The Modern Economic Depression – What, How, and Why – part 1
Facing A Depression?
It’s impossible to ingnore the signs at this point, even search engine land did 2 wonderful posts on the topic.
- Wall Street Meltdown: 11 Ways It Affects Digital Marketers
- Wall Street Meltdown and the 2009 Digital Marketing Outlook (Part 2)
I do not match their knowledge of the industry at this point and could not write a better article. On the other hand I think I can contribute to the general knowledge of the public, by takling a hard question: Why are we headed for depression? What’s the Cause, and most importantly, Que Bono – Who Benefits?
This is a 3rd article.
The Signs
- General Motors has confirmed that “it could run out of cash within a few months, which could prompt one of the biggest bankruptcy filings in U.S. history”. (USNews.com, November 11, 2008)) In turn this would backlash on a string of related industries. Estimates of job losses in the US auto industry range from 30,000 to as much as 100,000.(Ibid).
- the share prices of JC Penney and Nordstrom department store chains have collapsed.
- Circuit City Stores Inc. filed for Chapter 11 protection.
- shares of Best Buy, the electronics retail chain, have plunged.
- The Vodafone Group PLC, the world’s biggest mobile phone company not to mention InterContinental Hotels PLC are in difficulty, following the collapse of stock values. (AP, Nov 12, 2008).
- Worldwide, over two dozen airlines have gone under in 2008, adding to a string of airline bankruptcies in the course of the last five years. (Aviation and Aerospace News, 30 October 2008).
- Denmark’s Second commercial airline Stirling has declared bankruptcy.
- In the US, a growing list of real estate companies have already filed for bankruptcy protection.
- US factory orders have declined dramatically. Research firm Autodata reported in October that “sales of cars and light trucks in September had declined 27 percent compared with a year earlier.”(Washington Post, October 3, 2008)
- 240,000 jobs were lost during the month of October alone
- 127,000 in August and 284,000 in September, as revised.
- employment has fallen by 1.2 million in the first 10 months of 2008
- over half of the decrease has occurred in the past 3 months.
- Among the unemployed, the number of persons who lost their job and did not expect to be recalled to work rose by 615,000 to 4.4 million in October. Over the past 12 months, the size of this group has increased by 1.7 million.” (Bureau of Labor Statistics, November, 2008)
- A recent British report points to the potential plight of mass unemployment in North Eastern England. In Germany, a report published in October, suggests that 10-15% of all automotive jobs in Germany could be lost.
- Job cuts have also been announced at General Motors and Nissan-Renault plants in Spain.
- Sales of new cars in Spain plummeted by 40 percent in October in relation to sales in the same month last year.
Source, GlobalResearch.ca
The Cause Of Our Modern Recession
Why is this happening? Is this only a beginning? Are we facing a depression worse than the Great Depression of the 1930s?
To answer these questions, we have to go to the root of the cause and answer the questions:
- What is Money
- Why we have money systems
- What is Money Per Capita
- Who benefits from depression and why.
What is Money?
Money is simply – whatever we agree it to be. If a million people agree to assign values to stones, and then exchange those stones for goods, stones become the money, because a million people agree to use it.
Fiat currency, the currency used throughout the world, is a currency which is not backed up by anything. In another words, when you hold a 100 dollar bill, there’s no gold, or other physical valuable in the bank to back up the value of that bill. It simply says 100 dollars, and everyone agrees that the purchase power of that bill is worth a 100 “units”.
It’s a equivalent to 3 kids taking a piece of paper, writing a 100 on it, and then agreeing that this paper now equals to 100 units of purchasing power. They then take another peice of paper, write 20 on it and agree that it equals to 20 units of purchasing power. The kids may then trade candy with those imaginary money, for as long as they agree that its a valid form of money and that each bill represents a certain number of “purchasing units”.
England used “tally sticks” for around 400 years, which were nothing but wooden sticks, which all people agreed to use as money.
Money is something we all agree on and it can be anything we agree on.
Why We Have Money Systems?
The purpose of money is simple – it’s the means of transfer of goods and services. Without money, it’s hard to trade goods because it’s hard to agree on value of the goods. Money create a convenient system which sets values on goods and also simplifies exchange.
Money is also a commodity that everyone needs. WE ALL NEED MONEY, because we want to be able to buy food and other products. But don’t forget that money is only what we agree on, so if we agreed sticks to be money, we just as well could purchase cars, food and other products with sticks.
Money is commodity that everyone needs, because simply – its useful!
The real wealth on the other hand is – physical goods. Money systems go away, but physical goods stay.
800 years BC gold was valuable in Roman Empire. Today, gold is valuable. Take roman currency from 800 BC and use it today, what’s it worth? What Can you do with it? Nothing.
Take deutsche marks from 80 years ago and try to do anything with those marks today. What can you do? Nothing. Take a piece of land purchased 80 years ago in Germany, by deutsche marks, what can you do with that peice of land today? Sell it, rent it or use for it production, converting that land into other form of value.
Psysical assets KEEP their value through ages, while money lose value and go away.
Money are only systems which come and go. It’s far more beneficial to own physical assets than money, because assets can be converted into some form of money anytime, everywhere. Value of the those assets fluctuates in relation to a monetary system, but it never seizes to exist. Look at assets as energy that cannot disappear (like any other form of energy), but can only be transformed into something else. Look at money as void, with no energy value, which can appear or go away.
Understanding this is KEY to understanding the cause of this recession and possibly depression. Keep that in mind.
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