A load of sheet

Another one of those remarkable Karl Denninger comparisons:

The so-called “increase” in your wages are an intentional chimera which is thrown to you to make you “feel good” about your earnings “going up.” But in point of fact they’re not going up at all, they are going down because the divisor, the total number of dollars in the system that are available to buy the goods and services are rising much faster than your earnings are.

The fraud you’re being sold is exactly identical to going into a bakery and ordering a sheet cake. The baker asks you how many pieces you would like the cake cut into; your options are 2, 4, 8, 16 or 32. He then tells you that if you’re really hungry you should choose 32, because that way you can eat more pieces.

You’d either laugh at the baker or string him up by his necktie were he to pull that crap, yet this is exactly what Ben Bernanke along with all the politicians have been selling you for the last 30 years.

When I was in fourth grade, I read Mark Twain’s A Connecticut Yankee in King Arthur’s Court, which makes similar economic points. It’s stuck with me for half a century. No wonder students don’t read it anymore.

(Via Bayou Renaissance Man.)







3 comments

  1. Tatyana »

    8 May 2013 · 8:31 pm

    Sorry, I fail to see how this comparison is apt to what he is describing. If the cake (total amount of dollars available, incl. credit) was +25% increasing in size from 2006, but you were offered a piece of ~1/24 instead of 1/32- than it would be parallel.
    I am not saying his example is wrong, just not analogous to what he describes.

    Also, something feels wrong in that equation of hard cash and credit money; credit is just an obligation, it will become hard dollars in the future, when obligation will be met; how could it be counted at any given “section” of amount of money in circulation just as cash?

  2. McGehee »

    9 May 2013 · 8:54 am

    All cash money is conceived as a claim on — that is, a debt obligation entered into by — the issuing authority. When currencies were on a precious-metals standard, paper money was essentially just government-issued scrip entitling the holder to go to the government someday and demand to be given that much value in the precious metal in question.

    People found it more convenient, as the issuers intended, to simply exchange these debt instruments among themselves, so that under FDR the right of a private citizen to own gold bullion could be (temporarily, but he meant it to be permanently) outlawed, and the currency would still work.

    Now the dollar is no longer on the old standard, so the claim is against the delegated authority of Congress to determine the value of the currency. Looking at what Congress itself is worth, what should we expect of the dollar?

  3. McGehee »

    9 May 2013 · 8:55 am

    old standard = gold standard

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