Posts Tagged ‘politics’

What you can do

January 16, 2011

If you like many today, feel the Western democratic political process has failed you. If you, like many others, feel you have been taken advantage of by your leaders. If you, like many others, feel you are enslaved by an economic system that exploits you and gives nothing back. If you, like many others, feel there must be an alternative.

Here is what you can do and it won’t cost you any more than US$50. Not only that but it is also legal and safe. No need to take to the streets and risk being shot by an increasingly detached, tetchy and arrogant government.

Read on.

If you follow this blog you know I contend the monetary system is upstream of all human dynamics. Thus our entire socio/economic construct inscribes itself within our monetary system. Similarly, you will also know that the choice and management of the monetary system falls outside of the democratic process. Ergo, not only do politicians impose the system upon society but they also retain the right to manage it by decree.

So much for capitalism or, indeed, for our “open” societies based on democratic principles.

Western politicians have imposed a debt based fiat monetary system upon our societies. In the USA it started in 1913 and then from 1971 it gradually spread to all other countries.

The problem is that debt based fiat money is predicated on inflation. But inflation is a dynamic that conforms to the law of diminishing marginal utility so that greater degrees of inflation are progressively required in order to obtain the same result. In this case the “result” we seek is GDP expansion. So that in  order to keep GDP on a positive trajectory in a debt based fiat monetary system, government must necessarily induce progressively greater degrees of inflation in the economy.

But since inflation conforms to the law of diminishing marginal utility, it follows that the effect of inflation on GDP expansion must inherently be limited mathematically.

As the effect of inflation gradually wanes as it is mathematically true it will, government must necessarily intervene in the economy directly and at progressively greater and deeper degrees till government becomes the largest actor in the economy. This dynamic is accompanied by increasingly more severe and pervasive political crisis that is necessarily always accompanied by expedient politics, aberrant economic regulation and increasing degrees of corruption. As this dynamic evolves, social unrest becomes more pervasive and increasingly violent until it morphs into organized social unrest i.e. revolution.

History is replete with examples of what happens when a sovereign currency is debased.

The clearest indication that our current monetary system is pushing the mathematical limits is the endemic and pervasive corruption that permeates Western governments and institutions. It is clear today that the civic and political mechanisms that have made the West the envy of developing societies around the world have lost their intended function. Western governing elites no longer represent the aspirations and the hopes of their people and are instead beholden to select banks, corporations and unions in an attempt at maintaining the spending power of their office and that of their cronies in an attempt at perpetuating their own personal self interest.

I suppose that one of the clearest and most glaring examples of the incestuous and self serving nature of Western governments is given to us by none other than current US President Barak Hussein Obama whom, despite his pledge of change that carried him to the White House, just nominated another bank executive to the position of White House Staff thus not only reinforcing but also confirming and shouting it out loud from the roof tops that it is the banks that today pull the strings of puppet politicians.

But enough ranting.

Democratic politics is no longer a viable option for the common people. So, other than a violent uprising a la Tunisia, what can everyday folks do?

The easiest, most effective and devastating way to affect the political dynamic today LEGALLY is to exploit the weakness of the monetary system.

I say “legal” because it is still legal to suggest what I am about to suggest. However, beware! In Holland for example, a law is being debated that would criminalize the mere act of suggesting something similar to what I am about to suggest.


Debt based fiat money is predicated on the constant expansion of inflation. Inflation can only be expanded if the credit markets can be expanded.

You want to bring down currently sitting politicians and institutions?

Then you can prevent the expansion of the credit markets.

The easiest way to do that is to start accumulating gold and silver ingots or coins. We are not talking large sums here. If every person on earth acquired one silver ingot/coin and one gold ingot/coin that would suffice to bring the whole house of cards down. We are talking of an investment of US$50 per person at the most. Fifty Dollars!!!

If every single citizen in the West were to purchase one ingot or coin in silver and/or gold, that would deal a very serious blow to the major global banks. Take down the banks and you’ve paralyzed the political process.

If you really wanted to push the boat out there are other things you could do. Once again. These are so far all absolutely legal ways to put a very quick stop to the entire farce that is our political process.

Withdraw all your savings from the major global banks. Open accounts in smaller banks or cooperatives or just hold on to the cash. By withdrawing your savings you force banks !

to curtail their leveraged exposure.


These are very simple but lethally effective ways to put a stop to our governments and their shenanigans. But like everything in life, each action has an equal reaction.

Taking down the banks and paralyzing the political process is easy. In fact it is so easy most people cannot believe it is possible. But it is.

