Wednesday, July 1, 2009

How to ruin a country’s economy

As I earlier predicted the central bank of Sweden lowered the Interest rate from 0,5% to 0,25% today. The difference is in reality very slim but the hope is that this will increase the foolish Swedish populace willingness to borrow and spend. To borrow money at a low cost in order to buy things might increase GDP -which is the mad notion behind this scheme. I would not be surprised if the cornflake-economists behind this plot are Muhahahaha:ing behind closed doors and rubbing their hands together congratulating themselves to a job well done - but more likely they really don’t know what they doing.

Firstly the notion of buying more stuff (hence higher GDP) as a measurement of wealth is so stupid it is hard to believe people actually buy into it. Everyone from the Obaminator to NeuArbeit here in the UK to the Prime Mentalist Fredrik Reinfeldt of Sweden is trying to convince us that spending and buying is the back-bone of the economy. Eagerly applauded by mainstream journalists (that cannot count) and economists (that cannot count) this fart-filled concept is being packaged, marketed and sold to the general public. The only ones not being completely happy is the collection of circus freaks collectively known as “the socialists”. The lefties not being completely happy with billions of newly printed monopoly money and government loan after loan piling up - they want more! Much more! For those of you who actually might be able to form a coherent thought I can tell you that the basis of a country’s economy is based on production. If you borrow to spend it means that no value has been created. If you only consume and do not produce it means that you are living on borrowed time as well as borrowed money. Such an economy cannot last and this is the recession in a nut-shell.

Secondly IF this scheme continues to “work” hence makes people go out and borrow money to buy more stuff it might temporarily get the wheels rolling again but this in combination with more money in the system means that interest rates needs to go up. The longer the interest rates are very low and the more money that pours into the system and the worse the crisis becomes the higher the rates eventually will be. At the moment I would argue that Sweden has 7-8% rates to look forward to, but this is today. For every month that passes, for every bail-out, for every stupidity the enemy class conjure up the higher it will be. This in turn means that all those people borrowing now thinking it is easy paying back loans at these rates are getting seriously arse-fucked. With sky-rocketing unemployment, more bankruptcies and a continuation of the recession (soon turned into a depression) this will be devastating. And what will happen to the economy when defaulting and interest rates are so high that credit lenders no longer can manage their business? To a certain extent we are already there since this scenario is sort of (partly) the reason for the recession but what we are talking about here is on a completely different level. Imagine this scenario and than add the dollar collapsing and an increase in protectionist levels all over the world. Such a situation is worse than anything anyone has ever seen and that is where we are heading.

Thirdly, what happens when it is cheap to borrow and no one saves their money? It means that investments goes down (less jobs and less production in the future) and people get more reckless with money since it comes in abundant supply. In addition to this comes the very notion of spending, people do not want to stop spending, they want to spend more, buy more stuff. If the government does not make sure people can keep spending, the government will be replaced in the best case scenario, rebelled against in the worst. And with lefties everywhere promising and wanting lots and lots of more of this lunacy sooner or later a hysterical man with hysterical answers to a hysterical people will emerge and with this we can look forward to the 4th Reich and all the fun attributes that comes with.

The Swedish central bank and its cornflake-economists are destroying the future and ruining the economy, please remember this when you go out looking for a good steady lamp-posts and a hardy rope…


  1. Got a better idea?

  2. For what? The interest rates? The central bank? Well both of those stupidities should of course be abolished. There should not be such a horrifying and immoral thing as a central bank.

    But if we stay in the current situation they should - of course - do the complete opposite. The central bank should increase interest rates up to around 4%. They should stop printing money that excides the production capacity and they should not help out the government one single little tincy wee bit. Furthermore they should limit the money lending without security demanding lower ratio between the lending amounts and the in-house kept amount. Wouldn’t this cause the recession to continue and make things worse? Yes it would, in the very short term. Within a year the market would recuperate and we would see a much larger savings ratio which would make us better equipped once the recession/depression ends. The recession and the crisis cannot be stopped; the questions are; when it will be a depression, how severe and how long it will last.

    The Swedish central bank is working under three assumptions.

    1) The recession will not last and things will be much better soon.

    2) Inflation will not become a problem before the recession is ended hence higher interest rates will not harm so much.

    3) The government will not do anything stupid to jeopardize the economy

    If you, like the central bank, believe in this madness you might think they are doing the right thing, but even IF this is correct, it still means that savings will go way down and borrowing (people in debt) will go up. So even in the best of scenarios with this policy you get a hangover that is very severe.

  3. This was one of the most interesting articles I have read in years. However, Sweden is a small export-based country. The devaluation of the Swedish krona has always been a tool for the corn-flake economists and the politicans in order to help the export industry during recessions, even if it has not helped the industries competitiveness in the long run. This is one of the reasons to Sweden not joining the Euro. The Central Bank might not be that independent as suggested. Politicians want to win the next election...

  4. ....and when they do, they have 4 years of robbing us to pieces! And in the end, well the other corrupt party begins, because people are "tired" of the old gang. I feel sick!!!!

  5. Oh yes David, next year when the depression is really here we will have a change in power with communists, tree huggers and socialist running the show in Sweden. How fun will that not be? The lefties in power during a depression... oh.. this is going to be hilarious...

  6. The Central Bank is not independent at all. In reality the appointments to the board are "political" and their policies are dictated by the state. Also, in order to have some effectiveness, they need to correlate the efforts with the plans of the governments. In other words the "independence" is just a scam.

    Have you guys really taken a look at any paper recently? Every one of them has at least one article with some bonehead claiming we are seeing "green shoots" and the recession is easing off. The same paper however have also articles about unemployment going up, more bankruptcies, trade going down and so on. The delusions are tragic, but also very amusing.