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Central Banks Have Violated Fundamental Laws of Finance

EconMatters's picture




 

By EconMatters

 

Is Monetary Policy Too Complicated for Mainstream to Understand?

 

It is amazing how far Central Banks have been allowed to go with regard to policy tools and influence, and how extreme their policy measures have become since the financial crisis. No other form of governmental authority has been granted these types of unrestrained powers in any branch of government, not Congress, the Supreme Court, the President, or the Military for comparison`s sake in the United States.

 

These policy measures really are the perfect example of taking maybe what may be an effective policy tool in strategic, but rare instances and adopting it as an everyday, cure all that becomes standard operating procedure for a banking, finance and monetary system. 

 

Healthy Financial Infrastructure

 

It has been said that a modern civilization needs a banking infrastructure to fully realize its potential, and grow from a business and economic standpoint that represents the modern capitalistic model which has greatly improved human technological, creative and individual prosperities. 

Central Banks & “Monetary Extremism”

 

However, the last seven years of Central Bank actions, and the last 6 months in particular with the ECB`s actions to enact extreme monetary measures, the Federal Reserve making excuse after excuse to defer normalizing monetary policy, the Bank of Japan just experimenting with monetary policy solutions, and the recent cascade effects on other central banks to lower their rates to combat the side effects of the first movers “monetary extremism” it has become abundantly clear to all but the politicians that central banks are no longer the all-knowing saviors of the financial system, but in fact have gone off the deep end, left to their own unregulated devices, and have become a large part of the problems in and of themselves. 

 

Basic Finance Principles the Starting Point for Economic Theory

 

There is a major distinction between economic theory, and finance theory but let`s get this one thing straight, economic theory starts with finance theory, and not the other way around. There are certain immutable laws of finance that should never be violated under most circumstances, even for a few months; let alone let to stand as permanent fixtures of the monetary system in a capitalistic system.

 

 

ZIRP is the main problem with the global economy right now, and all the central banks are doing the exact opposite of what they should be doing, which is normalizing rates, developing a functioning yield curve which every modern lending system since the beginning of a banking infrastructure and finance community has relied upon to fully respect capital, and allocate capital to its most efficient pro-growth projects in society.

 

Japan ZIRP Model Failed 

 

Just take Japan they have tried this ZIRP model for over 20 years, it is a complete failure, remember when Japan was the rising giant of the East, and now the BOJ has gone completely rogue, well not according to the Krugman’s and the Bernanke`s of the world, which is where this whole modern ZIRP Economic Garbage of a theory went to the dark side in what I label “Modern Monetary Extremism”. 

Monetary Extremism: Like Having a Military Draft in Peace Time

 

If this happened in any other area of society take it the military, Supreme Court, a religion, a school board it would all have been rejected thoroughly by society, extremism of this magnitude is usually rejected in Democratic societies. 

 

Yes it is extremism Paul Krugman, one doesn`t take emergency measures and then implement these measures for seven straight years, the equivalent of an entire business cycle in some cases, to the point that they become the actual basis for the financial principles that make up the monetary system of banking, lending and commerce. 

 

Negative Real Rates a Big Problem for Central Banks

 

All one has to do is look at the negative real rates of the bond market to see the improper allocation of capital in the financial monetary system, in short the immutable laws of financial theory have been violated, and this is a problem for a functioning, and healthy capitalistic system. Remember economic theory comes from finance principles not the other way around, the economists of the world have completely ruined the financial system. The damage they have wrought on the financial system is far worse than the original financial crisis they were trying to fix. Gosh we only had a recession which we have had many in the history of the world, but now we are stuck with dysfunctional and socialized financial markets, the most basic strike against everything financial markets and capitalism stands for! 

Capital Allocation, Productive Growth & Negative Real Rates of Return on Investment

 

When I look at all the negative real rates around the world, and how much money, trillions and trillions of dollars chasing yield opportunities in electronic markets instead of this capital actually being incentivized by a normal functioning rate structure and curve in the global bond markets where normal finance relationships that have stood since the beginning of modern business transactions it is apparent that central banks need to actually start normalizing rates, and not lowering them because the zero bound is detrimental when utilized past 6 months to a year at the most in extreme emergency situations. ZIRP keeps money from actually getting out into the real world, and ends up incentivizing more capital searching for Yield in highly insulated financial markets, this capital never reaches the ‘real Economy’.

