Posts Tagged ‘monetary system’

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!

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.

French President Charles de Gaulle’s 1965 speech on the monetary system and his warning

May 6, 2012

With thanks to poster “Winston” on the Voy forums.

Exactly what this blog is about:

The empirical and arithmetical reality that cannot be refuted…

March 7, 2012

In the past 50 years, we have done this:

Graph of Real Gross Domestic Product, 1 Decimal

The above is indeed impressive.

The question of course is: how was this achieved.

If the above was achieved purely by ingenuity, productivity and efficiency, one would rightly have to be in awe at the prodigious nature of human kind if not at the effectiveness of the modern political construct.

But… but… as platitudes go, saying “the devil is in the detail” really does no justice to the followoing:

Graph of Federal Government Debt: Total Public Debt

That is not a “detail” by any stretch of the imagination.

Anyone that has ever had to handle a budget even only at domestic level knows that if you are borrowing progressively more than what you are earning in wages or sales, you are soon doomed.

However, there is a current of thought which, incidentally, happens to be the prevailing current of thought, that says, alternatively, that debts do not matter and/or that sovereigns that can print their own currency cannot become insolvent.

To which I can only say… well, I could say, but instead I’ll say that they should go back to reading some history.

Other than to say that if indeed debts do not matter, than why all the hand wringing and the emergency meetings taking place throughout the world to solve what would ostensibly be a run of the mill socio/economic crisis? Get printing, distribute cash liberally to corporations and individuals alike and presto, we should be off on our merry way once again. Better still. Lets put every single man, woman and child on a government salary and corporations will once again be making profits hand over fist in no time. Everybody wins.

If indeed debts do not matter and as monetarily independent entity a sovereign cannot become insolvent than why not put every single person on government payroll? Poverty would be a thing of the past and a new age of prosperity would immediately be ushered.

The reality of course is that debts do matter and sovereigns do go bust regardless of whether they have control of their currency or not. 7000 years of human history cannot be refuted. Either that, or we have discovered perpetual motion.

The reason is strikingly simple. It comes down to the monetary system and the socio/economic decisions that are dictated upon society by the choice of one system over another.

This is how it works.

Money can only be the result of economic activity. Money cannot be the instigator of economic activity.

(We are talking here of fiat money which is the standard today in the West rather than value based money)

Money cannot exist unless you have something to exchange. At the most basic level, you must have an idea or an item that others deem useful in order for there to be a need to create a medium of exchange (and in order to obviate to the problem created by barter known as the “Coincidence of Wants“) to trade your item for something else that you deem necessary or useful to your well being.

Therefore, in a fiat money system, economic activity is necessarily the precursor to fiat money. The construct cannot operate the other way around. If it does operate the other way around, then the demise of the system is inevitably dialed-in.

You may ask why.

Simply because unless the amount of fiat money created is fixed, then each additional unit of currency circulated erodes the purchasing power of all units created prior.

If you can get your head around that, then you will also understand that if politicians impose a fiat monetary system unilaterally and arbitrarily AND they reserve the right to manage it by decree behind closed doors, the inescapable conclusion is that the expansion of the monetary base and credit is guaranteed.

Graph of St. Louis Adjusted Monetary Base

Unless you have never looked into these matters with a modicum of interest, then you will also be unaware that our monetary system is predicated on something called “Fractional Reserve Banking” (FRB for short).

FRB is at once a genial concept but it is also the proverbial sword of Damocles that will kill you unless you are able to maintain all previous trends as evidenced by the charts posted above.

The reason is, once again, rather simple.

In order to expand debt in this manner:

Graph of Federal Government Debt: Total Public Debt

You have to hope that GDP expands at a faster clip than the debt you are assuming:

FRED Graph
But that is glaringly not the case. Can anyone refute the above?
The alternative is to progressively lower interest rates.
Graph of Interest Rates, Government Securities, Government Bonds for United States
Yup! There it is. Since 1980 interest rates have been manipulated inexorably lower thus enabling the monetary base and debt to be expanded as it has been.
But even a casual observer can, or should, wonder the following:
If in order to do this:
Graph of Real Gross Domestic Product, 1 Decimal
We had to do this:
Graph of Federal Government Debt: Total Public Debt
and the above was enabled by this:
Graph of Interest Rates, Government Securities, Government Bonds for United States
What happens when we reach the zero bound of interest rates?
And that is, or should be, a damn good question. What happens then?
If you are any of the pundits and economists that think that money and credit can be expanded at infinitum, obviously the answer is: “nothing happens”.
If you are a sensible person with a modicum of sense of observation, then you must be wondering what the options may be once interest rates reach the zero bound. Because, 40 years of economic history tells you that’s where we are going.
If anyone thought the late 80s were happy times when interest rates were declining, they are probably suffering from a severe case of dissonance at present. How good are times today compared to then when interest rates are at all time lows?
And if low interest rates = good times, then, by extension, negative interest rates should = a whale of time.
… hmmm…
This is where the evil of Fiat Money and, in particular, the evil of Fractional Reserve Banking which gives you Debt Based Fiat Money becomes clear.
Once we are at the zero bound of interest rates, our leaders could enact all sorts of creative tricks to keep the monetary system they have imposed going. But anything that will be done will transfer whatever vestiges of wealth may be left in the hands of society to a restricted band of people residing in the rarified air of the banking world.
You may ask why.
I will surprise you by saying that the reason is deceptively simple.
Once at the zero bound, whatever assets or, Ye Gods, cash left in the hands of economic entities (including you and me) will forcibly be removed. For example: negative interest rates mean that you will pay the bank to keep your money in a savings account. Which in turn will make you dispose of whatever savings you may have. By disposing of your savings you will
inherently need to make use of debt which you may think comes at zero cost. But that is not so.
As you help expand total credit outstanding, you are also helping to debase the currency. Thus you are making it increasingly difficult to service your debt till you no longer can service your debt.
The point at which most economic entities can no longer service their debt, either of two things happen. Either the debt is written off or it must be paid off. There is no third way.
Since this latest crisis has erupted, it has become abundantly clear that the banks are not in the mood to write anything off. Even when, as was the case in the latest settlement relative to the foreclosure scandal, government pretends that debt is being written off, in truth, whatever write off the banks agree to will be largely made up by incentives and compensation extracted from public funds – i.e. you and me.
And there you have it. As interest rates progress towards zero gradually, society is being robbed and made thoroughly dependent on government hand outs which, incidentally, are also being curtailed.
Why are government hand outs being curtailed?
The short answer is illustrated by the chart of GDP to Debt. Hand outs are being curtailed because capital is no longer being generated. All we are left with is debt. The reason this happened is simply because monetary policy is in the hands of a very restricted band of entities that reside outside of society and who benefit from the immense privilege of being able to create something that has no cost but that society must, under penalty of incarceration, make use of and must pay interest on. And in order to entice you to make use of their product, these entities tell you that no longer is work necessary to create capital. Today, unlike times past, it is banks that create capital for you so you don’t need to bust a gut. Just borrow it and borrow oodles of it to live your life and have access to all the things you never thought you could have access to. And since you don’t need to bust a gut to create capital, then you needn’t save anything either because your friendly local politicians will promise you all sorts of social safety nets that will keep you in the style of life you feel is appropriate even when you retire.
In other words. With this monetary system, the banks are selling you all the rope you need in order to hang yourself. And, granted, the time line is rather long. But hang yourself you will and you have.
And just to be clear. Doing anymore of this:
Graph of Federal Government Debt: Total Public Debt
can only result in a conflict of global proportions.
You may ask why.
That’ll have to be for another time.
And that is the evil of choosing one monetary system over any other that might be viable.

Considerations on the monetary system

September 13, 2011

I grew up in a family where discussing money was considered to be in bad taste and lowbrow. There was of course an understanding that money is necessary but the overarching goal of one’s life was supposed to be characterized by the attainment of ideological goals and the pursuit of intellectual endeavor.  Openly discussing how to make money and the pursuit of brands was for the hoi polloi and the arrivistes; people that should not be frequented.

This past week then I had the opportunity to spend some time with two rather intellectual friends whom I do not get to see half as much as I should. My friends are my age. They are modern and do not necessarily despise brands. They are well read, they both work in artistically creative fields and they are both successful. Discussing money and how to make money beyond making ends meet is not taboo.

