Mission Control Commentary
We Need a Hyper-Deflationary Expansion

Paul J. Cafaro
Nuclear Physicist
Aug 30, 2010

Last month bankers on an imaginary island were having lots of fun "blowing bubbles on the beach with their bikini clad girlfriends" and doubled the money supply causing the price of diamonds and gold to double. Well what also doubled was the price of workers' homes on the island. At first workers considered this a good thing but deep down inside they knew their homes didn't suddenly become "more valuable." The nominal price rise they were seeing was simply due to a "fiat adjustment" of the paper money supply on the island where the dollar lost half its value and that was the only reason all tangible assets on the island doubled in price. When bankers blow bubbles of fiat paper out of thin air (as Bernanke is doing now with his quantitative easing) they know they are not creating more wealth for the workers "only more paper" but the reason bankers love blowing money bubbles is because they get to use this fiat money "absolutely free" making themselves extremely wealthy. This wealth comes directly out of the pockets of the unfortunate workers on the island who are intentionally "held down" and denied a fair cost of living adjustment to their salaries (an increase necessary to compensate them for the massive increase in the money supply). In essence the unethical bankers and immoral politicians who "adjust the CPI figures downward" force common men, women and children "to walk the plank" and when they drop off the edge into the "abyss to nowhere" these people lose everything they ever worked for "including their homes." Now one would think that getting "free cash" from their TARP bailouts, etc. would be enough for the bankers but "their greed is insatiable" they deliberately conspire with the politicians to "fix the CPI inflation numbers to zero" so they don't have to grant workers a cost of living increase commensurate with the true rate of monetary inflation and this allows the bankers to take millions of workers "tangible homes" through foreclosure.

The bankers on this imaginary island have a very good lifestyle, they don't have to work or produce anything of tangible value yet they can accumulate mountains of free cash and free homes, etc. simply by blowing bubbles on the beach. However, what they are doing "creates serious complications for other people." The very act of expanding the money supply "contracts the economy." The economic contraction occurs because workers wages are not increased commensurately with the price inflation taking place. But the goal is to deliberately contract the economy so as to force workers into foreclosure and thus allow the bankers to collect the workers "real assets."

Workers forced to spend what little money they have "on essentials" like food and energy can't even dream about buying diamonds, gold or houses "at double the price" because they are now working longer hours "just to stay even." Saving money under such circumstances gets a bit difficult when prices double yet ones salary is held constant and this obviously creates "less demand for things like housing" and keeps home prices depressed and undervalued even in the newly expanded medium of exchange and artificially inflated economy. But the bankers "who get immediately use" of the money they print up with their "TARP bailout" programs, etc. are able to take advantage of depressed home prices and buy up these undervalued assets for as low as 50 cents on the dollar while the poor workers caught in an inflationary bind must sell their real estate, and sell their diamonds and gold at distressed price levels because they need to buy "life necessities" like food. The workers are treated without mercy as they are put out of their jobs, or their meager wages "deliberately frozen" to force them to part with their very valuable tangible possessions at depressed prices.

Another complication caused by the bankers "blowing money bubbles" and colluding with assessors and rating agencies, etc. to increase the nominal prices of homes is that the municipalities and school districts that went ahead and increased taxes on working homeowners based upon the "supposed increase" in the assessed value of their homes were put into a bind. Actually the "value of the workers homes did not increase" only the amount of paper that "had to be exchanged" to buy a house increased. And because the value of the working mans labor was not commensurately increased (to keep up with the inflation of the money supply) workers began to find it extremely difficult to pay the increased municipal and school taxes imposed on them by local authorities. Eventually the point is reached where ordinary workers (so burdened by the inflationary price increases throughout the entire economy and deliberately held back from receiving a commensurate cost of living adjustment to their salaries) can no longer afford to spend, except for essentials. The result being "the economy contracts" and workers "get fired." Which only further amplifies the economic contraction, mortgage payments fall further into arrears and more homes go into foreclosure (just as the bankers planned). However, the consequences for the towns and school districts (that went on spending sprees as the phony assessed valuations of homes soared) turned catastrophic. No longer could these municipalities and school districts depended upon defaulting homeowners to pay the increased taxes that were imposed on them to fund all the newly created town and school district projects (many requiring huge loans and debt payments well into the future).

