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Guest Post: How The Printing Press Is Leading To The Demise Of The U.S.A.

Tyler Durden's picture




 

Submitted by The Pragmatic Capitalist

There is, perhaps, no greater symbol of the slow decline of the United States, than the money we carry in our wallets. Of course, the United States isn’t the first nation to suffer similar currency problems.  The parallels between the modern day United States and 19th century Britain are striking.  Great Britain suffered from a similar currency decline as the world’s most powerful economy began to decay.

The British Pound was the world’s reserve currency for much of the 19th century until their economic power declined and the world lost faith in their ability to responsibly manage the currency.   Ironically, it was the Seven Years war (or The French Indian war) which began this precipitous decline.  The British doubled the national debt as they battled for the colonies and borrowed massively from European bankers.  This borrowing ultimately resulted in higher tariffs/taxes and led to the American Revolution.

Expensive wars and expansionism resulted in massive debts that ultimately sapped the country of their economic prowess.  At the time the United States was a robust, up and coming emerging market that was viewed as the wave of the future (this sounds all too familiar doesn’t it?).  As the power shifted so too did the confidence.  This change in confidence compounded the problems in Britain as investors began to shift their money from Britain to the United States.  The following chart display’s Britain’s severe financial problems that resulted from the wars and a failed attempt to print their way out of their problems. The British Empire’s reliance on debt and bankers ultimately crushed them.  The British Empire never recovered.  The bankers, however, prospered.

Having the reserve currency comes with a great deal of responsibility. Over the course of the last 15 years the United States has abused this power with reckless spending, wars abroad and a printing press that just won’t quit. As I mentioned many times during the financial crisis last fall, the dollar as a reserve currency likely saved our skin. Being the reserve currency made the dollar the obvious safehaven currency. The world was too dependent on the well-being of the dollar for it to implode. If it hadn’t been the reserve currency we probably would have faced a much more harmful crisis. But now the world is tired of seeing us abuse this privilege just as they grew tired of Britain’s abuse of the reserve currency.

There is now a massive change occurring in the international financial markets.  Capital once flowed into the United States because we were the responsible high growth nation.  But Americans grew to take this for granted.  Saving money and balancing check books became unnecessary because there was over $2 billion in foreign funds pouring into the United States on a daily basis.  But now, nations are diversifying out of the United States.

Yesterday, Bloomberg reported the massive shift in reserves out of the dollar:

Central banks have been shifting their record reserves into the euro at the expense of the U.S. dollar. Investors may not follow, with America’s saving rate and trade balance data back at levels that prevailed when the European currency was unveiled in 1999.The CHART OF THE DAY shows the percentage of allocated world currency reserves in dollars has fallen as holdings in euros increased in the past decade, according to quarterly data compiled by the International Monetary Fund. Also tracked are the U.S. personal-saving rate and trade balance as a percentage of gross domestic product.

A second chart shows the Intercontinental Exchange Inc.’s Dollar Index setting lows around the times Bear Stearns Cos. collapsed and Lehman Brothers Holdings Inc. went bankrupt. Short-term interest rate differentials favor the euro over the dollar, though only by 0.75 percentage point, the data show.

The dollar’s position as the world reserve currency has been called into question since reaching an almost three-year high in March. The currency has been under siege as the Treasury sells a record amount of debt to finance a budget deficit that totaled $1.4 trillion in fiscal 2009 ended Sept. 30.

If foreigners continue to view America as a reckless guardian of the reserve currency they will slowly stop pouring money into the United States.  This will ultimately destroy the great nation we built as the negative feedback loop feeds on itself and the lack of funding inhibits domestic growth while the debts gnaw at the Treasury’s leg.

The secular damage is most evident in the crashing trade weighted dollar.  Investors cheer the recent rally in stocks despite the fact that the currency in their pockets is down 25% from its peak while the S&P 500 also remains over 25% from its peak.

In a recent story I quoted a piece by Ron Paul:

An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law.  An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money.  An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore.

He could not be more correct.  The government has grown accustomed to borrowing their way out of their mistakes, but as citizens we need to hold our government accountable for their mistakes.  For too long we have allowed the Federal Reserve to devalue our money as the U.S. government runs up debts they can’t properly manage.  The world is tired of it.  The U.S. citizens should be furious about this.   We should audit the Fed, reduce our dependency on reckless banks, and we should hold our government accountable and force them to do what every responsible American is currently in the process of doing – managing their checkbooks responsibly.  If we do not, I can guarantee you that the America we have grown accustomed to will be a chapter in the Chinese history books.

 

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Tue, 10/13/2009 - 12:44 | 97592 brown_hornet
brown_hornet's picture

Why blame war spending so much.  I at least feel safer with the big military.  Government debt to prop up the banksters is what scares me.

Tue, 10/13/2009 - 13:01 | 97618 BobPaulson
BobPaulson's picture

Safer? I guess their propaganda machine is working on somebody. Just keep screaming at that photo of Emmanuel Goldstein and drinking your Victory Gin.

Wed, 10/14/2009 - 11:49 | 98754 Winston Smith 2009
Winston Smith 2009's picture

War is Peace!

Tue, 10/13/2009 - 13:04 | 97626 Anonymous
Anonymous's picture

Are kidding me??? What makes you think the Military is on your side?

Tue, 10/13/2009 - 20:40 | 98229 Anonymous
Anonymous's picture

The military swear to protect the constitution. In the end they might be the last hope of the Republic.

Wed, 10/14/2009 - 11:50 | 98755 Winston Smith 2009
Winston Smith 2009's picture

So do the politicians who tell them what to do.  And we all know how well they stick to that pledge.

Tue, 10/13/2009 - 13:13 | 97645 Clampit
Clampit's picture

Yes but are you safer? If you get a chance watch "War Made Easy" on Netflix. Do you think our war machine will be effective when the rest of the world refuses to deliver the funding? Do you think we can militarily enforce foreign treasury purchases or currency exchange rates?

Tue, 10/13/2009 - 23:18 | 98400 Anonymous
Anonymous's picture

The US is not like Britain.

Americans as a whole tend to focus only on bad reviews from biased sources. The USA is still a beacon for most of humanity. Wherever you go around this small planet, you may hear complaints about the American govt. and its policies etc
but generally Americans are welcomed. Most foreigners view American foreign policy as well-intentioned but naive.

But compared to Europeans and especially the British, Americans enjoy a greater degree of trust because they are not 2 faced.

The US will never be like Britain because it does not have an imperial history of foreign exploitation.

Think back to the three Opium Wars that Britain disingeniously engineered. Britain compelled China to open its market to imports principally opium.
Now, thats a true embodiment of a narco-terrorist state.
What else can you call a state that peddles narcotics ?
On top of that, Britain demanded and received 'war reparations' from a tecnologically inferior state for wars it promoted to achieve its imperial interests. Those wars bankrupted China. You can trace China's mistrust of Europeans back to their experiences.

Consider the US, despite its history of military conflicts in the asian theatre, Japan, Korea, Vietnam, Cambodia etc;
and its now generally accepted 'misguided' foreign policies at that time, it has not lead to a permanent state of disgust and disgrace for its misadventures.

By contrast, Americans are very much welcomed in most parts of Asia. Please note, I do not include the Middle East.

Tue, 10/13/2009 - 13:18 | 97651 Anonymous
Anonymous's picture

cause it is waste of money and human lifes

Tue, 10/13/2009 - 13:18 | 97654 Anonymous
Anonymous's picture

i don't feel in the least bit safer - quite the contrary....
the great drain on the treasury by the war has weakened
our economic situation substantially all thanks to
imperial overstretch....

our blood gushing wars of aggression are a massive
destruction of life predicated on a phony war with
al-qaeda....i don't feel safer when usa intelligence
destroys buildings in controlled demolitions using
military grade nanothermite on civilian targets....

all money spent on destruction and world domination
is money which could be spent on domestic economic
development and capital formation, jobs growth,
and prosperity instead of the carnage and destruction
of world conquest....

and yet it is the vast military industrial complex
whose ravenous appetite leads to the bankster
cartel which wraps its tentacles around the people
of this nation to suck them dry....

Tue, 10/13/2009 - 19:42 | 98175 Anonymous
Anonymous's picture

A large military pointed in a different direction (thier own citizens) has led to to fall of many Countries. With the power of our military and intelligence agencies, and it's propaganda machine; this would not be impossible here. Bases in so many cities and so many dependent on income for the military...we all should be concerned.

Tue, 10/13/2009 - 21:17 | 98291 Jerome Lester H...
Jerome Lester Horwitz's picture

Watch how quickly that big military that makes you feel safe gets turned against the American people when enough of us Americans finally rally together and threaten an end to The Fed!

The military is not asking soldiers if they will fire on Americans for nothing!

Tue, 10/13/2009 - 12:45 | 97594 SDRII
SDRII's picture

"* Swirling controversy - Some fear that by allowing the dollar to decline, the Fed is playing with fire, risking a destabilizing crash in the currency.  I disagree.  I view a weaker dollar as an adjunct to US monetary policy that helps prevent inflation from falling too low and is a stimulant to growth. "

 

MS economist

Tue, 10/13/2009 - 13:01 | 97621 Assetman
Assetman's picture

Yeah... I'm sure his bonus (which will be converted from USD to something else) depends on it.

Tue, 10/13/2009 - 12:54 | 97602 ShiftCTRL
ShiftCTRL's picture

YouTube - Tom Woods - The Great Awakening - Ending The Federal Reserve http://ow.ly/ubug

Tue, 10/13/2009 - 12:56 | 97609 Anonymous
Anonymous's picture

don't you mean 18th century?

Tue, 10/13/2009 - 13:53 | 97698 lookma
lookma's picture

the 18th century = 1700s, the middle of which is arguably when the pound began its descent

Tue, 10/13/2009 - 13:00 | 97616 Anonymous
Anonymous's picture

Too bad the general American population doesn't undertand this fact.

