Tuesday, May 22, 2012

Market analyst says US in an economic 'war'


A major market analyst said Sunday that the United States is engaged in an economic "war" as a consequence of a deadly collusion between politicians and large corporations that have defrauded the public for the past 30 years.

The danger that is inherent in such a war, he says, lies in the fact that not only has the U.S. economy been falsely inflated by the fraud but so has Europe and most of the advanced nations of the world.

Analyst Karl Denninger, who is the brain behind the Internet site The Market Ticker, states that the economy has been rigged by major power brokers in politics and business who wished to take the competition out of the markets. The motivation for the move was to insure that everyone would win and that no one would lose, or at least not enough to ruin them.

However, this is not the way capitalism works. Competition is the centerpiece of the capitalistic system of economics, meaning that one must risk losing in order to position himself to win. If someone else can offer the same goods and services at a lower price and with a higher quality, then it is that person who wins. The others either lose or find a way to cut costs and improve quality so that they can remain competitive.

This is the system that created the most prosperous society the world has ever known.

However, when the main players in the system decide that they no longer wish to risk losing, and then proceed to rig the system to insure no big losses, then 'capitalism' fails because it is no longer capitalism. It has become something else.

This, according to Denninger, is what politicians and big corporations have done to the U.S. economy and the markets. The power brokers may talk about "free markets" and "capitalism," but what they have created is nothing more than a massive Ponzi scheme with its characteristic bubble that can burst at any time.

Denninger says that everything in the markets is falsely over-valued, despite the attempt of the market to make a correction in 2008. Under normal circumstances inflation is corrected by deflation, leading to a scenario in which a more realistic value is placed on goods and services.

The moguls, however, wish to prevent the deflationary correction, for obvious reasons. They do not wish to lose money. But to prop up the value of goods and services artificially, which is what the politicians and the corporate moguls have been doing for years, leads to a bubble due to the fact that nothing is worth what the markets say it is worth. Sooner or later the average rank and file investor gets the message, and there is a massive sell off, leading to a catapulting plummet in prices. Thus, the bubble bursts.

No one currently in the presidential contest of 2012 is addressing this issue, according to Denninger. Romney, he says, is totally invested in the grossly inflated bubble. The Libertarian candidate, Gary Johnson, refuses to talk about the issue. And Barack Obama, although he is the one least invested in the bubble, refuses to deal with the issue because to do so would mean he would be forced to deal with runaway government spending and the massive debt.

The reason the United States and the rest of the world is on a collision course with economic collapse is that the wealth investors hold comes from buying up everyone else's debt. The market's value, thus, is in holding someone else's obligations. The wealthy are not really wealthy when they are merely holding someone's debt. True wealth comes in the production of goods and services, and then raking in the fruits of one's labors.

This false wealth will eventually disappear since it is based on nothing. And this is the predicament in which most of the world finds itself today.

The current solutions to such a calamity being floated about by politicians are diversionary, says Denninger. Politicians claim that the only two choices are either cutting government spending or spending one's way to growth.

While cutting government spending is a given, it is not the only solution when the entire system over the last 30 years is based on fraud. Spending reductions must be seen as part of an overall program of real debt reduction along with removing the protective shields politicians and big corporations have placed against losses in order to continue to prop up the false bubble.

In short, restoring competition that does not negate risk is a key component of the solution.

by Anthony Martin