Tuesday, January 6, 2009
The Business Cycle Theft
Tuesday, January 06, 2009 | 
Posted by
Chris Waner
For more than 50 years the media, political pundits of both parties, and well-placed academics have portrayed the rise and fall (good times to bad times) of the US and world economies as a natural phenomenon, occurring as investment stochastically flows into promising areas and then on to new investment horizons. Nothing could be further from the truth.Rather, the business cycle or boom-bust cycle, as it is called, is a carefully orchestrated contrivance of the banking and central banking cabal. It is designed to build confidence in a false market, lure investors and borrowers in, and then collapse the pseudo-market in order to confiscate wealth from the population. Each boom-bust cycle has six steps. Lets look at the current (and past) credit/real-estate market fiasco to see how the scam works:
Step 1: Find or Create a Problem. The cliche' goes, "necessity is the mother of invention," but hand-in-glove with that is, "necessity is the mother of investment." Financiers look to the public and public officials to find an issue to exploit. In both the seventies to eighties and again in this decade the problem of affordable and available housing was used, some argue it was created, in order to generate a new economic boom.
Step 2: Pump the Problem. In the seventies the housing issue received a great deal of attention. The media, largely owned by those who owned the banks, were a-buzz with stories highlighting not the median housing situation but the worst of the worst. At the time very little was mentioned of the roll high energy and commodity prices played in the housing situation, a problem compounded by the fact that very few loans were given out due to exorbitant federal interest rates, resulting in a low money supply. Academics wrote papers talking about the ethical and moral travesty playing out among the poor, who desperately sought a house to call their own. The American dream was declared dead. The public outcry was heard by Congress, which promptly passed legislation and regulation to ensure that credit was easily available and monthly payments were "affordable."
Step 3: Boom the Economy. To meet the "demand" for housing and to comply with government regulations like the Community Reinvestment Act (1977), the Federal Reserve (the Fed) and fractional reserve bankers pumped money into the economy in the form of loans to real-estate investors, builders, and new home buyers. As the money supply ballooned, the Congressional plan appeared to have worked. More people were in homes. However, the loans came with a grave price--usually variable interest rates and low down payments on overvalued loans.
Step 4: Let Supply and Demand Work. We should make no mistake, our nation's financiers (as well as those on the world stage) are no dummies. They understand supply and demand perfectly, and they know how to use it to their advantage. As soon as there are more houses built than buyers for those houses, the system will crash. The value of homes will drop leaving borrowers underwater, owing more than the house is worth. The over-investment in the housing market rushes away to more logical, real, and sustainable areas. Layoffs in the housing industry ensue; corporate and consumer spending decreases; more layoffs; people are unemployed and unable to pay the loans on the new houses.
Step 5: Constrict the Money Supply. Often the government--who is largely complicit in the scam, receiving campaign contributions from big banking financiers and being personally invested in the financial sector--commences with the bailout dog-and-pony-show. They spend even more of your money or print more money, which is inflationary. But this is all a sham. This money goes no where because the bankers have already received the slap on the wrist for government mandated and subsidized predatory lending practices and have increased the loan requirements beyond what most can bear. The result is that less money is flowing into the economy from loans. Those who have not defaulted on their loans continue to make their payments, which also goes no where in the system because no loans are being given back into the economy. This results in less money. And the hardship spreads as businesses and families go bankrupt. Incidentally, as I write this, we are currently in this stage of the game; banks that are usually running at 3% reserves are now sitting in the mid 90% range in reserves. They are actively and purposely taking money out of the economy.
Step 6: Confiscate the Wealth. During the boom stage the confidence in the market was high and loans were easy. Families and companies who were overextended were still able to make ends meet because the money supply was also elevated. As the money supply dwindles these families and companies are unable to pay their loan payments. The result is foreclosure and the confiscation of not only the loan asset (the house) but also the collateral on the loan. The bankers created money out of thin air to give as loans in the first place, then took away the ability for those people to pay back the loans, then took away the actual wealth--houses, cars, businesses, etc. The rich are made richer and the poor, poorer.
If you can survive the years between the bust and the next boom, you'll see that there's another investment opportunity to solve a new problem, and the money and loans will flow freely. People will think that the government bailouts worked and the world has learned a valuable lesson, but as things reach a euphoric high, the immutable law of supply and demand will take over. The bankers will be there to constrict the money supply, take your wealth, make themselves richer and you poorer, and do it all again.
The stakes are getting higher though, and the economic variables are getting harder to juggle. Each boom is getting bigger and so is each bust. Each time more money is dumped into the economy, hyper inflation becomes a more serious risk. Do the international financiers believe that this cycle can go on forever? Are we headed for a systematic crash of the US economy? Unfortunately, I can't say. But given how close this crash was, chances are we'll still be around to find out.
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Economics
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