Tue, 10/13/2009 - 13:01 | 97620 Prophet of Wise
Prophet of Wise's picture

The U.S. is insolvent, bankrupt under any objective rational analysis. Our ad hominem debt-to-infinity money print factory notwithstanding, our hour of reckoning cometh like the dawn. It is as inevitable as the passing of time. This psychological concept we conceived in that long ago age when our reason became hoodwinked will be evaporated as quickly as one blows out a candle and there will be nothing left but blood in the streets. Hang on to that irrational folly of value media which man calls his sacred dollar as long as you wish. A fool and his money will soon part. 

Tue, 10/13/2009 - 13:03 | 97623 You Cant Handle...
You Cant Handle the Truth's picture

Help me out here:  what's the alternative to the Fed?  I ask this in all honesty, and not at all facetiously.  The purpose of the Fed (perhaps nominally) is to depoliticize monetary policy.  I think everyone would agree that having some sort of disconnect between the Treasury and the Fed is a good idea.  We don't just want to push the Fed's powers back into the power of the Executive, correct?  So we want some sort of depoliticized entity counterbalancing the tendancy for the Gov't to rint, print, print its way to glorious short-term needs.  

The arguments seem to be that (1) the fiat currency is manipulable, and that's bad, and (2) the Fed is captured by banks, and that's bad.

As to (1), replacing the fiat currency with a standard based on a real world entity, like gold, silver, or antimatter, is increasingly problematic as physics makes it easier to manipulate whatever entity you would base it on.  You base your standard on gold, and then you find out that its possible to transmute something to gold, whammo -- you are fucked.  That may sound laughable, but you should really look at the state of where nuclear physics is at and where things are going.  Furthermore, any fixed pool of resource you allocate as the source of money is going to be stuck in stone and thereby unable to grow and shrink WHEN NEEDED.  I think it is naïve to believe that a gold standard would provide the flexibility needed to react to REAL crisis.  In other words:  just because crooks are abusing fiat currency doesn't mean fiat currency is a bad tool.  Lots of people abuse guns.

As to (2), banks are going to have to have some input for the Fed (or whatever you'd replace the Fed with), because they make loans and monetary policy directly affects what happens with those loans.  You take the banks input out of the Fed and suddenly you will freeze up confidence in lending.  If you want MORE independence from the banks at the Fed, then figure out how to accomplish that without scaring off people who would lend money and don't want you to inflate away their loans into valuelessness.

Enough pointing out the problems;  let's hear some solutions that aren't reactionary tripe.

Tue, 10/13/2009 - 13:08 | 97632 BennyBoy
BennyBoy's picture

There is no alternative to the FED.

There is no alternative to the FED.

There is no alternative to the FED.

We also support a strong dollar policy.

 

BB

Tue, 10/13/2009 - 13:26 | 97664 Anonymous
Anonymous's picture

Here's a link. Book--Web of Debt--a good history. Conclusions and recommendations subject to criticism, but serious and substantive.

http://www.thedailybell.com/496/Ellen-Brown-Web-of-Debt.html

Tue, 10/13/2009 - 16:35 | 97985 You Cant Handle...
You Cant Handle the Truth's picture

Thank you for the recommendation.  I'll take a look.

Tue, 10/13/2009 - 13:33 | 97675 ddtrader
ddtrader's picture

Points are myopic at best...."people abuse guns"??? Yes they do and people die as a result....good analogy.  More will die from abuse of the dollar then from gun abuse.  When the DXY goes to 52 I would be interested to hear your points again.  

You want some solutions??  Here you are:

1)  Cut local, state and federal spending by 25% immediately.  Break the system of gold plated benefits and pensions for union employees that are paid by taxpayers. 

2)  Cut "education" spending.  Approximately 68% of all local taxes go to support a failed educational system.  Something is very wrong here.  Education starts in the home almost immediatley after an infant comes home.  A simple program revolving around reading just 1 book a day to your kids will vastly improve reading skills, which are the lynchpin to a quality education.  

3)  Term limits on politicians.  Let's make "political service" actually mean something. 

Just a start...want more??  

 

Tue, 10/13/2009 - 13:54 | 97716 tip e. canoe
tip e. canoe's picture

"let's hear some solutions that aren't reactionary tripe."

thanks for the invite.  here's some possibilities:

(1) democratize the FED, i.e. give the other branches equal power to the NY & Washington branches.  just like the Senate.

also coinciding with taking away the banks' power to create $ & forcing them to maintain strict reserve ratio requirements.

this proposal may not as radical as most would wish, but for those that believe so, would it not be a step in the right direction?

(2) start creating complimentary currency platforms, a modern-day version of the Worgl experiment:

http://www.reinventingmoney.com/documents/worgl.html

(3) start implementing measures on a local/state level similar to the zero cost economy model (courtesy of ZH contributor GWash):

http://www.zerocosteconomy.com/

 

constructive criticism welcomed.  there's plenty of folks here with sharp minds & soft hearts to begin the process of creative discussion while we continue to throw punches.

let's face it: the dollar is doomed to decline.

time to consider alternatives yes?

 

Tue, 10/13/2009 - 16:40 | 97988 You Cant Handle...
You Cant Handle the Truth's picture

Good ideas.  

#1 is critical, as an effective remedy to the corrupting influence of power is the distribution (and hence dilution) of that power among more entities. 

#2 is smart;  in fact, I wonder if the E.U. doesn't have an advantage over our system in that its breadbasket approach & retained national currencies doesn't dilute the potential corruptive effect of a single currency policy-maker.

#3 is also interesting.

Thank you for your input.  Much appreciated!!

Wed, 10/14/2009 - 09:22 | 98576 Anonymous
Anonymous's picture

Nice,
#1 could happen with enough of a political push. (I would also like to repeal the 17th amendment, so you can see my bias.)
#2, I can't see happening as direct consumer currency - but indirectly - thru credit and debit transactions, maybe. Are the CA IOUs and various muni bond funds headed in that direction (personally I use a no load, muni bond fund like a checking account for big ticket items).
#3, good luck - not sure how it could happen outside of small fiscally responsible, homogeneous communities with the geographic conditions that favor it -- seems very utopian. Although I think we all would agree that a technology that allow for the decentralized creation of a modest amount of energy would revolutionize large sectors of the economy.

Wed, 10/14/2009 - 15:28 | 99045 tip e. canoe
tip e. canoe's picture

#1 agreed that it could happen...key would be to educate as many citizens as possible on the way money is really created in this system.  too many of us continue to have the curtain pulled before their eyes (i choose to believe that our fairO leader is one of them -- not that that ignorance excuses his behavior).

#2 yes, the examples that u made is a variation of a 'legalized' alternative currency.  also you make a good point, it would not work as a strictly consumer-based currency, then again, i choose not to label myself as strictly a 'consumer'.  a currency like what was done in worgl would only work amongst those who are willing to trade their goods & services with others who have other desired goods & services.  it would require a revaluation of what money is -- a medium of exchange vs. a store of wealth as someone else here mentioned.

#3 utopian perhaps.  but if you read his stuff, you will see it's utopian in a very buckminster fuller sort of way, i/o/w there's alot of practicality behind it.  he's definitely put a lot of serious thought into it and you got give it to him for at least thinking out of the box.

what you described is what John Robb calls resilient communities.  you might be interested in his blog:

http://globalguerrillas.typepad.com/

there's alot of cross-pollination with what is contained here, as i'm quite positive he reads ZH frequently.

thanks for the conversation anon and thanks for the inspiration U Can't.  it's refreshing to collectively consider the light every so often admist the darkness that is enveloping us all.

Tue, 10/13/2009 - 13:56 | 97721 Assetman
Assetman's picture

Fair enough... unfortunately, one would need to audit the Fed to determine the magnitude and underlying nature of the problem before an effective solution could even be considered.  But most of us are speculating what the Fed is doing anyway, so...

Congress has the consititutional authority to print money and effectively conduct monetary policy, and the Treasury has the ability to carry out those marching orders.  As you well know, that isn't a permanent solution, because that would be much too highly highly politicized process.

The problem as it stands today is that the Federal Reserve-- and its monetary policy-- have become highly politicized.  It's effective ownership is highly concentrated in a handful of TBTF institutions, and those members have essentially limitless lobbying power in Washington.

In it's simplist terms, the Federal Reserve needs to be radically restructured and de-centralized.  Effective ownership needs to be broadened well beyond the handful of the largest banking institutions, the center of power needs to be taken away from the New York Fed and spread among the other regions, and policy need decisions need to be more democratic.  The Federal Reserve chairmanship, should perhaps should be ablolished given what the current one in power is doing.

More basic than that, the Fed needs to re-direct who is ultimately serves.  Right now, there is little doubt that the Fed primarily serves the interests of the few member banks to which it is beholden.  Clearly, the Fed has mandates of targeting inflation (or preventing deflation) while maximizing employment to conduct monetary policy.  When those come 2 forces into conflict, as we see now, it appears the Fed's decisionmaking is seriously impaired.

While it would nice to see the Fed's primary goal as serving the American people, that servitude isn't really that pragmatic.  More pragmatic, perhaps, is for the Fed to serve primarily serve the interests of community banks and credit unions equally to those that are deemed "too big to fail".

This might mean the Federal Reserve is scrapped and renamed-- or it's just restructured and serves under a "new and improved" Federal Reserve Act.  But it is in serious need of a radical restructuring nonetheless.

Eh, it's at least it's a stab at a solution... 

Tue, 10/13/2009 - 14:36 | 97815 Anonymous
Anonymous's picture

You stated: "Congress has the consititutional authority to print money"

No, they don't. They only have the authority to coin money. The founding fathers had experience with fiat currency and hyperinflation and tried to keep us from making the mistake again. http://en.wikipedia.org/wiki/Continental_(currency) Sadly, they failed.

Excerpt from Article I Section 8 of the US Constitution: "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

Tue, 10/13/2009 - 15:09 | 97864 Assetman
Assetman's picture

Thanks for the fine-tuning there, anon.  I would gather that "coining" in the context of "regulating the Value thereof" would roughly translate into effectively "printing" when necessary.  Perhaps that makes me dead wrong.