 

Zero-Bound is Deflationary Monetary Policy 

 

I am not saying the Fed Fund`s Rate should be raised to 10% and higher is better, that is the extreme in the opposite direction. But this ZIRP Love Affair and Obsession got way ahead of its usefulness, and it was bad enough when Japan was the only country in the world going down this path, which should have served as a cautionary tale to the Krugman and Bernanke`s of the economic elite in this country, but the “Japanification” of the entire global monetary system, is the biggest problem the global economy faces right now. It incentives unproductive and highly inefficient uses of capital allocation strategies, and is actually deflationary, which is ironic because this is the very reason used for going down this extreme monetary path in the first place!

 

A healthy 3% Fed Fund`s Rate Allocates Capital in More Productive Growth Oriented Projects

 

I know it is counter-intuitive to what these economists believe, but a healthy 3% Fed Funds Rate will go a long way towards restoring basic financial principles and relationships in the broader economic system. It will promote much more productive uses of capital, in a sense respecting capital, and restoring the necessary healthy financial relationships needed for stimulating productive growth in the global economy. Negative Real Rates are a problem for central banks, certain basic fundamental finance principles must be respected at all times, and one of them is that a healthy banking, lending and properly functioning monetary system must always have positive real rates of return on investment. It serves as the basis for any healthy allocation of capital within a given society that promotes long-term growth initiatives. ZIRP in essence is deflationary in nature, it becomes a self-fulfilling, reinforcing slippery slope of “Monetary Extremism” and should be rejected at all costs!

 

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Tue, 02/03/2015 - 14:55 | 5739820 dexter_morgan
dexter_morgan's picture

You make it sound like all of this is not part of a grand plan. Follow the money, who is benefitting most from this MME?

Tue, 02/03/2015 - 13:30 | 5739384 wwxx
wwxx's picture

Did this person at Econmatters just pull his head out of his ass today, or what?  It is almost humorous to see how bitchin hot these people get, as the bitter subtleties of Friedman Economics, aka Disaster Capitalism (as described by Naomi Klein in her book from 2007 'Shock Doctrine') reveals itself to their reality.

 

But this Econmatters--asshole has gone too far, just like all the other jokers that believe in their 'new normal' internet re-wording ability.  With the complete lack of research, the Econmatters points at Japan as the sole eastern example...get a clue dude!

 

from the article--"Japan ZIRP Model Failed 

 

Just take Japan they have tried this ZIRP model for over 20 years, it is a complete failure, remember when Japan was the rising giant of the East, and now the BOJ has gone completely rogue, well not according to the Krugman’s and the Bernanke`s of the world, which is where this whole modern ZIRP Economic Garbage of a theory went to the dark side in what I label “Modern Monetary Extremism”. "

 

So is that what we should all call it now, 'Modern Monetary Extremism'...because Econmatters has now coined the phrase?  I guess you simply don't have a clue when The Bernanke, or Krugman refers to 'green shoots' or someone refers to the 'Chicago & Harvard boys'.

 

from the article-- "and it was bad enough when Japan was the only country in the world going down this path, which should have served as a cautionary tale to the Krugman and Bernanke`s of the economic elite in this country, but the “Japanification” of the entire global monetary system,"....bla, bla, bla  so funny to even conceive the idea, that Japan was the only example.  Now if you want to get real Econmatters, try reading a book like Shock Doctrine, by Naomi Klein 2007, and give credit where credit is due.

 

Oh yes, and your paragraph-long, run-on sentences, did not provide clarity or make a new point, as a matter of fact your whole essay didn't make a point of anything new.  You might want to reevaluate the more familiar term 'liquidity-trap', instead of making up the word "Japanification".

 

wwxx

 

Tue, 02/03/2015 - 13:00 | 5739295 moneybots
moneybots's picture

"There are certain immutable laws of finance that should never be violated under most circumstances, even for a few months; let alone let to stand as permanent fixtures of the monetary system in a capitalistic system."

 

That all goes out the window, when immutable laws get in the way of extending and pretending- kicking the can. 

