Fiat money and overbearing legislation (which also creates legal monopolies) has overwhelming crushed entrepreneurship in the west. Browse through some of the data presented below to get a picture of the landscape.
Not only does a fiat monetary dis-incentivize productive market activity and erode capital accumulation which is at the heart of entrepreneurship, but the distortion of price signals and discount rates encourages widespread mal-investment. Mal-investment which now cannot liquidate thanks to the machinations of central planners. Equities push all time highs while confidence indexes cruise near all time lows.
Bail-outs of mal-investment completely distort competition in the marketplace and push more cheap capital into bad business at a fraction of its real cost. Mal-investment and high inflation drives voters to push for more regulation which suffocates growth and innovation. Over-regulation pushes entrepreneurs to outsource labor or move operations to entirely external localities. The cycle repeats itself endlessly (until it doesn’t).
The marketplace of capital allocation becomes a game of roulette, rather than a careful and risk prone environment of value seeking. Winners and losers are determined by bureaucrats and lobbyists rather than by consumers. Marketplace incentives and a distortion of the replacement cost of assets drives capital into unproductive activity.
The process of capital accumulation degrades to the point of degeneracy. Driving the blue collar worker into complicated financial instruments to preserve purchasing power. He will demand increasing economic interventions to protect the new status quo. Asymmetry of bureaucratic favor and cheap capital remolds the ladder of wealth creation/accumulation into an entrenched caste system.
And of course, the mantra of the proles is to push for more regulation, more intervention, more monetary distortion, more spending, more taxes. Men and women who are no longer confident they can make their own way in the world by their own efforts, turn to the visions of despotic tyrants who promise utopia in exchange for just a little bit more control. An utterly demoralized populace will accept just about any proposal if they’re told its the path to a better way of life.
This isn’t a new story and we already know how it ends.
Book of the Month:
The Price of Tomorrow: Why Deflation is the Key to an Abundant Future
-“Many people believe that the system is much safer now. That we have safeguards with financial control to protect against a collapse like 2008. That the cause is well understood – low income loans to housing and toxic assets tied to it. If you believe that, take another look at the timelines above to see what the experts were saying in the run up to that crisis. While housing itself might be safer, the system is not. With credit continuing to advance globally, it is only a shell game as to where the next crisis originates. In fact, the shell game is now moving to currencies themselves and the entire economic system that is built on top of them.”
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