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In Part I, I rebutted one of the great myths of the mainstream media: that the terminal debt-problems facing Western economies are/were the consequence of reckless spending. I pointed out how the reality was that in fact we were in the midst of the worst revenue crisis in the history of our economies, and then in Part II I described some of the symptoms of that crisis.

The conclusion to this series will focus on how we can begin the healing process from this massive hollowing-out of our economies, and why the appropriate solutions are nothing more than a function of simple arithmetic and the most basic principles of economics.

In 2005 and 2006 we were subjected to the worst of B.S. Bernanke’s lies: that the U.S. housing bubble and the endless $trillions of Wall Street Ponzi-schemes which had been based upon that bubble represented a “Goldilocks economy” – where U.S. house prices and U.S. markets were just going to keep going up and up forever. Months later the whole, fraudulent house-of-cards came tumbling down.

For the edification of Mr. Bernanke and all those who still mistakenly follow his preaching, I will describe what a real “Goldilocks economy” would look like, and how it would function. To begin with we need to quickly rebut another of the popular myths of the media propaganda-machine: that advocating economic policies to promote a healthy middle-class is “socialism”.

Roughly 2,000 years ago (and more than 1,500 years before the birth of socialism), Greek philosopher Plutarch informed us of something which was already “old news” at the time of the Roman Empire:

An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.

Was Plutarch some sort of closet, leftist ideologue who had somehow managed to travel back in time to the ancient past? Hardly. Like many of the classical Greek philosophers he was simply proficient with two age-old tools: logic and arithmetic. Indeed, most of the reputable elements of modern economic theory are nothing more than a fusion of simple arithmetic and common sense.

Any/every healthy economy should have a wealth-distribution curve that looks almost exactly spherical in shape: widest around the middle, and narrowing at the most-rapid rate as we approach either extreme. In other words, a healthy economy is one where the vast majority of citizens are solidly established at a middle-class level of existence. As stated previously, favoring a strong, healthy middle-class has absolutely zero to do with ideology and everything to do with arithmetic. To demonstrate this we need to again resort to the starting point of all analysis: definition of terms.

What is a “healthy economy”? Obviously to attempt to answer that question succinctly requires a general answer: a healthy economy is one which provides the optimal balance between savings and consumption. How do I justify my definition? Too much consumption is unhealthy. Not only does that necessarily imply insufficient capital for investment/development, but excessive consumption leads to numerous unhealthy consequences. To begin with, economies overheat.

When you have the maximum amount of consumption dollars flooding into an economy, inventories are drawn down, sparking prices to move higher in an inverse manner (the basic principle of supply and demand). Over-consumption (as we have seen vividly illustrated in our own economies) leads to excessively high inflation, asset bubbles, and (in the extreme) excessive personal debt – as consumers spend more than 100% of their discretionary dollars.

It is a basic fact of arithmetic that the poorer the individual, the greater the percentage of every dollar they hold that is spent. This is one facet of the basic economic principle known as the “marginal propensity to consume”. Despite the intimidating label it is nothing but an expression of a simple, unequivocal fact: by definition the poor have no excess wealth – and thus each dollar they obtain is spent.

For this reason, we would not want to structure our economies to cause all of those consumption dollars to flow into the hands of the poor. While such policies would be extremely stimulative, they would literally be “too much of a good thing”. Of course, if the poor had all the money they would no longer be “poor”, but since it’s Monday morning I’ll side-step that logical paradox and simply stay focused upon the general principle.

At the opposite extreme we have the wealthy. If the “problem” with the poor is that they spend too much, then you don’t need to have the gift of prophesy to be able to predict the problem with the wealthy: they spend too little. As people become wealthier and wealthier, even though their total consumption may continue to increase in absolute terms, the percentage of each new dollar of wealth that they spend steadily declines. They inevitably begin hoarding wealth.

Articles & Blogs - International Commentary

In Part I it was necessary to spend most of my time/energy dispelling the fiction from the mainstream media that the debt-crisis afflicting most major Western economies is due to government over-spending. As I demonstrated with a combination of unequivocal charts, clear logic, and simple arithmetic; the U.S. economy is clearly in the grip of the worst revenue crisis in its entire history.

In Part II, I will explain why we can safely conclude that other Western nations are also facing a revenue crisis rather than their insolvency being due to excessive spending; and then along with that I will describe how this collective revenue crisis has emerged across the West.

To begin with, readers must understand that economies are dynamic entities, constantly evolving in response to the policies bestowed/inflicted upon them. This means that only dynamic analysis (i.e. analysis which accounts for change) can ever yield useful conclusions and policies.