What is really ludicrous about the whole situation is that it could have been "easily prevented" if the local politicians and school officials could have been made aware of the fact that "inflation caused by bankers printing money (the way Bernanke is about to do again with his QE plans) causes economic contraction." This is because workers wages "can never rise as fast" as the bankers can "electronically print" paper. And what do you think the current QE "quantitative easing" plan by Bernanke at the Fed is going to lead to? You got it ... not just more inflation but a "more severe economic contraction" for all of us down the road.

To avoid the complications of "fiat money bubbles" created by the bankers in continuous cycles. "The economic unit of value must be kept stable." If we go on simply allowing bankers to inflate prices (faster then our salaries increase) buying will dry up and the economy will fall into recession/depression. People just don't seem to understand that printing more QE/bailout money for the bankers "will contract the economy even more."

Some people mistakenly believe that inflation of the fiat money supply is a wonderful thing because they see the "nominal price of their assets increase" in the monetary unit of exchange. Until one day their homes become "unaffordable" as they are driven into foreclosure by the constantly rising municipal and school taxes (imposed on homes whose real value never changed at all). Strict control is needed over the amount of fiat paper money the bankers are given license to print up out of thin air. But the government exercises "absolutely no control over the Fed" who can print up trillions of new dollars and are not even required to tell Congress where that money went. Being on "a gold standard" automatically limits the creation of new money as gold can not easily be found or mined in abundance and it has one additional benefit ... it puts the Fed out of the (inflation/economic contraction) bubble business.

The situation on the imaginary island above is exactly where we find ourselves in America today. State governments across the country like California, Florida, etc. are in dire need of money as millions of homeowners default on their mortgages and go into foreclosure. The taxes needed to run municipal government and the school system can't be paid and it will not be solved by a Federal bailout. States asking the Federal government for bailout money will simply foster the creation more paper dollars out of thin air (and hence more inflation) which will contract the US economy even more (unless workers are provided additional salary increases commensurate with the paper money being printed). How politicians can ever think that "limiting cost of living adjustments" for workers is somehow going to mitigate the effects of money printing is beyond me. What kind of logic makes these politicians think that creating inflation to increase property prices (to support municipalities and schools) will ever be effective "if at the same time" they deny a cost of living increase to the very people who must pay the increased taxes? If cost of living adjustments are not provided to the workers by the politicians, homeowners will simply "gut their homes and turn in the keys" and municipalities and school districts will have no choice but to shut down their outlandish projects and school programs. The building of bridges to nowhere that the Federal, State, Local governments and school districts do as a matter of routine "must stop."

The simple fact is when a government (Federal, State or Local) can't collect enough tax revenue to pay its bills, printing money out of thin air is commonly used "to cover the bills" and this is the beginning of "hyper-inflation." When the printing presses are really speeded up and put into QE overdrive "just to pay the bills" it creates an even more "virulent inflation" leading to very severe economic contraction. It should be obvious to all that if peoples salaries don't keep up with inflation of the money supply an economic contraction is the obvious result (and when people are put out of work, tax revenues fall, etc., etc.). The politicians can order the bankers to print trillions of new paper dollars so they can pay their bills, but it will only further exasperate an economic contraction where only essentials like food will be purchased.

Many Libertarians such as myself and followers of Austrian economics agree that printing money creates inflation that leads to a contraction of the economy but they don't have a solution out of this nightmare other then to allow "free market forces" to work. I may be alone in my thinking as a physicist with no formal training in Keynesian or Austrian economics but my own gut feelings tells me certain crucial and critical things are required to get us quickly out of this economic situation all the "schooled economists" got us into, and are now compounding with additional quantitative easing.

1) Obama should sign a Presidential Order ordering the price of all goods and services sold to Americans to be immediately cut by 10 percent across-the-board while the government immediately steps in and pays workers and retirees an additional 10 percent increase in their take home pay. This Presidential Order should also include the immediate abolishing and elimination of school property taxes paid by homeowners (because this grossly unfair tax is forcing poor homeowners to shoulder all the cost to provide educated workers to the wealthy businesses and industrial corporations).

2) Thirty days later if signs of economic recovery are still absent the Presidential Order should persist and require a further reduction in the prices of all goods and services sold to the American people and provide a further salary increase to workers.

Initially businesses and the government are going to see some red ink "but we are currently seeing red ink" doing absolutely nothing. The result of "lower prices and higher income" will be "increased consumer demand." Increased demand will get factories to produce more (additional workers will have to be hired) and industry will quickly make back their initial losses. As the economy revives and people go back to work both State, Local and Federal government tax receipts will increase and the Federal government will also make back all its initial losses.

