THE BIG BUST: AN ESSAY
Edward E. Rochon
Edward E. Rochon on Shakespir
The Big Bust: An Essay
Copyright © 2016 by Edward E. Rochon
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Some Other Works by the Author
[Compound Interest: An Essay
Dollar Inflation: An Essay
Dollar Inflation II: An Essay
Green Gold: An Essay
Inflation Court: An Essay
Jobmasters: An Essay
Minimum Wage & Economics: Essays
Monetary Stability: An Essay
[Axioms & Theorems: An Essay
Global Warming: An Essay
Pest Control: An Essay
Pollution Solution: An Essay
Pollution Soup Cook: An Essay
Unified Field Theory: An Essay
Table of Contents
The Big Bust is the predicted economic crisis due to the United States deficit, money supply expansion, and surmised toppling of the dollar as the international currency standard.
Economics has been polluted by such nonsensical notions as Say’s Law, Marxist Dialectics, comparative advantage, and a false confidence in gold. Nevertheless, panics feed on themselves. We must never underestimate the capacity of human beings to be stampeded to their own destruction, nor underestimate the power of the sword of truth to cut through the web of intrigues and lies that have plagued the world for millennia. Should the bust bear prove unbearable, the rash solutions bull will be kicking on the gate, rearing for a fight with the matador. We offer a few comments on how to proceed.
Chapter 1: Ron Pauliad
Ron Paul is a major town crier sounding the alarm for the coming bust. His sidekick is Porter Stansberry, or Porter Stansberry is Paul’s. Porter has intimated or predicted a collapse in 2013, 2014, 2015, and sometime real soon for the foreseeable future. These are free market gold standard bugs. With the US off the gold standard and free markets regulated to varying degrees, we are clearly doomed according to the dictates of ideological purity. If we just go back to the gold standard and remove the evil regulatory machinations of big government, we will be on the road to paradise. We must look at a few of the underlying suppositions behind the Ron Pauliad. Prior to this, I must say that as a man dependent on social security, the gloom and doom of Paul disturbs me to the extent that he might ultimately set off a stampede. On the other hand, somewhat incongruously, I find Stansberry and Paul somewhat comforting. Why is that? Well, nobody is going to accept the dollar anymore, no more international standard of exchange. The scenario goes that the Federal Reserve will no longer be able to prime the economy and stave off collapse through printing money. Prices will go up for the American consumer creating a crisis. Off course this will lead to unemployment. Whenever we have poverty, we must always put people out of work for some reason. You might suppose the poorer a country is, the more incumbent for the population to work. But this ignores how speculators make money by playing on crisis situations. It ignores that making money is not necessarily making wealth, the wealth that gives money any value that it has. So what am I getting at?
Joseph Kennedy Sr. made money from the stock market crash of 1929. He was an insider trader and foresaw the collapse. The bull market saw a rosy future. So Kennedy was able to sell stocks at high prices, leaving the buyers to face bankruptcy or massive loss of assets. Who are these people that are going to dump the dollar? Those who hold reserves: the central banks of China, other countries who peg their currency to the dollar and must sink or float with the dollar? They must use dollars and pray for a stable dollar. We have other plutocratic investment holdings. Paul and Stansberry are predicting a worthless dollar. Where are these holders going to dump these dollars that they are dumping because the dollar is going down the drain? Nobody wants them but the US. Where can they dump them but in the US. If money pours in and you want to earn something from it, you must prop up the government: stocks and bonds, or invest in goods and services production or assets. If they buy assets such as real estate, this will hardly drive down prices to a collapse level. Good for the average American home owner? If they invest in goods and services, the Internet, notwithstanding, for offshore labor, jobs must be created in America. How will this make it harder for Joe Blow to pay off his debts? If the dollar goes down the tubes, all holders outside of America suffer, and where can they unload them as the clever Joe Kennedy unloaded his stocks prior to 1929?
The bad option, is to use these assets to bribe US politicians, buy up vital assets in America, or attack America in the worst scenario and seize the country. Now, we know that the Chinese economy has risen not just by the work of Chinese labor and engineers, but by financial assets draining from the American economy over the decades, trade deficits due to the decline in US manufacturing that the American worker certainly did not ask for, even if they did like the idea of cleaner air and water, safer working conditions. So I have mixed feelings about the Ron Pauliad. As long as the US military arsenal is strong, things could certainly be worse. Now for the errors of economics.
Chapter 2: Economic Drivel
SAY’S LAW: This law says that supply of goods creates demand. This implies that in a free market full employment will be guaranteed. Overproduction will result in more jobs. Supply will be monetized into capital that must be invested in the economy. Skeptics have pointed out flaws in this assertion, including M. Say. Forget about the details, look at it point blank from the point of view of common sense. Supply does not create demand. Demand creates supply. The very notion of supply in the economy is meaningless without a demand for the product. Muck at the bottom of the Pacific Ocean is only supply if somebody has a use and so demand for it. Sure, it is there, but not an economic supply.
