Global economics remain a disaster in progress. I’ll spare you the details in this missive, but you’re welcome to review my most recent article on a US centered depression. These problems will not get fixed unless the causes are fully understood. Let’s go there.

Most Americans are brainwashed into thinking they participate in “free market” capitalism. They also trust the government issued money. Big mistake. The core ingredients of our present catastrophe are manipulated markets and dishonest money. What exactly are the foundations of true capitalism?

I’m going to give you my own definition as opposed to complex economic mumbo jumbo. Classic capitalism is an economic system in which individual and private ownership of wealth and labor take precedence over state control. Business and financial transactions are performed according to voluntary private decisions as opposed to government mandate. Free markets are allowed to function to allocate resources and meet consumer demand. Market interactions are more trustworthy than government decree. The government plays only a limited role in the markets and the economy.

If you’d like a more detailed and complex definition you can see Wikipedia’s explanation (http://en.wikipedia.org/wiki/Capitalism). You can also read Jon Herring’s recent editorial on this same subject. It is clearly an important topic.

The US doesn’t operate according to this classic definition of capitalism, nor does anyone else. We run what is known as a “mixed economy”. Central planning, socialism and a degree of fascism have been thrown into the mix. You can’t blame capitalism for what this economic mongrel has accomplished.

WW2 was supposed to be the war to end fascism. Central planning and overt socialism were discredited when the USSR imploded. Guess which economic type is next to do the perp walk?

Yep, it’s the mongrel that is failing. Purebred capitalism and “free markets” haven’t been seen for well over three quarters of a century. That’s a doctored photo of Karl Rove above. Hopefully, many banking elitists will soon be drug in these same footsteps.

The Bush-Clinton administrations have aptly demonstrated how not to run an economy over the last 20 years. This isn’t a Republican or Democrat centered issue. The problems are much more deeply engrained than that. The newest managers are locked into the same failed strategies that won’t play out any better. This “mixed economy” has catastrophe written all over it. The sooner it’s scrapped the better.

Command economies are based on shaky premises. Power and control are at their center. It is ludicrous to believe that elected or appointed officials are sufficiently all knowing to run anything more complex than a scooter. Present follies lay this out clearly. No man or woman, or group of men and women, has the morals and judgment to “run” an economy. Remember the phrase … power corrupts and absolute power corrupts absolutely (Lord Acton).The Fed has way too much power.

Central planning should be in the spotlight but it’s not, yet. Citizens remain way too trusting of government powers. More interventions, like the present stimulus package, just pours gas on the fire. It is another redistribution scheme. A desperate and stupefied Congress is ready to try most anything, even if it goes, once again, against the will of the people.

Is a possible return to free market strategies in the cards? Not anytime soon. Present follies will inevitably have to play out. We have a chance in the long run.

In summary, the US economy doesn’t vaguely resemble a true free market capitalist system. A couple of other problems have been mixed into the brew. In a breathtaking display of greed, fraud and arrogance the NY/DC axis of weasels brought weird finance onto the scene. There is nothing free about $600 trillion in derivatives partially used to control and manipulate markets. Sorry, that ain’t capitalism. Not the way our Founding Fathers envisioned and dictated by the Constitution. Weird finance is what is failing.

Another primary perversion of our capitalistic legacy has occurred over the last 95 years, since the Federal Reserve was foisted upon us by stealth. I often recommend Edward Griffin’s Creature from Jekyll Island for more insight into the Fed and our economic history. How do you have a free market economy when the essential foundation of an economy, money, is variable, unsound and centrally planned?

A recent editorial by the prestigious London based Financial Times delved into this very issue. The editorial stated … “The lesson that must be learnt from this disaster is that ‘free market’ capitalism under a fiat money regime does not produce the same blessings that are produced by true free market capitalism within a monetary system anchored by gold.”

Another editorial in the Wall Street Journal, of all places, added a cry to return to honest money. Watch for this to become a major trend. Money needs an anchor.

Has capitalism failed? Absolutely not! It has been bastardized beyond recognition. We might just get to try it again when our present central planners get to the end of their rope.

Banker Fashion 2009

In the mean time, protect yourself and hang on for dear life. Buy gold and silver before the masses really drive up their prices.

Invest Resourcefully,

Rusty

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