The Plunge Protection Team..., page 2

The creation of new M or money supply as stated in my earlier post on this thread has a very adverse effect on a economy in spite of the appearence of early gains. This is true particularly if this moneys is obtained by Government deficit.
Now when we as individuals go out an borrow moneys we sign a contract stipulating specific performances and collateral. We offset this loan/loans over a period or time with out labors. We dont get something for nothing.

Government loans by deficit ...operate quite differently. The Government can get loans of incredible amounts such as the 80 billion originally slated to go to Iraq after the early bouts of the war. Government loans are done on the backs of the public as the Government tends to produce no real goods or services in a economy...that is unless you think more Government is a good or service.

TAke for example this 80 Billion dollars in the first batch going to Iraq...this money finds its way into our econony where it is spent on goods and services which are shipped to Iraq for rebuilding and support structures in the great plan to stabilize the nation. These goods and services are removed from our economy and replaced by this new influx of money. Over a period of time you now have more money in circulation and less goods available as they have been removed by the process. What this does is weaken the purchasing power of the dollar..as there are now more of them in circulation than before the 80 billion dollar loan to the government deficit.
This time difference in when the loans are made and when its effects begin to show up in a economy ..is enough for many people to forget the cause. It can be 6 to 9 months later depending on the size of the deficit/loan taken out...also how often this buisness is repeated. I believe since the first 80 billion dollar loan..there have been others.
These loans or deficit spendings allow the Government to literally steal out of the economy of this country without it being directly known by the public. If the Government taxed directly for the moneys they would have been overthrown in a revolution years ago. Deficits allow the government to steal at the public expense without it being directly seen since government unlike us ..does not work for the moneys by producing goods and services.
The effect of this as these moneys filter down over a lengthy period of time is higher prices in certain arenas...due to more moneys chasing fewer goods. It is also reflected in a weaker dollar. Meaning eventually the dollar will buy less goods and services. WE see this as rising prices.
These rising prices are already being reflected in local and state governments in the forms of higher taxes and costs for these government expenditures. Higher real estate/personal property taxes.

This increased money supply chasing real goods and services is stopped in two main ways.

Intrest rates are raised...meaning fewer loans are taken out because of the rising intrest rates facing a higher pay out for moneys.

The second way is increased taxes.

The big joke about both ways of decreasing the M or money figures in the economy is that neither method directly limits the Government ability to get moneys. They can still operate on a deficit and get more loans on the backs of he public without being directly detected.
The limits in these two methods of curbing a rise in M..are all put on the private sector....never the Government where it belongs. This is never explained to the public in terms most of us can understand.

The method of raising intrest rates works the quickest. Tax increases are not far behind. These two methods mean that the limits on consumption are put on the public since they no longer have the capital in circulation as was before. The problem is so many often go out of employment in companys facing payouts in intrest rates of 15% to 21 percent which is what happened back just before Jimmy Carter left office. Intrest rates went double digit..to stop the inflation before it turned the corner and became run away as it did in Mexico..in the late 1970s or early 1980s...or Germany between WW1 and WW2.
Raising intrest rates is how the fractional reserve system ..puts the brakes on a runnaway economy..along with tax increases. It is just that tax increases are so unpopular and Governments tend to be very loath to do this method. Hence they would rather steal from us by deficit spending.

WE are going to need some brakes applied soon...its going to be a shock to many of us. They are keeping these cards close to the vest. I am not sure how they are keeping prices down to this point in some areas..but it cannot hold out long against a dollar with rapidly declining value.

By the way..the collateral the Government has for these loans..is their taxing power and certain government influences when needed by the loan makers. All done behind the scenes where it is little noticed by most people..especially those educated in public schools. Little of the operations of these mechanisms is taught in these educational institutions as compared the real effects it has on the public.

Thanks,
Orangetom