Illusions, Propaganda, and Reality:
Good Morning out there in reality land, your King of Simple News is on the air.
I woke up to a snow covered world this morning and considered at first glance that everything appeared white, clean, and perfect. But then I realized that the snow merely covered up all the imperfections and will eventually melt away; after which we will be mired in mud. The illusion of a perfect unspoiled world that the snow creates is temporary; very much like the current stimulus program.
So long as our government, foreign governments, and the Federal Reserve pour borrowed money into the system, it covers up the imperfections. Once it becomes impossible to artificially stimulate the economy, the artificial effects will melt away and we will once again be mired in the deep mud of untenable debt.
I mentioned something yesterday that I consider as being important to keep in the front of our minds. “The best year that we have ever had since 1969 (last actual balanced budget) wasn’t enough.” Each year the U.S. required a mounting debt to continue to function. The White House says that TRILLION dollar annual shortfalls will continue for years…after which we will grow out of that smothering debt. If you believe that, I have a little ocean front that I could sell cheap near the Utah border.
I know that you get tired of hearing me say this, but the mathematically predictable exponential function is playing out in a classic grand finale.
We must constantly remind ourselves that there is no upper limit to the amount of money that government at all levels can spend on pet and make work programs, with the excuse that they “simply cannot be cut.” For instance, the department of Energy was formed in 1977 to create an energy plan. Thirty-two years and billions upon billions of dollars later, we have no energy plan. So why do we have a Department of Energy? This program simply cannot be cut; one of the Senators brothers-in-law most likely runs the outfit.
There is also no amount of money that individuals can’t spend. The movie star Nicolas Cage just had properties worth many millions foreclosed on in New Orleans, California and Nevada and owes $6,000,000 in back taxes. In stark contrast there are people who make minimum wage and are current on their bills. So how is that possible? How can one person make millions and be steeped in impossible debt and another make very little and be solvent?
Here’s where I tell another story that some of you have heard before: Many years ago, I and a friend attended a seminar in Seattle that was booked as “The Wealth Academy.” During the lecture, one of the speakers said, “Everyone should put some money back each and every month as an investment and for a safety net.”
One of the attendee’s interrupted him and said that with the rising cost of living, he and his wife simply didn’t have any money left at the end of the month to put back.
The speaker quietly asked the man if he and his wife made more than minimum wage. To which he indignantly answered, “Of course we do.”
The speaker then asked if this man knew anyone who made minimum wage, to which he responded, “I suppose that I do.” To which the speaker asked, “Are those minimum wage earners dead or alive?”
The man seemed perplexed at the question, but then said, “They’re alive.”
The speaker then concluded, “So you could have money left at the end of the month, you just don’t want to. Therefore, I can’t help you.”
It was very quiet in that crowded room as each of us rethought our own situation. The attendee, while embarrassed, stayed for the entire two day presentation and perhaps garnered more than anyone from that simple truth that he had unexpectedly learned about himself.
When I say live simple and live well, what I’m really saying is to live within your means (Nick Cage didn’t take my advice). Most of my life, I have chosen to live well below my means as compared to the norm. Better stated, I have resisted “borrowing my way to maximum supportable debt.”
Living below ones means is a powerful and envious position. The options enjoyed by living in this manner are nearly unlimited. It gives a person a strong sense of independence and therefore peace of mind.
However, we are not taught to live below our means, we are propagandized and educated in the discipline that growth is good…including growth of debt. “It’s only money. What’s money for if not to spend? You only live once. You deserve to drive a new car and have a new home; don’t wait until you’re too old to enjoy it. Live while you’re young” Sound familiar? It’s called propaganda and it makes the rich richer, the poor poorer, and the Middle Class disappear altogether.
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If we all lived below our means and didn’t take out loans, Capitalism couldn’t exist. There would be no way to put excess Capital to work. With no where to go, excess Capital couldn’t earn interest and the wealthy would actually need to work for a living. Not to mention that the economy would collapse - literally. Our debt and interest based economy must continually grow to survive.
The reason is simple, no one is going to give out a loan unless they believe it can be repaid with interest. For that to happen, there must be growth; otherwise, the principal and interest can’t be repaid.
However, there is a catch here. When the bank creates a loan, it doesn’t create the liquidity to pay back the interest. It is a game of financial musical chairs, a zero sum game. When the growth slows or stops, those without money loose the assets when they can no longer pay on them.