Tue, 02/03/2015 - 12:59 | 5739289 CHX
CHX's picture

The need to raise rates, but they can't. If they did, it became obvious to EVERYBODY that the world is bankrupt, and the system would be down and out for good in a matter of days, if not shorter. How could the US service it's debt at 5%, or at Volker-ish +15% ??? So they continue with the failed monetary policies, they hope to keep it together, extend and pretend, all over the place. The lynch pin are gold and silver: as hard money, they should rise in this ZIRP (negative real interest rates) environement, but that too would be admitting that fiat is just a congame. Extend and pretend is the best they can do, until all fails anyway. There are now swarms of black swans all over the place, so I think the dike has one too many cracks as they leafe the spigots running full throttle. 

Tue, 02/03/2015 - 11:02 | 5738579 LawsofPhysics
LawsofPhysics's picture

Deflation you say?  LOL!!  Let me be clear, so long as there is 7+ billion people (and growing) ALL competing for a better standard of living and ALL the REAL resources that are required to maintain that higher standard, THERE IS PLENTY OF DEMAND!!!

At least for real shit, paper bullshit, not so much. 

let's be honest for a change.  Monetary policy that is not attached to fucking reality in some way shape or form is just another name for fraud.


Tue, 02/03/2015 - 12:33 | 5739183 moneybots
moneybots's picture

Baltic Dry Index hit 554, below the low of the last recession.

Demand is lacking.

Tue, 02/03/2015 - 09:22 | 5738409 optimator
optimator's picture

Only the Congress can end the FED's "In perpetuity mandate".  When was the last time you even heard a Congressman mention the  FED?  Other than Ron Paul of course, who's mentioned them for three or four decades.  

Tue, 02/03/2015 - 10:12 | 5738568 LawsofPhysics
LawsofPhysics's picture

Correct.  Unfortunately, because so much "money" is required to get and stay "elected", the Fed and their primary dealer banks now own the majority of congress via K-street.

"The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class." — Rothschild Brothers of London, 1863

  "Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild

 

Let me be clear, all monetary systems with no connection to reality will fail.

Tue, 02/03/2015 - 07:46 | 5738237 sbenard
sbenard's picture

Babylon the Great shall fall!

Tue, 02/03/2015 - 07:06 | 5738202 sidiji
sidiji's picture

you mean the one that says "dont get caught!"?

Tue, 02/03/2015 - 05:45 | 5738136 Billy Bob101
Billy Bob101's picture

Classically, the dichotomy in philosophical outlook was between realist and idealist.  Since the 70's, Americans have become mostly "positive thinkers."  A practical definition of "positive thinking" is "if you believe it, it will be true." Obviously, this is absurd because positive or negative are matters of perspective only.  What is positive to the wolf is probably negative to the sheep.  No amount of positive thinking by the sheep will change that.    However, it's really difficult to get past that kind of thinking with facts or a sound argument, since it is absurd to begin with.  Many people are simply not dealing with reality - they are being positive. 

Tue, 02/03/2015 - 12:33 | 5739189 I Write Code
I Write Code's picture

Just for the curious, "realist" in philosophy is generally used to mean that dubious items like propositional attitudes are real, so if you're a realist about unicorns, there you are.

Tue, 02/03/2015 - 11:29 | 5738927 Mike Honcho
Mike Honcho's picture

Yes and yes.  The realists are pushed to the fringe because the idealists have to chant louder and louder to support their reality.

Tue, 02/03/2015 - 08:35 | 5738312 eishund
eishund's picture

Billy, I am sure your thinking is positively accurate.

Tue, 02/03/2015 - 03:22 | 5738025 Jack Daniels Esq
Jack Daniels Esq's picture

Bullshit baffles brains

Tue, 02/03/2015 - 02:19 | 5737955 Element
Element's picture

 

 

"... No other form of governmental authority has been granted these types of unrestrained powers in any branch of government, not Congress, the Supreme Court, the President, or the Military for comparison`s sake in the United States. ..."

 

FED's real mandate from Day 1 has been to fool the general public of the USA, and wider world and MSM that the 'US Federal Reserve Bank' is an official US organ of constitutional Governance and not just some ad-hoc tawdry criminal banking cartel. Any other form of asserted FED 'mandate', or role, is 100% contrived and non-governmental.

