Squatting On The Shoulders Of Midgets

Tyler Durden's picture

Authored by Simon Black of Sovereign Man blog,

Isaac Newton, the father of classical mechanics and progenitor of nearly every technology we use today, was easily one of the top 10 most influential minds in all of human history... so much so that even Albert Einstein kept a picture of Newton in his study.

Newton’s achievements were so momentous that when he died in 1727, he was buried with the honors normally reserved for a king. His body lay in state for four days at Westminster Abby, and his pallbearers included two dukes, three earls, and the Lord Chancellor.

Yet as accomplished as he was, Newton credited the brilliant scientists and philosophers who came before him, acknowledging that his insights would not have been remotely possible without the foundations laid by great thinkers– Archimedes, da Vinci, Descartes, etc.

In a personal letter to a colleague in 1676, Newton famously remarked “If I have seen further it is by standing on [the] shoulders of giants.”*

No doubt, all great ideas flourish by expanding upon the works of others. Unfortunately, so do terrible ones. And one of the worst ideas in history that continues to play out today is the grand experiment of fiat money.

The idea is simple. Rather than allowing money to be scarce and have intrinsic value, our fiat system grants power to a tiny elite to conjure money out of thin air. Presumably, if the ones in control are smart, honest guys, then everything should be fine.

Fiat was a total failure right from the beginning. When unbacked paper currency was originally introduced in the 11th century by Emperor Renzong of the S’ung dynasty, nasty inflation quickly followed.

The Yuan dynasty later adopted the same tactic of printing paper money without restriction, and they, too, suffered severe hyperinflation.

In fact, upon visiting China from Europe, Marco Polo remarked in his writings with incredulity how ‘[a]ll these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver… and indeed everybody takes them readily. . .”

For Marco Polo, this was unheard of. In the Europe of his time, the gold Florin was the major medium of exchange, not paper. And the Florin famously held its metal content at precisely 54 grains of fine gold for nearly three centuries.

It took a few hundred years, but the fiat idea eventually spread to the west. Today, fiat is the global standard; just as in Yuan China, paper is readily accepted as money, and future historians will likely look back on us the same incredulity as Marco Polo viewed the Yuan.

Nevertheless, we have our own ‘brilliant scientists’ championing this bad idea. We award our most esteemed prizes for intellectual achievement to men like Paul Krugman and Joseph Stiglitz who tell us that the path to prosperity is for one person to conjure trillions of dollars out of thin air… or to impose capital controls, raise taxes, or spend more money.

Like Newton, they’re merely building upon the foundations laid by men who came before them. Unlike Newton, they take bad ideas and make them worse, squatting on the shoulders of [intellectual] midgets like John Maynard Keynes, whose works include such gems as:

“Can America spend its way into recovery? Why, obviously!”


“[M]oney borrowed and spent will revive the economy.”


“[E]arthquakes, even wars… serve to increase wealth…”


“[To] fill old bottles with bank notes, bury them at suitable depths in disused coal mines. . . and leave it to private enterprise… to dig the notes up again… is not so different from gold mining…”

It borders on the absurd… as if it were all written as part of a satire. Yet in one of the most intellectually dishonest statements ever made, Paul Krugman recently wrote that “Keynesians have been right about everything.”

This is incredibly dangerous thinking. And it’s important to never forget that, despite how normal things may ‘feel’ on the surface, the economic engines deep below are steered by these same people who worship at the cult of bad ideas.

* The ‘shoulders of giants’ phrase is not originally Newton’s, and when he wrote it to his contemporary and rival Robert Hooke, it was in half-jest, half-humility.

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Zymurguy's picture

Watch:  Money As Debt video on YouTube.  Share it with everyone you can!

Supernova Born's picture

Krugman is merely a link in the human centipede of fiat crap passers.

TwoShortPlanks's picture

Never trust a man who never gave his Ferret a run.

DoChenRollingBearing's picture

FIAT$ work very well if you understand that it is for spending NOT as a store of value.  Gold is the best store of value.

Al Gorerhythm's picture

" if you understand that it is for spending NOT as a store of value. "

 We aren't using printed currencies in most cases, we are using electronic credits (usually), a derivative of a derivitive. 

"Gold is the best store of value."

True but silver is also on par as a value saver, if used as the currency money denoted in gold.

Silver as a currency should store wealth as well as gold but has been driven from use by banker credit notes.

Using fiat currency adds to the debt burden. Is it really working well as a medium of exchange of is it just passing the liability into someone elses' hands?

