Posts Tagged ‘fractional reserve banking’

A general awakening is taking place

December 7, 2013

Unless some great human tragedy should befall Western society shortly, the monetary system must at some point come into focus.

Even though few of the people that might have a say in what can be done have made the leap to actually and unequivocally admit the inevitable arithmetical reality afflicting our economies, the main stream press is indeed increasingly reporting on the tangible ramifications of this particular variety of monetary system.

Starting with this bit of research:

Three systems theorists at the Swiss Federal Institute of Technology in Zurich have taken a database listing 37 million companies and investors worldwide and analyzed all 43,060 transnational corporations and share ownerships linking them. They built a model of who owns what and what their revenues are and mapped the whole edifice of economic power. They discovered that global corporate control has a distinct bow-tie shape, with a dominant core of 147 firms radiating out from the middle. Each of these 147 own interlocking stakes of one another and together they control 40% of the wealth in the network. A total of 737 control 80% of it all. The top 20 are at the bottom of the post. This is, say the paper’s authors, the first map of the structure of global corporate control.

If one understands the arithmetical reality of our monetary system, then one must inherently and necessarily understand that the outcome can only be the concentration of profits thus the concentration of ownership.

The key aspects of this monetary system that make this the inevitable conclusion are:

– Unilateral and arbitrary imposition by force of this monetary system to the exclusion of any other
– Privilege of money and credit creation is bestowed on an entity that produces nothing but demands interest be paid to it
– Money and credit enter the wider economy through exclusive gates rather than entering simultaneously at all levels of the economy
– Constant and aggressive creation of money & credit results in steady debasement thereby awarding asymmetrical purchasing power advantage to the guardians of the gates
– The diminishing marginal efficiency of constant monetary & credit creation ensure that ever greater amounts of money & credit must be created – go to step 3, rinse and repeat

Once this dynamic is understood, the inescapable conclusion must be that, regardless the health of the economy, profit will concentrate towards the top of the pyramid thus ownership of productive capital will too. Profit concentrates in the hands of those entities that are closest to the source of monetary & credit creation.

The following too is more evidence of this inevitable reality:

Ten mega corporations control the output of almost everything you buy; from household products to pet food to jeans. According to this chart via Reddit, called “The Illusion of Choice,” these corporations create a chain that begins at one of 10 super companies. You’ve heard of the biggest names, but it’s amazing to see what these giants own or influence.

And of course, due to the same dynamic, the main stream press is fully captured too.

One more graph:

If you understand the monetary dynamic and if you understand that this monetary system has been imposed without debate nor indeed vote, then clearly the only other conclusion that can be inferred is that there must absolutely be an entity that has deemed it useful for this to be so.

If you understand the above, then you should also begin to understand why in a system predicated on electoral politics and regardless the persuasion, economic policy will always and everywhere result in increased deficit spending and expanding sovereign debt till the point where ideologies that were once at opposing conceptual spectrums will inevitably converge.

A bon entendeur, salut!

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…


On The Desirability Of Debt Based Fiat Money (DBFM)

December 27, 2012

The debate is still going on and it is in fact not getting any easier to explain effectively why DBFM should or should not be desirable.

My last attempt here gave rise to all the usual questions followed by all the usual unsatisfactory answers.

Once again however, I’ve come across a nugget of truth that fits neatly in the completion of the final puzzle that should, if not totally debunk, at least help shed light as to why money should be a monopoly of state and if it is, what the arithmetical consequences may be.

In the West we are proud of our democracy because we feel it engenders open societies, open economies thus personal freedom.

But our open, literate and ostensibly civilized societies have allowed government the monopoly of money. To be exact, government has unilaterally and arbitrarily arrogated itself the monopoly over money thereby simply skirting the democratic process and our societies have thought nothing of it; because we are free you see. We can travel; we can pick where to work (to a certain degree, I am Italian so ask me); we can buy property and we generally can enjoy all the trappings of an ostensibly free society.

But if we are open and free societies endeavoring under free markets, then why is there the need for a monetary authority to have the monopoly over money?

