Deflation and higher MARKET interest rates vs. Inflation and Lower interest rates: reducing the poverty gap and infrastructure spending – August 18, 2020,
One of my favorite podcasts is The Peter Schiff Show Podcast, and one f the main reasons I’m a fan of Peter Schiff isn’t his gold position, it’s his minimum wage position. Peter Schiff in real-time, can argue why the minimum wage law is one of the worst laws ever advised by a government.
Now, one of the main reasons, the world is off the gold standard is because of the minimum wage law, there is no WAGE MARKET if the government decides where wages should start. If the government says that you must pay a person a minimum of $14 per hour, ask yourself how could that happen if there were a Gold Standard?
When you comprehend that basic argument, you’ll have an idea as to why the price of gold is rising.
Gold miners help lift S&P/TSX composite as gold tops US$2,000 an ounce | financialpost.com
Now disgraced Finance minister of Canada Bill Morneau has been removed from his position and t least temporarily replaced by Deputy Prime Minister Chrystia Freeland, oddly enough on that news, the Canadian dollar rallied next to the Greenback. Now, just being serious, I think the Canadian dollar is rising because of what’s happening in the oil markets, but I’ll leave that topic alone for the post
Freeland to replace Morneau as Trudeau’s finance minister | cbc
The focus of this post is to dispel the myth that we reduce poverty by artificially raising the cost of labour, meaning paying people more money than the market is willing or able to afford to pay them. In a Gold Standard, Gold has to be mined before dollar notes can be distributed, the paper money in circulation under a gold standard has to be redeemable in Gold by the government in order for the Gold Standard to work.
Former President of the United States Franklin D. Roosevelt during the great depression which probably wouldn’t have been great had FDR simply stayed out of the economy, created something called “the new deal” often forgotten with the new deal is that there wasn’t just one ‘new deal’ there was several, because, with every intervention he made, he had to tweak something else.
FDR’s New Deal was so destructive that years down the line Richard Nixon had to take America off the gold standard entirely. Now, oddly enough prior to Richard Nixon axing the Gold Standard, the worlds standard of living had been increasing tremendously if you ask most people, the minimum wages during the booming times of gold standard made the minimum wage an afterthought, however, the problem with the federal minimum wage which was getting higher in the U.S every year until Barack Obama is that it didn’t allow for market corrections.
Minimum Wages don’t allow Market Corrections
One of the main reasons some countries don’t have FEDERAL minimum wages is that a minimum wage is actually a government printing money before they have it. So in the event, there’s a market crash or a market reset, instead of the market resetting to zero, it will be set to whatever the minimum wages is set at, worse no is that there are public sector unions who drive up the cost of labour, all of these additional costs are the root causes of poverty.
The whole part of a FREE-MARKET-ECONOMY is to allow people to set their own prices. When people set prices, those of us in pursuit of profits will find a way to make a sustainable profit at a pricing point near to what the market is willing to pay for something.
Now, the scary part of a free market is that nothing is guaranteed, a rich person can go bankrupt overnight in a free market, and a poor person could become rich overnight in a free market. Now, one of the reasons I’m not opposed to a fiat monetary system is that under a gold standard people have a right to hoard money.
When people hard money, bank liquidity becomes extremely problematic and this is where a central bank comes in. Now, I personally don’t have a problem with a central bank or government money as long as I can buy, sell and trade-in Gold if that’s what I choose to do.
The main problem with a central bank is that it works with politicians who make promises to voters that are unsustainable. The bank of Canada as an example tries to align itself with the policies of the politician in power and this is the root cause of poverty
Opinion: We can reduce the poverty gap by making work pay more | financialpost.com
Currently, the Prime minister of Canada is Justin Trudeau, now Justin Trudeau won the 2015 election telling ignorant voters that because interest rates are low now is a good time to invest in Canada’s infrastructure. Now, because Canadians heard those words and don’t see the connection with infrastructure spending and a higher cost of living, of course, they signed up for Trudeau’s plan.
Trudeau won a majority government and Canada’s central bank accommodated Trudeau’s Cabinet. Now, currently, the writing is on the wall for an economic downturn, but as I’ve written in other posts, the real problem facing Canadians and the Canadian economy in the future is a cash flow problem, the servicing of debts, debt servicing not just for the government but for the average Canadian citizen.
A free market discovers prices, government wages and price controls fixes problems and when there’s an economic downturn, there is no way to solve the private sectors deflationary problems without debasing the currency.
Now, in the article I point to above the writer assumes that the government giving an artificial pay boost will help the poor, when in fact if the government wanted to help the poor the government would get them off of welfare.
Now, it’s unlikely a Liberal or NDP government will tell Welfare consumers to earn their own keep and being that we live in a democracy and people can vote for the politician who promises them free crap, the truth of the matter the way I see it is eventually interest rates are going to shoot up, not because the governments want them too but because they’re going to have too.
I hear some people talking about a digital currency replacing the fiat dollar? Well, even a digital currency will have to entice people by offering attractive higher rates, people of MEANS aren’t going to switch to a digital currency unless it offers something the fiat system doesn’t.
Plus a digital currency will require digital infrastructure that currently doesn’t exist. furthermore, all money of value has a cost of creation, bitcoins have to be mined. I say this because as the article below states infrastructure isn’t free, infostructure is built and maintained by PRODUCTIVE humans, and the system we currently have rewarded the unproductive and rewards lower-skilled productivity with artificially high wages.
Now, I’ve always stated that instead of rewarding people for doing nothing, how about simply rewarding lower labour by getting rid of the minimum wage and subsiding lower-skilled labor with the money thrown at welfare recipients because at the very least lower-skilled labour generates INCOME TAXES!
Without minimum wages, more people would have more jobs, prices would be lower, we’d be able to build a stronger social safety net and when people are actually sick from work they’ll be more than enough money to help them rest! Mothers who need caregivers would have them because there would be no minimum wage.
In Singapore a small country with no minimum wages, everybody who wants a job has a job. a lot of people in Singapore have a MAID!, why? Because there’s no minimum wage, a lot of women as an example like working from home or in a home during a day, why have these women sitting at home on welfare doing nothing when they could be paying income taxes?
This is how backward Canadian culture has become and there’s a price we as Canadians pay for it. Infrastructure isn’t free, it’s maintained via taxes, when the government prints money to pay for infrastructure it’s promising investors that a payment in the future. Even if the forex markets reward our currency, debasement is debasement and the price of Gold rising is a clear sign of the debasement of the Canadian dollar which ultimately will lead to higher prices which will make the poor poorer.
Interesting times ahead!