Monday, July 14, 2008

Disinformation and the Economy

There's a lot of near panic out there. People are acting as if the sky is actually going to fall.

Here's some good news: the sky will not fall.

And when they sky doesn't fall what you will discover is that life goes on. People will work, eat, shelter themselves, etc. Not much will change. The U.S. dollar doesn't really mean anything - in fact it has no intrinsic value whatever beyond the paper it is printed upon. The dollars you so wish you had more of aren't actual wealth - they are the mere signifiers of wealth. And as fewer people carry actual paper currency and tend to carry plastic credit cards instead, what you really have is a situation where 1s and 0s in a computational machine are the signifiers pointing at nothing.

The situation is actually worse once you take into account our system of fractional reserve banking where banks effectively invent dollar entries in their computers for dollars that don't actually exist in a ratio of something like 1:10. For every one real paper dollar a bank can claim to have constructive control over it can lend out ten that are created by the mere act of lending out the money. This is a radically simplified description of what is written in Title 12 of the Federal Code. But again, the main point is this: dollars have no real intrinsic value and the whole economy is mainly a matter of faith in a system perpetuating the economic myth of perceived value.

Sleight of hand economics: now you see it and now you don't.

So if the economy is in the toilet, it's really more a crisis of faith than anything else. Do you believe the economy is tanking and cannot recover; or, do you believe that the economy is rough right now but will recover and become far more robust in the near future? Decisions, decisions...

Smart money says the economy will recover and our economic cycle of bubbles and busts will continue on its merry way.

Smart money also says that you do generally the opposite of what the media tells you. The owners of mass media have a message for you - the lowly consumer - and it runs usually exactly the opposite of what the media owners - and economic puppet-masters - are going to do. When they say the economy is bad what they really means is that they want you to panic and to sell low so that they can buy low. When they tell you the economy is in a boom cycle what they really mean is that they want you to buy high so that they can sell high.

This is really no different than people that try to spike the buying and selling of stocks by deseminating rumors that favor the way they want the sheep to move. The sheep move one way and the rumor-mongers move another way.

If you have the means, find the bottom in your favorite market and buy in bigtime. The move up is coming soon.