As free citizens, why do we not have the right to choose what to exchange our labor for? Our labor is our effort; it is what we deploy in order to improve our lives and expand the wider economy.

Why then should a presumed democratic government want the exclusive privilege to dictate what money is?

In a true “democratic” society, each individual would have the right to choose what they wish to exchange their effort for. Provided it is allowed to compete with any other type of money individuals can choose from, there is nothing wrong with state sponsored money per se. Quite the contrary. In ideal circumstances, state sponsored money should be a steadfast store of value thus of purchasing power, thus enticing everyone and their cousin to make use of state money.

But that is clearly not the case because we have an arbitrary and unilateral monopoly here.

Why then, is money so important that the state has deemed it necessary to impose this particular variety upon society to the exclusion of any other under penalty of violence?

The truth is not entirely intuitive but it becomes gradually more evident as the arithmetical limits of an artificial monetary system are reached.

By imposing DBFM, government sells individuals to the monetary authority. The word is “sells” – individuals are sold into slavery. It is a forward sale to be sure but a sale undisputedly it is. And a mighty future revenue stream it is too.

In return, the monetary authority grants the political establishment the funds necessary for the electoral dog and pony show and funds and encourages the establishment of different political forces and parties including the establishment of those presumed bastions of the rights of the common folk that are the unions. Unions are nothing but the addition of more layers of corrupt and privileged individuals over already bloated and corrupt layers of government – corruption that is an inherent and mathematical ramification of an artificial monetary system.

Money is a natural extension of who we are. Money is a natural right. Money is intrinsically and nominally expensive to produce because our physical and intellectual efforts represent who we are. What is the price of a human life?

By imposing artificial money upon society, government takes control of your effort. By instituting a monetary authority and bestowing upon it the privilege to create the money that society will have to make use of, government has sold your effort to the monetary authority.

Artificial money has no intrinsic value. The liberal creation of fiat money allows the monetary authority to gradually but arithmetically appropriate the wealth of society.

What I am outlining here is not an event of course. This is a dynamic that takes place over generations but the outcome is guaranteed. At the outset, the trap may not be evident. As the system expands, dissent is silenced or brought on side by applying a mix of coercion or flattery or by invoking personal interest. The easiest way to do that of course is to gradually expand government and para governmental institutions. The recent and current crop of politicians have invented nothing that the Romans, the Ottomans, the French or the British before them had not already devised in order to subjugate conquered societies.

Government expansion is usually justified by a mix of vague concepts that relate to justice, peace and safety; safety of the individual as well as safety of professional classes or industries or minorities and justice and peace for the citizens of sundry countries. Naturally however, what remains unseen is that the expansion of government is the primary cause of the lack of safety, justice and peace.

The need to expand government carries the perverted but inherent need to create a pretext. It begins by offering the masses unrealistic promises of health and financial security. It is boosted by building a powerful and sprawling armament sector and army (which combined employ significant chunks of the population) and it is cemented by the creation of entities that travel the globe offering developing countries advise and counsel on the benefits of borrowing artificial money and joining the Western sponsored monetary system.

Taken together over decades, over a century in fact, this dynamic fosters a number of socio/economic characteristics that are all evident today but that most people cannot relate to the original cause.

In over five thousand years of recorded history, there has not been one instance of an artificial monetary system that has lasted as long as our has or that has ended happily.

Money cannot be and must not be cheap. If society surrenders the right to choose what it deems worthy to accept as money, the usurper of that right will always and everywhere end up owning you.

If you think I am talking shite than answer me this.

How many of you reading this post feel comfortable quitting your job safe in the knowledge you will find alternative occupation that will allow you to live comfortably?

Better still. How many of you reading this post feel unhappy in your present employ and feel comfortable that you can quit and find alternative suitable employment?

How many of you work for government, a major bank or a para governmental organization such as the UN or the IMF or USAID?

But more importantly. How many of you feel you can now quit your job and live a less stressful though more frugal life doing the things you’ve always wanted to do but never had the time to?