The downside of taking down the banks is that we’ll create dislocations in a myriad sectors of the economy and life in general. Things like public transport or trash collection might be terminated for example. Fuel deliveries might be disrupted. Road and bridge maintenance could be adversely affected. Pension funds might blow up.

Any of the above is possible and more.

However, there is a rationale for taking bitter medicine now rather than letting things plod along as they are.

By letting things plod along, not only are our social services and social safety nets already compromised but there is a more than reasonable certainty that our “leaders” are going to plunge us into a world war.

Essentially, as the monetary system is hitting the buffers and politics have become incestuous and corrupt, social expenditure must be curtailed. Curtailing social expenditure at the same time that the governing elite is caught neck deep in corruption will lead to social unrest and eventually to revolution.

But I guarantee that our “leaders” will not let revolution happen in the “developed civilized” West. Before social unrest morphs into revolution, our leaders will have packaged a nice war somewhere to fight an evil empire that ostensibly threatens our way of life.

The choice today is: bring down the political system legally and lets take the consequences of the subsequent dislocation that is sure to follow … or … plod along as we are doing today and let our “leaders” send our children to the slaughter along with countless and nameless children of parents in faraway lands.

A bon entendeur…

Some interesting articles this morning…

January 28, 2010

… but not necessarily for what they appear to be about.

Let’s start with Bloomberg and Stiglitz:

This is an ambiguous article that deals with the economics of happiness. Stiglitz sets off with this comment: “Bankers created “negative value” with innovations such as mortgages that homeowners couldn’t afford, said Nobel laureate Joseph E. Stiglitz, who is speaking today at the World Economic Forum in Davos, Switzerland, on the economics of happiness.

Setting aside for the moment that the article is about the economics of happiness in an attempt at finding a better way of gauging the wealth and well being of a country, what strikes me as typical is the fact that even Stiglitz, Nobel Laureate that he is, perpetuates the perception that the problem that has befallen us was due to bad mortgages. Glaringly absent in Stiglitz’s comments now or in the past, is any indication as to why the banks should have been allowed and even encouraged to do what they did; and, by the way, banks are still now aggressively encouraged to do more of the same. My peeve with the whole charade is the unwillingness to have a proper discussion on the utility and desirability of a fiat monetary system. Because if banks did what they did, it is only because the presumed guardians of the system allowed them to do so despite the various laws that, if applied, would have clearly and immediately put a stop to such aberrant (criminal?) practices.

But then, Stiglitz goes on and at least partly redeems himself when he says:

Stiglitz, who advocates a broader measure of gross domestic product that takes social well-being into account, studied the issue last year for French President Nicolas Sarkozy, who has said that relying on GDP to gauge the state of an economy helped trigger the financial crisis.

Right there, Stiglitz actually hits the nail on the head. As I have already written in previous posts, the GDP figure is at the heart of most social, economic and financial metrics. But GDP is a flawed figure and, by itself, says nothing of the direction or the quality of development. As a flawed figure, GDP becomes the proverbial end that justifies the means. Specifically, since GDP is the begin all and end all of politics and economics, the natural tendency of government officials is to boost GDP by any means possible. Hence the appeal of a fiat monetary system which allows government to push credit and money creation in excess of GDP progression. The rationale for doing that is that by stimulating credit and money creation government can induce inflation, thus a rise in prices thus a rise in GDP.

That right there is the elephant in the room that few can intellectually countenance and, of those that can, fewer still are willing or ready to discuss. Because I assure you there are some officials that understand that.

Moving on from Stiglitz, Mr. Sarkozy of France too has a beef and it happens to be globalization.

Once again, Mr. Sarkozy’s peeve is justified but fails to address the reasons why globalization came about. Anyone that in talking about globalization does not mention that it is the logical ramification of the use of fiat money, is wide of the mark.

Fiat money has a logic. Fiat money is predicated on the expansion of credit and money supply. If that were not the case, then we could make do with either a fixed amount of money or with a value based monetary system. It is as simple as that. No need for arcane mathematical formulas. The choice of a monetary system is deliberate even if it is unilateral thus not submitted to the people for ratification. As a deliberate choice, fiat money implies two things: first, fiat money must not contemplate intrinsic value – second, fiat money can only exist in an inflationary environment.

The above being so, then it is clear that globalization is an inherent and inevitable consequence of a fiat monetary system. Few will remember for example that in the 1960s, the United States were exactly in the same jam we find ourselves in today globally. That’s right. In the 60s, the USA were confronting bankruptcy brought about by profligate spending that pushed credit and money creation far in excess of GDP since 1913. (Just a related observation here to note that the causes of the first inflationary crisis of 1929 were never really tackled. What happened instead is that as a consequence of WWII nobody anywhere had any industrial capacity left standing so that the USA were finally able to utilize their excess capacity to supply the rest of the world). Curiously enough,  in the late 1960s events were precipitated by none other than France who, smelling smoke in the wind, asked to redeem their US$ currency reserves for the gold they thought they were entitled to.