A further "very important stipulation" in the Presidential Order should be "a requirement" that all future cost of living increases for workers and retired people be "exactly commensurate with the growth in the money supply." No more "tampering" with the Consumer Price Index. Just consider the immediate benefit that would be derived by ordering the eliminating of the school tax burden off homeowners shoulders. It will "rapidly revive the real estate market." If big business needs "educated workers" they are the ones who should be footing the local school tax bill. Now if the Federal government wants to provide "tax incentives" to big business to alleviate some of these education costs then it should "further stipulate" that industry must build their factories in this country. Once home prices revive, consumer sales increase, and workers are back creating things, State and Local government tax revenue should increase dramatically providing all the money they need for their budgets.

Politicians "must begin to recognize" that it is the constant inflation of the money supply by the bankers QE programs that causes both price increases and the economic contractions that follow. Workers simply can't maintain buying power commensurate with the trillions of dollars the bankers create electronically out of thin air when bankers rapidly inflate the money supply. It is only "price decreases across the board along with increases in workers salaries" that can bring about a very rapid economic expansion. Workers are going to need both cash and lower prices to pull our economy out of its present nose dive.

Continuing to give QE/bailout money to the bankers will result in a hyper-inflationary depression. But allocating "temporary bail-out money" to the very people who will spend and drive economic growth will go a very long way to avoiding the hyper-inflationary depression the bankers will bring us. History shows that hyper-inflationary depressions have occurred on more then two dozen occasions in the past and "every time hyper-inflationary depressions take root" is exactly when government borrowing (with respect to governments gross expenditures) begins to go through the roof. This is exactly what is occurring in the US right now. Hyper-inflationary depressions always begin when a government can't collect enough tax revenue to pay its bills and must resort to the printing press.

If we want to learn from history we are obliged "not to repeat it." The "cash for clunkers experiment" and the homeowner "cash incentive experiment" have already proven "consumer spending can and will be increased by lowering prices and/or increasing wages." The completed experiments above fully support the assertion that an economic recovery can be kick started "very rapidly." But a steady stream of income to the workers (not one shot deals) is what will be necessary to revive "and expand" production. Expanded production will lead to more job creation and in turn increased tax revenues. In this way we can avoid printing money out of thin air to pay our bills, and avoid the hyper-inflationary depression the bankers are on track to bring us "without some assertive action" by the administration. Around a decade ago the median American workers salary was $52,000 dollars, today it is below $50,000 watered down dollars. Slow economic growth and commodity inflation has been the result. All very obvious.

What Obama needs to produce is a Hyper-deflationary Expansion!

What is a "Hyper-deflationary Expansion"?

It is an economic expansion produced by "dramatically lowering prices and increasing wages" and is characterized by an "explosive economic rebound." Right now is absolutely "the wrong time" to be denying cost of living increases to workers and retirees. Obama must reverse this foolish action and give more economic power to the people (not the bankers). Then T-bond holders and buyers won't flee from our Treasuries. The Fed won't have to buy T-bonds to hold interest rates down, people will automatically buy the T-bonds of a country in economic expansion. The T-bond buyers will keep interest rates down and make the interest payments on the national debt manageable. Produce a Hyper-deflationary Expansion and the Hyper-inflationary Depression that the bankers are on track to produce (to bail only themselves out) can be avoided.

It is obvious Obama can't continue to pay the governments bills with printed paper money "forever." As it will only "contract economic growth even more" and pave the way for "a depression of economic activity" while a hyper-inflation of the fiat monetary unit (known as the US dollar) goes exponential. Obama must get the politicians on both sides of the isle "to produce a new economic growth paradigm" by taking fiscally responsible measures like lowering the deficit, cutting war spending, etc. otherwise they are simply going to drive us all into a Hyper-inflationary Depression.