And yes, bringing up the "founding fathers" experience with fiat is correct. In no way do you want the executive or legislative branch to handle montary policy as a "permanent" fix.  Having Congress, however, serve a "temporary and limited" role, however, may be needed if you want real central bank reform.

Tue, 10/13/2009 - 16:21 | 97963 Anonymous
Anonymous's picture

The Continental “wasn’t worth a Continental” in large measure because of the massive British counterfeiting operation during the Rev War and not because of the fiat status of the Continental. That every “Dollar” willed into existence by the Fed represents debt of the US Government—i.e., every US citizen’s shared debt to the European banking interests—makes the Federal Reserve note one more step removed from the sound, debt-free currency represented by the US Note issued by the Treasury prior to 1914. Discipline is what’s required. Consider Milton Friedman’s computer program that would replace the Fed by issuing debt-free currency at a rate roughly equal to the growth rate of the economy.

Tue, 10/13/2009 - 14:41 | 97831 tip e. canoe
tip e. canoe's picture

+1 damn good stab

Tue, 10/13/2009 - 16:52 | 98006 You Cant Handle...
You Cant Handle the Truth's picture

I appreciate your well thought out reply.  That's a great start.

 

Tue, 10/13/2009 - 13:59 | 97730 Anonymous
Anonymous's picture

Who said "we" wanted a depoliticized entity at all? A gold standard is not at all impractical. It existed for well over 6000 years. It's not like we evolved out of it. It's not that Richard Nixon just came up with a genious plan to liberate us from a barbaric metal.

"Elasticity" in the money supply is a rhetorical joke that northeastern banking interests paid Ivy League economists to make up. Within those economics departments during the turn of the century, the debates were fascinating. Banks needed an intellectual base to support what is socialization of their losses. Banks simply create money. When they loan money, they simply add zeroes to an account. They know they have a printing press to later backfill the money created on a ledger with physical bills. There big issue is when someone spends the money outside of their bank. And thus, they created a central bank to have credits transfered between accounts at the Fed. No central authority can prevent this, because the central authority enables this.

So you say "think about the developments in nuclear physics", fine. Say you could design a process to produce more gold, what's that going to take? I imagine that'll take a lot of resources. A tremendous amount of energy. And you'll probably need something of equal mass to the mass of gold you're attempting to create. So what happens when everyone realizes you can create gold using a huge amount of energy and a mass of some other substance? What gold can be exchanged for and whatever that other substance can be exchanged for will converge. Your arbitrage would be eliminated and someone would say "why would spend so many resources just trying to create more of the medium of exchange? Just use the resources you have to exchange for other resources." This is the beauty of the gold standard. You're only ever exchanging things for things. We've never left a barter economy. We've (through the voluntary interactions with other human beings) just created a medium of exchange that solves the "coincidence of wants" problem. Gold won out as the primary medium because of other features that I'm sure 30 people on this site would gladly discuss.

Tue, 10/13/2009 - 17:02 | 98019 You Cant Handle...
You Cant Handle the Truth's picture

Please pardon my confusion as to your last paragraph, but when a money supply exists based on a resource, is it not imperative to know how much of that resource is available, at least in a crude sense?

Because if you make a loan, today, of 1 unit of gold, with the understanding that there are 100 units of gold in the world, then the terms you set are well and truly screwed when it turns out there are actually 200 units of gold in the world.  As an analogy, runaway counterfeiting of currency would surely not help the stability of lending, I would think.

So yes, gold is a physical thing.  But how much gold is out there?  Do you know how much is stored away?  And when a mass of gold "appears", would that not destabilize things, such as pallettes of newly printed $20s being dropped off by the Fed?

 

 

Wed, 10/14/2009 - 07:32 | 98526 Anonymous
Anonymous's picture

Problem is I doubt we would ever see "TRILLIONS" of pallets with gold on them....

Wed, 10/14/2009 - 08:27 | 98540 Anonymous
Anonymous's picture

Re: Gold

Drill deep enough and one comes to a strata where re-crystalization of silica-alumina occurs. Water is forced out of the matrix and is EXTREMELY mineralized. Zeolitic exchange can seperate elements at a reasonable cost. The technology is more practical than clean energy. And hot geothermal is a byproduct.
What would happen if all pass-through taxes and mandate costs were broken out in the consumer price of an item? Similar to sales tax. I think the 'sheeple' would put quite a bit of pressure on the government to reduce expenditures. Uneducated doesn't heve to translate as stupid. And greed is a usefull tool.

Tue, 10/13/2009 - 14:02 | 97739 lookma
lookma's picture

"As to (1), replacing the fiat currency with a standard based on a real world entity, like gold, silver, or antimatter, is increasingly problematic as physics makes it easier to manipulate whatever entity you would base it on.  You base your standard on gold, and then you find out that its possible to transmute something to gold, whammo -- you are fucked."

You presuppose human designation - why not let the free market work?

Hayek on currency competition:  http://www.iea.org.uk/record.jsp?type=book&ID=409

Ron Paul competing currencies:  http://www.lewrockwell.com/paul/paul434.html

More on the same: http://www.lewrockwell.com/orig/brimelow3.html

Tue, 10/13/2009 - 23:50 | 98424 I am a Man I am...
I am a Man I am Forty's picture

+ 100000

 

Tue, 10/13/2009 - 14:13 | 97767 clickjaw
clickjaw's picture

As regarding critique no. 1, you have far to much faith in physicists my friend. What you speak of is alchemy, perhaps the most sought after psuedo-science in the world's history. At present, the only way we could transmutate a substance like iron into gold is to recreate conditions close to the early moments of our universe. We could no more do that then destroy the whole world in the process!

However, it is theorized that there are large amounts of resources such as, gold, diamonds, etc., deep within the earth, yet, a technology has not been produced which could withstand the intense pressures that exist at a few hundred miles beneath the surface, so we can only wait and see. Furthermore, who says currency only has to be backed by gold? Couldn't there be a pool of limited natural resources that can back a currency along with gold? Think about it.

We must change to something new, and by new I mean something old. Gold is the best candidate by far. Mankind has invariably acted as god since the beginning of recorded history trying to manipulate markets to their favor in one form or another. It's time to let the market truly be free and rule as the tyrannical monster it is. Yes, the pie is finite, only some can have some while others do not, it not's fair in a childish, playground sense, but if you try to restrain and tame the wild beast of market, who longs to be free, you will arouse its wrath and it will destroy you, as we are seeing now.

Tue, 10/13/2009 - 14:39 | 97825 tip e. canoe
tip e. canoe's picture

"Couldn't there be a pool of limited natural resources that can back a currency along with gold? Think about it."

that's a good idea actually.  however, to play devil's advocate for a moment, wouldn't that scenario result in more nations going to war over those limited resources (more than what's happening right now)?

and hasn't human history also shown that gold markets & gold-backed currencies can also be manipulated to benefit the few at the expense of the many?

p.s.  according to CERN, the Large Hadron Collidor is set to fire up again next month.  so U Can't may get his wish sooner than you think (that is, unless he's sucked into a man-made black hole first):

http://press.web.cern.ch/press/

 

Tue, 10/13/2009 - 16:47 | 97997 sgt_doom
sgt_doom's picture

Actually, that was the original suggestion by Keynes at Bretton Woods meeting in the aftermath of WWII.

And Robert Triffin (economics, Yale) has already destroyed the basis of using a single element as the foundation for any currency (unless, perhaps, it is the promise of human labor).

The proposal for economic democracy, that is, the equal distribution of land and capital, as opposed it the corporate fascist, communist or oligarchic systems which exist today, would make far more sense.

In other words, allow neither the state (Soviet-style communism) nor the corporation (American corporate fascist state we are presently living in) to monopolize land and capital.

Tue, 10/13/2009 - 17:11 | 98029 You Cant Handle...
You Cant Handle the Truth's picture

If there is one thing physicists have earned my faith in, it is potential disruptive change capable from that branch of the sciences.  The list of things which were psuedo-science until quite recently is astounding.  Surely as Internet users we appreciate the disruptive change of technology with every key-click?

Yes, a pool of resources would be ideal.  I simply cannot accept the risk of a single element being the backing-store of generic exchange-value.  A single discovery (if it has not already been made already by a nation state or other entity) could provide the equivalent of a perfect counterfeit.

Tue, 10/13/2009 - 14:17 | 97775 gmrpeabody
gmrpeabody's picture

I got one...

Sent the freaking ***holes to jail who have used and abused the system for their own greed, politicians included.

That should give us a fresh start.

Tue, 10/13/2009 - 17:12 | 98030 You Cant Handle...
You Cant Handle the Truth's picture

Hear hear.  +1 to that.

Until the rule of law applies to all it is no law at all.

Tue, 10/13/2009 - 14:24 | 97791 Gunther
Gunther's picture

 

Handle,
a complete answer to your question is too long for a comment here, but let me try a few points:
For now I do not think that nuclear physics can produce gold cheaply. In the future that may be different. Anyway, your point has a precedent: After conquering South America Spain took/robbed gold from there and used it in Europe to pay the bills. That lead to inflation and nobody in Spain cared of the real economy where stuff is made – it could always be bought. Stated the consequences short, it did not end well.
Today gold would provide a harsh discipline to any monetary authority; anybody who suspects something fishy demands payment in metal. That would give the little guy way more power then today. Even if everybody empties the bank account, the only thing someone can get is paper that can be printed at will. The bankers know this very well and expanded their power to the point where they create money by adding an entry to a book or database. We are dealing with the mess that the bankers created right now. But under a gold standard were panics too; if yo have ever seen the DOW before 1913 it looked like saw teeth with dents. Boom and bust all the time.
Probably the solution is somewhere between the extremes of pure gold and pure fiat money. To make it more complicated the system should basically be honest, reward success and punish failure independent of size of the entity. That looks like checks and balances plus accountability for everybody.
Accountability in government seems really difficult to achieve, I'll leave that for another day.
Criminal law should only cover fraud in a broader sense; to set rewards properly asymmetric bonuses should be forbidden, so the fund manager gets a percentage of realized gain AND loss. As in real life, paper gains do not count until cashed in but paper losses do count. Risk needs to be limited to a level that is not threatening to the system, leverage for smaller entities is maximal 10:1; if the balance sheet is the size of the economy the maximum permitted leverage is 3:1.
That should be an outline to an answer.