This is the end of an era and like previous ends to similar monetary fantasies, it will be painful and bloody… and I am not talking twenty years from now.












Considerations On The Prosecution Of Fraud

December 17, 2012

Matt Taibbi put out a blog post on the most recent legal farce regarding the case of HSBC caught red handed (and admitting) laundering billions (9 zeros) of Dollars in drug money. The post is well worth reading if for no other reason that it is a piece of sober and factual journalism like no longer exists in the main stream press.

I have no quibble with the post and Mr. Taibbi’s articles and posts are usually well researched and factual.

As always and perhaps misguidedly, my personal effort is devoted to making people see that there is a logic behind what is by now blatant corporatism. This settlement like any number of other episodes of deviant and criminal behavior perpetrated at all levels of society (but particularly by the banks) and subject to arbitrary degrees of punishment are the inevitable consequence of the original premises upon which Western politicians chose to build society.

Everything begins and ends with money.

Money is by far the single most misunderstood construct in the universe. “Money” is just a noun. Anything can be money. If it can be exchanged, it could be money. Stones could be and are money on Yap island. Salt is money. Cigarettes are money. Children trading soccer cards in the school yard are exchanging money. Hippies living in communes and exchanging cabbages against cardigans have deemed that their money is represented by items and objects of utility realized by the effort of man; this is a key concept.

Money is but a noun. Anything can be money that is suitable for exchange between sentient beings.

Money is inextricably tied to who we are, what we think and what we do. Money represents our skills and our effort. If we have no ideas and no skills, few if anyone would want to interact with us. Money is us because we are the sole rightful owners of our ideas and skills. When luminaries such as Thomas Jefferson speak of the nature of money as the ultimate arbiter of the liberty of man that is what he meant.

Ultimate liberty would be the freedom to choose what we deem suitable as trading vehicle for our ideas and skills.

The minute you allow one entity to decide what money is and you further empower this entity to create this money at will, you have lost your liberty because you have lost the ability to uphold the value you deem is suitable for your ideas and skills. Suddenly, it is the monetary authority that dictates the value of your ideas and skills and by debasing money the monetary authority debases your skills and your effort, keeping you on a treadmill.

Money should be the inalienable right of every single human being to choose.

By taking away this right, the entity that is privileged with imposing the monetary system is placed at an immediate and asymmetrical material advantage over everyone else AND will arithmetically and gradually acquire the entire productive wealth of society, in the process rendering society destitute and fully dependent.

The logic of fiat money and Fractional Reserve Banking (FRB) dictates that great amounts of debt must be created. In order to do that, government, corporations and individuals must be compelled to spend liberally and without limit. Overspending is encouraged by expedient politics (welfare/warfare state), by progressively debasing the currency and by lowering interest rates.

The above is what inflation is all about.

But inflation is a dynamic that conforms to the law of diminishing marginal utility so that greater degrees of inflation are gradually required in order to obtain the same result.

The logic of FRB therefore cannot contemplate a contraction of the credit markets. This means that as the system threatens to collapse as it arithmetically would, the monetary authority must intervene at progressively greater and deeper degrees in the economy in order to postpone the implosion of the system. Postponing the inevitable is achieved through an expansion of government at home, through the creation of entities such as the UN, the IMF or the World Bank whose primary role is to promote debt gargantuan spending and through the assimilation of the markets and currencies of other sovereigns (Floating Exchange Rates). In this monetary context too, high level criminal fraud must initially be tolerated, then gradually encouraged till eventually,  as monetary policy loses traction, the state must deliberately carry out criminal enterprise. Fast And Furious is a case in point but TARP, the climate change boondoggle or the MFGlobal bankruptcy are good examples too.

So too is the “punishment” for HSBC which is the clearest and latest proof that the state is complicit in criminal behavior.

Since we are talking about HSBC and drug money laundering, here is something else worth considering.

The “war” on drugs.

