Excerpts from Bubblenomics II: A PhD in Common Cents by Lawrence Rowe

Speculatos who team up with guv’ments can’t help chuckling at the stupidity of sheeple. Sheeple is obviously a demeaning term, but this is how Speculatos view you and me: sheep•le, noun, people who do not understand bubblenomics, and can therefore be exploited by Speculatos and guv’ments. Combination of the words sheeple and people. Derogatory term used by Speculatos and guv’ments to describe the working class, which they consider a mindless herd that is meek and docile.

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Alan Greenspan was Inflator General for 19 years. During the booms of those decades, Greenspan was hailed by ignoramuses as “The Maestro,” an economic Einstein whose financial genius created America’s prosperity.

The worldwide dollar supply was $3.6 trillion when Alan Greenspan became Fed Chairman in 1987, $10.2 trillion when his tenure ended in 2006. Greenspan increased the money supply by $6.6 trillion, or $330 billion per year. $1,100 additional dollars per American each year. A 283% increase in 19 years.

If the Maestro hadn’t exercised his “genius” and created trillions of dollars out of thin air, tens of millions of Americans would not be broke for life now. Yes, sheeple had to be ignorant of money and accept massive amounts of credit too good to be true. Bankers dangled the hook, sheeple bit, and maybe a fish that bites should be fried. But Greenspan had to create that money first. If he hadn’t, no hook ever could have been dangled.

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$1.822 trillion!

Created by commercial banks in six years and lent!

This wasn’t just the fundamental, root cause of the housing bubble, in the most absolute and literal sense, this was the housing bubble. Without $1.8 trillion conjured out of thin air, there would have been no money for all the absurd Crayola chimp loans made during the housing bubble.

Had there been no central bank which can conjure base-money fortunes on a whim, and no system of fractional reserve lending which allows commercial banks to create 9 times base money, all money for housing loans would had to have come from savings. Every penny lent for mortgages would have been voluntarily surrendered by depositors who agreed to convert their demand deposits into time deposits. The M2 money supply was $5,137 billion in April 2000 when Fed began the Great Inflation which created and was the housing bubble. $1,822 billion is 35% of $5,137 billion--a 35% savings rate. Do you know anyone who saves 35% of what they earn? For the housing bubble to have arisen under an honest money system where money cannot be conjured, every American would have had to save 35% of their income! China has the highest savings rate in the world, and its savings are usually 20% - 25%. America’s savings rate is -1%. The housing bubble would have been impossible under an honest money system.

Very roughly, the average American home costs about $300,000. $1.822 trillion is enough to issue more than 6 million mortgages at $300,000 a pop. The entire $1.8 trillion wasn’t used for mortgages, just most of it, but that stat gives you a rough brute force sense of the amount of houses that $1.822 trillion bought.

It ain’t rocket science. The scam began, as it always does, with money created out of thin air. And as it always does, misery followed.

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Trillions of dollars were computered and used to issue mortgages which never would have been demanded otherwise. This spread false price signals throughout the economy. The false price signals resulted in malinvestment, in the construction of houses for which there was no true, sustainable demand. For example, in 2005, 1,283,000 newly-constructed houses were sold, compared with an average of 609,000 per year during 1990 - 1995. Very roughly, 600,000 unneeded houses were built in just 2005!

The average American mortgage is approximately $300,000, meaning that 600,000 houses have a very, very rough value of $180 billion. $180 billion of malinvestment in 2005 alone! $180 billion of resources taken from enterprises that were producing goods & services actually demanded in the free market, and redirected to construct houses that buyers could not actually afford, and therefore could not honestly demand, nor sustainably demand in terms of making mortgage payments.

This is just the malinvestment constructing the houses, it does not include commissions generated by brokers, and the myriad secondary activities which resulted from the purchase of houses, such as insurance purchases, and new appliances, furniture, and other improvements for a new house. The full scope of this additional malinvestment is difficult to quantify, but it is massive.

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For much of US. history, internal money supply was limited:

In 130 years, population increased 6-fold, money supply 6,000-fold. The money supply grew 1,000 times as fast as population.

If America had created only enough new money to match population increases, the current money supply would be $8.4 billion dollars. The remaining $8,318 billion of our current money supply--$8.318 trillion--was created only to levy the inflation tax.

If the current money supply was $8.4 billion dollars, overall prices wouldn’t have risen. A loaf of bread would still cost pennies, not dollars. Your great grandparents, grandparents, and parents all would have paid the same price you do for goods.

$27 per person was a sufficient money supply to conduct trade and create a prosperous society. There wasn’t a money shortage that forced people to abandon currency and barter.

It is tough to imagine this smaller supply of money. Today’s prices are so high, it seems like you’d be getting screwed if you only had $27. Prices are the balance between the total amount of wealth and the total amount of money that can claim that wealth. Prices of everything would be lower--the price of labor called wages and the goods & services that wages buy. We have trillions more dollars in circulation than commerce requires. This money is hidden taxation, wealth tithed by guv’ment and Speculatos over the centuries.

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