And yet, despite not being averse to discussing money or seeking to increase their income, like my parents, my friends do not understand what money is and how it works.

This is not new to me. If you read the introduction to this blog, I already bemoan ignorance of the monetary system on the part of most everyone including professionals in the fields of finance and economics.

Most everyone believes money just is. And despite most being aware of the ability of the central bank to print money, few understand that money must be and is managed and printing money is but one of the manifestations of the management of money thus the manipulation of society.

At this point, it is worth considering what role money plays in society. Could we live without money? The answer is that although we could definitely live without money, we would have to be ready to return to barter; a much more cumbersome economic system where the expansion of the economy and the development of society would depend entirely on a perpetual series of coincidence of wants.

Money plays a vital role in exchange thus in social development. The role of money is so vital in fact that whether we like it or not, money is THE ultimate driver of all human choices; choices that are political, economic and social thus choices that are made at individual level as much as at state level.

Intellectuals the world over would do well to make the study of money their primary intellectual pursuit so as to better understand the forces that drive a society towards efficiency, expansion and wealth or towards frivolity, consumption and indenture. People that embrace those intellectual ideals pertaining to the undesirability of the excessive accumulation of wealth, social equality, the protection of the environment, the prevention of abject poverty, equal opportunity education and tutti quanti should imperatively get to grips with the monetary system and the nature of money. Greens the world over should make the study of money a priority. Not economics, not social science or politics but money; what it is and how it does what it does and how it can or how it should be managed  so as to understand the dynamics that drive things like excessive consumption and pollution and how it is all related to the depletion of natural resources.

In human, social and economic development, nothing comes upstream of money. The choice of monetary system dictates and shapes our entire lives. Everything else evolves within the monetary system and is necessarily a potential proximate cause. The monetary system is THE ultimate cause and driver of all our choices. It is the logic inherent in the monetary system that drives all other choices, because money is the construct that allows humans to interact.

Today, an understanding of money is sorely missing. People are happy to discuss Marxism and Capitalism, they are happy to discuss tax rates and subsidies, they are happy to discuss the desirability of constantly lowering interest rates or not, but nobody discusses money. Money just is and whether the central bank prints more of it or not, money is taken for granted as, indeed, the fact that prices always rise. And even though people hear that the central bank prints more money and even though some may understand that printing more money results in rising prices, few understand the reason why a central bank prints money.

And this is the point at which in people’s mind money assumes a duality that has no reason of being. Essentially, people have difficulty equating how money is managed at state level and how it is managed at individual level. Of course, it doesn’t help that some politicians perpetuate the idea that the state is not bound by the same laws of arithmetic as the rest of society. Even less does it help that some politicians wish to inculcate the idea in the electorate that the state can create its own reality.

It is safe to assume nobody wants to return to barter. But since we have established that money is vital to our socio-economic development, the question arises as to why such a vital component of our lives should be the exclusive preserve of a restricted number of unelected officials to manipulate as they see fit. Worse still, why do we collectively feel it appropriate that in our ostensibly open societies predicated on democratic principles neither the choice nor the management of the monetary system should be put to the people?

Gold moves from investment to money (Forbes)

August 26, 2011

Though many would be tempted to say better late than never, this does not detract from the absurdity that the specialized press as, indeed, professionals in finance and economics, should finally be coming around to the mathematical reality of our monetary system.

Status Change: Gold Moves From Investment To Money

Why the movement to gold per se? It is an emphasis on asset-based rather than debt-based money. As Stoferle puts it, “The possession of gold is tantamount to pure ownership without liabilities.”” […] “The pump priming meant to nudge the economy out of the early 2000s recession spawned the housing bubble and its disastrous endgame. No central bank action, and virtually every possible one has been tried, has turned things around. The Erste report acknowledges a system failure: interest rates cannot go any lower, government debt has saturated the economy, and the misery index (the sum of the unemployment and inflation rates) in the U.S. is close to its average in the 1970s. Indeed, the real economy in addition to the financial system is deeply flawed. Forty-four million Americans are on food stamps and the effective unemployment rate is closer to 20 percent than the reported 9 percent.

