Friday, April 15, 2011
It's A Trap!
Since the advent of fiat, fractional reserve banking, our nation has gone down the one-way path of perpetual inflation. This makes it difficult to save, as the value of savings is eaten away either by inflation, or by the capital gains taxes paid on investments, made merely to avoid inflation, that increased in value only because the dollar decreased in value.
In such an environment, Americans interested in making large purchases will turn to borrowing, instead of saving, in order to buy such things as cars and houses. One seeming advantage to this strategy is that inflation favors borrowers in that the dollars a borrower must pay back are worth less than when they were borrowed, and in a growing economy they are therefore easier to come by.
But as Admiral Ackbar points out in the video above, "IT'S A TRAP!"
The catch is that our inflationary system inevitably leads to, and is part of, the business cycle. As everything feels good when borrowers take out their loans, the economy appears to be growing and there is mild inflation, it appears as a good decision, given the previously mentioned constraints that purchasers face. However, what few people realize, thanks to their ignorance of the Austrian theory of the business cycle, is that all booms inevitably lead to busts. And when the bust comes, you loose your job, you miss that payment, you loose your house, but inflation continues at an even quicker pace, as we are witnessing right now. There is no such as a free lunch. It is a trap. We must abolish the Fed!
As Lupe Fiasco points out, "Crooked banks around the world would gladly give a loan today so if you ever miss payment they can take your home away!"