What do we get instead from the mainstream media and their “experts”? A diet composed of 100% static analysis. It is simplistic, one-size-fits-all dogma – which never, ever accounts for change in our economies. The classic example is the Keynesian idiocy that governments can permanently run deficits (i.e.  never fully pay their bills), and that somehow this can lead to long-term prosperity.

Those who actually understand the concept of dynamic analysis would require only two words in rebuttal: “compound interest”. The chart below illustrates the long-term harm that has occurred to the U.S. from allowing the static dogma of Keynesian economics to be wrapped around the dynamic U.S. economy like a straitjacket.

At the beginning, Keynes’ static, run-up-the-credit-card mentality for economic management works great! In fact it keeps “working great” right up until it becomes time to start to pay the bills. Indeed, the Keynesian mentality is no different than that of the binge-drinking alcoholic: it’s not the “drinking” that is the problem, it’s the hangover.

In the minds of the Keynesians it’s not the “borrowing” that is the problem, it’s paying the compound interest on that debt. And so these frauds simply constructed a static economic model – where none of that compound interest is ever paid.

Any idiot knows that running-up one’s credit card could never, possibly be a recipe for long-term prosperity. “It’s different with national governments,” countered Keynes, and all the vacuous minions who have followed in his footsteps. Yes, it is different. Nations can run up much bigger bills, for much longer periods of time than any ordinary individual could ever get away with – but not forever. The binge-drinker must finally sober up. Ultimately “any idiot” would know that eventually those bills have to be paid.

Articles & Blogs - International Commentary

While some may argue my criticism of the insipid mainstream media is too extreme, my rebuttal is simple: “don’t shoot the messenger.” It’s not simply that these media drones are wrong consistently – indeed, almost unfailingly – but in many instances their reporting on issues is literally 180 degrees opposite to the facts.

There can be no more obvious example of the mainstream media’s inability to distinguish “black” from “white” than its utterly worthless reporting on the debt crisis sweeping across Western nations. Not only have they been unanimously incorrect in identifying any of the causes of this debt-crisis, but these dolts can’t even manage to describe the problem correctly.

In this case it is necessary to put the proverbial cart before the horse. First I’ll show people what the Western debt crisis is really all about. Then once the problem is clear it will be much easier to understand/accept the real causes.

Sadly, while is truly a “Western” problem it will have to be illustrated with U.S. data, due to the lack of availability of “real dollar” data for other Western economies. It is ironic that the U.S. – which has both pioneered and perfected lying-with-numbers with its official statistics – is now the only place to obtain realistic (i.e. “real dollar”) economic data in many important categories.

This is due entirely to the tireless efforts of John Williams of Shadowstats.com, as well as the efforts of less-visible sites and individuals who have built upon that body work. Williams produces the only data on U.S. inflation (and many other key statistics) using the same methodology for each year’s calculation.

Conversely, as I have explained on previous occasions the U.S. government is continually “moving the goalposts” with its statistical lies. It is continually changing the methodology of its calculations. Not only are these “changes” comprised of ever more dubious/absurd “adjustments” and “assumptions”, but this intentional deceit is compounded by refusing to update old data with the new methodology – the only possible means to produce consistent measurements.

Instead, the U.S. government’s statistical liars simply string together these disconnected series’ of calculations – thus literally comparing “apples” to “oranges”. We can see not only proof of the deceit, but a clear indication of the motives for these lies when we examine charts which include both the official government lies along side data produced from Williams consistent (and statistically valid) methodology.

The two charts below not only demonstrate unequivocally that the Western “debt crisis” is a revenue crisis (not a “spending crisis”), but we can clearly see the efforts of the U.S. government statisticians to hide the true nature of the crisis – by creating phony data to suggest we are experiencing a spending crisis instead.

Articles & Blogs - International Commentary

More than two years ago I began warning readers of the most heinous acts of fraud ever perpetrated by the Western banking crime syndicate, which I dubbed “economic terrorism”. These swindles involved nothing less than the destruction of entire European economies, solely so that the banksters could profit on approximately $100 trillion in bets they had placed on the debts of these economies.

The mechanics of this economic rape have been explained many times in the past.  First of all the bankers duped governments and institutions all over the Western world into placing trillions of dollars (and/or euros) in bets that interest rates were about to soar higher – just before they crashed interest rates to the lowest levels in history. This swindle is known as “interest rate swaps”.

The second (and even more destructive) form of fraud perpetrated against these governments didn’t even require their participation – merely their naïve acquiescence. The bankers began placing huge bets (totaling at least $60 trillion) that these nations would default, and then had the audacity to call these bets “insurance” (credit default swaps). Note that such “insurance” had been banned in the U.S. for more than half a century – based upon anti-gambling statutes.

Here is the question which these banksters would never answer: how does a third party placing bets on whether someone’s home would burn down provide any “insurance” to the owner of the home? The answer of course is that it doesn’t. What it did do, however, was to create a $60 trillion motive for “arson”.

