It Is The Monetary System…

June 5, 2013

Matt Taibbi and PIMCO’s Bill Gross dance around the conclusion from different perspectives.

In “Why Didn’t The SEC Catch Madoff? It Might Have Been Policy Not To” Matt Taibbi highlights the aberrant succession of events that was allowed to happen despite the warnings from industry insiders and the sheer amount of operational red flags Madoff had raised.

In “Wounded Heart” Bill Gross reflects on the sheer aberration of Fed’s actions and finds that it is actually part of the problem rather than the solution.

Other luminaries of finance have also danced around the issue.

The truth is of course, that once this particular monetary system is imposed, there can be no other outcome than what is being noticed by Msrs. Taibbi and Gross.

As an entity successfully imposes by coercion on society one particular variety of money and, simultaneously replaces the notion of capital with debt, the outcome is dialed in. In time, not only does profit gradually drain from society to concentrate in the finance industry but savings are depleted as government must arithmetically become the largest actor in the economy. This dynamic is driven by the diminishing marginal efficiency of debt which devalues the currency. As the currency loses traction, government must necessarily intervene in the economy at ever greater and deeper degrees to compensate the loss of traction.

On the road to becoming the largest actor in the economy, government has a vested interest in initially tolerating certain illicit behavior. But as the efficiency of debt is eroded further, government needs to progressively disregard egregious behavior till it must necessarily solicit it and, finally, collaborate in criminal behavior (i.e. MFGlobal and Cyprus).

It is all a direct ramification of allowing this particular monetary system to be imposed. A monetary system that was never voted upon or that was otherwise never submitted to the people to accept or reject.

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And for the WTF file of today… I give you…

April 29, 2013

And for the WTF file of today… I give you…

I have no inspiration to write much any more. Everything that needs to be said has been said. 

I grant you that going over some of the posts of the past five years highlights the need to write clarification and, in many cases, amendment or errata notes on many of my posts. My knowledge has evolved considerably since 2005. Other than that however, there is not much more I can write about.

At this stage, I suppose my time is best spent pointing out factual, if anecdotal, evidence of what is being foisted upon the public in the West – and this article should be as clear as any writing on any wall writ large.

Western governments have now adopted a blatant policy of intimidation and terror in order to make the masses pliable. This warning to Philadelphia residents has all the hallmarks of fascist totalitarian propaganda aimed at fostering insecurity and fear in a bid to ensure that when the government says “jump”, the public will ask “how high?” rather than asking “Why”.

A conflict of global proportions is around the corner and, in short order, Western citizens will be sent to a front somewhere.

 

They Are Coming For You

March 20, 2013

The debacle in Cyprus seems to have awaken some to the reality of the concentration of power in the hands of the European Union’s appartchiks.

What is still missing in the outpouring of outrage at popular level and, more disconcertingly, in the main stream press is the fact that the suspension of laws protecting private property has a precedent; a very recent and stunningly blatant precedent.

In 2011 MFGlobal filed for bankruptcy after $1.3Billion (with a B) in deposited funds had been pilfered from private accounts. In normal times this would have been an open-and-shut case as the regulators and sundry insurance bodies along with the department of justice would have stepped in to reimburse the losses and prosecute the company’s management. What actually happened is that the regulators as well as the DOJ did not uphold the law opting instead to hang the rightful owners of the funds out to dry; and mind you we are talking here of some large investors with a certain degree of clout (but obviously not enough of it to be able to recover their funds).

The supine passivity of the regulators was then confirmed  when Peregrine filed for bankruptcy too.

In hindsight, we can see that these two instances were merely trial balloons paving the way for a strategy to be rolled out at national level.

Today it is Cyprus’ turn. Tomorrow it will be anyone from France to Portugal via Spain and Ireland.

Never forget that evil triumphs when good people remain silent.

First they came for the communists,
and I didn’t speak out because I wasn’t a communist.

Then they came for the socialists,
and I didn’t speak out because I wasn’t a socialist.

Then they came for the trade unionists,
and I didn’t speak out because I wasn’t a trade unionist.

