Friday, December 6, 2013

Necessity to avoid.

     If we look back to the end of world war two the creation of the Breton Wood monetary system installed the U.S dollar as the world reserve currency. At that time U.S dollars were anchored to the gold standard. This system offered stability to the west as Europe repaired its war town cities. The U.S embarked on the greatest economic expansion history has ever seen. Prosperity and a new world with a new consciousness emerged.

      This golden age of capitalism lasted from 1945 to 1971. By 1971 the stability offered through the Breton Woods System had faded. The United States had begun to rack up huge debts from the war in Vietnam and the devaluing of the dollar through Federal Reserve policies. With a need to grow the economy President Nixon did what would have been unthinkable a decade earlier. What is known as the Nixon shock the U.S dollar was taken off the gold standard turning the world reserve currency into fiat system, largely centered on debtor to creditor relations. The Nixon shock had long lasting implications that we continue to witness. 

     In 1973 the Organization of the Petroleum Exporting Countries (OPEC) agreed to place an embargo on the U.S  due to complications in the middle that surrounded U.S Israeli relations. The embargo caused the price of oil to spiral out of control eventually quadrupling the price it had been just two years before. After the Nixon shock the U.S dollar entered a period of greater and greater devaluation. These two factors would lead to the stock market crash of 1973-74.This crash was the worst since the great depression. Lasting nearly two years, affecting the global economy. Hardship in the United Kingdom endured until the Prime Minister Thatcher privatized most of the national resources and beat back union representation to a fraction it had been just half a decade before.

    Many historians and supply side economists will argue that it was bloated welfare programs that caused the crash of 1973. These same economists will also tell you that by dissolving said welfare programs is what lead to the eventual economic recovery in 1985. These statements are not factual. The 1985 recovery was based on the intensification of the creditor to debtor relations. This relationship was made possible through the issuance of credit through private credit card companies. The purchasing power that consumers lost during the 1970's had returned, until the balance on your statement was due or you had reached your spending limit.

     The credit card industry help markets affected by the crash recover in 1985.   
Stocks lost value, and what companies failed to reach projections for more than a decade, but who really suffers when markets crash? The most vulnerable, who live day to day, pay check to pay check, that is who suffer the most during harsh economic bust. When jobs are lost because of policies created, by oil barrens, presidents and chief executive officers (CEOs) based on money manipulations rooted in centralized systems the middle and lower classes suffer. 

     Mayer Amschel Bauer Rothschild is rumored to have once said "Give me control of a nation's money and I care not who makes it's laws". It does not matter who originally said this phrase. It matters that this is the truth of our global economies. We are locked into an existence that is wholly susceptible to economic political affairs that have no answer to inflationary or deflationary measures. This is all very true, and also very avoidable.

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