Tue, 02/03/2015 - 00:03 | 5737743 VWAndy
VWAndy's picture

So I was talking to some grown ups about economics an stuff. This guy we dont know jumps in and asked what I thought about zirp. So I tell him. It means that pension is toast. All the young guys laughed. The older guys not so much. So the next question was. How so? My answer. Its like in the zombi movie, After you get bit.

Mon, 02/02/2015 - 23:41 | 5737681 Yancey Ward
Yancey Ward's picture

Word of advice- whenever you want to use the word "incentive" as a verb, resist the urge.  Use, instead, the word "induce".

Mon, 02/02/2015 - 21:20 | 5737250 Al Tinfoil
Al Tinfoil's picture

Tweeks to financial structures will not cure the fundamental ills of the Developed Economies.  The Developed Economies (DEs) are simply not generating enough wealth to cover all the demands being made upon those economies.  The shortfall is being made up by increasing debt and by Quantitative Easing money-printing.

Financial speculation has become the biggest business in America, and a country cannot survive on financial speculation alone.

The DEs actually went bankrupt (by GAAP standards) in the 1970s, but injections of money by central banks and easy credit were used to cover the mess over.  Private, Corporate, and Government debt levels increased, and speculative bubbles grew.  Each time there was a financial meltdown, the central banks rushed in with more monetary injections and lowered interest rates to re-inflate the bubble economies.  The lessons learned from the Great Depression were forgotten, and "deregulation" became the mantra of the day: "Let Capitalism and Prosperity Loose!"  Glass-Steagall was repealed, Citibank was formed, and a runaway train of bubble formation and financialization and fraud resulted in the 2008 crash.  The "cure" was to have the public purse pay for the banksters losses, recapitalize Wall Street, and QE the economy back to "health".  

Big business, tired of high costs and heavy regulation in the DEs, persuaded politicians to adopt "Free Trade Agreements" that allowed the corporations to move their factories to low-wage, low-regulation countries while maintaining access to the DE markets to sell their wares.  Wealth creation and wages went to Mexico, then China, India, southeast Asia, etc., and the Middle Class maxed out their borrowing capacity as they maintained their standard of living by taking on more debt.  The 2008 meltdown destroyed much of the Middle Class "wealth" by decreasing the bubbled-up value of their homes.  Starved of high wages and maxed out on debt, the Middle Class is unable to add to GDP by buying more "stuff".  Aggregate Demand, the darling of Keynesian theorists, cannot be created by people with no money to spend.

Meanwhile, vast sums of currnency are floating around the financial markets seeking "return", i.e. some profit from investment.  $Trillions of low-interest-rate QE have been borrowed and carried off to foreign countries where higher rates of return were seen, and $Trillions have been mal-invested in over-expansion of productive activities and in speculative schemes (fracking of shale beds for oil and gas is a good example).  

The fundamental problem is seen in the excess of "capital" seeking "investment returns" from financial markets.  There is simply more capital seeking returns than the wealth production of the world can support.  Hence we see carry trade money fleeing the Emerging Market countries back into the US and Europe and being "invested" in bonds - driving bond prices so high that effective rates of return are negative (the price paid for the bond exceeds the sum of the principal amount of the bond and the total return the bond issuer will pay over the life of the bond).

I believe Peter Schiff is correct when he says that the USA must get back to producing and saving.  QE and financial speculation will not cure the US economy.   

Tue, 02/03/2015 - 05:56 | 5738156 EddieLomax
EddieLomax's picture

"Tweeks to financial structures will not cure the fundamental ills of the Developed Economies.  The Developed Economies (DEs) are simply not generating enough wealth to cover all the demands being made upon those economies."

I would only add that the "tweaks" being made are to try and stop the economy from naturally healing itself, however painful that process will be, and each intervention makes the healing process more painful.  Politically I do not see us having the will to fix this problem before we face an unavoidable default, because not enough of the electorate understand what is going on.