The most fatal flaw in Say’s law is the existence of money itself. There is no absolute relationship between making money and making wealth. Indeed, speculators can make money off of a declining economy, as Stansberry himself entices his listeners with. To the individual, money and wealth are transparent, that is to say they are the same thing for all practical purposes. This is not true for the nation and the statesmen who live off tax revenues rather than from bribes from speculators and unscrupulous plutocrats or foreign governments attempting to undermine the state.
Internally, if the plutocrats deem the workers too uppity, they can induce unemployment. This drives down wages, increasing the relative value of their financial assets. It will make the workers more pliant, easier to pit unemployed workers against employed, and you get the picture.
Unfortunately, idiots such as Maynard Keynes, simply throw more money into the economy to prime demand. You see, a poor man has many demands. But the marketplace only recognizes demand when money or goods are in his hand to trade with. This is another problem with a money economy. So by making loans available to start up companies and credit to the poor, the demand is realized in the marketplace. The thing is that demand is absolutely dependent upon the production of real wealth, not simply wealth in more paper money, or even an increase in the value of gold, effectively increasing the money supply if not the coinage. What does this mean?
The statesman must make certain that any expansion of economic activity is geared to wealth generation. Make work jobs can be useful to keep idle hands busy from the devil’s work, but why not have them do something useful to increase the wealth of the commonwealth? Gambling casinos, whorehouses, expensive vacation junkets for politicians and the hoi polloi are not wealth generators either. They simply shift assets around in a musical chair dance of death.
Basically, all that need be done, is for the state to prime the private market, order needful public projects expedited to take up surplus labor. When this is done, the economy will expand. Then you simply increase the money supply on a Milton Friedman basis to make sure enough species is available to oil the wheels of business. The government of business is business as Cal Coolidge noted. Anyway, with a slack economy, government must take out bonds to expedite needful public renewal of infrastructure and new projects for the future. This increases the money supply by default. Think productivity first and let the money supply follow. Do not just increase the money supply. That is no guarantee for increasing the commonwealth assets.
Secondly, an honorable prince cannot tolerate compromising his military budget in a world of violence, nor tolerate unemployment at home so as to ensure domestic tranquility. And the tax base is absolutely dependent upon productivity. The demagogue will offer bread and circus, not the honorable prince. There is no true glory in that.
THE EVIL STATE: The state is ordained by God by biblical fiat, and those who say otherwise are evil heretics. If the state does evil, it is evil men from the nation or other nations that do it. The state is an absolute good, but corrupt people corrupt everything. The sacred object becomes profane when touched by impure and profane objects and hands. Moreover, reason and commonsense clearly tell us that a well ordered state is both necessary and good.
COMPARATIVE ADVANTAGE: When one country is less productive than another country, it should find out why and improve its knowledge base. Knowledge and organization are more important than mere labor in the generation of wealth. Everybody understands that the lone man finds it hard or impossible to make everything he wants with his own hands. But let us not make a virtue out of impotence and incapacity. All men, communities and states should strive for self-sufficiency. Separating production from consumption creates too many middlemen that suck off too much share of the pie according to the profit motive of get everything you can get. A good price is the highest price to sell and the lowest price to buy. If government tries to hem in economic corruption, multinationals make it harder. Trying to fix this by centralized world government produces more trouble, factions at the center and resentment in the provinces. This is not conducive to a commonwealth of a city or of a world.
TRUE VALUE: We hear from the British and Marxists that value is the amount of labor put into something. And what is that worth? It varies from place to place, time to time for the same absolute labor and time. In point of fact, nobody gives a damn what amount of labor is put into anything. The value of anything is what the buyer and seller place on it from their own individual perspective. Of course, this is indefinable. How can Uncle Miltie, Uncle Adam quantify that! Too bad. The thing about this is that sellers must take into account the price of material and labor. The buyer must take into account what he can afford, whatever he may value the item at will mean nothing if he cannot afford it, or can afford it but values the price in money as more valuable, not due to the absolute value of the money, but to the absolute value of his needs as he, yes, as he defines this value.
Well, just what does a commonwealth value? We know that sane people value clean water, air, healthy food in the quantity needed to remain healthy, vermin free shelter, comfortable and clean clothes. The sybarite values whores, booze, gambling, adrenaline rushes in barroom brawls, high risk felonies. These have no value to the sane and are not even of value to the sybarite. He does not care. Ruin everybody and himself. Lust above all else. What kind of state policy is that? More lottery tickets, anyone?