And this matter of having two to three wars going at once to help generate money for the bankers and industrialists is lunacy. The US has been in Afghanistan for eight years now and what have they accomplished? Consider that while our politicians talk big about a war on drugs here at home they still allow Afghanistan (the world's largest producer of opium and hashish) to continue to poison our children. Is supplying drugs to the drug Cartels in our national interest? Why can't we use our military for "a good and moral purpose" while we happen to be over there anyway and just burn down all the opium fields, how hard can that be for our military? And that oil and gas we are supposedly overseas to protect "it does not need to be bought by us," nor do we have to build gas pipelines in Afghanistan and use military force, because "America is energy independent already." We have enough natural gas reserves right here in America "right now" to supply "all our energy needs." That's right (there is "No Energy Shortage in America") We Americans have more stored energy in clean burning natural gas then "all the OPEC countries and Afghanistan combined." What Obama needs to do is simply order GM and Ford to install a simple $200 dollar conversion unit onto all the current gasoline engines on the road today to make them run on natural gas (now wouldn't that be an economic boom for Detroit). And talk about infrastructure development, we should be on a war footing to rapidly install all the infrastructure necessary to run our entire economy on natural gas. We don't need Iraqi oil or Iranian oil or Afghanistan gas - "We Are Energy Independent Right Now" - so our boys fighting and dying "to secure" Middle East oil and Far Eastern gas and to protect the Drug Cartels' opium is a "non sequitur."

We can also abolish the Fed because the little known fact is "we don't need to borrow the Banking Cartels' money to pay for the OPEC Cartels' oil". And we don't need to borrow the Banking Cartels' money to fight a war to protect the Drug Cartels' opium. The Banking, Drug and Oil Cartels are forcing us into a systemic economic collapse for "their own greedy purposes." Americans don't have to accept living through "a banker created" hyper-inflationary depression which in its final stages will result in a complete cessation of normal commerce and anarchy in the streets (look at Greece if you need an example). We are an extremely rich nation endowed with abundant resources and assets. We alone in the world can not only provide all the food we need to feed our own citizens but food enough to feed many other nations citizens as well. Barring temporary transportation disruptions (that a small supply of essentials on our stock shelves can ameliorate) Americans will never go hungry for "lack of food." We're "an extremely rich and a very fortunate nation" that should not be allowing itself to be plundered by greedy Cartels.

What Obama must do is simple.

1) Spend less and stop all the wars.
2) Eliminate government agencies (truly make the government smaller).
3) Stop writing blank checks to the bankers.
4) Don't wait for market forces to "slowly" lower prices ... "order" a lowering of prices across the board "immediately"
5) Enact salary and cost of living "increases" for the workers and "COLA increases for retirees" that truly reflects the real expansion of the money supply "that has already taken place" and is currently taking place.
6) Eliminate all school taxes that are now an "unduly heavy burden" off the shoulders of American homeowners.
7) End the Fed.

Doing these seven simple things will create what historians of the future will call "The Great Obama Age" ...a Golden Age noted for the "Greatest American Economic Expansion" the world has ever seen. I bet we can beat even China!

We the People of the United States of America depend upon "our elected representatives" to do what is right for "all the people" not just a select few Industrialists and Bankers. If things are left in the hands of the Banking Cartel they will continue to do what they have been doing since 1913 (printing money, creating inflation bubbles and bursting these bubbles) on and on and on the Fed will create never ending economic cycles that follow like clockwork the bankers fiat money (inflation and contraction) moves. If Obama continues to let the bankers run things in America we Americans will be subjected to endless cycles of bubbles and bursted bubbles. The world is getting "Fed up" with all these banker shenanigans, most want to sell their US dollar T-bonds and buy gold as an insurance policy. Look at what China, India, Russia and other countries are currently doing, they are converting their US dollars into tangible assets to protect their savings. Obama was elected to bring "Change to America" but in a few years his time to effect change will pass, and we Americans will have to find "a new leader" who will "live up to the economic and Constitutional principles" the Founders of this Once Great Nation gave their lives and very fortunes to bestow upon us, hoping against hope that we their descendants would have the same courage as they, and continue in "their footprints" to make "The United States of America Truly Unique Among Nations"

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Aug 29, 2010
Paul J. Cafaro
Nuclear Physicist
email: pcafaro11758@yahoo.com

Mr. Cafaro has a Master of Science (MS) Degree in Nuclear Physics, B.A. Degree Physics and completed many advanced study courses toward his Ph.D Degree in Nuclear Physics at Brooklyn Polytechnic Institute of New York. He attended Long Island University, C.W.Post, New York University and obtained his Paralegal degree from Adelphi University, worked 35 years for the United States Government as a Nuclear Physicist, and is in Who's Who in Technology and Who's Who in the East.

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