brainclamp

I think it is off track to focus so much on Weimar Germany, even though I have some family history on the maternal side who experienced it in its full glory. I think general picture of a economy which has too much government/over-employment jobs, a financial sector is more akin to the situation in Italy around 1990. Its economy was made of small manufacturers and a plethura of government non-jobs, and to keep unemployment down, embarked on a multi year inflation. The Lira devalued by 90% against the USD within 8 or so years. In the same way we can see pensions and benefits being tied to CPI rather than RPI, and, rather than a series of Thatcherist deflationist cuts and resultant unemployment a campaign of money printing and inflation is underway, which looks to be multi year, to the benefit of debtors. Maybe they will tax gold. Gold, like Houseprices looks to be eroded in real terms, as nominal wages rise, but it doesn't. I think the plan is something along these lines. Another major evil has been to utterly destroy savers or the concept of saving. I can only assume this comes from the simplistic Keynesian views of the Governer of the Bank of England and George Osbourne at the Treasury. Why remove the NS&I limited form of inflation linked shelter for citizen savers, thus guaranteeing they will be robbed and devalued and placing them in a moral panic? It makes little difference to the money printed to recapitalise the banks deposits, but a lot of difference to savers in the short term and future investment and jobs in the longer term. (this is from a recent Prof. John Hussman Article) It is a mathematical truth that GDP/Output = Consumption+Investment+GovernmentSpending (ignoring exports and imports) and that Investment = Savings. Keyne's believe was that savings (saving a part of consumable income) was terrible horror for the economy when Banks have suffered losses. Better to have no incentive to save! As follows Y = CIG, but C = cY (i.e. cY = savings - Part of Output - proportion to income) and I = I_fixed (the pool of real investment is fixed ; based on interest rates) so rewrite this as Y = cY + I_fixed + G or Y = (I_fixed + G)/(1-c) and, as savings, c, is a fraction of output Y, I and G are thus multiplied in relation to final Y (output). Notice the pool of possible investment is assumed by Keynes to be FIXED - i.e. investment opportunities do not increase in this model based on lower interest rates, or expected productivity increases. If Investment is fixed (cannot increase - i.e. opportunities to invest do not increase with lower interest rates and technology increases), then the act of people saving deflates output (Y) and the economy's final output contracts ; one persons income depends on anothers full spending - the act of saving is just holding back output and incomes ..the conclusion ...- savers should be trashed and burnt at the stake. All complete nonsense, because the investment horizon is not fixed, the opposite is true - there are always new projects to fund which will meet a major human need, major new possibilties and frontiers opening up, and the only long term path to full employment is from projects funded by saving to fund investment, resulting in real growth, not a pile of non jobs. The very act and drive, to save produces efficencies, production increases which raise REAL output growth and jobs, not the nominal kind the keynseans are after. Having said this is not like Weimar Germany, I must state that today we have a situation where if you don't spend and leave money sitting in a bank you will soon see it start to evaporate. People are trapped in exactly the same kind of moral horror my great grandmother felt in weimar Germany when she had to spend cash on whatever she could in order to save money for her kids future bread.