David Malone, one of the bloggers I follow regularly, has a blog post about the reality of the drug trade. Essentially, David convincingly argues that since the drug trade is a reality, banks are an inherent, essential and inevitable cog of the trade. This qualifies as an open secret or, if you prefer, an inconvenient truth. Where there are billions to be moved and legitimized, you must not only have banks to assist you along the way but, in light of the sheer size of the transactions taking place, said banks can only be major banks.

But beyond the legitimization of drug money, we also know that historically the drug trade is not only a fantastic revenue generating business for government but it is also a very effective tool to subvert nations and then justify gargantuan spending at home to provide ostensible “security” for the people. The Opium Wars come to mind of course but more recently we also know that since we invaded Afghanistan to, amongst other things, putatively thwart the opium trade, opium production has increased many fold. We know that because the UN tells us it has.


I began participating on discussion boards in 2002 and my first tentative contributions were made on The Motley Fool boards. At the time I felt something was not right but could not quite identify what and why. As I began to delve into the dynamics of money, a number of things began to come into focus. By 2005 I was already blogging, in a manner of speaking, on Facebook and already then I was able to project that we would witness progressively greater scandals coming to light in sequentially higher offices of Western governments.

What is happening today is not and should not be a surprise. After all, there is no shortage of historical precedents.

For a compendium of only the most recent criminal behavior see George Washington’s post:

As I opined already many years ago, this shell go on till mobs of destitute, homeless, hungry and angry people will be roaming the streets in search of bankers and politicians to lynch. At that point, our leaders will precipitate a war in some far away land and each (Western) nation will be rallied around the flag to fight a just war for our freedom and our way of life… such as it is…

The New World Order Has Already Taken Over

November 17, 2012

If you read this blog, you know that the unilateral and arbitrary choice of this particular monetary system dictates all our economic and social choices.

At a more fundamental level, the logic inherent in this monetary system guarantees that regardless the ostensible ideology of individual politicians, in time, there can be no practical difference in the policies enacted by liberals, republicans, democrats, socialists, marxists, fascists or whatever other degree of latitude one places him/herself on the political spectrum.

This monetary system arithmetically guarantees that the productive capital of society is gradually transferred into the hands of financial entities thus de facto bestowing full political and government control to these entities.

Hence the reason that in Europe and the United States of America politicians have been able to run roughshod over voters with, as yet, no consequences. As just one example of many, I remind you what happened in Ireland very recently when: “As Irish voters headed for the polling booths on Friday, the European Commission bluntly declared that the terms of the EU-IMF bailout “must be applied” whatever the will of Ireland’s people or regardless of any change of government.

The notorious NWO everyone frets about is not something that is in the works. It has taken over long ago. It took over in the USA in 1913 and in Europe in 1971. The powers of the NWO were consolidated with the creation of the Euro and extended under the guise of liberalized trade as one country after another fell for the apparent charms of Floating Exchange Rates and Fractional Reserve Banking.

The point of no return was past long ago. To be precise, we passed it in 1971.

Of course, there have been voices of reason along the way but the few that took the time to warn us have invariably been dismissed as cranks like De Gaulle for example. Of those few alive today many are too old (Vaclav Klaus) or about to become too old (Ron Paul). Few politicians today let alone the general public understand what is afflicting us. The responsibility to awaken the masses therefore falls upon the few that can see clearly though the ideological fog that is allowed to engulf society deliberately.

Whether you like Alex Jones or not, Mr. Jones has a point and has a plan. He deserves our support:

The Coming Global War

October 29, 2012

The arithmetical reality of debt based money must necessarily lead to government becoming the largest actor in the economy.

But the logic of debt based money is arithmetically finite. As a sovereign pushes the limits of debt based monetary policy, the social and political constructs are threatened. Argentina, Zimbabwe or, indeed, the former USSR are glaring examples of what happens when monetary debasement is pushed to its limit.

The “useful” life of a debt based monetary system can be extended if, and only if, other sovereign monetary systems and markets can be assimilated.  Assimilation can happen willingly or it can be forced.

Argentina and Zimbabwe were unable to assimilate other markets and currencies so their demise was quick, violent and counted in years.