Since the bank created the money out of thin air to begin with; it was only an accounting entry, the whole thing was a fraud from the outset. Now with the default, the bank is able to take title to tangible assets that it never owned, and does so by virtue of the fraud.
You see, the bank never loaned “its” money to you in the first place, it simply created a the money with a few key strokes when you signed the papers. There wasn’t enough money in the bank to cover your loan anyway, it’s called fractional reserve banking, and it is a scam. If everyone came to the bank at the same time asking for their money, the bank would be found to be insolvent and be forced to close its doors.
For a detailed look at how our banking system really works, read “The Web of Debt” by Ellen Brown. Our banking system is nothing more than government sanctioned fraud on a grand scale.
All of this happens because people are too busy buying things they don’t need, then working longer hours to pay for them. When that is done, they busy themselves having fun with their expensive toys. If enough people would spend a fraction of that time, energy and money educating themselves on issues of banking, finance and economics, we wouldn’t be living with the corrupt system we have today.
Greg,
If only the average person could comprehend your post here today.
You said, “If we all lived below our means and didn’t take out loans, Capitalism couldn’t exist….Our debt and interest based economy must continually grow to survive.”
I would only add that we must grow exponentially, and of course, that is impossible and therefore our current economic basis will not survive.
When I was a student in high school our vo-ag instructor took every class to visit a farm just down the road from us. It had all the latest equipment, the biggest blue silos, new pickup trucks and cars, and the people who ran it also had a first class superiority complex.
When we returned from the visit the teacher said that we should all aspire to have a fine, modern farm like that. I must have been a subversive even back then because I just couldn’t keep quiet and blurted out, “Too bad they can’t pay their bills”. You would have thought I punched the teacher in the stomach. He told me to stay after class and then proceeded to ask me how I could embarass such fine people. I knew they owed my Dad and Uncle for feed purchased for several years and said so. I never got a decent grade from that teacher again.
There is a lesson to be learned from this episode and it is this: Truthtelling is never rewarded, in fact it is often met with extreme resistance and may even be harmful to the teller. Prophets are never welcomed because they proclaim about things that are uncomfortable or worse. This is why we all get the cold shoulder or looks of derison from the general populace as we try to educate them about economics.
I guess I didn’t learn my lesson in high school LOL.
Speaking of illusions I would like to share this video about China. It appears that in order to boost GDP China has actually built an entire city that is uninhabited. They want 8% growth and this is the plan….
http://www.youtube.com/watch?v=0h7V3Twb-Qk
Hotrod,
Nice story, thanks for sharing a real life antidote.
Your teacher was a blind follower, a man who believed himself to be a lesser human than the local iconic families who he aspired to become.You burst his bubble.
Alfred North Whitehead said, “The poet, the artist, the sleuth - whoever sharpens our perception tends to be antisocial… he cannot go along with currents and trends.”
Prophets are unwelcome unless they prophesize better times to come. Obama falls in that category, as did his presidential predecessors.
Promise chickens even if you can only deliver feathers and your words will be far more welcome than a truth teller who blurts out the very real and verifiable fact that there are no chickens, only feathers.
The psychological makeup of the human mind rules well above the truth and always has as can be witnessed by the following quotes.
As scarce as truth is, the supply has always been in excess of the demand. - Josh Billings (1818 - 1885 )
A lie can travel halfway around the world while the truth is putting on its shoes. -Mark Twain ( 1835 - 1910 )
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. - Arthur Schopenhauer ( 1788 - 1860 )
Now if that doesn’t make you grin; what would?
Econalmost,
Thanks for the link. Where do you suppose the Chinese ever got such a silly idea? A $558 Billion stimulus for 1.4 Billion residents from a government that actually has the 1.4 Billion on hand?
The U.S. government wants to grow GDP, has no money, and has pledged more than $11.6 TRILLION to spur economic growth for 310 Million residents that are flat broke.
Don’t take me wrong, your Chinese example was great, but pales in comparison to our own nations attempts to spur a dead horse to life.
China WILL fill that city, have no doubt about that. It is an example of their absolute resolve to convert to a domestic expansion model; one of my greatest fears, but also one of my long term predictions.
Keep those links coming! What a psycho world we live in.
Don’t have anything to add to this blog. But I would like to commend all for some of the most profound offerings I’ve read in quite some time. It will need a week of contemplation at least.
Many thanks!
Michael in NC
The first step to living below your means is to get rid of the wife.
Whatever happened to the housewife that sewed patches on torn pants?