Surprise!! The gold wasn’t there. At least not enough of it because if the USA acquiesced to redeemed France’s foreign currency reserves, then everyone else would have wanted to redeem their reserves too and at that point, obviously, there wasn’t enough gold anywhere in the world to satisfy sovereign demand.


Abrogate Bretton Woods.

The USA gathered the leaders of the then developed world and essentially made them an offer they could not refuse. I mean; heck! The gold wasn’t there anyway so they had nothing to lose by at least listening to what the USA had to say.

The deal the USA put to the Europeans was to adopt a new monetary system based on the US$ as reserve currency.

To the question: “Why should we do that?”

The answer was twofold. The first part of the answer is what counted and what ultimately would have clinched the deal anyway; that is, the USA told the Europeans that by adopting the US$ as reserve currency they could themselves go on a fiat monetary system, hence they could print as much money as they pleased. The shrewd politicians that the European heads of states were, they needed no other reason to go along with the scam. The second part of the answer and which was then and still is today a moot point is that if the Europeans did not go along with the scam, the USA would have annihilated them (WWII was still rather fresh in Europeans’ minds and the Russian bogey man was looming large). A hard sell it was not.

And so it was that the US$ got a new lease on life. Essentially, inflation had saturated the US market hence the looming bankruptcy. By assimilating new markets, US$ inflation could now be pushed into a whole bunch of new currencies.

Incidentally, the introduction of the Euro served the same purpose. In one fell swoop, European currencies were devalued by anywhere between 20 and 50% thus boosting inflation.

Globalization is just more of the same. New markets to expand inflation into. Hence the US$ is today the official reserve currency of all countries and, thanks to the magic of “floating exchange rates”, inflation is guaranteed.

The problem of course is that inflation is a dynamic that is exponential in character and conforms to the law of diminishing returns. It could not be otherwise. If that were not the case, then there would be a direct correlation between the amount of credit and money creation and GDP progression. But as shown here, that is clearly not the case.

Moving on.

Here is an interesting blog post that puts forth an interesting observation. Essentially, our nations have surrendered sovereignty to the financial elite.

Fact is, the United States of America had no one in power to stop the Fed. The Fed did what it wanted to do. No one was a there to protect the taxpayer. America abdicated sovereignty. The country was actually too weak to fight the banks.

Though astute the observation is, once again the author cannot or does not want to make the connection with fiat money.

Fiat money has a logic. Fiat money must follow a cycle. Inherent in fiat monetary logic are a number of ramifications and outcomes. Chief amongst the ramifications of fiat money is that each additional unit of currency created has a diminishing effect on the overall economy thus a diminishing effect on GDP. The diminishing effect of fiat money is illustrated by what is known as the “Money Multiplier”. This is what the multiplier looks like:

Graph: M1 Money Multiplier

Now, here is the interesting part of this graph. Let’s zoom in on the period of time going from 2000 to present day:

