Debt Rattle March 13 2016

[Raúl Ilargi Meijer]

NPC Fred Haas, Rhode Island Avenue NE, Washington, DC 1924 • The Fed Caused 93% Of The Entire US Stock Market’s Move Since 2008 (Yahoo) • ‘Negative Ra
[See the full post at: Debt Rattle March 13 2016]

[Dr. Diablo]

“Oversupply destroys capitalism in a natural way.” DeutscheBank

Straight-up Marxist theory there, and although theories have good and bad points, when theory has been proven to be both wrong and violent, you might want to take extra caution. –And you thought I was going to comment on the disturbing irony of a supposed capitalist espousing Marxist theory, and I just did.

But the real point is this much-believed theory altogether. Seems perfectly plausible, and we’ve seen examples all our lives. Capitalism overproduces–what a problem to have! But then crushes its own profits and collapses, along with wages. So let me ask, if so, why didn’t we have overproduction of goods in the Middle Ages? They weren’t modern capitalists, but similar enough on this point. Why didn’t we find some Belgian making 10,000 shields he couldn’t sell?

Because people aren’t stupid. They don’t make goods they can’t sell. They need to be tricked into it with a plausible story of lies. In Modern Capitalism–and what makes it “modern”– is the over-extension of finance creating false signals, whether it be easier private loans or lower central bank rates. This causes the bidding war and transparent overproduction, as the economy is tricked into moving too fast, faster than the real, underlying supply and demand would otherwise allow, leading to unhealthy growth and malinvestment. Then, as it can’t be sustained, loans are called and producers fight like fish in a puddle to survive the contraction that was engineered by the boom. Who profits? He who issues more loans and repossesses the capital. This happens in modern capitalism, but is a function of financiers and unsound money, not “Capitalism” itself. Nor do we need to go to war over it, just enforce honesty in weights and measures, fraud, and bribery.

China, with its finance similarly over-stimulated and centrally-planned, is a parallel example. What are they going to do about no circuit breakers? Rig the market from behind in secret, just like we do. Lie about unemployment and layoff like we do. Rig and bailout bad loans, like we do. Save cronies and bankrupt outsiders, like we do. They only learn from the best.

[rapier]

We will have an answer quickly on this oil price thing. I believe it is possible that the published price for oil, as opposed to discounted oil at the terminals for specific buyers, can be maintained well above $30 and of course $19 by managing the futures market price.

I would be more than happy to be proven wrong.

[Author]

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