The debt based monetary system prevalent today throughout the West was conceived in the USA in December 1913. Since then, it has been gradually introduced to other countries. In Japan it was forced upon an unwilling political structure at the end of WWII. In Europe, the Bretton Woods accord was showing clear signs of stress by the late 60s necessitating a scorched earth solution for the US Dollar hence the introduction of the US$ as reserve currency followed by the creation of the Euro and the European common market.

The diminishing marginal utility of a debt based currency looks like this:

FRED Graph

Here is the problem.

Upon imposing a debt based currency upon society, economic actors are placed at an immediate economic disadvantage versus the creator of the currency.

Imagine an economy of five people of which one has the privilege to create the currency and the remaining four are forced by law to make use of said currency.

The four economic actors must borrow the first sum in order to trade amongst themselves. In this construct whatever profit each of the four economic actors may make is instantly diminished by the interest that must be paid to the creator of the currency. The more trading activity takes place amongst the four individuals, the more interest is paid to the creator of the currency.

Moreover, if the creator of the currency simultaneously injects ever increasing amounts of currency in the economy, the cash holdings of the four economic actors are gradually debased requiring these four individuals to borrow ever greater sums from the creator of the currency in order to compensate the loss of purchasing power of the currency. As they borrow more, they pay more interest to the creator of the currency.

As the political establishment forces this game pervasively, aggressively and incessantly upon society, over time the productive capacity of society is necessarily and inevitably transferred to the financial sector.

For as long as this monetary system can assimilate other markets and currencies, the economy of the sponsor of the system looks solvent and viable.

Clearly however, as debt based money conforms to the law of diminishing marginal utility and since on God’s green earth there are only so many markets and currencies that can be assimilated, a debt based monetary system must eventually but perforce hit its absolute arithmetical limit.

The point at which a debt based monetary system has lost traction, government is per force the largest actor in the economy. Once this happens, not only are individuals by and large dependent on government for their own survival but corruption is revealed in the highest offices of the state.

The above could be interpreted as a judgment on my part of course, but it is first and foremost an observation.

What prompted the above is an article in today’s Guardian newspaper.

You are aware of my assertion that the time for the willing assimilation of markets and currencies has come to an end.  Today we are out of any markets the assimilation of which would make any difference to our monetary system. Even the assimilation of China today can no longer reverse the total loss of traction of our currency.

If I am right, two key trends will ensure a global conflict: unemployment and fiscal revenue.

For as long as the expansion of credit could generate a relative expansion of the economy, sovereigns could claim increasing wealth. But as every new Dollar of debt by now only generates negative GDP as highlighted by the graph at the beginning of this rant shows, options are few and very well defined.

As Trillion Dollar arbitrary (and likely illegal) interventions fail to expand GDP even relatively any more, the leverage that allowed the expansion of the credit markets and the relative expansion of GDP can no longer be sustained. As credit markets collapse, so do all those social constructs that make the West stand out versus the rest of the world. Other than road maintenance or refuse collection or mail delivery, pension promises will be reneged upon as will subsidies to sundry special interest groups.

Rising unemployment of course reinforces the drop in fiscal revenue thereby crippling the very dynamic that makes the state the largest actor in the economy and the largest employer. This dynamic feeds upon itself naturally.

Critically, the reality of this monetary system is neither a surprise nor is it unforeseen. It is of course well understood by the sponsors of the system if not by the politicians. There is no shortage of historical references to draw upon in order to plot the inevitable outcome of our predicament. From Chinese use of scrip paper in the 9th Century (about 1800 years before the West ever gave paper money a whirl), to John Law’s French experiment to, indeed, the modern Russian Ruble, we know how this film ends. Or at least we should know.

The article that sparked this rant is:

West Sleepwalking Into Endless War

But of course you don’t need to understand the underpinnings of the monetary system to realize that we are going to precipitate a war. Nor do you need to have done two tours in Afghanistan to see what is going on. To wit, here is a post I wrote in November 2010 regarding a Telegraph article that did not leave much to the imagination:

Nato Must Prepare To Launch Military Operations Outside Its Border After Afghanistan

I don’t know how much more clearly anyone can put it. We are going to war and it is most certainly not because a bunch of troglodytes half way across the world resent our way of life.

