The mechanics of what is happening with money now is fascinating, and seems to be clarifying in my mind. It is hard to imagine a more inherently ineffective system of capital and resource allocation than crony capitalism. It is like playing a game in which the rules are rigged to deliver the money in the system to a relative minority of insiders, thereby bankrupting all the customers.
It is said that in a purely competitive capitalist system, all businesses are vectored to zero profit in a process of creative destruction. As a certain class of particpants clearly recognizes this they take every opportunity to corrupt and game the system through fraud. This is why markets must have regulators. At times the fraud overcomes the regulation to such a degree that the normal market balances are rendered ineffective and the system passes to a crony capitalist system, if not an outright oligarchy.
In a crony capitalist system a similar outcome can be achieved, but with the insiders and powerful interests holding most of the money which ultimately becomes worthless because the foundation of the money, the labor of the people, is destroyed.
In other words, greed compels the materially obsessed to obtain the greatest piles of chips, but in the long term renders their chips to be worthless because they are unable to stop their fraud and plundering even when it is in their best interests. They are not governed by rationality or conscience or even common sense. For periods of time oligarchies are able to survive in an uneasy equilibrium enforced by power, but ultimately these wicked die forever on their great piles of gains.
I now give more weight to the potential for hyperinflation, and will be exploring this topic during 2011. The Congress and the Fed are reckless to the point of self-destruction.