Mon, 02/02/2015 - 22:53 | 5737549 Squid-puppets a...
Squid-puppets a-go-go's picture

I'd also add that while ZIRP is deflationary, so too is suppressing the price of gold and silver.

how do TPTB expect to create inflation while simultaneously suppressing the bottom of the exeter pyramid? when investors view the comparative value of any assett or commodity against gold that is flat against the $US why would they be prepared to pay increasing prices for these assetts/commodities ??

Tue, 02/03/2015 - 12:46 | 5739250 moneybots
moneybots's picture

"I'd also add that while ZIRP is deflationary, so too is suppressing the price of gold and silver."

 

Commodity prices have been falling for several years now, due to deflationary pressure.  Gold and silver are commodities.

As Martin Armstrong puts it, gold is a hedge against government.

Mon, 02/02/2015 - 20:39 | 5737120 JoWazzoo
JoWazzoo's picture

Historically, managing rates on the down side (from "Normal" rates) has been a Monetary Tool used by a CB to counter the forces of a Recession (Other reasons as well.)  As the Recession unfolds, the CB drops the Federal Funds rate (in major cases reserve requirements)  And then again and again to temper the recessionary forces.  These reductions were reductions from NORMAL rates.

What will the Fed do the next recession?  Which could happen in the next year or so. BONG!  Out of Tools when you are at ZIRP.  So the only tool left is QE.

If you think I am pulling your leg, check what Japan Inc has done for the past 20 years.

 

Mon, 02/02/2015 - 20:33 | 5737087 RMolineaux
RMolineaux's picture

The author has financial policy and economic policy backwards.  The latter determines the former, not the other way around.  In a free market system that resembles the theoretical model, all sectors should expect to take risks.  The author seems to believe that the rentier class is entitled to receive an uninterrupted income stream that all other participants have to accomodate.  Not so.  Asset holders must take risks and accept social responsibiility along with the rest of the population.  When asset holders are able to accumulate wealth in a steady and unwavering stream, the result is oligarchy, social disorder and facism.  This is the current situation in the US, where a big fat parasite called Wall Street feeds off the rest of a weakened economy.  While a ZIRP program by the Fed has failed to encourage real capital investment, it has not hurt the Wall Street greed platoon, which has used it to finance stock buy-backs, thereby fattening their own net worth, not to mention front-running, high-frequency trading and the use of inside information.

Tue, 02/03/2015 - 10:20 | 5738602 Fix-ItSilly
Fix-ItSilly's picture

ZIRP is an oligarch's lovefest.  Forget the focus on interest rates (that's a middle class point of view), financial assets keep increasing in value (exactly what the oligarch class wants).

Tue, 02/03/2015 - 11:29 | 5738932 Kayman
Kayman's picture

Our financial criminals have killed the time value of money- net present value has become meaningless at the zero bound.

Interest (the time-cost of money) used to be paid out of surpluses from real economic activity-peoples' take-home pay, profits from manufacturing, etc. Now interest on money is simply conjured out of thin air.

Conjured money can also be destroyed just as easily as it is created when the debtor(s) no longer have real earnings to pay interest or the original face value of the loan. Once the loan goes bad the money is gone.

There is no magic to Monetary Policy- the first guys that get the money have a hell of a party- you get a hell of a hangover.

Mon, 02/02/2015 - 20:22 | 5737059 Joebloinvestor
Joebloinvestor's picture

Made possible by a fiat system running 24/7.

Mon, 02/02/2015 - 20:22 | 5737055 oudinot
oudinot's picture

Blah, blah,blah

Very uninteresting and sickeningly condescending  article.

Mon, 02/02/2015 - 21:19 | 5737244 Stained Class
Stained Class's picture

Yeah, right, this is no bulletin. How about link to squib?

Mon, 02/02/2015 - 20:14 | 5737018 honestann
honestann's picture

Is AUTHORITARIANISM too complicated to understand?

That is the real question.  The answer should be "no".

Tue, 02/03/2015 - 10:17 | 5738584 LawsofPhysics
LawsofPhysics's picture

Correct, just ask the Chinese...

Mon, 02/02/2015 - 19:26 | 5736879 Creepy A. Cracker
Creepy A. Cracker's picture

"Is Monetary Policy Too Complicated for Mainstream to Understand?"