A bon entendeur, salut

Debt II

October 25, 2012

Let’s be clear.

The problem is not Debt Based Fiat Money (DBFM) proper. As a system, DBFM is certainly less desirable than a value based system or a pure Fiat Monetary system free of debt.

No, the problem is not the system. Rather, the problem are the sponsors of the system.

DBFM is arithmetically limited in scope. Left undisturbed, DBFM would naturally reset regularly and by itself. In turn, this would allow a resetting of the economy purging the wasteful and the uneconomical before things get dramatically out of kilter. It is precisely this arithmetical limit that makes DBFM so desirable to the sponsors of the system.

The inherent tendency to reset provides the sponsors of the system with an excuse to intervene. In a DBFM system, under the guise of social justice, intervention takes the form of subsidies or bailouts. In this regard, electoral politics is symbiotic and reinforces the perceived “need” for intervention. Either way, the ultimate beneficiaries of intervention are the sponsors of the system. Hence the reason that in time, DBFM leads to the concentration of ownership of the productive capital of society in the financial sector along with the profits.

In an environment where the privilege to create the currency is arbitrarily bestowed upon a third party and where society is obligated to make use of this currency, the dynamic outlined above is arithmetically inevitable. The more expensive and pervasive the intervention the more assets are appropriated by the financial sector.

It is in this context that entities like the UN, the World Bank, the IMF, unions or any number of NGOs inscribe themselves. Pervasive and aggressive expenditure on the part of governments for the military, for subsidies or for social programs are absolute gold for the sponsors of DBFM. The best part is that some of this expenditure is justified as social justice or social responsibility when in fact it is purely a transfer of wealth … to the banks.

Now, don’t get me wrong. Government does have a role in upholding the rights of the less fortunate and the otherwise marginalized. But from there to justifying the dynamic of DBFM as morally right, is a stretch. It is a stretch exactly because the creation of funds ex-nihilo dictated by DBFM creates such violent social dislocations in the first place that neither the UN nor any entities that receive the funds can compensate the mayhem. Quite the contrary. An entity like the UN invariably reinforces corruption and waste thus it reinforces social marginalization and destitution.

It all goes back to the monetary system and the way it is managed.

It’s the monetary system stoopid! Government of the banks, by the banks and for the banks.

This is the reason saving the banks is presented as such a vital mission by our sovereigns.

Money And Liberty II – (The Monetary Straightjacket)

September 23, 2012

Money facilitates interaction between individuals. Money is a place holder for the value we assign to our skills, ideas and knowledge thereby allowing us to exchange anything at any given moment without stumbling on problems such as perishability. By eliminating the temporal issues of barter, money allows the division of labor thus specialization.

Money therefore cannot exist prior to there being and idea or an item to exchange. That being the case, it is not money that drives the economy; creativity drives the economy and money facilitates the exchange.

The more money is accumulated in profit, the more goods and services can be accumulated thereby simultaneously expanding the economy and wealth.

The above would be great if individuals had the right to choose what to use as money and if the accumulation of money occurs amongst  individuals that exchange goods, services and ideas. This is the ideal market economy.

If for whatever reason a government successfully endows an entity with the task of creating money and at the same time, makes the use of this variety of money an obligation enforced by law, the the role of money changes significantly and so does its utility.

When government mandates the creation of a central bank and tasks it to create the currency to be used by society, the currency that will be created will necessarily be debt based. This is inevitable because on one hand there would be no need of a central bank if the currency was either value based or a fixed amount of fiat currency and, on the other hand, the central bank must be paid for their activity.

The moment a central bank is instituted and the currency it creates is made the only legal tender, all individuals that have ideas and skills to exchange are placed at an immediate arithmetical disadvantage.

