Argentina is just
the latest example of a nation who prints currency to pay for a government
that has overtaken the free market private economy. The power grabs have
finally devolved into outright mass street protests, as the Argentine
goverment bans recourse against the government via the court system,
with the exception of loss of health or life (even that was given a six-month
limit).
The effects of the government printing currency, rising food prices, are
estimated at over 25% this year, and have persisted for a few years, similar
to the period for the U.S. in the mid-to-late 1970’s. Continued below...
When grocery prices rise faster than the population expects, families
begin to fear they may not be able to make ends meet the following week.
Governments often respond with the moronic idea of making the sale of goods
above some specific price illegal, otherwise known as price controls.
Investopedia remindsreaders
to “consider the price controls placed by the Nixon and Carter
administrations on gasoline, which led to long lines at the pump and
restrictions on how much gas could be purchased during the 1970s.”
Argentina is following the script to a tee:
1. Print currency to pay for a burgeoning government (lie about the rate of rising prices).
2. Capital controls limit transactions out of the local
currency (your labor and the purchasing power you have earned can’t be transferred into a new medium for protection).
3. Price controls limit prices of staples using force
(shortages develop, and rationing begins as for-profit production cannot
continue, and a true shortage appears for staples such as gasoline).
Here in the U.S., businesses have had troubles accepting payments from
Argentinian citizens who want to save in silver and gold coins to preserve
any of their remaining purchasing power. These are capital controls and are
the final stage in suppression of natural rights. Here is what Austrian
economist and Nobel-prize winner F.A. Hayek had this to say on what these controls do to the natural
rights of the working family:
The extent of the control over all life that economic control confers
is nowhere better illustrated than in the field of foreign exchanges…
experience of most Continental countries has taught thoughtful people to
regard this step as the decisive advance on the path to totalitarianism and
the suppression of individual liberty.
It is, in fact, the complete delivery of the individual to the tyranny
of the state, the final suppression of all means of escape—not merely for the
rich but for everybody.
It should not go without note that F.A. Hayek was very well respected by
London School economist Karl Popper, who said he has learned more from Hayek
“than possibly anyone else alive.” While at the London School, George Soros
studied under Popper, adopting the Austrian idea that expectations matter as
much as present conditions in price formation. The fact that there exists
significant “reflexivity,” or circular feedback, between market participants
and the ultimate outcome of market events is no special surprise.
Hayek is best known for his book, The Road to Serfdom (here’s a
short picture version).
Argentina has driven down this road to serfdom before, and as Austrian
economists emphasize, the public’s expectations for the rate of future price
rises mattered here. Argentina’s last currency crisis was in 2002, so the public
readily understands how, as currency is printed, prices rise. For that reason
the expectations of the Argentinean public are much further advanced; they
expect, and thus act, in a manner that accelerates the ultimate outcome at a
pace unmatched in regions where price “inflation expectations [are] anchored”
(such as the U.S., or Japan).
Argentina’s populist female president, Christina Kirchner, recently
ordered a price freeze on food products. This price freeze "was levied against the largest food
retailers in the country, and it is just the latest example of utterly insane
economic policies made by populist leaders who inevitably end up causing
massive suffering and economic damage to the nations they claim to lead.”
These types of policies have led to food shortages and riots and can bring
some pretty harsh questions into sharp focus as one searches for answers.
· What would you do if the currency suddenly crashed?
· Would government imposed price controls again mean shortages?
· Would you be prepared for store shelves clearing quickly?
· What would you do if, like tens of millions of others, you found
yourself out of a job?
These questions seem removed from reality, but this is simply because the
media does not want to focus on the real issues at hand. Right now in Greece
there are conditions more severe than in the Great Depression; school children are foraging in garbage cans for food,
bent over in hunger.
“What’s frightening is the speed at which it is happening.” When the
hunger comes... “It’s simple,” she said. “You get hungry, you get dizzy and
you sleep it off.”
This economic collapse resulted from planners messing with currency,
rather than letting the free market balance out prices, and allowing
bankruptcy to balance out bank insolvency.
The process of “becoming Argentina” is still underway in the U.S., slowed
dramatically as printed currency can bid on assets overseas, creating rising
prices abroad, because the U.S. still maintains the world reserve currency
status.
As this ploy becomes increasingly unacceptable, currency will return to
our shores, confidence will wane, and local prices for staples will begin to
approach the double-digit rates of increase last seen over 30 years ago.
Those who prepare today, for the events seen time and time again
throughout history (in some places more frequently than in others), will reap
the biggest financial reward in recorded human history because the biggest
debt-currency bubble in human history is being blown.
Except that this time, it is a global experiment. What could possibly go
wrong?
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