Pat from Michigan's response to Marc, Ian and "global economic collapse"

[Pvincent87]

I apologize for maybe getting a little riled up tonight on the program about the so-called “world wide economic collapse” its just, well, whenever I hear that claim I get pissed! Also, in regards to me declaring that I would not want to have sex with Julia, its not because she is unattractive, its just that big girls need some love too sometimes.

I claimed that the “United States has no productive capacity” and I staunchly stand by that claim. As all of you well know, the United States dollar is a fiat currency which basically means that it will eventually cease to retain purchasing power and subsequently collapse in a whirlwind of hyperinflation as the velocity of money accelerates and the money and credit created in the boom finally chases after goods namely items with inelastic demand (necessities). Since the U.S. is speedily destroying whatever industry it has left with governmental intrusion the capacity of the United States’ macro economy to generate wealth via competitive industry is castrated. Once the tip is snipped you can’t just snap your fingers and correct things, ya know? Since all major world currencies I know about are fiat currencies, traders on the foreign exchange market buy and sell currencies dailiy exploiting arbitrage opportunities. They almost always prefer fiscally prudent companies with a POSITIVE BALANCE OF TRADE. Since the United States has no real viable productive capacity to speak of, speculators on the FX markets will wise up and sell their United States dollars because they are backed literally by nothing, not even exports or natural resources (in the short term because of permits...etc). This is the crux of the problem.


Those who understand the Austrian theory of the trade cycle know just how catastrophic the “bust” phase of the 25+ year boom which ended in the fourth quarter of 2008 with the second bursting of the stock market bubble is going to be and, make no mistake about it, hyperinflation is inevitable. This claim is indisputable, and if you do not believe my claim you should read the following article: http://mises.org/story/3390 I surely hope that your backgrounds in Austrian economics eventually brings you to this same conclusion!



So when Mark says that United States citizens have washers, dryers, and other consumer goods and he equates that to wealth, I just have to smack my head!!!! The key thing to remember is that the United States is going to face a currency crisis and currency crises necessarily substantially decrease wealth generating endeavors (i.e. production!!!!)  which further accelerates the fiat currency collapse because there is even less “stuff” backing worthless paper resulting in a failed currency a la Weimar, the French Revolution, Zimbabwae, Angola, or even America a few hundred years ago with that worthless continental!!!!! All of them are worthless, pwah!


The problem is that this falsehood is still held by many so-called Austrian economists (not Hayek, Mises, Rothbard, Schiff, Rockwell or Higgs, mind you). Consumer goods such as a washers and dryers are NOT capital. They wash clothes and add VALUE but they are not capital goods. Capital goods create wealth and in turn that wealth is spent on consumer goods to add value. You really must understand the difference! When I buy a car from jim bob’s car dealership, I’m adding value to my life by making my commute easier and arguably safer and so forth but I’m not creating WEALTH in fact it is quite the opposite, I am consuming, i.e. destroying my own wealth for such an item. When I build a factory which constructs cars in order to sell them to jim bob’s company I am in fact doing the opposite of consuming, I am producing. I am becoming wealthier, not poorer. Now you could make the argument that consumer goods do create wealth by making tasks easier but this is not true because all consumption goods depreciate as they are consumed thus you are left with no residual WEALTH. Unfortunately, the people in the United States and elsewhere, mind you, have confused these two activities and seem to equate consumption with production. This is all Keynsian nonsense, they are two very different activities. One expands the production possibilities curve (according to austrian theory, that is) the other actually necessarily decreases it despite the marginal benefits accrued from buying say a car or a big mac.

And you must remember that the U.S. dollar was only the reserve currency of the world because it was linked to gold. The U.S. repudiated the last remnant of the gold standard in August of 1971 but the rest of the world was so dumb that they actually kept the US dollar as the reserve currency. Fools! Now America’s creditors have figured all this stuff out and they no longer want to hold dollars but SURPRISE! They own short term U.S. treasuries.  Not wanting to completely destroy their own assets, their VOCAL criticism remains minimal although…meanwhile they are stockpiling gold bullion and real stuff (china recently doubled its gold reserves and is now stockpiling copper).


In order for fiat currencies which are intrinsically worthless to continue their charade and exist they need to be backed by some kind of commodity like say…the commodity which is best suited for monetary purposes: gold. But even that is unnecessary. In the next few years you will see this become evident as the Canadian loon substantially appreciates versus the U.S. dollar BECAUSE of Canada’s vast petroleum reserves which basically means they will maintain a positive balance  of trade for the next few decade or so as oil wells around the world dry up and the United States loses Saudi Arabian and Mexican oil. You see how this works? In lieu of an actual gold standard, the production capacity of a country leads to increased EXPORTS which are sold to CONSUMERS who depart form their wealth in order to attain such goods. This increased productive capacity leads to a net positive balance of trade which currency speculators at the Forex attribute, rightly so, to a strong currency. Errrr...I hope I didn't leave anything out......


It seems I’ve ranted again somewhat…but I hope you understand why I grew frustrated.

Love the show! I’m moving to New Hampshire probably sometime by next year….hopefully my commentary doesn’t come across as too confrontational and I’m sorry if it does  but you must see the lighhhhhttt!!!!!!!

***Come to think of it, a car could be considered a capital good (it creates wealth) as well as a consumer good so my analogy there was flawed. Hopefully you get the point though.