 

 

Tue, 10/13/2009 - 17:18 | 98037 JR
JR's picture

According to figures provided about two years back by Prudent Bear, the Fed was keeping about 1/4 of 1% in deposits as "fractional" reserve money in its system, i.e. 25 cents in receipts for every $100 of debt creation.  Mogambo Guru conputed that, in the final round, to be .00026% in reserves at the time—just enough, I suppose, for the Fed central bankers to continue the refrain that America is on a fractional-reserve system.  I doubt if there's even 25 cents reserve backing for every $100 in this debt-ridden system now, no matter the Fed's refrain.  After all, “saving” is hoarding, n’est-ce pas?

Tue, 10/13/2009 - 16:15 | 97798 Daedal
Daedal's picture

You Can't Handle,

First, the quantity of Gold that exists is not really relevant. Let's say, hypothetically, that the amount of Gold doubled overnight. Then, what you'd have is: $1,065 / 2 = New Spot.

Point being, if the quantity of Gold does not change, it would simply appreciate against other goods and services, ie, you'll need less and less Gold to buy certain things. It will be the opposite of inflation -- you're purchasing power will keep increasing, instead of what we have now -- goods and services tend to get more expensive over time. Consider this: do you find it abnormal that you are able to buy a $500 computer that is 6x faster than a $2,000 computer a few years ago? The same would apply for many other goods and services. Gold would simply appreciate in value against other things. As with the computer example, your buying power would increase; you'd be able to get more goods for less gold.

If quantity of Gold diminishes to unreasonable levels, other things will replace the medium of exchange function. I cannot predict what the market will choose, but initially it will likely be Silver. If advanced physics will make it so that Gold can be replicated as easily as it is to print $1 trillion on 1 bill, then the market will find a solution to replace Gold. But it is not up to Ben Bernanke, or me, to dictate or predict what that will be -- or to state that simply b/c we cannot predict what will replace current currency that fiat currency should be maintained. Having said that, in a free market, you can theoretically buy and sell things in any asset that you choose. For instance, you may be able to redeem IBM stock at a grocery store. But, again, that would be up to the free market (the grocery store and its customers). Keep in mind that even in that instance, IBM stock is priced on medium. That's the beauty of having a medium of exchange; it allows for rational transactions to take place. Fiat currency not only strips value over time, it also skews the perceived value of the medium vs the real value, and promotes misallocation of resources and investments.

The Fed need not exist. You'd still be able to deposit Gold at the bank. And the bank can even issue you 'receipts' to that Gold (which we can call paper money) but which, unlike current money, is redeamable in Gold. Consider it like a check.

The difference would be that you would likely pay the bank/holding company a small fee to hold the Gold, like a checking account. Gold that you allow to be lent out, like savings account, would be paid back with principal plus interest (Gold), or silver for instance.

That's just a brainstorm, but hopefully it elucidates some things. More intelligent people than I have opined on this subject, so perhaps you ought to read them as well (Murray Rothbard, for instance).

 

Tue, 10/13/2009 - 17:25 | 98053 You Cant Handle...
You Cant Handle the Truth's picture

Thank you for your thoughtful response.  

 

Tue, 10/13/2009 - 14:34 | 97808 Bankster T Cubed
Bankster T Cubed's picture

Wake up dude

Tue, 10/13/2009 - 17:20 | 98043 You Cant Handle...
You Cant Handle the Truth's picture

If I drink any more coffee, I'd die.

Tue, 10/13/2009 - 16:41 | 97989 sgt_doom
sgt_doom's picture

" The purpose of the Fed (perhaps nominally) is to depoliticize monetary policy."

Nope, got that one wrong.  The purpose of the Fed is to follow the guidelines set forth by the Federal Reserve Act (which it conveniently has ignored under Greenspan and Bernanke).

So even that pathetic straw doesn't help.  The Fed, ignoring its responsibility under Title 12, Part 208 (setting and monitoring minimum reserve and capital requirements of the banksters), is the major part of the problem.

There is simply no real purpose to such a private bankster-controlled outfit.  Any American, 40 years and over, who doesn't yet comprehend that the major banksters are criminal entities; Wall Street is simply a conglomeration of criminal entities; the IMF World Bank and the Fed are criminal entities, is best described as an Ameritard!

Tue, 10/13/2009 - 17:19 | 98041 You Cant Handle...
You Cant Handle the Truth's picture

Federal Reserve Act; Section 2a. Monetary Policy Objectives:
"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."

I'll assert again that the purpose of the Fed was to depoliticize monetary policy, by preventing short-term monetary politics (e.g. Germany after World War I) from upsetting the long term expectations of lenders. To me "long term" == depoliticization.

Apparently we can agree that that long-term perspective has been lost.

Tue, 10/13/2009 - 17:34 | 98062 sgt_doom
sgt_doom's picture

You Cant Handle (#98041),

I would say that passage is more about halting speculative bubbles more so than "depoliticizing." 

Agreed, that has not been followed by Greenspan and Bernanke. 

Get me the nooses......

Tue, 10/13/2009 - 20:02 | 98186 Anonymous
Anonymous's picture

If the supply of money needs to be flexible so that it can expand with the economy to avoid deflation, then it should be tied to GNP.

The rate at which we can mine gold and silver is not tied to GNP, which is why I assume we used to have short, harsh business cycles.

The Fed is a good idea only in that it is private, so the gov't does not have direct control. Unfortunately, they have chosen inflation (why does no one shout when they target anything but 0%?), which is simply a corporate subsidy.

So, instead of using the 10 year treasury to determine the prime rate, why not set it at a rate that keeps us at 0% inflation? Why did the founders allow the gov't to borrow without a declaration of war, BTW?

Tue, 10/13/2009 - 21:35 | 98307 Marge N Call
Marge N Call's picture

CUT fucking goverment spending. What's the mystery here. Are you dense???

Wed, 10/14/2009 - 01:12 | 98465 Anonymous
Anonymous's picture

there are lots of options...like the public option...see Ellen Brown's, "Web of Debt" http://www.webofdebt.com/

People may argue about solution, but its hard for anyone to argue on Ellen's, and many others', criticism of the Fed and banking...

Wed, 10/14/2009 - 11:53 | 98760 Winston Smith 2009
Winston Smith 2009's picture

The only way we'd be able to get away with no Fed would be if all other nations also disbandoned their central banks.  And that's even less likely than just the Fed going away.

Tue, 10/13/2009 - 13:06 | 97630 Anonymous
Anonymous's picture

When the USA out spends the rest of the world combined, in military spending, it's not about defense.

Tue, 10/13/2009 - 14:20 | 97783 Anonymous
Anonymous's picture

Even if the defense department is wiped out, we would still have a $1 trillion deficit this year. We have a spending problem across the board, not just in defense. To balance the budget, we would need a 50% across the board spending cut on the federal level.

Tue, 10/13/2009 - 13:09 | 97634 Unscarred
Unscarred's picture

From today's Wall Street Journal:  "Deficits and the Chinese Challenge" (op-ed by Zachary Karabell)

http://online.wsj.com/article/SB1000142405274870410720457446907384760401...

Another must see:  "I.O.U.S.A." (documentary by the Peter G. Peterson Foundation)

http://www.iousathemovie.com/

Tue, 10/13/2009 - 13:31 | 97672 Anonymous
Anonymous's picture

You mean positive feedback loop

Tue, 10/13/2009 - 13:31 | 97674 brodix
brodix's picture

What is money?

Money is a public utility, not a private store of value. It is like a road system. You own your car, house, business, etc., but not the roads connecting them. While most people think of it as private property, the reality is that the system belongs to whomever guarantees its value. Render unto Caesar. We do possess the money we hold, in the same way we possess the section of road we are driving on.  Money is a similar medium. It is a drawing right on community productivity for which we exchange our surplus resources.    When the Rothschilds developed private banking three hundred years ago, they were taking over the management of money from monarchs who were profligate. In doing so, they were responsible for maintaining the value of the gold certificates that were their currency. With central banking, the stability of the currency has become a government responsibility, while private banks maintain the profits of loaning it out. This is the foundation of the socialization of risk and the privatization of reward.  Believing money is private property encourages people to hoard it and hoarding money is destructive to a functioning monetary system. If it is simply withdrawn from circulation, more must be issued to keep the system functioning, until such time as the value is perceived to decline and then the hoarded money is dumped, leading to a collapse. Otherwise saving money means loaning it to someone else. The problem is that capital is subject to the laws of supply and demand, with the lender as supply and the borrower as demand. Since supply is potentially infinite, it is the amount of prudent borrowing which determines how much wealth can be saved. Unfortunately political power is on the side of those with money, rather than those borrowing it and this results in factors which swell the supply of money, while depleting the resources of borrowers. To create and store more notational wealth, the financial industry resorts to lowering loan standards and manufacturing excess circulation through securities and derivatives. Now this bubble is popping and much of that notational wealth is evaporating.  If we came to the realization that the monetary system is a form of public commons the practice of hoarding excessive amounts would lack logical justification, so savings would be taxed progressively. This is not to discourage individual effort, but a necessary recognition of the effect of excess savings on a functioning monetary system. If people understood monetary value constituted public property, than they would be far more reluctant to drain value out of their social networks and environment to put in a bank in the first place. We all like having roads, but there is little inclination to pave more than we need. In this situation, the same would apply to monetizing our lives. Other avenues of trust and reciprocation would have the space to develop, from good will to local currencies, which would strengthen communities and their relationship to the environment. Money is a powerful tool of society, but it cannot be made a god.   Political power started as private initiative and eventually grew into monarchy. Monarchists railed against mob rule, but we eventually learned how to make politics a public trust by allocating power where it was most responsive. Why not do the same with the banking system? As the currency is a public utility, so profits from its administration could be public income. A public banking system would not be one huge behemoth, but consist of institutions incorporated at every level of governance, so individuals could bank with the ones which funded the services they are most likely to use. Different communities would seek to provide the best services with these funds, otherwise they would lose business and citizens to other communities. It may not be as globalized a system as we have now, at least to start with, but it would provide a solid economic foundation for a more sustainable global economy to develop.  The problem in developing an successful monetary system is that while bankers are inclined to over-extend credit to increase profits, politicians are inclined to inflate the money supply to pay for public works. So banking would have to be a separate branch of government, similar to the judiciary.  Another large problem is the system of public financing, where enormous bills, stuffed with enough goodies to gain sufficient support, are rammed through the system. That's not budgeting. The process of budgeting is to prioritize needs and desires, then decide where to draw the line between what can be afforded and what cannot. In the US, some years ago, there was a discussion about the "line item veto," where the president could delete any item he wished from spending bills. Obviously this would remove all power of the purse from the legislature and likely be unconstitutional. In the spirit of actual budgeting, a possible solution would be to break these bills down to their constituent lines and then have every legislator assign a percentage value to each line and then re-assemble them in order of preference. The president would then draw the line at what would be funded. This would divide responsibility, allowing the legislature to prioritize, while giving the president final authority over total spending. Since making the cut would be graded on a curve, there would be much less incentive to trade favors and the percentage system would allow legislators to fine tune their granting of favors to other legislators and lobbyists. Since may local projects wouldn't be funded on a national level, this is where the circulation of wealth back into the local communities, by a local public banking system, would be necessary.   While this model may not appeal to the world's speculators, it would appeal to the libertarians on the right and the communitarians on the left. As well all those trying to find a way to get by in the middle.