WORK ETHIC: There is one and only one wise reason to work: for the health of yourself and family. Hard labor is inadvisable except when dictated by circumstances. Sloth destroys men as individuals and the community to whatever extent sloth is present. Health is an honest days work, no more, no less. The work ethic is a work vice, hiding greed, arrogance of superiority, and flight from family problems and personal problems. These are all character flaws. Greed is evil. Gordon Gecko is evil. Prosperity is good when it comes from true wealth generation, not the accumulation of money at the expense of the well being of the commonwealth. Any wealth that compromises the health of worker and society is no wealth at all, merely delusion promulgated by vile lust.
GOLD STANDARD: Gold as a commodity is more valuable today than it ever was in the past. Nevertheless, the economic value of gold has historically been pegged to a promise to pay. Gold does not rust away easily. It is universally accepted as a standard of value. It is easy to work into coinage or bars. The very fact that it is money makes for much of its value. In that sense, it is no different from paper currency, that is backed up by a promise to pay or accept as payment. It’s commodity value, even today, is a minor factor in its value. Paper currency can be burned to bake bread and has been done so. Collectors will pay quite a lot for old bills above what they were worth when in circulation. That is the nature of value.
Having noted these matters, what if the crisis of gloom and doom happens to America? Stay tuned for the next chapter.
Chapter 3: The Donald
If the Trump of Doom happens to us, what can we expect? Well, as you can imagine, with massive inflationary pressure placed upon the poor and faltering middle classes, the cry for wage and price controls may be heard in the imagination. Wage control more for employers, more for price control from employees. Unfortunately, this is a bad tactic. This is universally despised by the free marketeers. Here, I must agree with them. What you get is this: outrageous black market activity, rampant corruption and bribing of officials, gang violence, oppressive measures by bureaucrats to make the controls work in a huge economic infrastructure that America is.
Donald Trump, as of this writing (October 2016) is talking tariffs and tough renegotiating of trade agreements. What are the pitfalls of this? The problem is that consumer goods and many personal use essential goods are no longer produced in America. If Trump raises tariffs on foreign goods to any degree, the American consumer will suffer, until such time as American production can replace them at affordable prices. A great deal of the assets to create the factories are in China, Tiger economies, foreign central banks. Trump will create unemployment in foreign places, creating hatred for Trump and America. As for renegotiating trade agreements, how about the standard fare of our own Congress: gridlock? What are the American people going to do with economic instability, outrageous inflation, angst among the American wealthy, fear of investing in America, resulting in no job creation? Donald has a plan: play it by ear.
OK, wage and price control is a bad idea. But something drastic would need to be done that will be resented. What? The Donald gives the trading partners two options. He should not want to create a world depression, though Mr. Trump admits that he has often made money on bear markets. What else is new, Joe Kennedy Sr.? This does not a good President make, assuming Trump has any chance of that.
The Donald likes to bargain. We do not want to create massive unemployment in America, and by the golden rule, drive people out of work in China, ruin their retirement packages backed up by assets in American securities, create more corruption in China.
El Trumpo puts tariffs in place for many goods. They must not be so high as to encourage smuggling and the corruption of American federal employees. Smugglers will smuggle but want a good profit. If the tariffs are not high enough, less money to bribe the Coast Guard, Customs, etc. and profits on goods smuggled. So the Donald plays it by ear, but he gives them a bypass of tariffs. Instead of imposing wage and price controls, he becomes a sole buyer of merchandise. This has not been done in a free market to my knowledge, but socialist governments have done in the past. The Soviet Union buys grain from the US as a sole buyer for the goods. Lacking capital, it barters with resources produced in Russia.
This is what The Donald does. All the pottery and home goods must pass through customs and be tariffed, or purchased by El Trumpo. El Trumpo will then wholesale to Sears, Kmart, Home Goods. When you make large purchases for goods you can drive a better deal. Trump can pay in cash from sales to Sears, or make deals with owners of products to trade Chinese manufactures for American wheat, planes, or whatever can be arranged. Money is convenient, but you usually get a better deal in barter. It is inconvenient for the state to collect taxes in piecemeal barter (stealing chickens or taxing chickens from the coop), but barter in large consignments is another matter.