The "mainstream" voted for Dear Leader Obama.  So, yes, they are morons, not able to understand much more than where the EBT card goes in the machine.

Mon, 02/02/2015 - 22:15 | 5737429 logicalman
logicalman's picture

The Mainstream voted.

That's where the problems start.

Best to keep it simple.

 

Tue, 02/03/2015 - 00:30 | 5737197 Radical Marijuana
Radical Marijuana's picture

Most of the mainstream morons, or the masses of muppets, would have to go through severe cognitive dissonance to comprehend that the public "money" supply is made out of nothing as debts by privately controlled banks! For them to understand that would result in them understanding how, for generation after generation, they have been acting like incompetent political idiots, or Zombie Sheeple, while they were being fleeced to exhaustion, as they and their lambs were being set up to be slaughtered.

It is NOT too complicated to understand, except that they have been conditioned to not want to understand! In that regard, I would blame the Black Sheeple, or reactionary revolutionaries, for that, as much as I would blame the Zombie Sheeple, or the Vicious Wolves and their more Domesticated Dogs.

The basic problems are that civilizations operate as systems of organized crime and controlled opposition. The more successful the established systems of organized crime, the more totally their opposition is controlled. Perhaps the mainstream morons intuitively recognize that the opposition is controlled, because it spouts bullshit "solutions," based on impossible ideals, which can never work in the real world? Many People have a good intuition for bullshit, although they may have not been educated to intellectually understand that.

Privately controlled banks creating the public "money" supply out of nothing as debts, which "money" can also disappear back to nothing when those debts disappear, does not merely seem to violate the fundamental laws of finance, that also seems to violate the fundamental laws of physics, such as the conservation of energy.

One of the manifestations of the conservation of energy is the conservation of matter, which was why there was some intrinsic ring of truth in money backed by gold and silver. However, all of that has become way too superficial an old-fashioned perspective to fully comprehend the degree to which the financial systems are based on runaway ENFORCED FRAUDS, that have become electronic, backed by atomic power, which makes it become extremely difficult to understand that the ONLY connection between human laws and natural laws is the ability to back up lies by violence. THAT IS THE WAY THAT THE ENFORCED FRAUDS DO NOT ACTUALLY VIOLATE THE LAWS OF FINANCE OR PHYSICS, ALTHOUGH THEY APPEAR TO DO SO!

For the mainstream People to more fully understand their situation, they would have to understand that they are members of an organized crime gang, called their country. As citizens, they theoretically have the power to participate through the rule of law operating a democratic republic. HOWEVER, more than a Century of the economic system being based on enforced frauds has resulted in vicious spirals of most citizens being reduced to Zombie Sheeple, who were victims of the best brainwashing that money could buy, for generation after generation. One of the ways that manifests is through believing in false fundamental dichotomies between "truth versus lies," which has many facets such as believing in the false fundamental dichotomy between "government versus organized crime."

I believe that the majority of the mainstream People could understand, IF they wanted to. However, they would have to go through profound paradigm shifts in order to understand enough to effectively change things, because they would have to go through the deeper processes of appreciating how and why money is measurement backed by murder.

It would not be good enough to merely recognize that "their" government had become the biggest form of organized crime, controlled by the best organized gangs of criminals. They would have to go through even further, to stop relying so much on facile DUALITIES, and to start using UNITARY MECHANISMS. Those would be the ways to recognize that instead of continuing to allow the powers of "We the People" effectively being privatized by big banks and corporations that were robbing the vast majority of the People blind, those People could become responsible members of the organized crime gang which was "their" country.

I would express that as going beyond being merely cynical about the government being corrupt, to comprehending the deeper reasons how and why the government has ended up being so completely corrupted! Most the People are nowhere near cynical enough, because they still want to believe in false fundamental dichotomies and impossible ideals, that the government should not be corrupt. Most People want to continue to believe in false fundamental dichotomies, that say there should be honest government. However, they have to understand that to be really honest about government is to face the fact that governments necessarily are forms of organized crime, indeed, governments must necessarily be the biggest forms of organized crime. There are no realistic ways that governments can actually exist than as forms of organized crime, controlled by the best organized gangs of criminals.