Then they came for me,
and there was no one left to speak for me.

 

A conflict of global proportions is around the corner and hapless Westerners will be packed off to the front as cannon fodder to ostensibly protect our way of life… such as it is…

Nothing new to readers of these pages:

https://guidoromero.wordpress.com/2010/12/27/on-transitioning-towards-a-police-state-and-a-re-post/

Funny Irish People & The Pope: Ex-Benedict

February 14, 2013

Hat tip The Pink Agendist

Funny Irish People & The Pope: Ex-Bendict.

A good dose of creative and lateral thinking. Just what the doctor ordered.

The Berlin Wall

February 10, 2013

I went to a fun quiz night last Friday and one of the questions asked was: “When did the Berlin wall come down?”

As is well documented, the Berlin wall came down on the 9th of November 1989. What is less documented is that it only came down to move West

http://www.telegraph.co.uk/news/uknews/leveson-inquiry/9817625/Leveson-EU-wants-power-to-sack-journalists.html

“A European Union report has urged tight press regulation and demanded that Brussels officials are given control of national media supervisors with new powers to enforce fines or the sacking of journalists.”

 

Capitalism? Free Markets? Freedom To Trade?

January 29, 2013

Via Zerohedge.

Just the latest example of the absurdity brought about by this monetary system that cannot contemplate a diminishing cost of living.

Fractional Reserve Banking only allows expanding credit markets. As credit expansion slows or, Ye Gods!, stalls, government must necessarily and inevitably intervene. Government intervenes with subsidies, with protection of industries, with the granting of social benefits (student loans are a prime example) and with the imposition of taxes. Whatever form it takes, government intervention is aimed at increasing costs thus increasing the cost of living. Initially, intervention is cloaked in things like social justice and security for the less fortunate. But as the expansion of credit markets no longer brings about the nominal increase in asset values as it used to, government must necessarily intervene at the micro level at increasing degrees.

Till one day, the state intervenes to…

http://www.zerohedge.com/news/2013-01-28/guest-post-louisiana-grocery-store-forced-raise-milk-prices-state-regulators

 

The Icelandic Solution

January 27, 2013

President Olafur Ragnar Grimsson tells the simple truth on how to get out of this jam…

Since we are at it, one of the things I suggest we should also have the courage to take a look at is how a country that was on its knees militarily, industrially, economically and agriculturally was able, in six years, to not only rebuild, re-industrialize and rearm, but jump at the leading edge of technological innovation. We should have the courage to take a dispassionate look at how Hitler was able to do what he did in six years. Where did the money come from at a time when Germany was under embargo and was forbidden to trade liberally with partners?

My view is that Iceland and Lithuania today like Germany before them, successfully broke out of the central bank imposed debt cycle thereby boosting real internal growth by reinvesting profit within their economy rather than leaking it in the form of interest to a third party.

Discuss.

The Trillion Dollar Coin

January 19, 2013

The proposal has been killed as it should have been.

Is this proof that our politicians are sensible?

Not at all of course. What happened here is merely a calculation aimed at self preservation. Someone realized that in going through with the plan, society would begin to question the role of the central bank; as they indeed should.

If Treasury is legally entitled to repay the entirety of the debt generated by a Debt Based Fiat Monetary system (DBFM), then why don’t we just do it? Similarly, if Treasury is legally able to create the currency, why exactly do we need a central bank? More importantly, why should government borrow money from a third party and pay interest when government can create its own money?

These are questions that central banks do not want asked.

Please note. I am not advocating that Treasury should take over monetary policy perpetuating DBFM. Monetary policy should be in the hands of the public and politicians should not have free rein in managing the monetary system just as unaccountable and unelected central bankers should not either. In this respect a value based monetary system or a fixed amount of fiat money would be desirable and would serve to, at once, eliminate the central bank and restrict government excesses.

The Trillion Dollar Coin Delusion

January 12, 2013

When some of the most prominent pundits, economists and financiers, if not the intelligent ones, can opine positively on this idea, then I too feel entitled to offer my thougths.

