Some think that central bankers and their friends are controlling the business cycle to enhance their own wealth and power, in addition to the publicly admitted fact that they are state-sponsored counterfeiters.
Since the central bank controls interest rates, it can roughly control the timing of the business cycle. After inflating the currency for some years to create a boom, the central bankers tell their friends they are about to tighten up the money supply and the interest rates and cause a stock market crash. The friends sell their stocks.
Later the central bankers tell their friends they are about to lower interest rates and so the friends buy back the stocks at a much lower price, and the cycle starts all over again.
Pump and dump is a conspiracy theory, of course, and there is no proof that it is true. If you don't believe in conspiracy theories, then you should stop reading here, because I am basing this essay on the assumption that pump and dump conspiracies are a reality. I do not “believe” in the pump and dump theory. I merely want to discuss the ramifications as if it were true.
It is undoubtedly true that the central banks are literally “making” money just by printing it or adding digits to a bank computer. This money goes to the friends of the central banks. If you accept the pump and dump theory, then the friends of the central banks are not satisfied with a 3 to 10% or so annual inflation tax on any savings in their county, but are also running a crooked gambling establishment with the roulette wheel fixed to favor the house.
The inflation racket was invented nearly as soon as money came to be mass-produced. Since then debasing the coinage or the currency has periodically been a favorite income source for governments. Fortunately, this scheme is doomed to eventual failure, usually destroying or severely crippling the government involved when the inevitable happens and the government succeeds in reducing the value of the currency to zero. Of course a far-sighted, wise, and provident government would never do this, but government is essentially a criminal organization, and a far-sighted, wise, and provident criminal organization is a contradiction in terms. As John Maynard Keynes famously said, “In the long run, we are all dead.” The long run has arrived and Keynes is dead, but we are not.
So what does this tell us about the current world economic crisis? The US dollar has been the world's reserve currency, so the bankers and businessmen in the USA have been in control of the pump and the dump for a long time now, and they have taken full advantage of their opportunity. Paradoxically, they were able to do this because of the capital built up during the approximately 120 years when the US was on the gold standard, and pumping and dumping was not possible, at least on a national scale.
For more than a hundred years the levers of the world economy have been controlled by an alliance between a few small countries in Northern Europe and the US. Something like a tenth of the world’s population has been holding the pump handle, but that may change soon.
The financial center of gravity of the world has now moved to Asia. The Chinese and Japanese and various other Asian economies have built up huge surpluses, and they appear to be poised to use that leverage to take the pump handle away from the USA.
We can't entirely avoid the economic karma our misuse of the trust of the world, but we could minimize the damage by returning to a hard currency backed by real assets and bringing our troops home.
If you decided to go down to the local gas station and get your gas tank filled at the point of a gun, your gas would probably turn out to be much more expensive than if you just bought it. Why should it be any different on an international scale?.
Just because we have better weapons than others, doesn't mean we can do anything we want. There are lots of ways to survive besides better weapons. The saber-tooth tiger is extinct, but there are probably billions of common house cats in the world today.