Tue, 10/13/2009 - 13:52 | 97709 chumbawamba
chumbawamba's picture

This is dumb.  When everyone "owns" something, no one does, and it becomes neglected and decays.  Money, or more appropriately in this case currency, has value because we can own it.

Another thing dumb about this is that our currency is, in effect, publicly owned.  FRN's are not "private" property in that they can be recalled or made worthless by the same fiat that brought them into being. 

I am Chumbawamba.

Tue, 10/13/2009 - 14:02 | 97741 brodix
brodix's picture

CB, You seem to contradict yourself. First you say money has value because we can own it, then turn around and say it's public property.

 As I point out, it is quite possible to have public property and maintain it, such as a road system. Know it may not be perfect, but either we get the population down to about ten people a square mile, or find a way to create a functioning economy. As you admit, a monetary system is public property. The question is how to make it work.

Tue, 10/13/2009 - 14:41 | 97834 chumbawamba
chumbawamba's picture

The open market will make it work.  Don't worry your pretty little head over it.

I am Chumbawamba.

Tue, 10/13/2009 - 14:50 | 97845 lookma
lookma's picture

A fiat monetary system is a medium of exchange masquerading as a store of value.

The masquerade could in theory be pulled off for a suprising amount of time were the system managed properly.  But people are people.

The way to "make it work" (or to "stop it from not working") is for people to use it for what it is - a medium of exchange - and to stop using it for what it is not - a store of value.

Tue, 10/13/2009 - 16:29 | 97972 brodix
brodix's picture

Thanks. It's not like I'm socialist, just trying to understand how the system functions in order to understand why it's broken. 

Tue, 10/13/2009 - 16:51 | 98003 sgt_doom
sgt_doom's picture

Outstanding, lookma!  You have completely and pithily explained it.

Well done!  (And to anyone who still doesn't quite get IT, simply do some in depth research into securitization.)

Tue, 10/13/2009 - 14:55 | 97855 Anonymous
Anonymous's picture

Money is not like a road system, nor is it a "public utility". Money existed well before governments ever did, as well as what one would consider to be "civilization". So this model is not going to fly with libertarians. You lost them in the first sentence.

Money is whatever people commonly accept as the medium of exchange. Notice how that definition has nothing to do with a government or banks or what people do with that medium. Whatever it is that I have, I exchange for something else. If that person doesn't want what I have, I can exchange for different item that I know that person will want. If that other item can be exchange with a wide range of other iteams, we will use it as the medium of exchange. I don't need to vote on this. I don't need to pass a law saying we must exchange. I don't have to have a concept of "collective property". What's mine is mine and what's yours is yours. If I want what you have, I have to find something you want in order to exchange. What's mine is not everyone else's. It's not shared with the community writ large.

If you don't have something that I want, I won't exchange with you. You seem to like to describe this as "hoarding". This is about immature as calling someone on the playground a "ball-hog". What you're suggesting is that because you've gotten a lot of people to agree with you (or at least the people who have guns), you can demand that I exchange with you. So whether you force me to surrender my property or you destroy my ability to exchange my property with other people (devaluing the currency), you're still stealing from me. But when you use this "public utility" argument, you attempt to cut off the "stealing" argument by assuming that I don't actually own anything.

Bottom line, Chumbawamba is right. Things have value because you own them and therefore exchange them for something else.

Tue, 10/13/2009 - 16:56 | 98013 brodix
brodix's picture

anon,

 Common property and personal property both pre-exist civilization. The problem is trying to adapt basic concepts to a mass society. Your property is yours and mine is mine. The currency belongs to whatever entity guarantees its value. Just ask the credit card companies who that little piece of plastic in your pocket really belongs to. If you think the money is really yours, why not just run some off on the copier? Why not? Because you don't own the copyright. Does it have your picture on it? There was a time when banks issued their own currency, but now it's all federally guaranteed, whatever the status of the Federal Reserve. The only value any currency has, whether it's paper or metal or shells, is whether sufficient numbers of people accept its value that anyone accepting it has faith they can exchange it for something of value equivalent to what they traded for it. So it is that collective faith which gives it value. If I want to hoard bottle caps, or pieces of gold, it's not a problem, but if everyone tries to save as much currency as possible, more has to be introduced to keep the system functioning. Eventually a point is reached where the value is perceived to decline and everyone tries to get rid of the currency and its value collapses. That is a problem. When we loan it out, the amount that can be loaned and therefore saved by investing, is effectively limited by how much can be prudently loaned. Above that and asset values are inflated. I.e, the value of the investment dollar declines. All these sub-prime loans, derivatives, securities, government debt, etc. are vehicles for saving wealth. If they can't be paid back, that wealth evaporates. That is a problem.

 The system has blown up an enormous bubble of illusionary, notational wealth and frankly I don't care who has hoarded it, because most of my wealth is in agricultural real estate. And I'm not trading any paper for it anytime soon. The question this thread is about is how to solve the problem of printing too much money. Do you even understand how money functions?

Wed, 10/14/2009 - 01:19 | 98467 Anonymous
Anonymous's picture

I agree, first off, even private banking should be a regulated utility for now obvoious reasons...but like the public option of banking. Gives a time value to money, a useful tool, through interest, but rather than interest accumulating in the hands of wealthy parasites, it is used in way tax dollars are used...for common wealth issues...

Do you know/agree with Ellen Brown, author of Web of Debt?

Tue, 10/13/2009 - 13:43 | 97685 Anonymous
Anonymous's picture

so if the above scenario plays out as suggested, and the dollar is going to continue this free fall, what would one want to do with their dollars at this point in time?

Tue, 10/13/2009 - 14:40 | 97827 hp12c
hp12c's picture

Open a bank account in Canada, invest in a non- USD hedged foreign Bond fund, buy gold or silver coins....

Tue, 10/13/2009 - 14:43 | 97837 Anonymous
Anonymous's picture

Why would you want a hedged foreign bond fund (unless you really somehow think the dollar will rally)?

Tue, 10/13/2009 - 15:11 | 97866 hp12c
hp12c's picture

I said NON-HEDGED..

Tue, 10/13/2009 - 18:38 | 98132 phaesed
phaesed's picture

That's right! MAKE your money weaker America! Keep sending your dollar overseas as an inflation hedge while it helps inflate to make the OTHER dollar in your hand even weaker than before!

 

Don't people see the cycle???

Tue, 10/13/2009 - 13:46 | 97691 brown_hornet
brown_hornet's picture

Sorry, I didn't mean to get the anti-war activists excited, but my Dad was wounded storming the beaches on Saipan doing what the Constitution says is the governments job,  so I'm somewhat predjudiced.  I guess without all those aircraft carriers and nuke subs, the Chinese would just let Taiwan and Japan and Australia be. 

 

An illegal amendment is what made the fed and gave the banksters power to bail themselves out spending money that is driving us to bankruptcy.  At least the military-industrial complex provides jobs and technological advancement.

Tue, 10/13/2009 - 13:53 | 97714 chumbawamba
chumbawamba's picture

At least the military-industrial complex provides jobs and technological advancement.

That and death and maiming and destruction and scandals and ruined nations and a failed empire.  Thanks.

I am Chumbawamba.

Tue, 10/13/2009 - 14:20 | 97785 gmrpeabody
gmrpeabody's picture

-1

Tue, 10/13/2009 - 14:41 | 97835 Anonymous
Anonymous's picture

+1

Tue, 10/13/2009 - 17:10 | 98028 sgt_doom
sgt_doom's picture

Thanks for that reply, chumba.  There are still people out there who don't understand the funding of the Taliban (American tax money, via Pakistan, to the Taliban, to buy munitions and other materiel, to then kill Americans, Euros and Indians with --- get the picture????).

I recall coming across a weapons system during Vietnam duty, which had been sold - via third party - by a Xerox defense subsidiary, to the North Vietnamese.  Boy oh boy, was that ever a real-world education in the "defense" and war biz!

Wed, 10/14/2009 - 01:38 | 98471 morphizm
morphizm's picture

The truth hurts. But I'd rather have it than jingosport, which almost always goes bankrupt.