I just read a report on SGT that said that modern currency was readily accessible because credit is readily available. I contend that that is not the case. I see currency controls everywhere; on how much cash you are able to access and how much you can carry and if you can spend it without being reported (* see below) There are withdrawal restrictions, travel restrictions, spending restrictions, yet easy access through credit cards. There IS a currency shortage, so, are fiats working well? If a fiat comes into your wallet, it is still fiat. Currency should be money as well, not just a derivitive of it. Currency should be a valuable less precious but precious all the same, coin of exchange, not a debt note but a settlement device as well. One that has been brought into existence via work, not whim.It shouln not have nor nedd an interest rate of devaluation risk attached. It cannot be nor need be debt. It shouldn't be a physical symbol of someone eles' liability but rather one's proof of their ability to settle an account. On the other hand it is also the proof of a seller's acceptance of the coin's settlement value. The acceptor Knows that work has been employed in its creation. Work-for-work exchange. The dollar hasn't that inateness. There is no value for value exchange if the currency can be brought into existence by whim.Remove the symbol and we are a little less jolted by the realization of its very existence. Not that many get it, yet. 



Dear Jim,

My friend just arrived back from Budapest after some dental work. This is what he was welcomed to when he got home in Pennsylvania. The following is his email:

CIGA Brian


I had an incident yesterday which has disconcerted me. When I was getting ready to go to Budapest, I went to the bank and got $2000 in $100 dollar bills for spending cash and emergency funds. I never spent the money while I was gone, so when I got home I had all these hundred dollar bills. I went to WAWA and used one. Apparently a Timothy McVey looking guy who was a Federal Agent was standing behind me in line and saw me use a large bill. He followed me from WAWA and stalked me as I stopped at Trader Joes then followed me home and called in back up. I went to take a piss and the front door started banging, I yelled down, "be right there" and the banging got

louder, I stopped mid stream and ran down only to find my house surrounded by Israeli troopers in riot gear ready to shoot anything that moved. I said come in and turned around and they drew guns on me and said don’t do it.

There were at least 6 cop cars and 2nd street was blocked. They took my name and number and then they went back to WAWA to look at the bill in question, which turned out to be a good bill. They called me to apologize for the excitement.

When I asked how they got here so quickly after I left WAWA the Media officer told me about how the Fed agent following me.

I now do not feel safe in America, I want to go back to a communist country like Hungary where the Israeli military tactics are not in force. I would like to complain and make sure this nut job who is harassing tax-paying citizens is removed from this environment. But I just want to go live in a civilized country which operated on the honor system. I have been to the other side and "IT’S MUCH BETTER" than this bullshit, America/Israel sucks. I can’t help but feel this incident has shaken me up and made me feel very uncomfortable. It was a personal dose of reality as to what our country has been turned into – an Israel slave state. Last week I went to Barnes and Nobel to buy a book on beginning Hungarian and they don’t even publish a book on the language. I don’t care; I would rather live in Budapest unable to speak the language than live here and have Israel show up on my doorstep ready to kill an innocent victim. France, Italy, Austria, Hungary, even Greece, one of you, here I come!!!

Dear Brian,

We have to be real. There is no end to this in the next four years. In fact it will double and then double itself until it is so much a part of life that the 47% will welcome it as a form of class warfare. The only difference between Nazi Germany and the upcoming USA is that it will coddle minorities growing into majorities as a political base. The SS is coming out of inland securities as they organize an army. The signal of no return without any doubt will be the disbanding of State Defense Forces.

Already 13 governors have been contacted to make a full report of their State Defense forces and all deployments over the last ten years.

Face the facts. There is no road back and if you try to make one you will end up in the same cell with a Rear Admiral or maybe a General. You want an alternative? Forget passports and start thinking permanent residency permits and work permits that would not trigger tax retribution, at least today.


Real Estate Geek's picture

I'm calling Bullshit on the WAWA story. No fucking way that happened for a good C-note.

Al Gorerhythm's picture

Hmmmm. I wanna live in that squeaky clean world you live in. 

Diogenes's picture

They call it Fiat money because it depreciates like a rusty Italian car.

devo's picture

Governments throughout history have debased metal coins, too, either by fixing price below market or adding alloys. Just saying.

robobbob's picture

and hence the phrase bad money driving out good as people hoarded the true currency while shunning the debased further eroding the economy that the debasement was supposed to help

Pairadimes's picture

Is it a tradition in everyone's household to spit after saying 'Paul Krugman', or just mine?

