This is my first post here on ATS, and I wanted to post this to share with you what is really wrong with the Economy. Why the Economy has gone the
way it has, and why there is always an Economic bubble, even if it isn't one as large as this one.
Imagine a country, name the US or name it Gentile State, just for fun. This Gentile state has a labour market, which creates a value worth X. Let
us now ignore all imports and exports, and merely take this states own internal economy as an example.
As anyone can imagine, you have to print some amount of money to pour into society. And the bills you produce must in some reflect the value of
commodities within the society. Let us imagine, that a year balance here, is equivalent with one billion of our local currency. So, the country
produces somewhere around one billion of our local currency, and there is one billion in circulation at any given time. This means, if I use a 100
million to buy commodities, 100 million of these commodities will be shifted, along side the 100 million of my local currency. So far, our cash is
balanced and checked.
Now, what hapens if I suddenly print 2 billion of our local currency, but we produce the same amount? Obviously, you cannot buy 2 billion worth of
commodities ... that is impossible. The amount of commodities within society, MUST ... take note of this, they MUST be evenly distributed amongs the
value of our currency. For the sake of simplification, we assume each commodity is 1. Now, we have to change this value ... and each commodity,
obviously, has risen in prize ... each commodity now costs 2.
This is a simplified case, but the reason I put it here, is to provide for you a case scenario of what happens in society.
We do not know the exact value of our commodities, these are done by Wall Street, that buys and sells stocks and commodities without them exchanging
hands. But the amount of dollars is the same, so each comodity must rise and fall in price. But what happens, if I buy N amount of commodities and
stock pile them, and then wait for a higher price to sell them ... there is obviously a mis balance here, that isn't reflected in the currency, isn't
there. There is a "production" and "loss" of dollars, that actually don't exist. What iff, the government "prints" extra amounts of cash, to
distribute over Afghanistan? that is also an extra amount of dollars. What if China buys dollars, for Yen and stockpiles them ...
I think most people can see the complexity of the system here, but what most people don't see ... is if I print 2 billion dollars in our local
currency system, than buy the "gold" commodities at the price of 1 ... what happens? I've bought these at half the price ... and the other half will
have to be payed up at some point. If it's allowed to time lapse, it will be an economic bubble that bursts, and the tax payer will have to pay the
price ... price of commodities must rise as a result.
Ladies and gentlemen, this is why prices rise in society ... the above reason. You are being cheated upon ... and I haven't even touched upon the
system of buying and selling dollars and yens, yet. What happens, if China buys dollars for yens? There are less dollars in the US economy, and
there is an overflow of Yen. The US must balance this out, and therefore it must increase it's import of goods and services from China. China, must
do the same, to use the dollars it has. A countries currency, has only a value to buy commodites that are in that currency ... for most countries,
that include products, but for the US, that also includes oil. The existance of the currency in foreign countries, guaranties that these will be used
to buy commodities. However, if the US government replaces these dollars that are shipped to foreign countries, with more dollars that are inside the
US economy ... you again, arrive at the bubble stage. The US might do this, for the purpose of wanting to get an advantage on the exchange rate, but
so might China do the same ...
Think about it ... now add to the complexity, the fact that bankers are lending of money 10 dollars for every 1 actual dollar.
edit on 27/12/2011 by bjarneorn because: (no reason given)