The idea is, to be polite, at best asinine. No suspense in what my position is as you can see.

Here is the quick and dirty.

If treasury can mint a 1oz coin of platinum and declare it to be worth $1 Trillion Dollars, where do we stop?

The question is rhetorical of course because in the new normal governments are attempting just that. When Fractional Reserve Banking and Floating Exchange Rates no longer provide the lift to asset prices as they used to, then the monetary authority must intervene directly to buy assets itself which, of course, runs counter to the dynamic they are trying to save.

Moreover, anyone who still believes the West enjoys free markets and a capitalist economy should finally have the cob webs removed from their eye lids. Insidiously if deliberately we are reaching the logical end of what this monetary system has wrought and the statist slant of the electoral political process is finally revealed for the authoritarian centrally planned utopia most politicians worth their salt dream about.

A $1 Trillion Dollar coin? If that works, then similarly why not declare by fiat the value of real estate, the value of wages, or what the rate of unemployment is…. oh! Wait!

The Monetary Straightjacket II

January 3, 2013

Pluralistic open societies like to boast the democratic principles and ideals under which they presumably endeavor. Few proponents of open societies however understand the utility or the desirability to allow individuals to choose what type of money they want to utilize in daily life. Western citizens are free to choose where to live, what car to buy, whom to marry and, to a certain extent, where to work but they cannot choose the money they wish to make use of.

There is of course a very good reason why money is imposed by government and the privilege to manage it is bestowed upon an unelected third party.

By forcing individuals to make use of a specific variety of money that is under the control of a privileged party, the monetary authority can gradually divest society of its financial and professional independence thus making the individual dependent on government. This is a generational strategy of course but it is arithmetically guaranteed to work. We have already gone through the arithmetic of how this works. What we have not yet explored however, is how this same dynamic eventually results in an homogenization of policy resulting in traditional political ideologies becoming indistinguishable in their policy implementation. But this dynamic should be clear.

In a Fractionally Reserved monetary system, money is gradually debased. This is a self evident truth. This is achieved by aggressive monetary inflation which in turn is justified by the political and social process which inevitably results in an expansion of government. As money is debased, government expands and the financial independence of the individual is ineluctably compromised. The eventual but direct result is that government not only becomes the largest employer but it also becomes the entity that is considered the only and primary “investor” in the economy.

Although the contradiction in terms should by then be glaringly evident to even casual observers, at that point the continued expansion of government is deemed vital to the welfare of society.

This is too the point at which government is deemed to be the only viable solution to the crisis; a crisis that has been precipitated by the constant debasement of money, the excessive expansion of credit markets (think mortgages or student loans) and the concomitant expansion of government and para governmental agencies.

It is at this point that, regardless of the rhetoric, whoever may be elected into office is presented with a set of monetary realities that foster a set of political conditions that cannot be reversed easily or quickly. This is the point at which the choice is to either do what is arithmetically sensible by reducing the deficits and the debt and go down with the political ship on a wave of social upheaval as the incumbent will be perceived and portrayed as the destroyer of wealth, or just go along for the ride thus allowing the political dynamic to continue as it has and try to keep credit markets expanding and postpone the political upheaval as far off into the future as possible. Just to be clear however, either option results in the same outcome. There are however two important differences in that the latter option buys time at the cost of creating a more dramatic outcome and, certainly,  a more costly one both in financial as well as human terms.

As we have already pointed out several times in these pages, credit markets cannot be expanded forever. The point at which each new Dollar of debt generates less than $1 of GDP this strategy is pretty much dead in the water and the piper is knocking at the door.

FRED Graph

When the piper is knocking at the door, trying to do more of what you have done till the present moment only serves to dig a deeper hole for society.

This is where we are today in the West. Obama, Draghi, the new head of the Bank Of England and now Japan’s Abe have all embarked on the same strategy of perpetuation of the status quo only in spades. But the arithmetical reality is what it is so that the final denouement is going to be that much more severe with, this time, bloodshed in the cards for all; and I mean all including Western citizens.