How To Intentionally Exacerbate The Greater Depression

Posted 24 Mar 2009

C.S. Lewis' short but masterful The Great Divorce is about Ghosts in Hell who journey by omnibus up through a crack in the earth to meet Solid People and hopefully be guided into the mountains.

 As the Ghosts become substantive their feet are pricked by the sharp grass.  Only a few overcome their problems and journey into the mountains while most board the bus and shrink into oblivion as it descends back down the crack from whence it came.

In the financial realm, many are lured by the the derivative illusion and ensconced in a rapidly dissipating cocoon of self-satisfied self-deception woven over their eyes and mind leading to their faulty thinking that the way they see things is the way things really are.  Fractional reserve banks and fiat currency have wrecked predictible havoc and mayhem on the entire world economy.  Fortunately, monetary and currency alternatives exist.


The Great Credit Contraction and the accompanying liquidation of malinvestment is to be embraced and not feared.  As Murray Rothbard observed on page 18 of his 1963 America's Great Depression, "It is true that credit contraction may overcompensate, and, while contraction proceeds, it may cause interest rates to be higher than free-market levels, and investment lower than in the free market.  But since contraction causes no positive malinvestments, it will not lead to any painful period of depression and adjustment."

Mr. Rothbard continues the observation that government policy can hobble the adjustment process by: "(1) Prevent or delay liquidation, (2) Inflate further, (3) Keep wage rates up, (4) Keep prices up, (5) Stimulate consumption and discourage saving and (6) Subsidize unemployment."

In the present case, mark-to-market rules, like FAS 157, are not implemented, delayed, ignored or willfully violated.  For example, Section 132 of the Emergency Economic Stabilization Act of 2008 is titled "Authority to Suspend Mark-To-Market Accounting" and restates the SEC's authority to suspend the application of FAS 157.

The Austrian definition of inflation is an increase in the money supply.  The Adjusted Monetary Base, the very lowest layer of power money, shows a tremendous increase over the past couple months.  The effects are most likely masked by the tremendous slowing in the velocity of money.

In an effort to stimulate consumption and discourage savings that will result in keeping prices and wages high the Obama administration has unveiled a $1 trillion stimulus package.  The Geithner toxic asset plan will only serve to hasten the destruction of wealth from the economy as the system evaporates.

Minimum wage is set to rise for the third consecutive July.  Unemployment will be subsidized by extending benefits for 13 weeks and delaying the income tax payments.  Legacy industries, like the auto industry, are receiving bailout money to keep wage rates up and people employed doing nothing all day long because of the huge over capacity of automobiles.

Austan Goolsbee, a senior Obama economic adviser, said on CBS’ Meet the Press, “We’re out with the dithering, we’re in with a bang.”


Well, it is obvious that the Financial Insanity Virus epidemic is raging on Wall Street and in Washington.  They are hitting the bulls-eyes on all six policies to hobble any potential recovery.  The result will be a lengthening and intensifying of The Great Credit Contraction and resulting Greater Depression.

 Worse is that these criminal gangs costumed in government regalia have no excuse for not knowing what the result will be.  Therefore, they are acting either with premeditation and deliberation or with reckless disregard for the world economy and all the individuals affected.

This will result in a lot of economic and physical pain and misery coupled with individual culpability.  As the mentor in The Great Divorce sagely taught, "All who are in Hell choose it.  Without that self choice there could be no Hell."  Indeed, "to be afraid of oneself is the last horror."

"All Hell is smaller than one pebble of your earthly world: but it is smaller than one atom of this world, the Real World."  The Great Credit Contraction continues to grind while the illusions evaporate making many organizations and institutions increasingly irrelevant.  Hopefully these soon to be worthless entities that are gluttonous parasites on the global economy will become at the most footnotes in the annals of history.