Muppet Pimp's picture

Its my tradition now.

Here is some truth for you:

Throughout the crisis the libor provided the best price to sell your debt.  They are being chastised for whatever they did to get the best rate to their clients (and I am sure a lot for themselves on the side, but I digress).  So, who is smarter, the guys in london who served their clients with the best prices, or the fools in NY who charged more?  If there are two coin shops, and one is willing to sell to you below spot and the other at spot, who is taking the best care of their client?  There is a massive dis-info campaign going on that is why you keep hearing about all this progress on the debt from one side and no progress from the other side.  LBMA is also keeping their foot down on precious metals so you can get some before it takes off.  So just consider, who are the good guys, London or NYC and DC.  Draw your own judgements, but I bring you facts fellas.

Slightly Insane's picture

We don't spit after saying "Paul Krugman"


We practice vomitting, followed by spewing blood from the eye sockets.  Consequently, we don't like him much here, and he ranks well below a profuse case of hemmorhoids with Ghost Pepper Sauce added for effect.  My brother thought it would be better to just pull the pin on 6 grenades.  I'm thinking he was right.


In future human history, Cockroaches will be remembered as "Krugman's", and "Geitners"

Silver Pullet's picture

You didn't invent that physics.

Slightly Insane's picture

Of course not.  Invent is to create.  He just "Discovered" physics.  Much as you will discover how little you know about the human scumbags that are taking your country down the crapper.

Backspin's picture

I think maybe you missed his point.

Flakmeister's picture

His point was to get a cheap laugh...

It would have worked better if it had not been a twisted out of context line over-hyped and played ad nauseum....

No, it is pretty clear that he got the point...

Silver Pullet's picture

I don't think it's been played ad nauseum yet. Point taken though on 'discovered' vs. 'invented'

kindape's picture

"Fiat was a total failure right from the beginning."


Wrong. Without fiat we'd never have had the technical/monetary/resource velocity we've had. Gold is fiat too, just takes more resources to mine gold. Real wealth is energy and built capital/productive capacity - what we have today couldnt have possibly been built with metal marker capital (without leverage/digits as well).  Internet memes are mostly just the same -they get part of truth right but err badly on the larger story. "Fiat" is a misused/burned term just like Peak Oil and Sustainability

Seer's picture

"Without fiat we'd never have had the technical/monetary/resource velocity we've had."

I get what you're saying, but to state that it couldn't have otherwise been possible is to do so knowing that there isn't a parallel universe to inspect.

Velocity is SPEED.  The exponential function, of which fiat employs, clearly expresses speed as time (or, time expresses speed, the correlation is pretty absolute).

Flakmeister's picture

You are aware that the derivative of an exponential function is another exponential...

y = e^(f(x))  dy/dx = d f(fx)/dx  e^(f(x))

Edit: Based on the junks, the fuckin' Boetians are out in full force tonight.... that along with junking the Brachistochrone story..

NotApplicable's picture

So, you're saying that without fiat, we'd never had this massive malinvestment that has destroyed an otherwise productive economy?

"Gold is fiat too."

I don't think you know what fiat means. Gold existed as money long before sovereigns designated paper as their exclusive, official money. Fiat ONLY has value due to the coercive force of the sovereign. Gold, OTOH, is valued for all of the reasons that have made it the premiere form of money on the planet (none of which is due to a decree of fiat).

Saying that gold is fiat is akin to legislating that the sky is blue.

kindape's picture

yes gold has been accepted as money but just like cowry shells or beads or whatever it is a MARKER. my argument isnt really about gold its more that people are naive if they think we could have close to this amount of complexity, trade, standards of living on a gold standard. I fully agree that we wouldnt have had the 'problems' we have now - but my original comment pertained to the amount of productive capacity/energy use.

Raynja's picture

if you think that real wealth is stored energy, then you should understand the difference of fiat and gold.  with fiat they can steal your energy after you stored it, with gold they cannot.

steve from virginia's picture





"So, you're saying that without fiat, we'd never had this massive malinvestment that has destroyed an otherwise productive economy?"


Without fiat, we would never have had the massive malinvestment in the illusion of a productive economy. What is ending today is the illusion ... because lies cost too much.



wisefool's picture

In addition to your original comment, People also need to read the first post in the comments section, and then follow the link to the "debt as money" videos. watch them all the way through. Dont turn them off after the first 15 minutes when they talk about how gold was better than barter.

