
Inflation is the increase in the money supply and credit. The word “inflation” once applied only to the quantity of money. It meant that the volume of money was inflated, blown up or overextended.[i]
As the money supply is increased, people have more money to offer for goods. But if the supply of goods doesn’t increase — or increases at a slower pace than the money supply — the prices of goods goes up. Each individual dollar becomes less valuable because there are more dollars available. This leads to more of them being offered for a commodity. A “price” is an exchange ratio between a dollar and a unit of goods. When people have more dollars, they value them less. Goods then rise in price, not because there are fewer goods than before, but rather because there are more dollars available.[ii]
Continued inflation caused severe distortions within the U.S. economy and in financial relations around the world. At home, an artificially created “easy-money” policy encouraged people to incur more debt for new houses, new cars, new appliances, etc., at prices that continued to rise. Businessmen were encouraged to venture on new undertakings that could not have been profitable under stable monetary conditions. It led to rampant speculation in real estate, securities and other things; and it became so rampant, in fact, that things such as real estate began to be thought of as an investment.[iii]
This sounds like something that was written within the past year or two to describe the crash. But, in fact, it comes from a publication first published in 1955. That is why I say that it is impossible that Greenspan and Bernanke didn’t see what was coming.
But why do governments want — nay, encourage — inflation? Schiff explains it very well. He writes that inflation is the government’s silent partner and is used to secretly confiscate the public’s money:
There are five reasons for creating inflation:
- Inflation makes the national debt more manageable because it can be repaid in cheaper dollars.
- In a democracy full of personally indebted voters, the government will pursue monetary policies hospitable to debtors even as it accommodates the special interests that lend to them.
- Inflation finances social programs that voters demand but avoids the politically unpopular alternative of higher taxes, allowing Uncle Sam to play Santa Claus.
- Inflationary spending is confused with economic growth, which is confused with economic health. (Of course, GDP numbers are theoretically adjusted for inflation, but that doesn’t mean much if the inflation figures are misrepresented.)
- Inflation causes nominal asset prices to rise, such as those of stocks and real estate, instilling in the minds of voters the illusion of wealth creation even as the real purchasing power of their assets falls.[iv]
In my own book, Burning Your Money, I wrote that anything that artificially increases aggregate demand for goods and services is inflation. It could be lowering interest rates, increasing credit or money printing, as the Fed has been doing with its so-called quantitative easing.
This is the uncomfortable truth the money creators don’t want you to know. But why would they want to hide it?
Schiff writes that governments hide inflation because it keeps the interest on national borrowing low, allows the government to keep Social Security payments as low as possible and allows for lower interest rates for consumers, which encourages the phony expansion of the debt-dependent economy.[v]
By hiding the truth, the money creators seek to control the system, or non-system of fiat dollars which they use to control us. Americans believe they have trillions of dollars in savings and investments. In truth, what they have is only numbers, not substance. It is fiat, which is “money” only by the decree of the “authority” of government.
Yet, time after time, Americans listen to the solutions posed by those “experts” that are “in charge” and trust them to tell the truth and do what is best for the country and the economy. And they wonder why, three years after the crash, nothing seems to have changed and the “experts” are pushing for more of the same.
[i] What You Should Know About Inflation, by Henry Hazlitt, p. 2.
[iii] What Would More Inflation Mean To You?, the American Institute for Economic Research, p. 5.
[iv] Crash Proof, by Peter Schiff, pp. 72-73.
[v] Ibid, p. 73.