Posts Tagged ‘the monetary system’

Property rights

October 21, 2014

This is going to be a stream of consciousness post.

I have just finished watching an interview with one of the great hedge fund managers whom not only confirmed my recent epiphany but also illustrated that the problem is pervasive.

In the past few weeks I have finally been able to identify the crux of the problem as one of possession. When I started researching the how and why of what I was observing in real life, I quickly established that this monetary system cannot contemplate saving. Hence the reason banks discourage holding gold by charging you interest for example.

But it is not till a few weeks ago that I realised how throughly captive we are regardless of what we do or where we go.

The central bank has successfully drawn a boundary around society. The simple fact that you can only transact in the currency imposed by the state, whatever you do, wherever you go and whomever you elect to associate with, you are fully subject to the power of the central bank.

Western society is predicated on a handful of very clearly defined pillars.

One of these pillars is the definition of the individual.

Another pillar is the concept of private property.

But one of the most important pillars is economic freedom.

By imposing the use of one arbitrary type of money, the central bank has effectively neutralised the function of private property and economic freedom. In the process, the definition of the individual has become the essential tool that guarantees that your effort can be depredated.

From the legal point of view, the money imposed by the sovereign is the exclusive property of the central bank.

Society is obligated under penalty of law to make use of this arbitrary money.

On the other hand, the central bank has not reciprocal obligation to guarantee the value of the money.

Since money is the legal property of the central bank, it is only lent to society against payment of interest.

Therefore, money is inherently debt.

By accepting money in exchange for your work, you are effectively exchanging something you own outright, for something you do not own and owe interest on. Ergo, by simply accepting money in exchange for your effort, you are in debt.

This is borne out by the fact that even if you never take out a loan in your name, the simple fact that the central bank will always and everywhere increase the amount of money and credit in circulation, your earnings are gradually devalued.


purchasing power


The arithmetical outcome of this fundamental truth is that regardless the underlying economic conditions, compound interest guarantees that the more transactions take place and the deeper and more complex the economy becomes, the more profit is channeled to the owner of the currency. The inevitable outcome is a state that goes deeper in debt thus a state that becomes gradually more detached from society as it becomes more intrusive and authoritarian. All the while an ever larger slice of wealth is channelled towards the owner of the currency. This is an arithmetical reality.

This is the reason why in 60 years of presumed political plurality and “democracy”, regardless of the persuasion of successive governments and despite differences in style along the way, in the West the result across the board is the same. An increase in the cost of living and concomitant loss of purchasing power and wealth, high barrier to entry in business and industry thus a monopolisation of the economy thus an ever greater portion of the population that becomes unemployable. One of the preordained results of this dynamic is off shoring of course.

The political, religious, ethnic and territorial skirmishing that polarizes and divides society, is in fact a God send for the monetary dynamic. Be it Fascist, Communist or Democratic the ideology that is foisted upon the public and the increasingly byzantine legislation and growing fiscal complexity that derive thereof, are pure, unadulterated, high-octane fuel for this monetary system too. In fact, the greater the malaise, the more strident the rhetoric, the more truculent the pandering, the more frequent and complex the wars or, indeed, the humanitarian interventions, the greater the profits accumulated by the owner of the currency and the entities that gravitate around it.

Politics has nothing whatsoever to do with what afflicts us today and we cannot even hope to bring back some balance to society by participating in the political process. What needs changing is the monetary system itself.


As soon as I realised the enormity of what I discovered, I intuitively knew this might not exist in isolation.

Sure enough, other than what has already happened with the Robosigning Scandal or the London Whale, Raoul Pal confirms what I had deduced not only intuitively but also arithmetically.

Having deliberately established a system that precludes ownership of anything by gradually divesting society of wealth and independence, surely other areas of the economy have succumbed to this template?

Raoul Pal confirms that in fact the other area where presumed private property is compromised is in that institution where all titles are held on behalf of investors: the Depository Trust Clearing Corporation – DTCC.

Many decades ago, at a time when “Capitalism” still meant something, when individuals and institutions bought shares in a listed company or, indeed, government bonds, they would receive title of ownership in the form of physical paper certificates. Today, that is no longer the case. When your pension fund buys $100M of government bonds, these are held at the DTCC. If you buy shares in IBM, these will be held at the DTCC. The DTCC however, does not allocate these instruments in proprietary accounts. Bonds and shares are simply added to a pool of like instruments that the DTCC in turn makes use of for its own purposes.

If for whatever reason, as has already happened in 2007 to similar constructs ( think AIG but Fannie Mae was the bigger one), two or more parties to the DTCC pool should suddenly find themselves in dire straits, there is no legal guarantee that what you thought you owned after years of contributions to your pension fund for example, may be returned to you whole.

Pensions in fact, are technically bankrupt across the West so that a minor dislocation is certain to sink them entirely this next time around.

We are in a much bigger hole than we ever thought we might be in and if you work through the numbers, the options that will be foisted upon us shortly are few, dark and very well defined.