In simple terms, there are four problems:

– The first and most pernicious problem is that there is nothing to constrain the creation of the currency and credit. Quite the contrary. The central bank is encouraged to create currency liberally because that’s how it makes a living.

– The second problem arises from the excessive creation of currency and credit because in allowing the unchecked creation of currency, the central bank gradually devalues the purchasing power of the money it circulates.

– The third problem arises due to the routing the newly created currency takes in order to be injected in the economy. Newly created credit enters the economy through exclusive gates controlled by the central bank and the entities that gravitate around it such as commercial banks and other financial institutions. As first users of newly minted currency and credit, these entities enjoy a disproportional purchasing power advantage over any other entity that receives the money farther down the line. Although marginally ahead of children who perceive a weekly allowance, the salaried consumer or the recipient of government assistance are the very last recipient of newly minted currency so that by the time the currency reaches their pockets, the cost of living has already increased considerably. In this construct, the central bank and its acolytes are always a few steps ahead of the rest of society.

– All of the above is obviously a strategy that is limited mathematically because there is an absolute point past which the currency can be debased no more.

When this dynamic is allowed to run its course undisturbed, eventually, all profits will gradually but inexorably concentrate in the financial sector and, with the profits, so will the productive capital of society as well as political power.

During this cycle, society is gradually divested of savings and is burdened with debt. If the debt is not assumed directly by individuals, the state will overspend on behalf of citizens and will then try to recover the sums through taxation. As this dynamic evolves, individuals gradually work longer and harder just to stay in place till, towards the end, they are on the proverbial hamster wheel. At this point, the majority of individuals are stuck in jobs they hate and prospects of new jobs are dim. Similarly, numerous individuals may be employed by entities whose policies they may not necessarily agree with but are in no position to contrast because their life style depends on them keeping the job – this is particularly the case for people employed by government and by para governmental agencies such as the UN for example.

Like all pyramid schemes, as this monetary system reaches its arithmetical limit, the underlying economy no longer generates sufficient profit to service the debt. At this point, individuals and corporations have to liquidate assets in order to try to repair their balance sheet. However, as more individuals try to do this, demand wanes, asset prices collapse, tax revenue dwindles, sovereign deficits worsen and this dynamic engenders an increase in unemployment just at the time that government is short of revenues and has already ransacked public funds.

All the while, as financial entities acquire progressively more political clout, they become the first and only recipient of public funds and enjoy accounting privileges. Conversely, personal debt is not forgiven nor is it reduced.

At this point, society is hostage to the banks.

Make no mistake. This is only the beginning of what is to follow because if there are hostages there is necessarily a demand that must be met or else…

More from the horse’s mouth (albeit another horse)

March 2, 2011

Initially I just quoted an excerpt that I thought would give the jist of the entire article. But as I read through the piece by I realized it is stuffed full of half truths and false remorse. I am now posting the entire article and interspersing my comments throughout.

Article and comments:

In some of his strongest language yet, Mervyn King today claimed the fall in households’ living standards was the fault of the financial services sector and he expressed sympathy that innocent families paying the price.

“The people whose jobs were destroyed were in no way responsible for the excesses of the financial sector and the crisis that followed,” he told MPs on the Treasury Select Committee.

GUIDO COMMENT: So, what’s going on here. Genuine heartfelt remorse? A moment of candor?

In most aspects, he said, the economy had been on a sound footing before the crisis. Previous downturns were often caused by inefficiencies or weak management and were useful opportunities to improve systems. “None of that applied in this crisis,” he said. “We had quite a successfully operating economy.”

GUIDO COMMENT: And there you go. It didn’t take long for Mr. King to come clean. His is not remorse nor is it candor. What Mr. King is doing is staging contrition. But it is not genuine. It is meant to placate the masses. By any measure anyone measuring the health of the economy prior to the crisis, would have found little to nothing healthy about it. What there was, was the ability of the banks to expand credit markets. If that’s Mr. King’s only measure to gauge the health of an economy then, yes, the economy would have been healthy at that point. But as anyone that has ever managed a budget can tell you, if your debts are increasing at a faster rate than your revenue and your intrinsic wealth you will soon be taken to jail.