Tue, 10/13/2009 - 14:16 | 97773 Anonymous
Anonymous's picture

Why is it our responsibility to bankrupt our country in order to defend those countries or any other country? Why is it our responsibility to feed and care for citizens of other countries when we cannot provide for our own? Our own house is on fire and we are out trying to save other houses that are on fire. Stop the insanity.

Tue, 10/13/2009 - 17:13 | 98031 sgt_doom
sgt_doom's picture

Geez, anon, study some finance and economics for a change.  The IMF isn't a charitable organization -- no matter what you've heard.  They didn't establish all those "Financial Intelligence Units" (via their Egmont Group) at all the "offshore finance centers" around the planet to actually stop money laundering (since the OFCs are primarily about money laundering and profit laundering), but to CONTROL money laundering.

The US military is about seizing foreign resources, always has been, always will as long as the American Empire has 724 official bases around the globe, along with several hundred secret ones.

Can you dig it?

Tue, 10/13/2009 - 19:40 | 98172 Anonymous
Anonymous's picture

the military industrial complex provides tyranny
and extra-constitutional powers of government and
oppression to unelected and invisible forces....it has deprived us of a vibrant economy because it pre-empts
productive peaceful investment....

those are jobs we needed but can't have....the
military industrial complex is the vampire
squid sucking life out of its host....

the military industrial complex has demanded
2000 bases around the world....for what? to defend
us from faux al-qaeda forces blowing up the world
trade center with technically advanced nanothermite
produced at skandia labs? i think not.

the mic jobs are jobs we don't need.

Tue, 10/13/2009 - 13:50 | 97704 Anonymous
Anonymous's picture

I really like the piece, it does a great job outlining a problem that many of us have noticed over the last six months.

As a follow up, I have concerns regarding the site. I used to like coming here because it provided me with an opportunity to learn from people connected with the financial field, while providing all of us with a balance to the BUY BUY BUY media.

Is it just me, or are these message boards being clogged with a bunch of tripe from out of work college grads and conspiracy theorists who are angry at the world? Is there no way to get rid of these clowns? I just "junked" like thirty comments.

Tue, 10/13/2009 - 14:09 | 97756 lookma
lookma's picture

It is you and you can go away, or maybe you could recognize that the folks from paragraph two are providing much of what you attribute to paragraph three.

Tue, 10/13/2009 - 17:19 | 98042 brodix
brodix's picture

You know what bugs me? All the posters who are to damn lazy to think up an alias so it isn't just an indistinguishable bunch of anons.

Tue, 10/13/2009 - 13:54 | 97718 fxguy
fxguy's picture

I don't think there are any fiat currencies that have lasted more than 100 years without ending in devaluation and eventual collapse. The "green-back" US Dollar Federal Reserve Note was introduced in 1914. I wonder what it will be worth in 5 years ? Hopefully more than the 4 cents it cost to produce.

Tue, 10/13/2009 - 13:58 | 97727 TPC
TPC's picture

This isn't about the politics of war vs. anti-war.  It just so happens that wars are damn expensive and happen to coincide with the end of many civilizations and empires.  This isn't an anti-war rant.  It's an anti reckless spending rant. 

Tue, 10/13/2009 - 14:51 | 97847 gmrpeabody
gmrpeabody's picture

+1

Tue, 10/13/2009 - 17:17 | 98035 sgt_doom
sgt_doom's picture

Great reply, and in case you've yet to read this, may I strongly recommend Joseph A. Tainter's "Collapse of Complex Societies"?

He has done some truly sterling and original research, and it so happens, regardless of how positively he attempts to end his writing, that we are presently living through those eras he describes.  (I.E., diminishing returns on problem-solving processes, etc.)

Tue, 10/13/2009 - 13:59 | 97731 Anonymous
Anonymous's picture

The situation reminds me of Percy:

England in 1819

Princes, the dregs of their dull race, who flow
Through public scorn,--mud from a muddy spring,--
Rulers who neither see, nor feel, nor know,
But leech-like to their fainting country cling,
Till they drop, blind in blood, without a blow,--
A people starved and stabbed in the untilled field,--
An army, which liberticide and prey
Makes as a two-edged sword to all who wield,--
Golden and sanguine laws which tempt and slay;
Religion Christless, Godless--a book sealed;
A Senate,--Time's worst statute unrepealed,--
Are graves, from which a glorious Phantom may
Burst, to illumine our tempestous day.

Tue, 10/13/2009 - 14:02 | 97740 Anonymous
Anonymous's picture

brown_hornet --you are defending the military industrial complex? Supporting those that fight and die for our country is not the same thing as supporting the military industrial complex i.e. Blackwater, Perini, URS Corp. Are soldiers getting their share of these profits from these corporations?

Do not confuse those that profit from wars with those that fight them.

(and yes I'm anti-war and an army brat)

Tue, 10/13/2009 - 14:08 | 97751 phaesed
phaesed's picture

Oh goddamnit I want to f'm scream... STOP MAKING AMERICANS STUPID BY CALLING IT A PRINTING PRESS!!!!!!!!!!!!!!!!!!!!! THE MAJORITY OF THESE FUNDS ARE IN PRESENT CAPITAL-VALUE... IE CREDIT!

 

Damnit people, don't you understand what happens when the multiplier goes to 1??? Figure it OUT! SOON!

Tue, 10/13/2009 - 14:33 | 97806 Anonymous
Anonymous's picture

Not being obtuse, here, phaesed, but can you explain a bit please?

Tue, 10/13/2009 - 17:40 | 98068 phaesed
phaesed's picture

Exactly, so if they don't use a printing press, they use a ledger, that means it's on both sides of the asset sheet, which means if we should ever demand all our liabilities they'll be broke.

 

But it's even easier than that... if more Americans wanted their money in CASH. It doesn't matter if you want to pull it out right away or not, because the banks don't have NEARLY enough dollars to hold in short term deposits.

 

So now, if the discount for a one month bill should ever equal the same value as a one month bill interest rate.... What will happen people?

Tue, 10/13/2009 - 15:23 | 97883 TPC
TPC's picture

Everyone knows they don't actually use a printing press.  Jesus.  Calm down. 

Tue, 10/13/2009 - 17:18 | 98040 sgt_doom
sgt_doom's picture

The proper response is:

"Calm down, Gutenberg!"

Tue, 10/13/2009 - 14:10 | 97757 bugs_
bugs_'s picture

Some of the virtual dollars are going to prop up their

own failed systems.  Typical - complaining about it

on the one hand while holding out the other.

Tue, 10/13/2009 - 14:12 | 97761 Anonymous
Anonymous's picture

This is the beginning of the end for America. Once the currency collapses and the federal dollars stop coming to the states, what will keep this country together? What state will want to be bosses around by Washington DC? We aren't under any real threat of invasion anymore.

Tue, 10/13/2009 - 14:24 | 97790 SayTabserb
SayTabserb's picture

As far as the problem of insolvency is concerned, I think the U.S. is past the point of no return. As we're all painfully aware, stating the national debt as about $12 trillion is contrary to generally accepted accounting principles because this figure does not take into consideration all of the unfunded liabilities for social entitlements and other long-term obligations.  No foreseeable level of growth or prosperity is going to allow us to pull even with these debts, nor even come close. With the present spendthrift madness, we're getting farther away than ever from solvency. The real question is what follows the present arrangement of the United States, and how do the regional federations, or whatever, go about disavowing the sovereign debt of the old USA and establish their own economic regimes. There will be a lot of movement in that direction in the next few years. The secessionist talk from Texas, Alaska, S. Carolina and other places will begin to look like a logical response rather than fringe craziness.

Tue, 10/13/2009 - 17:25 | 98051 sgt_doom
sgt_doom's picture

Bingo!  To paraphrase the economist, Paul Craig Roberts, with every job offshored so goes a chunk of the GDP.  The American tax base is pretty much nonexistent, together with the dramatically shrinking tax bases of individual states.

A recent BLS study demonstrated that ZERO jobs had been effectively NOT created by the private sector during July 1999 to July 2009.  Ergo, the USA has reached the critical mass point with regard to corporate jobs offshoring (which 27 of the state governments also partaked in --- plenty of former American jobs created in China, though, as corporate America claims it can only exist on the backs of communist labor!).

Looks like the greedster money party of those private equity firms (Peter Peterson, American Enemy Number One), Wall Street banksters and professional offshoring firms may be soon over.

Balkanization, thy name is America!

Tue, 10/13/2009 - 15:27 | 97890 JR
JR's picture

To those who say we need war, do we need continuous war?  The Cheney/neocon philosophy is we need pre-emptive war. The fallacy of that argument is who determines the danger? In the case of Iraq, it was breaking everything and paying to have it rebuilt. The problem with Rothschild wars and many U.S. wars is that the bankers finance both sides, i.e., Saddam Hussein, armed and encouraged by the U.S. in Iraq’s war with Iran, and a short time later this one-time ally is an enemy of the U.S.

“As long as the mechanism of central banking exists, it will be to such men an irresistible temptation to convert debt into perpetual war.” – G. Edward Griffin

Baron Rothschild, an 18th-century member of the Rothschild banking family, is credited with saying that "the time to buy is when there's blood in the streets." He should know. Says Griffin: Perpetual war did not become a habit in eighteenth century England until they were easy to finance through central banking and fiat money, “

“The formation of the Bank of England (chartered in 1694),” says Griffin, “ was created for the specific purpose of financing war: 

1689-1697 The War of the League of Augsbert

1702-1713 The War of Spanish Succession

1739-1742 The War of Jenkin’s Ear

1744-1748 The War of Austrian Succession

1754-1763 The French and Indian War

1793-1801 The War against Revolutionary France

1803-1815 The Napoleonic Wars.

“In addition to these Eruopean conflicts, there also were two wars with America: the War for Independence and the War of 1812.  In the 126 years between 1689 and 1815, England was at war 63 of them.  That is one out of every two years in combat.  The others were spent preparing for combat.