FRED Graph
Now look at this:
FRED Graph
Since hockey stick shaped graphs seem to be the topic du jour albeit in different discussions, how’s that for a hockey stick?
The hockey stick shape representing the acceleration of debt at government level (not included in this graph is corporate and household debt which must be added for full effect) is matched by a multiplier that literally sank like a lead balloon.
That, dear reader, in my opinion represents the limit of the “beneficial” effect of a fiat monetary system. That, in my opinion, is the end of the inflationary cycle and the end of what can be done to keep GDP on an expansionary trajectory. That, in my opinion, is the end of this iteration of this monetary system. As a by the by, there have been so far 3 iterations to this monetary system: 1913 – 1929, 1929 – 1970, 1970 – today. The first iteration was saved by WWII, the second iteration was saved by bringing in new markets and currencies in on the US$ fiat monetary system. How will we solve this iteration of the monetary system…??? (For those of you that are mumbling that a new reserve currency will solve our problems you get a goose egg. A new currency will buy us some time; think Euro. Ultimately, the problem remains excess debt, excess industrial capacity, overbearing government and insufficient revenue to service debt.)
But more importantly, if any of my contentions as outlined above are true, that is the reason our “leaders” are about to throw us into a conflict of global proportions.
But let me be clear about something here. Most of you reading this post have been indoctrinated by the facile cliche that wars are profitable. As a matter of fact, wars are profitable. Not only are wars profitable, but they also keep research and development alive and a large number of military applications then make their way into civilian life too. So limited back water wars are inevitable if for no other reason that when you build weapons you cannot stock them unused forever.
But this next war is not going to be an inventory management war. This next war has a well defined economic and social focus. This next war serves to reset the fiat monetary system and create the conditions that allow us to re-start inflation. This next war will be a world war complete with civilians called up and packed off to the front and energy and food rationing at home. This next war must deal with one of the inevitable outcomes of fiat money; this next war needs to address industrial and infrastructure overcapacity.
Since I can virtually guarantee that no main stream politician today could contemplate any other monetary system than fiat, then the present system must be reset. Thus a world war is inevitable.
Got bullion?
PS – The war is inevitable and must involve civilians packed-off to the front for the simple reason that currency seems to have lost its multiplier role. If that is true, it means that unemployment will increase significantly. The trouble is that if the currency no longer has a multiplier effect on the overall economy, then revenues will necessarily dwindle at individual and corporate level thus at government level. As revenues dwindle, government must curtail public spending. And that’s the flash point. Rising unemployment must now confront lower social expenditure if not discontinuation of certain social services. Thus, unless someone somewhere can find a way to restore to the currency its multiplying powers as contemplated by Keynesian economics (the prevalent economic model of the past century), then we are looking at horrendous levels of unemployment (by taking the broadest measure in the US, unemployment is already well in the 20% according to labor statistics measure U6 as opposed to U3 which is the figure government uses for its official calculations). Thus it looks to me that the next war not only has to address infrastructure and industrial overcapacity but also a pernicious problem of unemployment because the unemployed poor have a nasty but historic tradition of rising up against the power elites and hang them.

Walk away from your mortgage (New York Times)

January 9, 2010

Is this more anecdotal evidence of media awakening?

As stated here, there is absolutely no moral obligation not to. A mortgage is a financial transaction.

Where this essay in the New York Times fails, is in correctly identifying the reasons government attempts to persuade you that walking away is immoral. The NYTimes article says: “There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. […] The other reason is that default (supposedly) debases the character of the borrower.

Actually, the NYT only partially got it wrong. The reason government does not want you to walk away is because doing so would immediately cause a revaluation of the property to the downside. This would require a re-marking of the outstanding debt thus triggering a reduction in total outstanding debt.

Of course, if you follow this blog, you know that in an unchecked fiat monetary system inflation is the conditio sine qua non of the existence of government. Thus, the survival of government is predicated on the continued expansion of inflation thus on the continual expansion of debt.

A reduction of outstanding debt is contrary and lethal to the logic of government.

Deflation brings about a reduction of outstanding debt. Deflation is the enemy of debtors and nobody is deeper in debt than government issuer of the reserve currency.

Treasury removes cap for Fannie and Freddie aid

December 25, 2009

… this, may I remind you, is to save a company which, not two years after the Enron debacle, in 2004 was unable to publish its accounting books for a period of 18 months. That’s eighteen months. And back then, nobody thought something might be amiss…

How much more blatant can criminal behavior get?

Oh and, by the way, … continuing the tradition of rewarding failure…

Fannie and Freddie CEOs to get up to $6M in pay

…. tic, toc…. tic, toc….

Geithner: We will not have a second wave of financial crisis…

December 24, 2009

Typically, something is not true till official government sources deny it…

And of course, the opposite is also true: i.e. when government peddles a concept as being true it typically is not (anyone for global warming? Which, by the way, is now conveniently termed climate change).

Lets see how this prediction pans out.

Curtailing public spending… a precursor to war…

December 24, 2009

OK… now wait for the scandals to keep piling up and the masses will revolt… same goes for California, Spain, Ireland, the UK, France Italy….

Social unrest has the pesky characteristic that makes it contagious and causes it to spread cross borders…

The count down to global war is on… 2013/2015 latest

This is what 400 years of illuminism and the emergence of “reason” have come to

December 21, 2009

Not a surprise here. Just more confirmation of the end of the inflationary cycle where government is the largest actor in the economy and it seeks to perpetuate its existence by any means in spite of any legal or moral obligations as may prevail in society.

Significant excerpts, emphasis added.

“The U.S. Circuit Court of Appeals in Washington, D.C., had ruled that government officials were immune from suit because at that time it was unclear whether abusing prisoners at Guantanamo was illegal. […] Finally, the circuit court found that, even if torture and religious abuse were illegal, defendants were immune under the Constitution because they could not have reasonably known that detainees at Guantanamo had any constitutional rights. […] Finally, the circuit court found that, even if torture and religious abuse were illegal, defendants were immune under the Constitution because they could not have reasonably known that detainees at Guantanamo had any constitutional rights.”

