AUSTRIAN ECONOMICS ADDICT

Charles Hugh Smith at oftwominds.com always makes me think. This article titled, Dear Keynesians: Your Failed Devotion To Your Sad Religion Hasn’t Conjured Up A Recovery – Here’s Why, is a great analysis of why borrowing electronically printed counterfeit money at low interest rates hasn’t made things better. Actually the underlying structure of production is weaker because of these policies by the Federal Reserve. At some point counterfeiting more money has a diminishing return. Here are some excerpts from the article.

“That any schoolkid could predict eliminating feedback and consequences will lead to a series of disastrously poor choices by speculators and imprudent borrowers doesn’t register with the Keynesian Cargo Cult.”

“It turns out that prudent people have no interest in borrowing more money, even at low rates of interest, and imprudent people are happy to do so but will stop paying the loan as soon as something untoward occurs in their finances.”

“Corporations, meanwhile, look at the real risks of expanding business in a debt-saturated economy distorted by Keynesian Cargo Cult policies and realize that gambling capital on the possibility that waving dead chickens and chanting “humba-humba” will actually increase profits is a truly stupid bet, so they borrow the nearly-free money and invest it in various carry trades overseas that return a virtually risk-free return, thanks to the nearly-free cost of borrowing mountains of money from the Cargo Cult.”

“…Diminishing returns result when a system’s ability to produce an economically valuable output declines.”

“The cruel stupidity and immorality of the Keynesian Cargo Cult knows no bounds because they refuse to accept the reality that diminishing returns cannot be fixed by more debt and more squandering of good money after bad.”

“If a speculator borrows money and loses it in a high-risk gamble, the Keynesian Cargo Cult’s solution is to force the taxpayer to make good the gambler’s losses and then give the speculator more nearly-free money to continue gambling.”

“This “solution” works the first time around, less well the second time around, and triggers a collapse the third time around. This lifecycle is called the S-Curve:”

Related Article – The Incompetence Of The Federal Reserve And The Deep State Is Unavoidable, by Charles Hugh Smith, at oftwominds.com.