“The mark of The Rothschild Formula—by which  war is converted into debt and debt converted back into war--is unmistakeable in the conflicts.”

The footprint of The Rothschild Formula now leads to our own doorstep…  Is America to suffer the same collateral damage as England on the central bankers' march to world socialism?

“Since its sucker-punch inception in 1913, the central planners have devalued the dollar down to roughly $0.04 (”inflation” actually means the devaluation of the dollar). It also serves as the engine of the American Imperialism perpetual war machine, which is currently devouring roughly $1 trillion per year. As a result, you can thank “the Fed” for the rest of societies woes such as poverty and the crime that spawns from it, the recent housing bubble, much of the current economic woes and criminal gas price gouging…”  – 08/21/2008  ignoranceisntbliss AT hotmail.com

http://ignoranceisfutile.wordpress.com/2008/08/21/federal-reserve-videos-documentaries/

Tue, 10/13/2009 - 15:33 | 97900 Anonymous
Anonymous's picture

speaking of unqualified support and confidence in the dollar, central banks are un-dollaring at the fastest rate ever....

http://dailyreckoning.com/dollar-suffers-another-blow/

it seems like folks are doing with toilet paper what one does - flush...and no mr tidy bowl to clean up the mess...

Tue, 10/13/2009 - 15:43 | 97923 Prophet of Wise
Prophet of Wise's picture

Mr. Handle,

There are several rational and viable monetary system alternatives to the Federal Reserve or any form of central banking. But the real alternative to the Fed is to trade honesty for deceit; liberty for slavery; fair dealings for corruption; sanity for insantiy; objectivity for subjectivity; plain speak for the Tower of Babel; protect and value savings and investment for the systematic destruction of that which it [the Fed] claims is the reason for its existance. The history of fiat currencies and all central banks has been one of complete abject failure. Unmitigated failure for us but unparalleled success for the purposes for which it was truly borne.

SIR JOSIAH STAMP, (President of the Bank of England in the 1920's, the second richest man in Britain)
"Banking was conceived in iniquity, and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen, they will create enough deposits, to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers, and pay the cost of your own slavery, let them continue to create deposits."

 

It doesn't matter the form the alternative takes but rather it must inculcate the indispensable quality that each unit must be based on a finite quantifiable absolute resource or media of value. The exact mortal opposite of the present infinite fiat global money monopoly which projects no value in finite absolute terms. You must remember what money is. It is nothing more than a tool of exchange and a storehouse of value which is why over the centuries money has come to be everything from tobacco leaves, wheat, livestock, to corn cobs, to precious metals coins and bullion [gold and silver] who each share that indistinguishable characteristic; the value could be "accounted for, measured and verified." When you understand the next statement you will understand money.

"So you think that money is the root of all evil?" said Francisco d'Anconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears not all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor--your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money, Is this what you consider evil?" -- Franciso D'Anconia Atlas Shrugged 1957

Over the years gold and silver proved the most worthy underwriters of our economic and financial prosperity because man could count on the principle by which it was based upon to stand up (i.e. it could be trusted). Under our present system [dollar based on an unknown quantity of unproven oil reserves in another hemisphere] there is absolutely no relationship between what your mind perceives the value of your output to be against its actual or real value. You must also remember that fiat currencies and their central bank patriarchs have been around for centuries and they share one indisputable characteristic. Just like their little brother liberalism, every time they've been tried they have collapsed and failed their people miserably throughout the sum history of man. Because make NO MISTAKE fiat currency is designed for one purpose and one purpose only to permanently and irrevocably enslave the nations which drink its blood and to bind the value of their output forever to the yoke of debt and usury until they choke and drown upon their own blood. Such is the nature and history of every fiat dollar ever spent in war. They were not fighting your enemies. They were fighting you. There was never conceived a greater ingenuity or more effective means to confiscate and plunder the American people. There is not one instance in history when a fiat [valueless] currency has survived until the U.S. dollar which I guarantee you will suffer the same fate as the Roman Denarius, the Chinese "Flying Money," the French Livres, Assignats and Francs and the German Mark in the days of the Weimar Republic and recently in such nations as the Mexican Peso, Argentina , Iceland, the Russian Ruble and Zimbabwe and yes even here in the United States of America our own currency has already "crashed" during the Revolutionary War with the "Continental"

Please read: http://www.nowpublic.com/world/fiat-currency-good-or-bad

Anyone who wants to know where to find the alternative needs only to read Article 1 Section of the Original Constitution:

The Congress shall have power to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

With the passage of the Federal Reserve Act of 1913, Congress unconstitutionally transferred control of the U.S. monetary system to a monopoly cartel of twelve private banks. This fraud allows the Fed exclusive monopoly license to print the coin of the realm via digital computer entry and exchange it for government debt instruments. This means this cartel was the only group established in the history of the United States granted a means to break into your house and to steal your money right out from under your nose without you ever knowing it and force you to pay interest on what was stolen.  Then to beat it all the Fed also controls the supply of money, expanding or contracting the supply at will, thus causing the very boom-bust economic cycles and causing asset bubbles resulting in inflation followed by economic contraction, recession or depression. So now what you have to understand is it was not enough for them to just outright steal from you and force you to pay interest on what was stolen. No they have to take the extra [government interventionist] step of purposefully destroying the very economy which your production provides and which provides for your family. The alternative must restoresthe exclusive authority of Congress to execute its Constitutionally mandated powers to coin the money. The money of the Constitution, or a sound money system, means money based on something of value or tied to the value of something absolute and definable. The Constitution contemplates that the "something" that money should be based on is gold and silver. If our money were tied to a standard of gold and silver, then our government [Congress] would have to spend within its means or borrow only "real money." Those loans would be redeemable in gold or silver which would prevent devaluation of the currency [i.e. inflation], as occurs today with debt based loans based on nothing, because the government's ability to debase the currency by create money out of nothing at its discretion would effectively limited. Sound money does not require a precious metals standard to be effective but what is requried is for the Fed's control of the money supply of the American people should be ended immediately and control returned to Congress as the Constitution requires. The only requirement is that whatever is chosen (gold, silver, land, energy, jelly beans, etc.) that it be measurable and definable [absolute/finite] and that the Congress be statuatorally prevented from debasing it through an ability to divide its base through the threat of addition. The best explanation is a very very simple one. My company is a privately held company with 10,000 shares of common worth 'X' dollars-per-share and a total net capitalization [market value] of 'Y.' Now if I issued and authorized an additional 10,000 shares and made them available to my shareholders at no cost and required they contribute no additional capital, then the price-per-share value 'X' would decrease while the total net capitalization [market value] of the firm 'Y' stays the same. Sound money requires that the number of shares (i.e. units of value, dollar) remain fixed and to allow us each to compete for the value each unit but it should be noted unlike any other material on planet earth nothing can compare to the long-term historical consistency of storing your wealth in gold. I would recommend you seek out the details of sound money systems in the Creature from Jekyll Island by G. Edward Griffith and End the Fed by Ron Paul.  

(1) The science of witchcraft Alchemy [the transmutation of common metals into gold] is as failed and evil as the witchcraft science of fiat currencies.

(2)  The Fed is owned by the same banks with which you appeal for us to protect. I would advocate to allow the banks which CAUSED the present financial crisis to fail along with their partner the Fed. When the dollar is finally destroyed they should fail. Such wanton financial malfeasance without consequence eliminates the free nature of markets; permanently and significantly usurping one of the most sacred and vital forces of a truly "free-market" system. The force and function in the market known as failure. Failure is consecrate. It is more than indispensable. It is terrifying in the abject disregard for sanity this current financial climate of ours has assumed there is no one and I mean no one standing up for the absolute necessity in the market for allowing firms to fail. It is the threshold which governs and discerns all rational minds to an objective end. In its absence we cannot contemplate the consequences of rash decisions. If it is profitable for firms to loan money at interest then the machine of the market will provide them. The best alternative to the Fed is freedom. Unmitigated laissez-faire economic, political and financial freedom.

 

Tue, 10/13/2009 - 16:31 | 97978 JR
JR's picture

Santayana was right: “Wisdom comes by disillusionment.” Would this were a Zero Hedge Guest Post for the world’s disillusioned to read, Prophet of Wise. You are a great teacher; I salute you.  I am a wiser man today because of you. 

Tue, 10/13/2009 - 17:00 | 98015 tip e. canoe
tip e. canoe's picture

"If it is profitable for firms to loan money at interest then the machine of the market will provide them."

for example, http://uk.zopa.com/ZopaWeb/

in this case, the machine is simply providing a transparent exchange to connect individual borrowers & lenders.

why do we even need banks again exactly?

Tue, 10/13/2009 - 17:37 | 98065 phaesed
phaesed's picture

Dude you're almost PERFECTLY correct.

 

However, what Congress did was constitutional because Congress retains the authority to order the Fed to print money... why do you think they want to raise the debt cap? What the Fed does is create a ledger, or rather CREDIT. So if no more credit can be created or extended, what can we do? WE CAN BUY OUR DEBT AND OWN CONGRESS

 

Don't you understand why everyone says don't buy treasuries?

 

BECAUSE NOBODY WANTS AMERICA TO BE OWNED BY ITS CITIZENS.

 

If we owned all of our debt and became our own creditor... what will happen??? THINK!!!!!!

Wed, 10/14/2009 - 09:31 | 98586 Anonymous
Anonymous's picture

What if I got one Federal vote for every X dollars of treasuries I owned?

Tue, 10/13/2009 - 17:52 | 98080 brodix
brodix's picture

PW,

 Central banking was originally gold based. As the old saying went; It's the golden rule. Those with the gold, rule.

 The problem with any currency based on a particular asset is that it inexorably accumulates to the banks. If you dig some gold out of the ground, to use it as money, you spend it. Eventually it gets deposited in a bank(someone with a safe) and because people don't like carrying around gold all the time, they are willing to trust the bank and hold certificates of deposit. The banks are also willing to loan out these certificates, at interest. of course.....

