Well, assuming this isn’t your first time reading my blog, the first question is an easy one. Any self respecting Austrian will tell you that a “bailout” certainly isn’t in the interest of the people doing the bailing out. But for the common American who gets their news from CNN it might leave them a little confused. There was a bailout under the Bush administration, there was another bailout under the Obama administration. If both sides think a bailout is the answer, why aren’t things getting better?  Well from what I can tell, a “bailout” is nothing more then a way of convincing the American people that printing vast sums of money in order to prop up the current political agenda will somehow stimulate the economy, put more money in the tax payer’s pockets, and get everyone a shiny new job.

This is where we get to cover one of my favorite topics, the Phillips Curve. Learning this for the first time, and really understanding it is very important. But realizing what most people who are running the American coercive monopoly still believe in, is much like finding out that everyone you’ve elected still believes in Santa Claus. Trust me, it’s that bad.

The Phillips Curve;

We’ll If you’re not an economist, you’re probably curious as to what that means. What it means is, that these people think that inflation and unemployment are inversely related. When inflation goes up, unemployment goes down, when inflation falls, unemployment increases. Still confused? Well in short it basically means that the government thinks that, by printing money, and spending it (in any particular fashion) will increase wealth for all the good little boys and girls. This however, is an easily provable falsehood.

Let’s begin with the Cantillion Effect. I have mentioned this before, in a previous argument, but never explained it. The Cantillon Effect is when a central bank, who has been given permission to issue fiat currency (currency with no real or “intrinsic” value), gives this currency out in loans, investments, or issuances, and, before the market can adjust to the new currency by adjusting their prices to it’s relative value, the spenders of this fresh, previously unknown of money get it at a much lower cost then if every knew there was a larger money supply in circulation. This, essentially, drives wealth back the original money issuers. The bailout is basically this happening unprecedentedly fast, about 750 billion dollars at a time. All this does is makes the people with the power to print, and their friends much wealthier, while the people in the lower classes with unflexable wages and savings have less and less due to this rampant inflation. It hurts 95% of people in the long run.

Come back tomorrow, part II in the works. (sorry didn’t expect this to be so long, and I like to keep these relatively short. Be sure to comment on it and let me know what you think and if you have any questions.)