The Last Resort Of A Dying Economic System: From "Beggar Thy Neighbor" To "Beggar Thyself"

Tyler Durden's picture

The phrase of the week comes from The Privateer's Bill Buckler, who has coined the one term that best describes the lunacy that has gripped the world: "Beggar Thyself." Unlike the 1930s when the theme of the day was "beggar thy neighbor" and which culminated in World War 2, this time the emerging paradigm is one in which the first to defect wins... if only for a few seconds. Because when the "beggar thyself" process is complete, it will mark the end of not only the central banking regime, and the days of excess wealth accrual to the financiers of the world, but also the termination of the 140 year old Bismarckian "welfare state" which is the primary culprit for the creation of trillions of imaginary wealth out of thin paper. When the fiat system ends, so will end the hallucination that developed societies are capable of providing for their hundreds of millions of existing and future retirees. And with that will come the "social instability" that always marks the closure of a failed monetary regime and the admission of global bankruptcy.

From the October 17th edition of Bill Buckler's Privateer:

What Other Choice Is There??:

In the hundreds of articles appearing in the mainstream financial press all over the world and especially the English-speaking world, one headline stood out. It was this - “Currency wars are necessary if all else fails”. The headline appeared in the October 11 edition of the UK Telegraph.

The contents of the article are not germane. What is germane is the naked contention that the nation or nations which will emerge the “strongest” from the current financial malaise is the nation or nations which succeed in devaluing their currency faster than any other. Only in that way can the “currency wars” be won. If these “wars” develop further, they will become a race to see who can come up with a worthless currency faster than anybody else. The 1930s coined the phrase “beggar thy neighbour”.  Today, the financial potentates have gone one better. They are working on a “beggar thyself” policy.

Co-operative debt-based stimulus didn’t “work” and neither have “austerity” programs, according to the IMF. Their “World Economic Outlook” comes to the conclusion that the world can neither “stimulate” its way out of the current GFC nor get there via “austerity” programs. And it isn’t too sanguine on the prospects of currency wars either. As the IMF report noted: “Not all countries can reduce the value of their currency and increase net exports at the same time”. After all, they tried that in the 1930s. The only thing that “saved the day” then was a REAL war, not one on the foreign exchanges.

But still, the global financial potentates keep thrashing around inside their own context looking frantically for a way to overcome their plight. As they want the citizens of the nations they “represent” to see it, they have no choice. If they for one second admitted that the entire system as it is presently constituted is deficient by its very nature, they would instantly have the “social instability” they are warning us against.

In other words, with each passing day the fraud that is the concept of Bismarckian social cohesion and stability, brought to you by a hundred years of central banker subjugation, like a putrid onion, loses layer after layer of its mask, until soon the entire world will see behind the lie. The resultant explosion in pent up decades of anger could easily make all prior conflicts seem tame in comparison. Hopefully it can be avoided. But for that to happen, the fate of the dollar as the reserve currency must and will end. Buckler again:

The “Game” Explained:

On October 12, the minutes of the FOMC’s most recent meeting (on September 21) were released for scrutiny. The gist of these “deliberations” are contained in one sentence - “Policy-makers had a sense that (more) accommodation may be appropriate before long.” This is the expectation on which the world has been basing its investment decisions ever since that September 21 meeting.

The reaction to the release of these minutes was by no means confined to the US. An excellent example of this is a quote from Brazilian Finance Minister Guido Mantega. For weeks, Mr Mantega has been maintaining (quite rightly) that the world is already in a currency war. This is what he had to say about  the US central bank - “The Federal Reserve is promising quantitative easing, which is monetary policy’slast resort. I don’t think it will reactivate the economy, but it will weaken the Dollar.”

This is more than “monetary policy’s last resort”. It is Ben Bernanke’s “helicopter money” scenario writ large. The US central bank proposes to use the Federal Reserve notes it creates out of thin air to “buy” the debt of the US government which the Treasury creates out of thin air. This is the last gasp of a monetary “system” which is as far from sane and historically sound money as it is possible to get. Not only is it doomed to failure, it will doom the US Dollar if it is put into practice to any substantial extent.

Since the US Dollar remains the premier global reserve currency, that will leave the rest of the world with absolutely no choice but to institute radical changes to the money which underpins everything. In the modern sense of the term, there can be no markets without a viable money. The Fed is on a path which will remove the money. The markets can only then survive with a different, and better, underpinning.

What are the alternatives? These should seem obvious.

[The BRIC nations] rank first, second, fifth and ninth in terms of world population. Two of them, China and India, are the two most populous nations on earth with almost 37 percent of the global population between them. The BRIC nations are often singled out as the coming global economic powerhouse, the nations which are and will increasingly drive world economic “growth” in future. In recent surveys done in the US, they were seen as being a better investment bet than is the US itself.

The majority of the “ordinary” people in ALL these nations, but in India and China in particular, are still living in a coin economy. They still conduct their transactions the way the whole world did until the 1920s or 1930s and the way that all but the richest nations (the US and Canada in particular) did until the mid 1960s. Coined money is not a nuisance to these literally billions of people, it remains money itself.

The history of indirect exchange developed in two main stages. First came a steady narrowing down of the physical economic goods which were seen as having the utility to be a medium of exchange. That ended when Gold (and silver) were singled out. The next development was a tangible form that these two metals could take so as to be used as money. Gold and Silver coins emerged and lasted (in the case of silver coin) right up until the mid 1960s. As an illustration of the consequences of the banishment of precious metal coin money, consider this: The US stopped minting Silver dimes (10 cent pieces) in 1965. At current prices, the silver in one of these coins is now worth just under $US 1.70. A pre-1930s US Gold $US 20 Double Eagle coin is now worth about $US 1310 in Gold content. In the early 1930s, $US 20 was a month’s wages for many. At today’s minimum wage, $US 1310 is considerably more than a month’s wages. The difference is that the wages then were TANGIBLE. Today they are promissory.

In essence, that is what the history of the global fiat money era has been. The masters of the universe have taken a simple thing like precious metal coinage and turned it, in stages, into a galactic game of GIGO (Garbage In - Garbage Out). Computers, without which our modern monetary “system” would be impossible, will accept anything that is fed into them. So will a lot of people. But many will not.

The idea of Gold and Silver coin circulating as money may seem like something out of the distant past. But Gold coin DID circulate until about 65 years ago. And Silver coin was still circulating as money in the US when Kennedy was assassinated in late 1963. For half the world, coins still ARE money.

There is little, if anything, that can be added to this.