Failure of debt-based monetary systems and economic governance via deficit spending
I ask students in my Economics classes some essential critical thinking questions. They learn how the banking system works, how each dollar is created as credit, that only 3-5% of money in circulation is physical while the rest is IOUs on a network of digital ledgers, and why a credit-based monetary system has no choice but to inflate. This is because at any given point in time, the money that was loaned into existence only includes the principal, while the total owed back to lenders is (principal + interest), which is always greater. And the interest is compound, not simple, so there is the exponential component of global debt growth. Exponential functions play out slowly at first, and then go ballistic in the later stages (hockey stick curve). If it was just math, like Keynesians and monetarists believe, it might be okay if wages kept pace with the exponential growth of debt. Assuming that both the population and production grew at close to the same rate. Unfortunately, the physical world of resources from which things are produced cannot grow exponentially. That's the brick wall of reality, and why Keynesianism fails in the long run. Long run aggregate supply is inelastic and finite.
Connecting the dots, what is the logical and inevitable end state of such a monetary system in terms of individual standard of living, and why?
The problem created by binding price ceilings: shortages. Mamdani and the New Yorkers who voted for his policies are about to learn a painful lesson in basic economics. Rent caps inevitably reduce the supply of affordable rental units. The laws of supply and demand do not care about socialist delusions. Mamdani essentially bought votes by throwing landlords under the bus to get votes from renters by promising "free stuff," which is basically theft from the property-owning landlords in an attempt to transfer producer surplus to the renters. And those people are about to learn econ the hard way, through reality. This will happen whenever rent caps are applied, anywhere. The result will be evictions, slum apartments allowed to fall into disrepair, landlords selling & leaving the city, and fewer units of affordable housing. Socialist ideology fails to understand the first law of economics: THERE IS NO SUCH THING AS A FREE LUNCH. And I am not advocating for crony capitalism, like we just saw with the Vancouver, BC, Canada condo bailouts, because that is equally bad.
December. A month for celebrating with gratitude and kindness, and spending time with beloved friends and family. May your season be bright, and filled with happiness, fellowship, good cheer and love.
Steve Faz retweeted
The wreck of the Swedish warship 'Mars' became a tragic spectacle when it caught fire and exploded during a fierce battle in the Baltic Sea in 1564. Resting at the seabed for nearly five centuries, the ship remained hidden until its discovery in 2011. Renowned as the largest and most formidable warship of its time, it was christened 'Mars' in homage to the Roman god of war. King Eric XIV of Sweden commissioned the construction of this majestic vessel with the aim of positioning Sweden as a dominant force in naval warfare. Boasting an impressive five decks, two of which were dedicated to artillery, particularly cannons, even the crow's nests were armed with guns.
However, tragedy struck on May 31, 1564, during the First Battle of Öland, as the 'Mars' was engulfed in a devastating inferno, consigning approximately 800 to 900 Swedish and German sailors, along with a substantial fortune in gold and silver coins, to the depths of the Baltic Sea.
The discovery of the 'Mars' in 2011 marked a significant milestone, as researchers determined that it was the most remarkably preserved vessel of its kind, representing the earliest generation of Europe's grand three-masted warships. Naval historians promptly embarked on a comprehensive study, driven by the scarcity of knowledge regarding warships from the 16th century, despite possessing extensive information about ships from the following century.
The ship's identity was further corroborated by the retrieval of silver coins within the extensive wreckage, minted in 1563 under the reign of Eric XIV of Sweden, a year prior to the ill-fated battle.
The First Battle of Öland was a watershed moment in naval warfare, as it marked the transition from boarding and hand-to-hand combat to the utilization of extensive cannon fire as the primary means to sink or capture enemy vessels.