Stoferle deftly links the rise in inequality in the U.S. to its monetary policy. Today, a CEO earns 425 times the average worker’s wages; in 1980 the disparity ratio was 24:1. “Monetary dispersion is not neutral,” he writes. “Market participants who receive the new money early and exchange it for goods benefit in comparison with those who get the newly created money later. We can see a transfer of assets from late money users to early money users.”” […] price inflation is relative and staggered as “newly created is distributed neither equally nor simultaneously among the population.

I will take only minor issue with the statement by the writer (not excerpted above): “Investors and central bankers have woken up to the reality that paper currencies decline over the long run because governments cannot resist pump priming in the face of economic slowdown.

The problem is not that governments cannot resist pump priming. The problem is woven in the monetary fabric. Debt Based Fiat Money can only exist in a world of constant pump priming. If that were not the case, then any other monetary system would do. The reason banks propose the system and politicians impose it on society is exactly because the system mandates constant pump priming (so banks make profits and politicians can fund their pet projects) AND BECAUSE those entities that have access to the newly created money first (banks and politicians) gain disproportionally more than entities that have access to it further down the line like the consumer… i.e. you and me.

Do any of you reading this blog still harbor any doubt that the particular variety of monetary system that has been imposed in the West is a deliberate policy of impoverishment of the many for the benefit of the few?

If so, I submit you truly need to revise your elementary arithmetic skills.



On the desirability of Debt Based Fiat Money

July 4, 2011

Recently, I had a discussion on another blog with someone who asked why Debt Based Fiat Money (DBFM) should be such an evil construct and how it is that it should be better or worse than any other monetary system.

As expected, I launched in my usual rant about exponentiality, diminishing marginal utility, transfer of productive capital yada, yada, yada till, I thought, I had defined the issue in its entirety. Whether she was being kind or whether she just wanted me to stop, my interlocutor acknowledged she now understood the mechanics of DBFM. However, she wondered, how much worse can DBFM be than any other variety of money?

It is only some time later I thought of something that should finally clarify the evil of DBFM.

In a non debt based monetary system (that could be either value based or predicated on a fixed amount of fiat money), an individual may choose to work less and, provided he at the same time chooses to consume less, said individual could still be able to save a portion of his earnings.

On the other hand, DBFM does not allow this choice. In a DBFM system, the same individual could not choose to work less because even assuming he decided to consume less, government would overspend on his behalf thus not only devaluing the little income the individual may have saved, but also saddling him with public debt which he is going to have to pay through taxes and/or through an increase in the cost of living.

March 1st, 2012 addendum

In the case of individuals that cannot or do not want to work, DBFM allows politicians to promise all sorts of state aid under the guise of social safety nets and safe in the knowledge that outlays can always be covered by newly minted currency. A cursory look at the creation of credit and currency over the past forty years will readily evidence the profligacy of our expedient political/monetary system. And, by the way, we ain’t seen nothing yet. The diminishing marginal utility of debt ensures that as the mathematical limit of the construct is reached, credit and money creation must go exponential:

FRED Graph
This picture requires little comment me thinks.

So even though, given political will, either monetary system can be subverted, a non debt based monetary system has the virtue to at least allow a 50% chance that the system can be managed properly ensuring fiduciary duty, true free markets, true freedom of choice and true democracy. Not so DBFM which from the get go is geared towards statism via the debasement of the currency and which is set up to transfer the productive capital of society into the hands of a financial elite and its cronies.

Charlie Rose interviews Charles Ferguson (Inside Job the movie)

April 3, 2011

Zero Hedge reports the full interview here.

Inside Job is a good movie to the extent that it may make people realize this debacle is entirely man made if not down right intentional.

But… there is a “but”!

Despite Charles Ferguson’s courage, he too fails to make the connection as to the why what happened happened. When asked what it would take to fix the broken system we find ourselves in Mr. Ferguson suggests: “(i) change the role of money in elections, (ii) to pay regulators well, and (iii) have law enforcement that is necessary to enforce the laws we have.”

Readers of this blog will by now know that the reasons mentioned by Mr. Ferguson are but the proximate causes of socioeconomic failure. But Mr. Ferguson fails to identify the ultimate cause and the prime driver of scioeconomic failure.