This is precisely what we have we have seen. After the banksters (primarily based in Wall Street) got assorted chumps to take the wrong side of this $60 trillion, unregulated mountain of bets – betting that these Euro governments would not default – they then began to systematically burn-down the economies of Europe one by one.

I have explained this process several times in the past already, so those readers new to this will have to refer to my previous work. In a nutshell, the Wall Street terrorists can manipulate the interest rates of these nations to (literally) any number they choose via the fraudulent manipulation of the credit default swaps market. I warned readers that this made Greek default inevitable, since if interest rates can be manipulated to any level then any nation can be bankrupted on its debt.

This is exactly what took place with the destruction of Greece’s economy. Each time that Greece’s government served the bankers by announcing a new round of “austerity”, the terrorists would immediately drive-up the interest rates on Greece’s debt so much higher that every dollar of budget-cutting was consumed in higher interest payments…plus a little bit more.

The result was that instead of austerity improving the solvency of Greece’s economy, the Wall Street terrorists always ensured that its economy was worse off after each new round of budget cuts – immediately creating even more pressure for even more austerity. It was nothing but a totally masochistic vicious circle. At one point the banksters had manipulated Greek interest rates more than 50 times higher than those of the U.S. – despite the fact that (as I have explained previously) the U.S. economy is even more fundamentally insolvent than that of Greece.

Now the terrorists have targeted Spain.

Articles & Blogs - International Commentary

As regular readers know, one of the first things learned by beginning economics students is that monopolies and oligopolies are unmitigated evils in any free-market economy. They are (by definition) non-competitive and totally parasitic; and in the rare instances when one of these abominations is perceived to be a necessary evil, that inherently parasitic nature demands that they be securely restrained in a regulatory straitjacket.

Sadly, this appears to also be one of the first lessons forgotten by economics graduates, apparently moments after accepting their degrees. For what do we see in the global economy today? A world which is not only saturated with these mega-monstrosities, but where much, most, and in some cases all regulation has simply been put through a paper-shredder – and all with the complete blessing of the intellectual zombies in the economics community.

After a quarter-century of allowing these corporate oligopolies to rampage out of control, the carnage is plain to see. The worst revenue-crisis in the history of Western democracy threatens to bankrupt most if not all of these economies. Our tax-base continues to wither and die. We see on the one hand Big Business and the ultra-wealthy refusing to be taxed (while parasitically enriching themselves at the fastest rate in history). Meanwhile everyone else simply has nothing left to tax.

Forty, solid years of declining wages (in real dollars) combined with forty, solid years of rising structural unemployment has not only caused our poverty rates to more than double (and created millions of homeless), but has transformed most of our former middle-class into a brand-new class: the “working poor” – drones who exist merely to service the Corporate Oligarchs. The result of this forty-year slide in our standard of living is that it now takes two incomes in a household to provide the same standard of living as was formerly provided by one-income families a mere generation ago.

However, you would never know of this crisis by reading/viewing any of the outlets of the Oligarch-controlled, mainstream media. In the world of Big Media, our governments are being bankrupted by “too much spending”. The disconnect with the real world only intensifies when Big Media tells us what it thinks we “can afford” and what we “cannot afford”.

We can afford to spend $trillions invading nations halfway around the world. Apparently no price is too high when it comes to preserving the money-laundering profits of the Banking Oligarchs (the “War for Drugs” in Afghanistan), or hijacking the oil resources of other nations for the Oil Oligarchs (the “War for Oil” in Iraq).

We can afford to dole out $trillions more every year in corporate welfare (i.e. “subsidies”) for these deadbeat Oligarchs – who take about $10 in hand-outs for every $1 they pay in taxes. You “do the math” here, because no one in Big Media will ever do it for you.

We can afford to pay $trillions in interest every year to the bond parasites, interest on paper which these bankers literally conjured out of thin air (and at no cost to themselves). This is despite the fact that much of this debt, and the interest payments on it are a direct result of either fraud in the interest-rate swaps market or fraud in the credit default swaps market (by the same cabal of bankers).

At the same time, Big Media isn’t shy about telling us what we cannot afford. We cannot afford healthcare, education, aid to the poor, pensions, or any other basic government service – at least not in the same quantity/quality which our parents enjoyed only a generation earlier.

Even talk about lighting a match to $trillions in fraudulent bond-debt (or their own outrageous “bonuses”) and the Banking Oligarchs will howl in outrage about “the sanctity of contracts”. Yet when it comes to tearing-up the pension obligations, health benefits, or even wages of ordinary workers, “sanctity” is a word nowhere to be seen – at least nowhere in the world of Big Media.