 That's how banking got started.

 On a personal note, one of my ancestors was Louis Mclane Jr. who was an early president of Wells Fargo and got his start hauling gold out of the Sierra Nevadas down to San Francisco. I call myself a trust fund baby because I get a couple hundred a year out of a very old and widely distributed trust fund.

 

Wed, 10/14/2009 - 04:54 | 98493 nobita
nobita's picture

great post prophet of wise, thank you.

Tue, 10/13/2009 - 16:01 | 97948 Bear
Bear's picture

The US Dollar cost $0.04 to produce ... We are in real trouble!

Plea to Obama: 'Please Mr. President take the waste out of printing green-backs'

Tue, 10/13/2009 - 16:26 | 97968 Anonymous
Anonymous's picture

The metal in a nickels cost .045+ and rising with the dollar's demise, and they are illegal to export. I am hording them.

Tue, 10/13/2009 - 17:06 | 98023 Prophet of Wise
Prophet of Wise's picture

Here's another alternative...stateside. Just imagine a world not completely dominated by the ruling financial oligarchy. It is possible.

 http://www.lendingclub.com/home.action

 

Tue, 10/13/2009 - 18:16 | 98104 tip e. canoe
tip e. canoe's picture

it is indeed possible.

now imagine what a p2p capital market could accomplish.

 

Tue, 10/13/2009 - 22:33 | 98360 Anonymous
Anonymous's picture

Unfortunately too many of you are intelligent only concerning investing. We are where we are because the liberals have distorted our economy to enrich the banksters. All of this was laid out by ZH months ago ( also by Marc Faber, Tom Woods, William White,et. al.). Now we are going to pay for not stopping the liberal spendthrift policies. I really do not see a way out of this until we get some more Reagan type politicians with the will to make the unpopular decisions and stick to their guns. Jobs are not created by government spending. We need reduced taxes on businesses and reduced meaningless regulations that stymie job creation by small businesses. Eventually it will be done, or we will all be living Soylent Green lives.

Wed, 10/14/2009 - 02:59 | 98481 Rogue Economist
Rogue Economist's picture

The more I read various armchair assessments of the impending "Dollar Crash", the more ticked off I get at the narrow view most folks take of this monetary crisis. Clearly various policies are bein pursued here by Da US Goobermint to devalue the dollar and in so doing "rob" the citizenry of whatever wealth they might have accumulated in dollars. One of the MOST obvious things just occurred, with the Fed purchasing some $50B in SDRs, which themselves are a manufactured currency of a basket of currencies including Gold of course. The problem here seems obvious enough to me, but perhaps its not so obvious to everyone? All the currencies are mathematically connected, and the so-called "basket" that constitutes the SDR reflects the value of all those currencies. Thing is, all those currencies are just the same thing as the Dollar is, abstract value notations. Is there any inherent reason why a Yen is more valuable than a Dollar or a Gold Coin either? None at all really, especially when the obligations they represent cannot be met by any country issuing their currency. The policy the Chinese are following right now is to blow a bigger credit bubble than we did, but they can't sell any of their products to anyone, especially not to anyone who has a currency devalued against the Renminby. Our armchair currency pundits are VERY provincial in their thinking, they focus entirely on the incredibly stupid policies being followed by the Fed here in the US, while entirely IGNORING the fact that every other CB and Nation-State on EARTH is doing precisely the same things at the same time, in some cases going even further off the cliff of mathematical logic, the UK for instance. What about the DEBT!?!?!? is the Clarion Call here for the Audit the Fed Lemmings. Lemme bring this down to a smaller situation we can understand better. What about YOUR CC debt? Are YOU worried about this debt now? I sure wouldn't worry about it much. Run it up so long as you have a credit line, you'll never pay it back of course. In aggregate, this is what is going on EVERYWHERE. NOBODY is ever going to pay back on this debt, which really is just a mathematical abstraction of obligation. I loan some money to my brother in law. He is broke and can't pay me back. I am bummed I won't get paid back, but that's how it goes when you loan money, its a risk you take. Of course TPTB aren't quite so forgiving here, mainly because they use the obligation of debt as a means to enslave populations. Its really quite simple, en masse you just repudiate the debt! Of course also, they won't let you repudiate it, they use the force of "law" and the military to tax it out of you if you won't willingly cough up the interest on your Option ARM Mortgage. Unfortunately, if your population isn't actually making ANY money or producing anything, there is nothing here to TAX. System Implosion. The underlying REASON for this type of collapse comes from compound interest, which persistently accrues more debt obligation than you can actually produce. Its a function of Capitalism and a function of the Banking system which supports it. As long as you pay Interest and then Interest on Interest, in a fairly short amount of time by Geologic standards the monetary system will implode, that is even WITHOUT the restriction of a planet with diminishing resources and expanding population. Add those into the mix, and the monetary system is just TOAST no matter WHAT you do. Devaluation of the currencies involved here is inevitable, and mainly its a race to the bottom and some folks are playing a carry trade between the currencies betting on which one is the last to fall here. IMHO, betting on the Dollar as the last one to fall is a bad bet.Too much of the world wealth is denominated and held in dollars, so some value must be maintained here in that currency. The Pound Sterling could go down the Toilet and only a few Limeys would get their clocks cleaned. A whole lot harder for the wealthy of the world to sell off all their dollar holdins here and maintain wealth and power. The dollar will devalue, but it won't TANK entirely. Some other currencies will. The Renminby is likely to be one of them, for the simple reason that the Chinese have 1.3B mouths to feed in a country with serious water shortage problems. Buying Chinese is an exercise in financial suicide IMHO.

Disclaimer: I am not a registered Currency Trader and hold no position in Remnimby. LOL.

RE

Wed, 10/14/2009 - 03:39 | 98486 Hammer59
Hammer59's picture

There are some pretty sharp people here. Prophet of wise---I went to view the site (P2P) lending, and was not impressed with the people seeking funding. Like RE alluded to---most were seeking funds to pay off their credit card debts, and several had red flags.  My aunt's home in Modesto CA sold in 3 days for $58,000. USD---true, the location was an armpit, but it sits on .25 acres of land. Our Country has been ruined by Bush/Cheney, Greenspan, Wall St., and the conspicuous consumption of Main Street. RE hit it squarely on the head re: a world w/ dwindling resources and unrestrained overpopulation. The wealthy have been constructing their residences like fortresses for years now. I now understand why.

Wed, 10/14/2009 - 15:48 | 99073 tip e. canoe
tip e. canoe's picture

re: P2P -- agreed hammer, Lending Club in its current form seems to be simply an enabler for conspicuous consumptive behavior.  personally, i would rather lend through kiva.org or Grameen to entrepreneurs who don't have access to any debt or capital markets otherwise.  however, those are setup (in the US anyways) as more charitable organizations rather than a way to democratize the lending market.

rather, it's the platform itself (and the possibilities contained therein) that seems interesting.  an opportunity to place the rights & responsibilities for lending directly into the hands of the depositor vs. handing those away to a bank and 'trusting' that they are making proper decisions on how to handle your deposit.  if done correctly, it could be spontaneous order at its finest imho.

 

Wed, 10/14/2009 - 06:19 | 98511 Rogue Economist
Rogue Economist's picture

< The wealthy have been constructing their residences like fortresses for years now. I now understand why.>

When I lived in Brasil in the 60s, upper class folks lived in walled compounds.  The poor lived in Favelas. You can have such a dichotomy when there is a functioning economy worldwide.  You cannot when that economy is TOAST.

You cannot wall yourself in and shut out the deprivation surrounding you, its just IMPOSSIBLE.  You will be OVERRUN by the Have Nots. You know how Nicholas and Alexandra Romanoff went to the Great Beyond?  They got filled full of lead in a Ruskie Basement in a very nice little Chateau.

So sorry, NOBODY walks away from this collapse. As the Money goes worthless, so goes the protection. Best guess here would be that those who hide behind the walls of their compounds will be LUCKY to get off as easily as Nicholas and Alexandra Romanoff did.  This time, you are looking at a resurrection of REAL JUSTICE, Spanish Inquisition style.  I most certainly would NOT hide behind the walls of a rich compound in the conflagration to come.  It just makes you a TARGET.

RE

Wed, 10/14/2009 - 13:02 | 98855 Prophet of Wise
Prophet of Wise's picture

Only one solution remains...

"While you were dragging to your sacrificial altars the men of justice, of independence, of reason, of wealth, of self-esteem -- I beat you to it, I reached them first. I told them the nature of the game you were playing and the nature of that moral code of yours, which they had been too innocently generous to grasp. I showed them the way to live by another morality-mine. It is mine that they chose to follow.

All the men who have vanished, the men you hated, yet dreaded to lose, it is I who have taken them away from you. Do not attempt to find us. We do not choose to be found. Do not cry that it is our duty to serve you. We do not recognize such duty. Do not cry that you need us. We do not consider need a claim. Do not cry that you own us. You don't. Do not beg us to return. We are on strike, we, the men of the mind.

We are on strike against self-immolation. We are on strike against the creed of unearned rewards and unrewarded duties. We are on strike against the dogma that the pursuit of one's happiness is evil. We are on strike against the doctrine that life is guilt.

There is a difference between our strike and all those you've practiced for centuries: our strike consists, not of making demands, but of granting them. We are evil, according to your morality. We have chosen not to harm you any longer. We are useless, according to your economics. We have chosen not to exploit you any longer. We are dangerous and to be shackled, according to your politics. We have chosen not to endanger you, nor to wear the shackles any longer. We are only an illusion, according to your philosophy. We have chosen not to blind you any longer and have left you free to face reality -- the reality you wanted, the world as you see it now, a world without mind." -- John Galt, Atlas Shrugged 1957

Wed, 10/14/2009 - 15:50 | 99078 tip e. canoe
tip e. canoe's picture

"We are god's unwanted children, SO BE IT!" -- Tyler Durden, Fight Club 1999

Do NOT follow this link or you will be banned from the site!