Why Stimulus Always Fails

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Published : January 31st, 2013
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Category : Crisis Watch

Read the Monday Afternoon Wrap-Up for 1/28/2013 and the Tuesday Morning Commentary for 1/29/2013

Last week, I came across the below article; and immediately knew I had a RANT topic-to-be.  The title says it all; about realities of the past, present, and future

Guest Post: Why Stimulus Has Failed

In most aspects, the world is a very complex place.  And when you’re talking about a GLOBAL economy incorporating hundreds of nations, languages, and currencies; “complex” is certainly the operative word.  However, economic theory is not complex at all.  To the contrary, NOTHING could be simpler than Economics 101.

Its central tenet is that in a free market, supply will naturally gravitate to demand; at times, yielding painful, but necessary “corrections.”  However, governments embrace the OPPOSITE of these universal laws; mucking up the self-correcting process; causing MASSIVE capital misallocation; and ultimately, dramatic crashes like we experienced in 2008.

In and of itself, fiscal stimulus is contrary to the aforementioned LAWS of “economic Mother Nature.”  However, they are a necessary societal evil; and when utilized prudently – with retained Treasury savings – its impact is typically non-destructive; and at times, beneficial.

However, in today’s fiat world – in which ALL nations abandoned the gold standard four decades ago; the corrosive side effect of MASSIVE debt buildup has rendered the concept of “prudent stimulus” impossible.  Rather, essentially ALL nations PRINT MONEY to effect “stimulus”; causing increased debt buildup and gross capital misallocation.  Worse yet, the global “fiat standard” has enabled bankers to commandeer government; causing most “stimulus” to benefit them,at the expense of all else.

In other words, today’s definition of “stimulus” is MONEY PRINTING; to “bail out” anything and everything – but principally, bankers.  With such “benefits” come a LETHAL dose of DEBT and INFLATION – which only bankers benefit from.  This DEBT and INFLATION spreads like cancer across society; metastasizing rapidly, and causing irreparable damage.  Consequently, each new stimulus destroys more “healthy” cells; until ultimately, the law of “DIMINISHING RETURNS” is reached, causing PARALYSIS and DEATH; which sadly, is EXACTLY where the GLOBAL FINANCIAL SYSTEM is today.

Thus, from this day forward, whenever you hear the term “stimulus,” realize that society as a whole has been pushed one step closer to “economic death”; or as I often call it – FINANCIAL ARMAGEDDON.  The Mayans may not have gotten the date right – nor the specifics; but I assure you, the fact they picked NOW may one day be considered quite the coincidence.

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Andrew Hoffman was a buy-side and sell-side analyst in the United States (including six years as an II-ranked oilfield service analyst at Salomon Smith Barney), but since 2002 his focus has been entirely in the metals markets, principally gold and silver. He recently worked as a consultant to junior mining companies, head of Corporate Development, and VP of Investor Relations for different mining ventures, and is now the Director of Marketing for Miles Franklin, a U.S.-based bullion dealer.
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