Will people be pissed off at having to buy from The Donald as the sole source? Of course, but they can still pay the tariff and buy direct. As for the loss of freedom, how about the loss of dignity when the Repo man grabs your car, the city or creditors run a sale in your living room, and if you are not lucky, sell your house from under you? Some freedom! If the bust comes, you may have to suffer a little indignity to keep your jobs, give investors confidence to re-industrialize America, keep black market generated corruption from rotting away American optimism and faith. What if people claim Trump is dealing unfairly with American vendors for mercenary or vengeful reasons? This looks like a job for Superman: truth, justice and the American way. But there is no Superman. Is there no truth, no just men in America, no real Americans? What do you expect? Of course the country is going to hell. As for me, I am voting for Superman for President in November 2016. We have two New Yorkers running. I am voting for Clark as an Independent. Why waste your vote? Because America has no No Vote. If I could vote no to both of them, depriving either of the office without a majority vote in their favor, I would do so. I do not believe either of them would get in office. We would just have to have another vote until somebody got a true majority that the no votes would not be able to overrule. At least, we would have a real choice. If I do not want A or B or some Libertarian or Green Party moron, this is no choice to me. Do not tell me I will get what I deserve if I do not vote. I will not get what I deserve. Give me the No Vote or shut up, moron. I now live in the Midwest. Clark came from the Midwest before going to New York via outer space. Hey, so did Hillary. Yeah, via a lot of corruption in Arkansas, Arkansas Difficulties for Huck Finn and the rest of us. Are we going to be sold down river along with Jim? Bill loves black people unless they are one of those Black bastards, especially if they are one of his black bastards. Then he does not want anything to do with them.
What else can Donald do? The Chinese have grown rich at the expense of America. We cannot continue to buy without producing something. The Chinese have dollar assets. They invest back in America and create factories, services and jobs. El Trumpo must make sure they do not control vital interests or become too bossy. But if a Chinese cartel controls 100% of the hula hoop market, I can live with that. It is when they control 100% of military-industrial stuff that we must be pissed off and paranoid. Look, factories just don't spring up in a day. Donald oils the deal. He says to the Chinese, since you sell stuff over here, why not warehouse more goods in the US for a start? Americans build or rent out warehousing. Some jobs are created for Americans. Warehouse jobs are better than factory jobs, but you have many goods and much fewer workers moving them. Then we talk about final production assembly or joiner jobs. The Donald says that we know you want to keep your factories at home. But we want some final assembly jobs here in America. You can save money on shipping when you ship parts rather than finished products. A finished good is more likely to break in transport, takes up more space. The Chinese keep their factories, ship goods cheaper and save some money to make up for final assembly in America. Moreover, they can distribute assembly plants nearer to the market. Parts also ship cheaper on American railroads and trucks. On top of that, by buying cheaper for goods, El Trumpo stems the blood letting of the US economy, a tournaquet to save money. That in itself is helpful, whether Chinese move jobs to America or not.
Quite often, when auto companies open factories in foreign countries, they are final assembly plants to start with. The parts come from the home country initially. Finally, the best way for China to keep the value of its assets in US dollars worth something, is to invest in America as Milton Friedman can tell you, or could before he died. What he did not note is the propensity for foreigners to push their weight in money around at the expense of the debtor nations. What is the Donald going to do about that? Make damn sure the Air Force has nukes ready to tell the Chinese where they can go if they get too pushy. Make sure spies and traitors who hate America have not sabotaged our military and deterrent, that is what.
But how can The Donald handle all of these sole buyer deals? Moses’ father-in-laws knows how. Assign seventy other sole supplier negotiators to help carry the load. the Donald can supervise. But that lecherous sex scandal plagued candidate will never get elected. All right, insist that Hillary do the negotiating. Hire Donald to run it. That way, if things go sour, she can blame El Trumpo. Why would they do this? Will The Donald work for the bitch, the bitch hire El Trumpo? To paraphrase Lord Nelson, America expects every American to do his or her duty. Hate the bitch all you please, but do your duty. Hate the son of a bitch all you please, but do your duty.
Other Works by the Author
Collected Poems I
Collected Poems II
Elements of Physics: Matter
Elements of Physics: Space
Elements of Physics: Time
Unified Field Theory: An Essay
Space as Infinity II
Golden Age Essays
Golden Age Essays II
Golden Age Essays III
Golden Age Essays IV
Golden Age Essays V
My current biography and contact links are posted at . My writings include essays, poetry and dramatic work. Though I write poetry, my main interest is essays about the panoply of human experience and knowledge. This includes philosophy, science and the liberal arts. Comments, reviews and critiques of my work are welcome. Thank you for reading my book.
A preface notes how Ron Paul expounds dire warnings of doom. I note some flaws in his position. Chapter 1 notes that Paul's dire warnings (Pauliads) worry me and comfort me at the same time. If the dollar is doomed, how can the holders of them unload them? Who will buy them? They must keep the value of the dollar up or lose big time. The only place to unload them is in America, building up the economy. Chapter 2 attacks Say's Law, Comparative Advantage, the Gold Standard, the evil state proposition, the work ethic as a virtue. Chapter 3 proposes The Donald or Hillary become sole buyers of foreign goods in a crisis to get better deals for the the American consumer. They will give foreign sellers the option of bypassing sole buyer deals by paying tariffs on direct imports. This will remove the need for placating the demand for wage and price controls in the crisis. This must be done to avoid black markets and corruption, and resentments. The Donald also adds in deals for moving Chinese and other production to America while safeguarding essential American assets. I briefly comment on my bitter view of the current presidential election.