THE PARADOX OF MORE "HONEST" GOVERNMENT IS THAT WOULD REQUIRE THE PEOPLE TO BECOME MORE HONEST ABOUT HOW MONEY WAS MEASUREMENT BACKED BY MURDER. Indeed, progress in physical sciences, such as quantum mechanics, or the special theory of relativity, have already driven some people to accept the profound PARADOXES proven to be there, while those paradigm shifts in physical sciences then enabled technologies like electronics and atomic energy to be developed. That is how and why we are being driven through runaway contradictions in civilization, since that kind of progress in physics has nothing like that manifesting as progress in politics.

Progress in physics took developing better UNITARY MECHANISMS that transcended the old false fundamental dichotomies and related mistaken idealized presumptions which common sense based physics used to rely upon. Progress in physics had to move past the old-fashioned notions based on DUALITIES. That progress in physical sciences is now driving a technologically based civilization to have to go beyond the mistaken presumptions of DUALITIES in politics, to develop a politics that embraces more UNITARY MECHANISMS.

One of the main ways that manifests is that it becomes clearer that, since human systems act as entropic pumps of energy flow, human realities are always organized lies operating robberies, in which context, money is always measurement backed by murder. THAT IS WHAT EXISTS NOW, (but that actually works through measurements which are as fraudulent as possible, being backed up by murders which are as deceitful as possible.)

I agree that the established systems of enforced frauds were debt slavery, which developed at an exponential rate to generate numbers which have become debt insanities, and that the about zero, and then effectively negative, interest rate policies of central banks were forms of "monetary extremism," which were band-aid ways to cope with the basic causes that the central banks were built on government enforced financial frauds. However, the ideals that we could return to something which was not basically the entropic pumping of energy, wherein the overall amount of entropy was always increasing, is as utterly impossible as expecting the government to stop operating according to the methods of organized crime, which should end up resulting in those governments stop being controlled by the best organized gangs of criminals.

Although the established systems have become runaway "monetary extremism," due the basic structure of those systems having been enforced frauds, or debt slavery that automatically drove its numbers to become debt insanities, which resulted in central banks driving down interest rates to apparently ridiculous levels, to attempt to adapt to those numbers becoming unprecedented levels of debt insanities, the deeper problems were the degree to which systems of legalized lies, backed by legalized violence, enabled there to appear to develop psychotic disconnections between the basic laws of physics to develop, which were much worse than the apparent absurdities due to the laws

The central banks suffer from the central contradiction within social pyramid systems based on being able to back up lies with violence, which is that no amount of violence is ever able to make those lies stop being false. Therefore, the financial systems become elaborate systems of legalized lies, backed by legalized violence, which are simply enforced frauds, whose inherent dilemma is that being able to enforce frauds never is able to stop those frauds from being false.

For the mainstream People to understand the political economy would require them regarding that in its overall environmental context. The mainstream People would have to go through two steps. The first is to recognize that the established systems were based on organized crime, and the second is to recognize that almost all the apparent opposition to those established systems were controlled, because the third point is to return to embracing that governments were basically military organizations, based on the history of warfare, where war was organized crime on a larger scale.

Therefore, the mainstream People, as citizens, are members of an organized crime gang, who theoretically have the power to operate a democratic republic through the rule of law. However, in fact, the systematic triumphs of the best organized gangs of criminals, the biggest gangsters, the international banksters, have captured almost total control over all branches of government, so that what actually exists now is government of the money, by the money, for the money.

The theory of government of the People, by the People, for the People, is a still a good theory. However, that can not actually work unless enough those People understood that money is measurement backed by murder. The only thing that is quite complicated to be able to understand is the layer after layer of bullshit that is piled on top of the basic facts of life. For generation after generation, people have been brainwashed to believe in bullshit. They have been rewarded for agreeing with lies, while punished for not agreeing with lies. That schedule of reinforcement has resulted in them wanting to believe in bullshit.

In that context, this article above regarding "monetary extremism" is based on the view that the exponential growth of the debt slavery systems, as something relatively new, as merely "the last seven years of Central Bank actions." However, there was nothing new, except that the doubling of total debts became more obviously insane every time that happened, and so, to double total debts again and again, to keep the established systems going, has become so blatantly insane that many more people are perceiving that fact than ever before.