Not everyone on zerohedge is a goldbug, but many are. 99% of people on zerohedge are sound money advocates. So welcome to a respected minority of the majority.

According to some legends, Newton spent more time on alchemy (turning ordinary materials into gold) than his published works. He was also a secret agent for the crown to root out conterfeiting. Like most geniouses, he worked every angle.

Had he succeded at alchemy (gold only), he would still be remembered more for his contributions to physics in general. Alchemy would (and still might) have made gold as worthless as it was on delivery by the last spanish galleon. (also covered in the money as debt series, if you have the guts to watch it all the way through)

Even a broken clock like Keynes is right once or twice in a 50 year career. Too bad millions of people have died in war, non-state violence and suicide. Largely from the rest of his idiotic teachings.

Flakmeister's picture

You were doing so well until you suggested that millions died as a result Keynes...

Christ, now that is really pushing things....

Deficit financing of wars is as old as warfare itself....

wisefool's picture

Good points. I would only offer that the modern Keynesian tax code combined with his monetary theories was purposefully created to be immune from war weariness. Allowed for durations and scales of war not seen before in history.

One good thing about PM currency standards. When the barbarians met the legions on the frontier. They asked for gold. The legions said, we don't have any, they pay us in tin now. The barbarians traversed the countryside. They asked the peasants. Give us your gold. The peasants pointed tword rome and said, we dont have any. they took it. The rest is history.

ATM's picture

I am wondering how it is the the Roman Empire created all it's infrastructure without fiat? How was all the building done if not via fiat?

MayIMommaDogFace2theBananaPatch's picture

Pretty sure that the "empire" endeavors required debasing their coins...

But just a little bit -- at first anyways...   ;-)

BigJim's picture

...Without fiat we'd never have had the technical/monetary/resource velocity we've had.

Assertions are not proof. Give us your reasoning - something along the lines of:

clever bureaucrats have a much better grasp of a society's capital than savers, who mistakenly believe they have a right to delayed spending power... instead of having their masters suck the value out of their savings and 'investing' the capital in exciting (and wealth-creating!) projects like invading Iraq

kind of thing.

Gold is fiat too, just takes more resources to mine gold.

No, chum, gold is not 'fiat'. As its present day value attests. OH???? You didn't know it had been demonetised... and yet still retains value? Unlike the Weimar Papiermark. Or the Hungarian Bilpengo. Or the Argentinian Old Peso, the Peruvian Sol, the Zimbabwe Dollar, etc, etc. Get the picture, idiot? Once the government demonetises fiat currency, it loses all value... except to numismatists. Gold does not.

Now fuck off back to HuffPo where such idiotic memes get swallowed without chewing, you achingly ignorant buffoon.

BraveSirRobin's picture

All you gold bugs are getting PUNKED! The banks and corporations are hording cash created from thin air. Soon, they will knock the legs from under the economy, and stop priniting. Everyone will either sell in the panic to avoid heavy losses, become liquid to avoid bankruptcy and forfieture of collateral, or just to be able to buy necessities. Gold will crash against cash just as well. And all those banks and big corporations hording all the cash will be buying and taking with both fists - your gold, your silver, stock portfolios, bonds, homes, everything.  

Everyone here reading this forum is the little guy, and the big guys (the house if you will) ALWAYS wins.

Bend over and grabs your ankles boys. And you better learn to love it, or else, bitches!

BigJim's picture

So - these 'banks and big corporations' will be buying gold & silver with both fists... with money created out of thin air... but somehow the price will drop?

Please explain, I'm sure we'd all like to know how that whole supply and demand thingamajig works.

Oh, and an explanation of the effects of monetary inflation on the prices of hard assets would be quite useful, too.

I knew there was a reason to keep coming back to ZH!

EscapingProgress's picture

He's absolutely right. Deflation followed by inflation to buy the world. I also believe that is the end game.

Money is debt, and we have a massive debt bubble. When it pops money will be destroyed because debt will be destroyed (i.e. defaulted on). This will decrease the supply of fiat money (deflation) which will increase the value of fiat relative to other assets. Borrowers will also be wiped out by this high deflation which will encourage large sell-offs of leveraged assets (i.e. real estate). This is the deflation that will preceed the inflation.

After the paper prices of various assets has crashed a printing spree will commence in order to "reinvigorate a once great economy" (or something to that effect). This newly created money will, of course, end up in the hands of bankers (see: Cantillon Effect). A massive buying spree of distressed assets will ensue, and anyone that isn't a banker who is left still holding anything will be desperate to sell just to buy bread.

