Thursday, April 2, 2009

What you need to know – please read

What I write here is both what started the crisis and how to fix it. It is not magic, it is not difficult and after a couple of minutes reading this you will be aware. I hope you read this and really understand it so we can save the world, because that is how far we have come.

Since this is a financial and economical crisis it is important to know something you do not get taught in school and what most economists and politicians don’t know or don’t care about. I’m going to present you with three facts and then explain them. If you truly understand this, you can say you know better than all the people at the g20 conference, you will be smarter than all the central banks economists put together and you will understand something that journalists never will.

1. It is very possible (and this happens all the time) that a country can have a growing economy counted in GDP, low inflation and still get poorer. Why? Because of borrowing. The people and/or the government can be borrowing money and since GDP mainly take into account the spending, not the debt, this can increase poverty. Especially when this is combined with lower production and that the money being spent only is spent, not invested or saved. This means people is only getting stuff, not producing them. This is what Peter Schiff and many others tried to explain several years ago when the American economy went extremely “well” and GDP was growing and inflation was low. Schiff with several others (including myself) told people they were actually getting poorer, but everyone shaked their heads and regarded us as madmen. And this is why United States today is more or less bankrupt. If you do not produce, only borrow in order to buy things, you get deeper and deeper in debt and consequently poorer and poorer. And what are the governments with Obama as frontrunner doing to fix the crisis? That’s right; borrowing more money to spend it! It is not production they are putting the money on, it is not savings and it is hardly even investments (some, but not enough) it is almost only spending. In other words, they are doing the exact same thing that is the main cause of the crisis in order to fix it, but at a higher and faster rate. Can you see the fun as I can?

2. You can be producing things faster, better and more and get higher salaries all the time, but still getting less and less for your money. Why? Because of the increase in money on the market. If the amount of money in the system grows more than the production rate, you will get less and less for you money in regard to prices. This also means that if this happen; you are getting taxed! This is the point you probably have hardest to understand and you really need to know what money is to fully grasp this, but think of it in terms of supply and demand. If something is plentiful, the price on it goes down. If something is scarce, the price goes up. This is also true for money. This is the second thing that is the basis of today’s crisis and also the main reason why production is going down in relation to GDP. And what are governments also doing to avert the crisis? They are printing more money!

3. Low interest rates make us borrow and spend more, high interest rates make us borrow less and save more. This most of you probably do understand. If rates goes up and makes it more expensive to borrow, you will not borrow or at lest borrow less. This is the third big reason for this crisis because in several countries the interest rates have been artificially kept down by governments. They have forced central banks to lower rates or they have put in their own public banks or loaning institutes on the market to make people borrow more money. This is very obvious in America were the governmental institutions of Freddie Mac and Fannie Mae practically gave away money to an very low interest rate, and of course people took them and went out spending them on things they in reality couldn’t afford. This in combination with 1 (and 2) above is the real problems and why we are in deep, deep trouble. Because, again, what are governments trying to do to divert the crisis? Yes, that’s right; they are trying to force people to borrow more so they can spend more to keep GDP up and growing.


To this we could add other things like trade and so forth, but to keep it simple, above is what you really need to know. The only additional thing you really need to keep one brain cell focused on is the restrictions, laws and other things that keep the market from correcting these faults by it self. Since I know most of you who read this do not agree with me about the markets fantastic ability to ‘govern’ itself, we can skip that, because what I have just told you is too important to not focus on. If you truly understand these 3 facts you now know how this crisis started, but more importantly you also know why the things governments are doing all over the world will not help. Even IF all the stimulus and bail-outs “work” in the sense that people start spending again and the market recuperate some, nothing have changed. This crisis will continue over and over and over again, until politicians and/or you, the people, demand a true solution based on what I now have told you.

This is also why it is very important not to spend and not to do what OECD and the world leaders are saying. Instead you should praise the Swedish Government for not doing the same (They are not doing completely 100% the right things, but they are the example to follow). And you should not blame banks making interest rates higher, that’s a good thing at this time! We are going to have a crisis, no matter what we do, but the length, the depth and the seriousness of it is dependent on people realizing what is said in this text. If you still want governments to spend to save your job or if you still go out and demonstrate under those red flags, do not blame me when you and the rest of the idiots are doing much, much worse then today. Please believe me; this can only get worse (catastrophic), not better.


  1. Nicely done, I actually agree to some parts with you.

  2. Good, maybe I can save one more... :)