Debt ceiling to be raised

December 11, 2009

This is going to be interesting.

If you read this essay and this essay, you will know I contend that we have reached the limit of how far we can expand inflation and that as a consequence, our Dollar based fiat monetary system is now broken. The most immediate concern is that deflationary environments bring about the insolvency of government.

Some of you will retort that governments have always been bankrupt but that somehow we’ve always come out ok.

What you are missing is the logic of inflation in a fiat monetary system characterized by floating exchange rate.

For as long as a government is able to borrow progressively more money, then its unfunded liabilities can be kicked down the road. Think of the pension trust fund. The money has been paid in all right. But government has used that money. Physically the money is no longer there; it has been spent. What governments count upon is inflation. Essentially, government feels free to spend today what it thinks it can repay back tomorrow in devalued currency. That in a nutshell, is what Western governments have been doing.

The above works for as long as inflation can be maintained on a positive trajectory and for as long as sovereign participants to the monetary system can and want to purchase each other’s sovereign debt (that is the meaning of floating exchange rates – i.e. the value of a currency is predicated on a basked of other currencies thus relying on sovereigns buying each other’s sovereign debt)

But pushing inflation into a system artificially, aggressively, pervasively and relentlessly over decades necessarily results in distortions, aberrations and criminal behavior. Thus, towards the end of the inflationary cycle, nominal profits progressively show up in fewer and fewer sectors until at the very end they show up only in the financial sector as the entity that is first in line for the use of fiat money.

The point at which nominal profits disappear from most sectors, is the point at which unemployment and social costs soar and is also the point at which tax revenue declines. This is the typical environment in which the power elites are also shown to be willing and consenting participants in unlawful and criminal enterprise.

Here is the problem.

As tax revenue declines, the ability of sovereigns to expand debt is hampered. On one hand declining tax revenue puts a dent in the budget that leads to credit worthiness revisions. On the other hand, as governments apply more of the tactics they think have enabled them to induce inflation into the system till recently (i.e. more spending on public projects, bailouts, military) they worsen an already critical fiscal situation.

This is the point at which sovereigns are either unwilling and/or unable to purchase each other’s debt.

The USA today have opted to increase the debt ceiling by $1.8Trillion.

Even assuming other sovereigns were willing and able to buy US debt, 1.8Trillion is a gargantuan chunk that would be tough to palm off during good times let alone during a crisis when all sovereigns are busy bailing out their own industries and banks.

Considering that the Fed has already been the purchaser of last and only resort of US debt in the past 8 months, it will be interesting to see who will buy any of this 1.8Trillion and how much of it. If the Fed should once again be the largest buyer as it has been in the recent past, the balance sheet of the entity responsible for the global reserve currency (the Fed) is going to show that the international monetary system is totally and utterly broken.

Main stream media on deflation

November 20, 2009

Here is a concept that is commonly misunderstood. From the article:

A sustained price drop might set off a chain reaction in which lower profits force employers to pare wages and payrolls. That would erode consumer demand, exacerbating wage cuts and firings.

A sustained price drop only reduces nominal revenue. Consequently, wages will have to be pared back.


But why would lower prices engender lower consumption? If prices and wages drop simultaneously, on a relative basis there would be no change to consumption.

The problem is debt.

Deflation reduces the nominal value of commercial revenues and wages. However, debt and debt service amounts remain at the same value as when they were first generated.

Government finances suffer the same fate. Deflation brings about reduced tax collection and  the bankruptcy of government.

So unless someone somewhere does not find a way to restart the credit markets and inflation at rates approximating anything like the period 2000/2007 Western governments are bankrupt with no possibility to postpone the day of reckoning.

War it is then.

Curtailing public services continues unabated… tic,toc… tic,toc

November 20, 2009

Now Detroit must use the revenues from its three casinos—MGM Grand Detroit (MGM), Greektown Casino, and MotorCity Casino—to cover a $4.2 million monthly payment to the banks before a single cent can go to schools, transportation, and other critical services (emphasis added).


Without a federal fix, strapped municipalities like Detroit could be forced to slash vital services even more. The city’s public schools, which had been putting off paying textbook suppliers and other vendors, aren’t likely to see their funding rise now that banks are taking a bite out of the city’s budget.”

Page two has way too many relevant passages to excerpt. Read it. It is what is happening throughout the Western world.

If government should force anyone to do anything, it should force banks to write off the debt with a provision that when things should pick up again in the future, they could lay claim to part of the original sum.

Gold bullion looking ever better