The people who are now suffering “did not get bonuses of the scale people in the financial sector got”. The financial crisis may have occurred two years ago but, as austerity measures kick in, “the cost is now being felt”, he said.

It remains “a big political problem”, he added: “I’m surprised the real anger hasn’t been greater than it has.”

GUIDO COMMENT: Crocodile tears folks. Mr. King is seeking forgiveness.

The Governor also warned that living standards may be permanently lower than where they would have been under the economy’s trend growth rate before the crisis. “The evidence of the past is that the impact of a [financial] crisis like that persists for many years,” he said.

GUIDO COMMENT: Funny how Mr. King is aware of the historical background of financial crisis but, like all central bankers and official economist world wide, was unable to see this one brewing.

“You may not get it back for very many years if ever. It’s a very real hit on living standards. That’s why it is important to take the issue of financial stability very seriously.”

GUIDO COMMENT: He truly sounds sorry does he not? Let’s see what he proposes.

Making a personal commitment, he said he hoped to ensure the banks would never again be allowed to cause a recession of the scale just witnessed. “I joined the Bank of England 20 years ago today,” he said. “I don’t want to leave until we have a framework in place to ensure we don’t have to go through this again.”

GUIDO ROMERO: Number 1 rule of getting away with murder: show contrition, make puppy eyes and ask for forgiveness and then ask to stay in place to put things right.

The Governor also expressed concern about the legislation being enacted to give regulators greater powers on bank supervision. He said the Bank would have preferred a new Act rather than amendments to the existing law, but that he was satisfied with the current plans.

GUIDO COMMENT: Isn’t that precious. Mr. King is satisfied with current plans. Not one sentence ago, he pledged to stay on till he sorted this whole bloody mess out. But, you know, though he would have preferred a new act current plans are ok too… Which of course begs the question… why should he stay in place then if legislation being enacted is satisfactory?

Andrew Tyrie, chairman of the TSC, suggested the current plans are a “pig’s ear of a legislative process”.

The biggest change to banking supervision, Mr King said, would be to “move to a regime that does countenance failure but does not cause havoc with the financial system”. Regulators will pay closer attention to whether a bank can fail safely rather than continue with “excessively detailed scrutiny of the big banks”.

GUIDO COMMENT: The price of eggs in china shoves numerous pallistairs under the legislation of corporate mandated social fung shui. That’s a long worringstall for research in the quantum strands rabble.

His position appeared to contradict that of his future deputy governor Hector Sants, currently chief executive of the Financial Services Authority, who has said the new regime would have a “low tolerance for failure”. Mr King said: “I don’t think that’s where we are now.”

End article.

Mr. King basically wants to stay on and change little or nothing. That’s the jist of his speech. No mention of the monetary system, no mention of fiat money, no mention of fractional reserve banking no mention of anything that in fact is a prime mover in our boom-bust economic cycle. Nothing. Just crocodile tears.

Unless of course Mr. King is not aware of what debt based fiat money is and what are the laws that govern this type of monetary system. Though unlikely I suppose it is possible. Possible in the same manner that it is possible that the sun will not rise tomorrow.

Let the banks fail. Withdraw all your funds from the major banks. Close all your lines of credit with the major banks. Make use of small community banks or just keep the cash in a safe at home. Buy one coin and one ingot of silver each. Just stash them away till this whole unGodly mess washes over.

Good luck

The truth shall set you free (Spencer Bachus)

December 22, 2010


House Republicans on Wednes­day promoted Bachus to chairman of the House Financial Services Committee, which has wide juris­diction over banks, capital markets, housing, consumer credit and the overall health of the American fi­nancial system. […]  Bachus, in an interview Wednesday night, said he brings a “main street” perspective to the committee, as opposed to Wall Street. “In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks,” he said. He later clarified his comment to say that regulators should set the parameters in which banks operate but not micromanage them.

The above requires no comment or, at least, it shouldn’t.