And thus the scourge will conquer.

JOYFUL's picture

Pointlessly pessimistic...

the cabbalistic formula for 'world domination' comes with a built in self-destruction mechanism...

"Bankers"(code word for hebraic moneychanger\tax farmer)will weave fantastically complex plans to advance their goals, only to see it all blow up in smoke...again and again...

yet one more confirmation of the fact that all of our waking reality was predicted and modelled by the cartoon geniuses of those 50's studios like HannaBarbera...while I am still a bit confused as to whom the Roadrunner is a stand in for, there is absolutely no doubt of the identify of the Coyote.

And the plethora of mad genius evil no goods constantly plotting no-goodness? The Professor, Master Cyclinder, General Clang...and so on?? Lurianic cabbalists the bunch of them...http://www.zimbio.com/watch/sUjbVtztn7f/Felix+Gold+Mine+How+Steal+Gold+M... The Barrick Formula....http://www.zimbio.com/watch/3WypvUGTI3M/Instant+Money+Master+Cylinder+Ki... =The Federal Reserve System

Maghreb's picture

I think you have a point that fiat isn't all bad. Alot of modern super projects  would have been impossible without Fiat. You see it with the Roman Empire. They were pushing an almost pure fiat system through debasing their own Silver Denarius. It makes alot of things possible that wouldn't be. Not only can you tax the fuck out of people the old fashion way but you get the extra inflation tax that no one can hide from as well.

Seer's picture

What a brilliant idea, question the premise!

Now, Simon, let's take another step toward THE central premise driving everything: How about asking whether basing everything on perpetual growth is a good idea?

francis_sawyer's picture

Newton stole his ideas from some long lost knowledge that came long before him... You don't think the Alexandria library totally burned down [along with everything in it] do you?...

Real ideas are only found on cocktail napkins... You should know that Simon... You seem to spend your life setting your drinks on them in Tiki bars... Newton DID have a goofy little pocket computer named after him though... If you keep at it Simon, in 2 or 3 centuries from now they might name an 'etch a sketch' out of you...

Seer's picture

BTW - Great way to attract the SEC! ("midget" in the title and all)

Snidley Whipsnae's picture

Comparing the current crop of idiots, ie; Krugman, Bernanke, Timmy, et al, to Newton and those upon who he stood to invent a new math for calculating the movement of heavenly bodies, create tide tables, etc, is ludicrous at best.

All MMTers, Fed promoters, ivory tower psudo intellectuals, etc, 'economists' do not equal a pimple on Newton's ass.

How many of these modern clowns that call themselves economists have had a single original thought?

AUD's picture

Leibniz was no less influential in the development of the calculus.

Snidley Whipsnae's picture

Many were influential. Newton was extrodinary.

One thing that sets Newton apart was his frugal life style and his willingness to be alone for years with his work and no human companionship... male or female. At times he would go without food for a week or more, even though it was delivered to his door. He was very unusual and almost alien to those around him... and he didn't care what others thought of him. He only cared that whatever he published or lectured upon was absolutely correct. Even so, he made a few mistakes.

Who doesn't?

AUD's picture

If any event need be singled out as the beginning of the integral calculus, it was the recognition that the determination of an area is the same thing as solving a differential equation, and the credit for this step is mainly due to Leibniz, who also introduced the dx symbolism

Mathematics for the Million, Lancelot Hogben, 1936

MayIMommaDogFace2theBananaPatch's picture

I was gonna say that Isaac has a cookie named after him, proving his superiority, BUT it turns out Gottfried Wilhelm also has this distinction.


Strider52's picture

Thank You. I studied Newton, and he was likely the most intelligent man ever born. Yes, this made him obsessive to the point that he was practically a freak, but you have to admire his accomplishments.

Seer's picture

Of course it's STUPID to compare "economists" to Newton!

Anyone know what Newton thought of the exponential function?

Flakmeister's picture

Not sure but have you read the story about the Brachistochrone problem...

Snidley Whipsnae's picture

"Of course it's STUPID to compare "economists" to Newton!"

Why? Today's economists claim that their discipline is a science and feel that they right to accept Nobel prize for their 'work'... lol

Flakmeister's picture

I suggest you lookup who exactly gives the Nobel prizes in science and who gives the prizes for Peace and Economics....

Al Gorerhythm's picture

Yes; he invented the gold standard.