Allow me here to be absolutely clear about something that seems to be missed by the wider public. As everything else in life, one man’s crisis is another man’s bonanza. As has been been made abundantly clear already, this quick succession of failures of social and economic constructs we are witnessing today is in fact a God send for a handful of global banks. This you must not forget.

As to the ultimate cause of this phase we are living in today, we must go straight up to the one dynamic that frames all other dynamics: the monetary system.

When asked what it would take to fix the broken system, Charles Ferguson should first and foremost clarify whom the system is broken for because it sure as heck ain’t broken for the global banks and for the US Primary Dealers in particular. In fact, this is the single best possible universe the Primary Dealers can evolve in. That done, Mr. Ferguson could simply point the finger at the monetary system. And guess what! It is exactly what today are the Primary Dealers that have sold this particular variety of monetary system to the politicians whom, in turn, impose it on society.

We can argue today whether politicians are truly witting accomplices of the banks or whether they are mere useful idiots. But we can certainly not overlook the primary and central role the monetary system plays in our lives. This particular variety of monetary system in use today in the West is predicated on inflation. Thus our monetary system is predicated on discouraging savings and encouraging rampant expenditure. Rampant expenditure can be encouraged via aberrant fiscal and monetary policies of which low interest rates is the first and most basic. Debt based fiat money is predicated on hollowing out the productive capacity of society transferring said productive substance to the entity that has the privilege to create the currency…. this may appear too abstract to wrap your head around so picture the following…

Draw two separate circles on a piece of paper. One circle is much larger than the second. Now imagine that the larger circle represents society as a whole – all men, women and children, all governments, all factories, all schools… everything. The second circle stands apart from the first circle and it represents the entity tasked with the authority to create money.

Now think about this.

The small circle is arbitrarily bestowed three privileges. 1) It can create a substance that has zero cost of production 2) It is allowed to inject said substance into the larger circle. 3) It can demand said substance must be returned in its entirety PLUS more of it.

The large circle is forced to make use of said substance but at cost.

In the above construct, simple arithmetic says that if the large circle is forced to make use of the substance that is the exclusive privilege of the small circle to create, because the small circle has no cost of production and because the same amount of substance PLUS more must be returned to the small circle, eventually the large circle will transfer all productive capacity to the small circle.

In the construct above, it is clear that the politicians and, indeed, the banks have a vested interest in concealing the true nature of the monetary system and in avoiding as well as discouraging any discussi0n of same. But what is also painfully clear from the above construct is that the politicians and the banks have an interest in not pursuing regulation too vehemently particularly with regards to selected entities of which the banks are the most prominent example.

Thus, identifying “the role of money in election” is not a useful observation not only beacuse as long as there is politics, money will always play a role and this is particularly so in the context of electoral politics. But because Debt Based Fiat Money is predicated on spending money far and wide regardless of how or why. We cannot alter the reality of politics but we can change the nature of money.

Similarly, “paying regulators well” is not a solution. This is a concept that harkens back to 18th century political theory that says that civil servants should be well paid in order to discourage them from succumbing to corruption. Obviously that hasn’t really panned out well particularly in Europe where for example civil servants in France and Italy are by far the best paid in the world and yet corruption is rife in both countries. And, anyway, in a Debt Based Fiat Monetary System, regulation must be loose so as to allow the expenditure of great sums far and wide. Once again, we cannot alter the nature of man but we can change the nature of money.

And of course, “have law enforcement that is necessary to enforce the laws we have” isn’t going to be much more helpful because in a system predicated on spending money far and wide, law enforcement must by necessity be fairly lax particularly with regards to laws that may regulate the spending of money.

The corollary to all of the above is that this system lends itself to aberrant policy. Take the issue of “money in elections”. Debt Based Fiat Money allows politicians to promise outlandish expenditure to various interest groups. In turn, this dynamic fosters the creation of more interest groups thus always requiring more extravagant projects to be proposed as political platforms. Rinse repeat.

Take the issue of “paying regulators well”. In a debt based fiat monetary system, the inflationary dynamic dictates that government must progressively but necessarily become the largest actor in the economy thus the largest employer and the most munificent. This dynamic along with the dynamic of “money in elections” ensures that civil servants and regulators are fully aware which side their toast is buttered on. So that as the recipient of special interest money regulators are hired by the politicians that have been put in place by the interest groups because they agree to pursue a certain regulatory policy.