However, the basic situation throughout the history of Neolithic Civilizations have ALWAYS been social pyramid systems based on being able to back up lies with violence. There has always been the domination of organized crime, surrounded by controlled opposition, which controlled opposition often took the form of some State Religion.

At the present time, the dominate State Religions are the Monetary System, and National Security, both of which are based on the maximum possible frauds and deceits, which are manifestly becoming more absurdly backwards at an exponentially accelerating rate. Therefore, more of the mainstream People are feeling like something has gone wrong. However, the problem with politics continues to be that the alleged opposition groups are almost all controlled opposition, who promote the same basic bullshit world view that the banksters did.

To more fully understand the degree to which Central Banks Have Violated The Laws of Finance, one needs to understand that the basic systems are enforced frauds, in deeper ways that appreciate how and why we have actually ended up with a social situation where the government is the biggest form of organized crime, controlled by the best organized gangs of criminals, while the vast majority of citizens who are actually members of that organized crime gang have been reduced to being incompetent political idiots, that feel like they do not want to understand that, especially since almost all of the controlled opposition groups that exhort them to become "educated" or "wake up," are mostly still misleading them to go backward, rather than forward.

In my opinion, most of the mainstream People could understand finance, IF THEY WANTED TO, however, they would have to go through an intellectual revolution to change their paradigms regarding how they perceive political problems in order to be more completely able to do that, most of which would require not only facing the facts that "their" government is the biggest form of organized crime, controlled by the best organized gangs of criminals, but also that citizens were actually members of that organized crime gang, in order that enough of those mainstream People could organize better systems of organized crime, to take back real control over their government, which would primarily mean taking back control over the public money supply, which could not be done unless enough of those People understood the ways that their murder systems backed up their monetary systems.

To fix the real problems requires facing what those actually are, and dealing with them on those terms. The established systems are almost totally based on organized crime and controlled opposition. That is what enough of the mainstream People would have to understand enough in order to more realistically resolve the problems, which are now automatically getting worse, faster ... as the systems of enforced frauds automatically become more egregiously exponential, and outrageously blatant, every day!

As that happens, more of the mainstream People will be forced to face those facts, no matter how much more uncomfortable their cognitive dissonance becomes as they approach doing that! For many, changing the paradigms with which they perceive politics may approach some degree of psychotic breakdown, since mainstream People tend to initially have a very hard time comprehending the degree to which the real world has become an insane asylum controlled by the most criminally insane inmates. However, as the consequences of that social situation keep on getting worse, faster, more and more mainstream People are going to be driven outside of their mental comfort zones, where their old mental habits are disrupted by their circumstances causing them to start to think about things that they previously took for granted ...

Tue, 02/03/2015 - 11:35 | 5738955 Mike Honcho
Mike Honcho's picture

"I believe that the majority of the mainstream People could understand, IF they wanted to. "

 

Nail say hi to head.

Mon, 02/02/2015 - 19:58 | 5736982 lordylord
lordylord's picture

"not able to understand much more than where the EBT card goes in the machine."

I wish they would just understand where the EBT comes from. 

I'm thinking about standing at a Walmart exit and saying "you're welcome" to everyone with a cart full of doritos and pepsi.

Mon, 02/02/2015 - 21:40 | 5737316 FIAT CON
FIAT CON's picture

It's off to work I go.

 Millions of EBT card holders are counting on me.

Mon, 02/02/2015 - 18:25 | 5736640 XitSam
XitSam's picture

The basic law of finance is moar money for bankers.

Tue, 02/03/2015 - 06:24 | 5738175 kikk
kikk's picture

 

The most important lesson I've learned from reading ZH articles and comments is that in the financial sector  

CRIME IS LEGAL.

Mon, 02/02/2015 - 22:17 | 5737439 logicalman
logicalman's picture

There is no law in finance.

 

Mon, 02/02/2015 - 20:01 | 5736987 lordylord
lordylord's picture

"The basic law of finance is moar money for bankers."

That's the basic law.  The SUPREME law is issue moar debt.

Mon, 02/02/2015 - 19:35 | 5736909 disabledvet
disabledvet's picture

So indeed the author is correct.

 

Yet I think you put it so much better.

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