David Rhodes asked if I have become a deflationist.
Yes, I have. gone to the deflationist camp, but the camp has a hyperinflation fire in the middle of it.
(I know that you know this stuff, but I want to try to write my reasoning for a layperson with a little interest and a little time )
Hyperinflationary depression. This is the chronic state of the billions in the third world. My X went to Ecuador a few years ago. There was massive unemployment, and yet most of the goods were unaffordable to all but the elite. The process of impoverishing the many is called a hyperinflationary depression.
Unfortunately keynes couldn't wrap his mind around that.
Poverty writ large is a product of the systematic destruction of the wealth pf the people. Wealth is another word for describing the accumulated resources and knowledge that is necessary to making the tools to feed, cloth, and provide for us.
Wealth is destroyed by misguided speculation. When the speculation is on a massive scale, mountains of real resources are consumed making the objects of the specs. Over-speculationis driven by the availability of easy money.
Money is easy when it can be conjured into existence by a majic recipe only available to chartered banks and thier appendages. Easy money is conjured into existence whenever a bank makes a loan in excess of it's deposits. When the conjured money is deposited into another , or the same bank, even more easy money can be conjured up by making more loans. The process conjures up a mountain of cash and an equal valley of debt.
The easy money fueled speculation in housing, commercial property, consumerism and all the industry that made the objects of speculation. Many people bought homes not to live in but to speculate that they could sell them later for a highr price. a tremendous amount of resources were steered that speculation. Many innocent people were fooled by the false signals given by thirty years of money conjuring.
Now it is found out that the resources were largely wasted. The speculation has consumed much of our wealth in the very real sense. In addition, there is all the debt that came with the speculative easy money.
The speculation could not last forever, because eventually there is so much of the object of speculation, such as McMansions that the price of the spec falls below the amount owed.
Loans go bad and the whole conjuring process ceases and then goes into reverse.
And you know the rest of the story. In obedience to Keynesian theory, the central bank whips up from the ether a tidal wave of money to fill the void created by the collapse of the credit conjuring process. The economy becomes a tempest as the tidal wave of whipped ether fiat central bank money crashes and swirls around the black hole of credit money de-conjuring.
Whipping followed conjuring throughout the boom and kept the boom going. Now the deconjuring process is sucking so hard that even massive ether whipping can't fill the void.
The politicians, seeing the plight of the people, super size spending and even give away cash. To get the cash, they sell bonds. Most of the world's cash savings are diverted to the purchase of these bonds, starving the world of available cash. Even most of the worlds savings is not enough. The fed whips the rest.
Resources desperately needed to build the tools needed to make what the people actually need are diverted by the ruling elites into military adventures, prisons, drug wars, and other schemes. If enough resources are diverted by the rulers to stuff people don't need, the stuff they do need cannot be made in sufficient quantity, and becomes unaffordable.
Thus wealth is destroyed first by the conjured credit money boom, and then further destroyed by the whipped ether fiat money response to the subsequent credit bust. The great majority of people are impoverished.
Finally, seeing the peoples desperation, politicians may send big checks to everybody. The Politicians may just take over the money whipped out of ether process, or they can pressure the central bank to whip up some money to buy the bonds that the politicians print up. Either way, massive inflation results, completing the ruination.
And this is how we end up in a Banana Republic without the bananas.
In a banana republic the tools of wealth creation are scarce. to this american traveller this was visible when watching a construction project in Central America. there were no cranes, no cement trucks, no bulldozers, mini or otherwise. Everything had tobe done by brute manual force. This is a society starved of capital by chronic robbery by the banking and political class of both left wing and right wing regimes.
Fortunately, the policies that create the misery can end. The widsom needed to escape the tyranny of counterfiet money is building. We can emerge from this maelstrom free of the money masters, ready to rebuild a prosperous society with wealth enough to care for one another and the beasts. forests rivers and seas in our realm.