|Looking at the face of the government
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- By Bill Bonner
Gualfin, End of the Road, Argentina
Nothing special in the markets yesterday. Dow down 104 points. Gold up $5.
When we left you yesterday, we were trying to connect the bloated, cankerous ankles of the US economy to the sugar rush of its post-1971 credit-based money system.
Today, we move on. We look at the face of our government. It is older, with more lines and worry wrinkles. But whence cometh that pale and stupid look? That too is the result of an advanced diabetic epizootic that has infected the whole society.
After real money and real savings left the economy, GDP growth rates fell. Wages atrophied. The rate of start-up businesses, the backbone of employment and output, was cut in half since the '70s and '80s.
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The whole body economic grew soft and mushy, unable to hold itself erect or to stand on its own two legs. Thenceforth, it needed the crutch of increasing credit.
The new money system meant that Americans had less real wealth, but until 2007, they could still get what they wanted by borrowing. Few noticed that they were borrowing from the company store, and becoming slaves to their credit masters.
No one ever figured out how to create gold. So, they changed the money system, in two steps, 1968 and 1971. With the new dollar, unbacked by gold, they could create all the money they wanted. After the '70s, instead of earning more money, or borrowing from the savings of his neighbors, the typical American had to grovel to the elite who controlled it.
Government and its cronies in the banking sector created money 'out of nowhere.' This money cost them nothing. Still, it was lent out, just as if it were real savings. The typical American took it. He bought a house. He bought a car. He had a nice spaghetti dinner and paid with a credit card. Now, he was no longer a free man, in a free economy with real money in his pocket. He was a slave to the credit system. He needed to work hard to keep up with it. The feds got the money for nothing. But he had to pay for it. Most often, he couldn't pay off his debt. So, he became a debt serf - beholden to his masters for his home, his transportation, his education, his health care, and even his food.
If he wants a house, doesn't he depend on the fed's Fannie Mae to help him get it? If he wants a car, doesn't need the Fed's low interest rates to help him buy it? If he needs a job...doesn't he need the Fed's stimulus...or, failing that, at least the feds' unemployment insurance, food stamps, or disability payments?
Just look at the feds' SNAP (food stamp) program. From zero in 1970, the scheme now costs $75 billion per year - every penny of it to people who used to be capable of feeding themselves.
The elegance of this scam is staggering. The banks get money at zero cost. They give the homebuyer a mortgage. Now, effectively, the bank owns the house and the 'homeowner' pays it rent every month. And the homebuyer never realizes what has happened. He kisses the hand of the lender and practically begs him to sleep with daughter.
Then, when elections come, he is ready to play his role - a proud citizen and homeowner, voting for more lashes.
More and more Americans vote for 'something for nothing,' because nothing is all they have to bargain with. Here are the numbers from the Social Security Administration:
-39 percent of American workers make less than $20,000 a year.
These flabby income numbers, too, are a result of the regulatory policies and artificial money that has been drip fed to the American people over the last 45 years. By one estimate, had the economy remained on the track it was on in the '50s and '60s - before the new money and crippling restrictions took hold - the average person would earn $125,000 more per year today. Instead, the average income is only a fraction of that number. And it's getting worse. Household income has fallen since 2000 from $57,000 to only $52,000.
-52 percent of American workers make less than $30,000 a year.
-63 percent of American workers make less than $40,000 a year.
-72 percent of American workers make less than $50,000 a year
But we are still talking about money, aren't we? Let us take another look at the face of our new government and draw a measure of its character. The skull may be the same as they were in 1970 - the Constitution hasn't changed - but gone is the smooth, youthful, open visage. Over the years, the sour creases have multiplied. They tell an ugly story.
When a group of people can control an economy's money, they tend to direct it to where they want it - to themselves, their cronies, and to their favorite projects. The rich, special interests, the well-connected and the elite figure out how to play the game. And how to make it pay. They throw some bones to the plain people and take the meat for themselves. The financial sector, for example, watched as its profits when from only about 15% of total corporate profits in the US in the '70s to 40% in the 2003-2007 period. How did that happen? Easy, they were lending money they never had to earn.
The corruption of the American system of government has taken place over more than half a century. But it is only in the last few decades that the body politic has begun to curl into a grotesque new shape. In a credit based money system, the people who control the credit are like guards a gulag. And pretty soon, they act like them. They decide who eats and who goes hungry. They are not bad people or good people. They are just like all of us - eager to take advantage of opportunities as they present themselves.
Gone is the delusion of democracy. Out the window is the hope of a free market. Forget the American dream. It is all fraud, scam, and the old false shuffle.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.
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