Before one can analyze solutions, one better have a very good grasp on the problem.
Most people do not understand the cause/effect that created the current economic consequence.
Bernanke is playing his best 3-card Monte Card game.
He wants everyone to believe it was “speculators” that caused the economic bubble/burst.
However, let’s be clear.
No speculator creates money out of thin air.
No speculator sets the discount rate for lending for the banks.
No speculator sets the reserve capital requirements for the banks.
The FED does all of that.
The FED, its fractional reserve system and its economic policies are the direct and only reason for the economic consequences the US and most of the world suffers today.
Creating regulation on banks or speculators or the public, making tax breaks or increasing taxes, or anything else that fails to address the FED and its ability to manipulate the economy and as a result solves absolutely nothing.
Nationalizing the FED would only make it worse.
So, what is the solution?
Hayek, back in 1975, went on “Meet the Press” to discuss the economic situation – that in that time – was the worse since the Great Depression – Stagflation.
Nixon had just closed the gold window of the FED, and a global economic depression with rampant inflation exploded over the USA and the world.
Then, like now, it was blamed on some other economic actor – the speculators of that day was OPEC.
OPEC, seeing the value of their product fall in real terms as the US$ went into high inflation – began raising their prices in terms of dollars (but not in terms of gold).
Everyone blamed OPEC for the economic failure – and missed, again, the true villain – the FED.
Here is the interview:
Hayek describes completely the only solution, and the huge consequences that would be suffered by the people.
So the pundits hit Hayek for his supposed personal opinion that unemployment is better than inflation, as if the trade off is direct and easy to manipulate.
He pointed out, with no uncertain terms, that if hyperinflation is to be avoided, hyper-unemployment will occur. And it may occur concurrently with high or hyper-inflation.
The pundits try to suppress their laughter and challenged Hayek – what unemployment would be acceptable? 10% 15% 20%??
Hayek simply said – whatever level is necessary for the economy to correct its mis-allocation of goods – including labor – as a result of the artificial low cost of credit.
The pundits incredulously responded, saying that such a level maybe higher than what the people are willing to suffer – if it is too high, it will be politically unsurvivable.
Hayek responded, saying that, yes, that maybe so – it maybe politically unsurvivable and this country may be destroyed by it. However, that is the only path.
The longer the nation delays such reckoning, the higher the probability that the only solution – the economic correction and reckoning – will cause a level of suffering that the People cannot accept, ending in political collapse.
The economic correction, no matter the politics, is unavoidable.
It is this single realization that is so important.
The economic reckoning is unavoidable
So, I come back to my point.
There is no solution to the economic crisis except suffering. The American people must suffer and will suffer. There is absolutely no way to avoid of this.
However, any attempt to delay or mitigate this suffering will guarantee that the suffering will be longer and worse.
We have to remember that Hayek issued his warning in 1975, looking at the depth of the economic problem back then – and he was already worried.
35 years have passed since his dire warning.
It will be much worse than his best hope – and approaching his worse nightmare.
The only solution – which will never happen – is the ending of the FED, and the ending of the monopolization of money by government and its tool of central banking and the fractional reserve system.
So, what is left?
Nothing but deep suffering.
If this is the inevitable condition of our future, then we must face it, and most importantly, prepare for it.
We must realize that 98% of the rest of this nation firmly believes some magic or miracle will appear and this Great Reckoning will dissipate with little harm or fury. They are all living in a fantasy.
When it hits, and believe me, its whole fury is still coming, it will wake up the mindless masses out of their dreamy sleep.
You must be so far ahead of this wave, because you have no hope of competing with the hundreds of millions that will be desperate.
The political turmoil, probably political collapse, and the economic suffering will be severe.
It will represent for those who are prepared the truest representation of the two Chinese sinographs for “Crisis” – dangerous opportunity.
There is no solution but deep suffering. This will be avoided to the bitter end by the elite and the People.
Thus, the suffering will be unbearable.
Therefore, do not waste intellectual or physical energy trying to discover ‘a solution’ to this economic crisis. There is none.
Do not count yourself in any group that by any action attempts to avoid or mitigate this inevitable disaster by some political means.
Join a different group, the “Prepared”.
It is your only hope.