The same goes for law enforcement.

What is afflicting society today is the monetary system. But it is afflicting society. It is most certainly not afflicting the Primary Dealers. Quite the contrary.

So, “Inside Job” is a good movie and a worthy subject to explore. But we must not lose sight of the fact that our problems stem far upstream than mere regulators or law enforcement officials.

We must take the monetary system to task along with the sponsors of the system


March 31, 2011

A main stream publication allowing one of its reporters to take the monetary system to task!!!

Better late than never comes to mind. If this trend catches on, the governing elites might be forced to justify their choice of our current monetary system. Could that really come to pass?

I am too cynical to think that might actually happen at this time. It may indeed be forced upon the elite but they would certainly not allow debate willingly or preemptively.


And for the most recent “WTF!” moment…

February 12, 2011

This is right up there with the strange goings on in Sweden.

The single most popular internet search that leads to my blog is “most civilized country in the world”. This is due to a post I put online some two years ago chiding Sweden for betraying its status as most civilized country in the world when it decided to offer negative interest rates on saving accounts.

For a country of till then high moral standing, that was a decision I found to be out of character. Sweden eventually went on to do other peculiar things as, indeed, did Denmark when it was implicated in a carbon trading credit scandal of rather large proportions and whose instigator eventually went on to become EU Climate Commissioner. Nice work if you can get it.

One wonders what is happening with those beacons of morality and fairness that northern countries are usually known for.

And so it is that today it is Holland’s turn to act out of character. To be sure, Holland has already been acting strange in the recent past as attested by the attempt by two politicians to pass legislation that would criminalize the expression of comments that are deemed to lead to withdrawal of funds from a bank (which is exactly what I am suggesting in order to get out of this crisis and bring about a modicum of democracy again).

So now, for the most recent WTF moment,  Holland is at it again as the Dutch central bank orders a tiny pension fund to sell its gold holdings.

NB: On May 10th, 2011 I have updated the link to the press article. The original link I provided is no longer active. This is the new link:

Excerpt emphasis added:

The Vereenigde Glasfabrieken pension fund said Thursday it wants to keep the gold but a Rotterdam court sided with the bank in a ruling Tuesday.”

If you understand the implications of any of the above, you have to wonder what is going on with these countries that till recently were unmatched examples of tolerance, social justice, personal freedom and morality.

More specifically, in a presumed open and capitalist economy, economic actors are ostensibly free to operate as they see fit provided they operate within the bounds of the law. Moreover, in a debt based fiat monetary system where the authorities are hell bent on conveying the idea that gold is a barbarous relic, buying, holding or selling gold is not an activity that should be subject to state approval and, certainly, is not an activity that represents a particular threat to anyone thus should not be subjected to legislation.

If the central bank or the Rotterdam court feel that gold represents a particular investment risk I can only conclude that the head of the central bank and the judge of the court have taken a look at the performance of their own pension funds over the past ten years and threw an issy fit when they realized that this little pension fund did rather well for itself as compared to the average pension fund that has shunned gold.

But, seriously, at a time when the performance of traditional investment vehicles that are stocks or bonds has been disastrous for the past ten years, why condemn a little fund that has done well by blazing a trail in alternative investments? Indeed, innovation is the essence of capitalism. So, what’s going on? Why beat-up a small pension fund? And why is all this happening in these economically marginal countries? And why now? And, anyway; this pension fund’s investment in the precious metal is equivalent to only 10% of total money under management so that even if the price of gold went to zero, the fund would still survive and eventual losses do not even approximate what the fund has lost in bonds and stocks since the year 2000.

Here are some charts that tell the real story of what has happened to various investments during the past ten years.

The only thing I can think of is that small economies are being used as test ground by the monetary authorities like the ECB and the Fed to see what would happen if they were to push such aberrant legislation on larger countries.

These are likely tests for last ditch attempts to keep the current monetary system alive short of opting for the nuclear option of converting to a global currency.

In line with the spirit of this blog and as I have done so far, I am inclined to act in a manner that is contrary to what the authorities suggest and dictate.

A bon entendeur…