History Geek Time

OK. I like history and charts/numbers — and sometimes the two show something quite interesting.

Here is the — inflation-adjusted, total return (price + reinvested dividends) chart overlay for two time periods — post-1929 and post-2000

The same chart without an inflation adjustment

One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge — even to ourselves — that we’ve been so credulous. So the old bamboozles tend to persist as the new bamboozles rise. — Carl Sagan

There is no question that inflation is one of the best bamboozles. It was Keynes who observed —
Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

And, surely, the entire “inflation-adjusting” process is one that can conceal/distort as much as it reveals. But even using government-created inflation data, what is revealed is the massive deterioration of our economy and the transfers (via inflation) of wealth that have occurred since the stock market bubbletop of 2000. Not 2008. 2000. Ten years. And even at this point, Keynes is probably right that only 300 people in the US actually understand what is happening to them. For the rest, merely an inchoate anger that something is badly wrong

Where Keynes is clearly either wrong or evil is that our government has been following totally Keynesian policies during that entire time. Monetary policy was for all practical purpose near-zero for most of the time. Bush and Republican Congresses spent money like drunken sailors trying to goose the economy. And Bush/Obama and Democrat congresses have spent money like drunken sailors trying to goose the economy. And we are still now in just as bad shape in real terms as we were in the Great Depression. None of it has fixed the problem. Nor has any real honest serious open public discussion of the problem even occurred yet. Just like Japan, we have already had a lost decade. We just haven’t known it.

That is the real “value” of inflation to those who benefit from it. It – combined with a bit of social welfare around the edges to dull the senses of those who should be angry as hell and a lot of divide-and-conquer to ensure that no real agenda/discussion is allowed – is more effective than opium. A population that should, IMO, be hanging the bastards from the trees by now is instead generally simply continuing to play our acceptable role in the divide-and-conquer game. Pretending that if we elect a slightly different group of bastards that the game will change in our favor. And once that no longer works, then presumably a war will be started so that we can be riled up to go out and smote some them. Divide-and-conquer on a grander scale. That is ultimately what worked in the 1929-1945 timeframe. Pearl Harbor. We did not “solve” the underlying problems then. We just floundered until a war presented the right circumstances/conditions for the problem to be coincidentally solved.

I do wish I were one of the one-in-a-million. Sometimes I think I am. And no doubt I understand economics (without being tied to supporting the existing structures that create this problem) better than the vast vast majority of people. But I know I’m not one of the one-in-a-million. This stuff stretches me to my limits – and it is beyond those limits where understanding lies.

Enough.

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One Response to History Geek Time

  1. Stumbled upon your internet site via msn the other day and absolutely like it. Continue the good work.

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